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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 3, 1999
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EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
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(Exact name of registrant as specified in its charter)
MINNESOTA 000-22765 41-1771946
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
805 HANLON DRIVE
BELLE PLAINE, MINNESOTA 56011
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (612) 873-7000
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Item 5. OTHER EVENTS.
On May 3, 1999, Excelsior-Henderson Motorcycle Manufacturing
Company (the "Company") sold and issued 10,000 shares of Series D Convertible
Preferred Stock (the "Series D Preferred Stock") at a purchase price of
$1,000 per share in the aggregate amount of $10,000,000 to two institutional
investors (the "Investors"). The Series D Preferred Stock is convertible
into Common Stock of the Company at an initial conversion price of $7.65416
per share (the "Fixed Conversion Price"), a 10% premium over the recent
market price, and is fixed for at least the first twelve months after
closing. After May 3, 2000, the conversion price may vary based upon the
market price of the Company's Common Stock during the period immediately
preceding conversion, but will never exceed the Fixed Conversion Price. The
Series D Preferred Stock includes a dividend of six percent per annum payable
quarterly in cash or Common Stock at the Company's option. The Company also
issued warrants (the "Warrants") to the Investors to acquire an aggregate of
350,000 shares of Common Stock. The issuance of the Series D Preferred Stock
was made pursuant to Regulation D of the Securities Act of 1933, as amended,
and was therefore exempt from registration under such act.
At the closing of the transaction, the Company had approximately
13.6 million shares of Common Stock outstanding. Depending on the ultimate
conversion price, the number of shares issuable upon conversion of the Series
D Preferred Stock could range from a low of 1,306,479 shares to a high,
without obtaining prior shareholder approval, of 2,716,615 shares. The terms
of the Series D Preferred Stock provide for certain rights including
antidilution and redemption rights.
The Company has agreed to file a registration statement on Form S-3
for the resale of the shares of Common Stock issuable upon conversion of the
Series D Preferred Stock and upon exercise of the Warrants.
The foregoing discussion is qualified in its entirety by the
provisions of the documents filed as exhibits hereto. Such provisions are
incorporated herein by reference thereto.
Item 7. EXHIBITS.
4.1 Statement of Designation of Rights, Preferences and Limitations of
Series D Convertible Preferred Stock, filed on May 3, 1999.
4.2 Registration Rights Agreement, dated as of April 30, 1999, by and among
Excelsior-Henderson Motorcycle Manufacturing Company and the Buyers
listed therein.
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4.3 Form of Common Stock Purchase Warrant Certificate for the purchase of
shares of Common Stock of Excelsior-Henderson Motorcycle Manufacturing
Company.
10 Securities Purchase Agreement, dated as of April 30, 1999, by and among
Excelsior-Henderson Motorcycle Manufacturing Company and the Buyers listed
therein.
99 Press release dated May 3, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EXCELSIOR-HENDERSON MOTORCYCLE
MANUFACTURING COMPANY
Date: May 17, 1999 By /s/ Thomas M. Rootness
------------------------------------------
Thomas M. Rootness
Senior Vice President of Finance and
Administration and Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. EXHIBIT PAGE
<S> <C> <C>
4.1 Statement of Designation of Rights, Preferences and Filed
Limitations of Series D Convertible Preferred Stock, Electronically
filed on May 3, 1999.
4.2 Registration Rights Agreement, dated as of April 30, Filed
1999, by and among Excelsior-Henderson Motorcycle Electronically
Manufacturing Company and the Buyers listed therein.
4.3 Form of Common Stock Purchase Warrant Certificate Filed
for the purchase of shares of Common Stock of Electronically
Excelsior-Henderson Motorcycle Manufacturing Company.
10 Securities Purchase Agreement, dated as of April 30, Filed
1999, by and among Excelsior-Henderson Motorcycle Electronically
Manufacturing Company and the Buyers listed therein.
99 Press release dated May 3, 1999. Filed
Electronically
</TABLE>
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EXCELSIOR-HENDERSON MOTORCYCLE
MANUFACTURING COMPANY
STATEMENT OF DESIGNATION
OF
RIGHTS, PREFERENCES AND LIMITATIONS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
The rights, preferences and limitations of the Series D Convertible
Preferred Stock are as follows. All references to Articles and Sections
herein are solely to Articles and Sections within this Statement of
Designation of Rights, Preferences and Limitations (this "Certificate of
Designation").
I. DESIGNATION AND AMOUNT
Of the 7,000,000 shares of preferred stock that EXCELSIOR-HENDERSON
MOTORCYCLE MANUFACTURING COMPANY (the "Company") is authorized to issue under
its Articles of Incorporation, 10,000 shares shall be designated as shares of
Series D Convertible Preferred Stock of the Company (the "Preferred Stock" or
"Preferred Shares"), par value $0.01 per share, with a face amount per share
of $1,000 (the "Face Amount"). The relative rights and preferences of the
Preferred Shares are as set forth in this Certificate of Designation.
II. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms
shall have the following meanings:
"Anniversary Date" means April 30, 2000.
"Business Day" means any day that the principal exchange on which the
Common Stock is traded is open for business.
"Closing Bid Price" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by
Bloomberg Financial Markets or a comparable reporting service of national
reputation selected by the Company and reasonably acceptable to the Majority
Holders (collectively, "Bloomberg"), if Bloomberg Financial Markets is not
then reporting closing bid prices of such security, or if the foregoing does
not apply, the last reported sale price of such security in the
over-the-counter market on the electronic bulletin board of such security as
reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such
security that are listed in the "pink sheets" by the National Quotation
Bureau, Inc. If the Closing Bid Price cannot be calculated for such security
on such date on any of the
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Excelsior-Henderson Motorcycle Manufacturing Company Page 2
Certificate of Designation
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as mutually determined by the Company and the Majority
Holders, or, if they are unable to agree on such value, it shall be
determined by an investment banking firm selected by the Company and
reasonably acceptable to the Majority Holders.
"Closing Date" means the date on which the Preferred Shares are
initially issued.
"Closing Price" means $6.95833.
"Common Stock" means the common stock, $0.01 par value, of the
Company.
"Conversion Price", subject to the adjustments provided for in Article
X hereof, means the lesser of (i) the Fixed Conversion Price or (ii) the
Market Price at the time of conversion; PROVIDED, HOWEVER, that on and prior
to the Anniversary Date, the Conversion Price shall equal the Fixed
Conversion Price; PROVIDED, FURTHER, HOWEVER, that the limitation in the
preceding provision shall not apply to conversions taking place on any
Conversion Date (as defined in Section IV.C) (and the Conversion Price shall
equal the lesser of the Fixed Conversion Price and the Market Price at the
time of conversion) (i) that the Common Stock trades at a price which is
greater than or equal to the Fixed Conversion Price, (ii) occurring on or
after the date the Company makes a public announcement that it intends to
merge or consolidate with any other Company or sell or transfer substantially
all of the assets of the Company, (iii) occurring on or after the date any
person, group or entity (including the Company) publicly announces a tender
offer to purchase 50% or more of the Company's Common Stock (or any other
takeover scheme), (iv) occurring on or after there is a Material Adverse
Change or (v) occurring on or after the occurrence of any uncured Redemption
Event (as defined in Section VII.A).
"Effective Date" means the date the Registration Statement required to
be filed pursuant to Section 2(a) of the Registration Rights Agreement is
declared effective by the Securities and Exchange Commission.
"Fixed Conversion Price" means $7.65416 [110% of the Closing Price].
"Holders" means the initial Holders of the Preferred Stock and their
permitted transferees.
"Majority Holders" means Holders holding a majority of the outstanding
shares of Preferred Stock.
"majority of the outstanding shares of Preferred Stock" means greater
than 66.6% of the outstanding shares of Preferred Stock.
"Market Price" means the lowest volume weighted average price of the
Common Stock during any period of five (5) consecutive Business Days (the
"Market Price Days") during the twenty (20) consecutive Business Day period
ending on the day prior
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to the Conversion Date (the "Pricing Period"). The Market Price Days shall
be designated by the converting holder at the time of conversion (from among
the days comprising the Pricing Period) and such designation shall be set
forth in the Notice of Conversion.
"Material Adverse Change" means (i) bankruptcy of the Company, (ii)
the Common Stock is suspended or halted from trading for more than five
trading days, (iii) the Company fails to meet the maintenance requirements
for its listing on the Nasdaq National Market, or (iv) a judgment against the
Company of $5 million or greater.
"Maximum Share Amount" shall mean 2,716,615 shares of Common Stock,
subject to adjustments for stock dividends, stock splits, combinations or
similar events.
"Preferred Stock" means the shares of Preferred Stock issued pursuant
to the terms of the Securities Purchase Agreement.
"Registration Statement" means a registration statement filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended.
"Securities Purchase Agreement" means the Securities Purchase
Agreement referencing this Certificate of Designation, among the Company and
the purchasers named therein, as amended from time to time in accordance with
the terms thereof.
"Warrants" means certain stock purchase warrants to acquire shares of
Common Stock issued by the Company to the initial Holders at the Closing (as
defined in the Securities Purchase Agreement).
III. DIVIDENDS
A. The Preferred Stock will be entitled to dividends paid on the
Common Stock, with such dividends calculated as if the Preferred Stock had
been converted to Common Stock at the then-applicable Conversion Price on the
date of declaration of such dividend.
B. The Preferred Stock will be entitled to receive cumulative
dividends at the rate of six percent (6%) of the unconverted Face Amount per
annum (the "Dividend"). The Dividend shall be payable until such time as the
Closing Bid Price equals or exceeds 150% of the Fixed Conversion Price for
ten consecutive Business Days (the "Dividend Termination Date"). Such
cumulative Dividends, to the extent not previously converted, shall be
payable quarterly in arrears within three Business Days of the last day of
each April, July, October and January, commencing July, 1999 (such date of
actual payment being referred to herein as the "Dividend Payment Date"), in
cash or, so long as (i) and for at least thirty (30) Business Days prior
thereto all of the shares of Common Stock issuable upon conversion of all of
the outstanding shares of Preferred Stock are (x) authorized and reserved for
issuance, (y) registered for resale under the 1933 Act by the holders of the
Preferred Stock (or may otherwise be resold publicly without registration
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Page 4
or restriction as to the number of shares as of a particular date that can
then be immediately sold); PROVIDED, HOWEVER, that the first Dividend Payment
Date will be postponed until such registration statement is effective; and
PROVIDED, FURTHER, HOWEVER, that in no event shall the first Dividend Payment
Date be after August 31, 1999, and (z) eligible to be traded on a National
Exchange (as defined below) and (ii) there is not then a continuing
Redemption Event, Common Stock, at the Company's option subject to the
provision of Article V. Any payment of dividends in Common Stock shall be
calculated at the average Closing Bid Price for the three Business Days
ending on the day prior to the Dividend Payment Date. Dividends on the
Preferred Stock shall accrue and be cumulative on a daily basis from the date
of issuance (with appropriate proration for any partial dividend period),
whether or not earned and whether or not in any dividend period there shall
be surplus or net profits of the Company legally available for the payment of
such dividends.
IV. CONVERSION
A. CONVERSION AT THE OPTION OF HOLDER. Subject to Article V(B), on
and following the Closing Date, each Holder may, at any time and from time to
time, convert all or any portion of the Face Amount (plus any other amounts
payable thereon, including, without limitation, accrued and unpaid Dividends,
payments due under Section 2 of the Registration Rights Agreement and
Conversion Default Payments, in each case, to the extent not paid by the
Company in cash (the "Additional Amounts")) of its shares of Preferred Stock
into a number of fully paid and nonassessable shares of Common Stock
determined by dividing the aggregate Face Amount of the Preferred Shares
being converted (including any Additional Amounts) by the then applicable
Conversion Price, subject to adjustment as provided in Article X; provided,
however, that, in no event shall a Holder of shares of Preferred Stock be
entitled to convert any such shares to the extent, but only to the extent,
that (x) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the shares of Preferred Stock or unexercised portion of the Warrants or any
other securities containing analogous limitations) plus (y) the number of
shares of Common Stock issuable upon the conversion of the shares of
Preferred Stock with respect to which the determination of this proviso is
being made, would result in beneficial ownership by a Holder and such
Holder's affiliates of more than 4.99% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
this provision may not be waived by the Holder or the Company and beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Rules 13(d) through (g)
thereunder, except as otherwise provided in clause (x) of such proviso.
B. MANDATORY CONVERSION. So long as, for a period of thirty (30)
Business Days prior to delivery of a Mandatory Conversion Notice (as defined
below), and
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continuing through the Mandatory Conversion Date (as defined below) (i) all
of the shares of Common Stock issuable upon conversion of all outstanding
shares of Preferred Stock are then (x) authorized and reserved for issuance,
(y) registered for resale under the 1933 Act by the holders of the Preferred
Stock (or may otherwise be resold publicly without restriction) and (z)
eligible to be traded on the Nasdaq National Market ("Nasdaq"), the New York
Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX") or Nasdaq Small
Cap Market, or any successor national securities exchange or market
(collectively, a "National Exchange") and (ii) there is not then a continuing
Redemption Event and the Maximum Share Limit has not been reached (unless the
Share Limit Waiver (as defined below) has been obtained), the Company shall
be entitled, on any date that the average of the Closing Bid Prices of the
Common Stock during the ten (10) consecutive Business Day period ending on
the Business Day immediately preceding such date of determination is equal to
or greater than 200% of the Closing Price (subject to adjustment in
accordance with Article X hereof), to deliver a written notice to the Holders
requiring the Holders to convert all, but not less than all, of the Preferred
Shares. Such conversion shall be on a Business Day designated in such
notice, which date (the "Mandatory Conversion Date") shall be no earlier than
twenty (20) Business Days and no later than twenty-five (25) Business Days
following the date of such notice (such notice, a "Mandatory Conversion
Notice"). Notwithstanding anything herein to the contrary, no mandatory
conversion will be required, and the applicable Mandatory Conversion Notice
shall be of no further force and effect, if on the Business Day immediately
preceding the Mandatory Conversion Date, the Closing Bid Price of the Common
Stock is not equal to at least 175% of the Closing Price. The mechanics of
such conversion shall be in accordance with Section IV(C), except that each
Holder shall be deemed to have delivered a Notice of Conversion, with the
Conversion Date being the Mandatory Conversion Date specified in the
Mandatory Conversion Notice.
Nothing in this Article IV (B) shall prohibit conversions of Preferred Stock
otherwise permitted pursuant to the terms of this Certificate of Designation
during the pendency of any Mandatory Conversion Notice.
C. MECHANICS OF CONVERSION. To convert the Preferred Shares, a
Holder shall: (i) fax (or deliver by other means resulting in notice) to the
Company a copy of the fully executed Notice of Conversion in the form of
Exhibit H to the Securities Purchase Agreement, and (ii) surrender or cause
to be surrendered to the Company or its transfer agent (the "Transfer Agent")
(or satisfy the provisions of Article XIII(A), if applicable) the
certificates representing the Preferred Stock being converted (the "Preferred
Stock Certificates") and the original executed version of the Notice of
Conversion as soon as practicable thereafter. The date the Holder delivers
to the Company the Notice of Conversion described in clause (i) or such later
date specified in the Notice of Conversion shall be the "Conversion Date".
In the case of fax or messenger delivery, delivery shall be deemed made on
the date of such fax or messenger delivery.
D. TIMING OF CONVERSION. No later than the third Business Day
following the Conversion Date (the "Delivery Date"), provided that the
Company's Transfer Agent has
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Page 6
received prior to such date the Preferred Stock Certificates (or the Holder
has satisfied the provisions of Article XIII(A), if applicable), the Company
shall cause the Transfer Agent to issue and deliver to the Holder (or
otherwise at such Holder's direction) that number of shares of Common Stock
issuable upon conversion of the number of Preferred Shares being converted,
if applicable, and a new certificate representing the Preferred Stock not
converted by such Holder. The person or persons entitled to receive shares
of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares at the close of
business on the Conversion Date, unless the Notice of Conversion is revoked
as provided in Article V(E). If Preferred Stock Certificates are not
received (or the provisions of Article XIII(A) are not satisfied) prior to
2:00 p.m. Eastern Time on the Business Day prior to the Delivery Date, the
Delivery Date shall be extended until the Business Day (or, if received after
2:00 p.m. Eastern Time, the second Business Day) following the date of
surrender to the Company of Preferred Stock Certificates to be converted or
satisfaction of the provisions of Article XIII(A), if applicable.
E. CONTINUING RIGHTS. In addition to any other remedies which may
be available to the Holder, in the event the Company fails for any reason to
effect or to cause the Transfer Agent to effect delivery to the Holder of
certificates representing the shares of Common Stock receivable upon
conversion of the Preferred Shares by the Business Day following the Delivery
Date (which certificates shall be unlegended as and when required pursuant to
the Securities Purchase Agreement, the Registration Rights Agreement entered
into in connection with the Securities Purchase Agreement by and among the
Company and the other signatories thereto (the "Registration Rights
Agreement") and this Certificate of Designation), the Holder shall, unless
the Holder otherwise elects to retain its status as a holder of Common Stock
by so notifying the Company and the Transfer Agent, regain the rights of a
Holder with respect to such unconverted shares of Preferred Stock and the
Company shall immediately cause the Transfer Agent to return the subject
Preferred Stock Certificates and other conversion documents, if any,
delivered by Holder, to the Holder, or, if shares of Preferred Stock have not
been surrendered, adjust its records to reflect that such shares of Preferred
Stock have not been converted; provided, however, that the Company shall
remain liable for payment of the amounts determined pursuant to Article VI(A)
hereof for each day falling between the Business Day following the Delivery
Date and the date the revocation notice is received by the Company, and shall
also remain liable for any damages suffered by Holder.
F. STAMP, DOCUMENTARY AND OTHER SIMILAR TAXES. The Company shall
pay all stamp, documentary, issuance and other similar taxes which may be
imposed with respect to the issuance and delivery of the shares of Common
Stock pursuant to conversion of the Preferred Stock; provided that the
Company will not be obligated to pay stamp, transfer or other taxes resulting
from the issuance of Common Stock to any person other than the registered
holder of the Preferred Stock.
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Page 7
G. NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the conversion of Preferred Stock, but the Company shall
make a cash payment equal to such fraction multiplied by the Closing Bid
Price on the Conversion Date in respect of any fractional share which would
otherwise be issuable; provided that in the event that sufficient funds are
not legally available for the payment of such cash adjustment any fractional
shares of Common Stock shall be rounded up to the next whole number.
H. ELECTRONIC TRANSMISSION. In lieu of delivering physical
certificates representing the Common Stock issuable upon conversion, provided
the Transfer Agent is participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer program, upon request of a Holder, the
Company shall use its commercially reasonable efforts to cause the Transfer
Agent to electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account of a prime broker designated by the
Holder with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system. In the case of electronic transmission of such Common Stock, the
Company or the Transfer Agent shall, if applicable, within three (3) Business
Days issue a new certificate representing the Preferred Stock not converted
pursuant to any Notice of Conversion.
I. CASH CONVERSION. Following the Anniversary Date, so long as (i)
for at least thirty (30) Business Days prior to the date of any Cash
Conversion (as defined below) all of the shares of Common Stock issuable upon
conversion of all outstanding shares of Preferred Stock are then (x)
authorized and reserved for issuance, (y) registered for resale under the
1933 Act by the holders of the Preferred Stock (or may otherwise be resold
publicly without registration or any restriction as to the number of
securities as of a particular date that can then be immediately sold) and (z)
eligible to be traded on a National Exchange and (ii) there is not then a
continuing Redemption Event, in lieu of honoring Notices of Conversion by
delivery of shares of Common Stock on the Delivery Date in accordance with
Section IV(D), the Company shall, subject to the notice requirement set forth
in the last sentence of this Section IV(I), be entitled to make a cash
payment ("Cash Conversion") in an amount equal to (a) the number of shares of
Common Stock deliverable to a Holder pursuant to the Notice of Conversion
multiplied by (b) the average Closing Bid Price of the Common Stock for the
five consecutive Business Days preceding the Conversion Date. The number of
shares of Common Stock that would have been issued absent any such Cash
Conversion will be deemed to have been issued for purposes of calculating the
Maximum Share Amount. If the Company desires to effect Cash Conversions, it
shall notify the Holder subject thereto at least five Business Days prior to
the first date during which Cash Conversions will be effected, and, unless
waived by the Company, during the period specified in such notice, not to
exceed (with respect to any one notice) thirty (30) days, only Cash
Conversions will be permitted.
V. RESERVATION OF AUTHORIZED SHARES OF COMMON STOCK; LIMITATION ON NUMBER
OF CONVERSION SHARES
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Page 8
A. RESERVATION OF COMMON STOCK. Subject to the provisions of this
Article V, and subject to the Maximum Share Amount (unless the Stockholder
Approval (as defined herein) has been obtained) the Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to provide for the
conversion of all outstanding Preferred Shares and the exercise of all
Warrants (at the then-current Conversion Price and Exercise Price,
respectively) in accordance with Section 4.11 of the Securities Purchase
Agreement (the "Reserved Amount"). The Reserved Amount shall be increased
from time to time in accordance with the Company's obligations pursuant to
Section 4.11 of the Securities Purchase Agreement. In addition, if the
Company shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Preferred Stock shall be convertible at the then current
Conversion Price, the Company shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Preferred Stock.
B. LIMITATION ON NUMBER OF COMMON SHARES TO BE ISSUED.
(i) Notwithstanding anything in this Certificate of
Designation to the contrary, the Preferred Stock shall not be convertible
into an aggregate number of shares in excess of the Maximum Share Amount,
subject to adjustments for stock dividends, stock splits, combinations or
similar events, and upon issuance of Common Shares in conversion of the
Preferred Stock equal to the Maximum Share Amount, the Preferred Stock shall,
from that time forward, cease to be convertible into Common Stock in
accordance with the terms of Article IV and Dividends shall cease to be
payable in Common Stock, unless (a) the Company, at its sole option, shall
have notified the Holders that the Company will continue to honor conversions
of Preferred Stock into Common Stock, and (b) either (1) any necessary
stockholder approval required by the Nasdaq (or such other principal exchange
upon which the Common Stock is then trading) for the issuance of shares in
excess of the Maximum Share Amount has been obtained or duly waived by such
exchange, and evidence of such approval satisfactory to the Holders has been
delivered to the Holders or (2) the Company can issue additional shares
without violating National Association of Securities Dealers, Inc. ("NASD")
rules and regulations (but only to the extent such rules or regulations would
not be violated) (satisfaction of clauses (a) or (b) of this Section V(B)(i)
being referred to herein as a "Share Limit Waiver").
(ii) Following any Stockholder Approval Trigger Date, the
Company shall solicit by proxy the authorization (the "Stockholder Approval")
by the stockholders of the Company of the issuance of shares of Common Stock
upon (x) the conversion of shares of Preferred Stock pursuant to the terms
hereof and (y) the exercise of the Warrants pursuant to the terms thereof,
representing in the aggregate in excess of twenty (20%) percent of the
outstanding shares of Common Stock on April 30, 1999 (the "20% Limit") for
the purpose of eliminating any prohibitions under the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or any of its securities on
the Company's ability to issue
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Page 9
shares of Common Stock in excess of such 20% Limit. The Company shall
thereafter use its commercially reasonable efforts to obtain the Stockholder
Approval no later than ninety (90) days following the Stockholder Approval
Trigger Date. The failure to obtain Stockholder Approval shall not
constitute a breach of the Company's obligations hereunder. "Stockholder
Approval Trigger Date" shall mean any date following the Anniversary Date and
following the date (i) on which the Holders have, in the aggregate, converted
more than 50% of the original Face Amount of all of the Preferred Stock
issued on the Closing Date and (ii) on which the sum of (a) the number of
shares of Common Stock issued upon conversion of the Preferred Stock, payment
of Dividends and exercise of the Warrants on the date of calculation plus (b)
the number of shares of Common Stock issuable upon conversion of the then
outstanding Preferred Stock at the Market Price and upon exercise of the
Warrants at the Exercise Price on the date of calculation, is, in the
aggregate, in excess of the 20% Limit.
C. REDEMPTION OBLIGATION FOLLOWING ISSUANCE OF MAXIMUM SHARE AMOUNT.
Within 90 days of the date that the Maximum Share Amount of Common Stock has
been issued (or has been deemed to have been issued as a result of Cash
Conversions), the Company must (a) to the extent the conditions set forth in
clause (b) of Article V(B)(i), have been satisfied, provide the Share Limit
Waiver to each Holder, and thereafter permit conversions of the Preferred
Stock into shares of Common Stock in excess of the Maximum Share Amount, or
(b) redeem all of the outstanding shares of Preferred Stock, with the
redemption amount for each share of Preferred Stock being equal to the Face
Amount thereof plus any Additional Amounts owing with respect thereto. The
Share Limit Waiver must be provided within two (2) Business Days following
the issuance of the Maximum Share Amount of Common Stock unless the Company
delivers to each Holder a certificate signed by its Chief Financial Officer
or a Chief Executive Officer certifying that the Company will exercise
commercially reasonable best efforts to obtain sufficient financing to permit
the redemption of all of the outstanding shares of Preferred Stock during the
90 day period referenced in the preceding sentence. Unless the Share Limit
Waiver is delivered on the Business Day following the date that the Maximum
Share Amount of Common Stock has been issued, any conversions of Preferred
Shares into shares of Common Stock in excess of the Maximum Share Amount
(after the Share Limit Waiver has been delivered to each Holders) shall be at
the lowest applicable Conversion Price, as chosen in the sole discretion of
each Holder, in effect from the date that the Maximum Share Amount was
reached until the date of delivery of the Share Limit Waiver to such Holder.
D. ALLOCATION OF RESERVED AMOUNT, MAXIMUM SHARE AMOUNT. The Maximum
Share Amount (including any increases thereto) shall be allocated by the
Company pro rata among the holders of Preferred Stock based on the number of
shares of Preferred Stock issued to each holder. Each increase to the
Maximum Share Amount shall be allocated pro rata among the holders of
Preferred Stock based on the number of shares of Preferred Stock held by each
holder at the time of the increase in the Maximum Share Amount. In the event
a holder shall sell or otherwise transfer any of such holder's
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Page 10
shares of Preferred Stock, each transferee shall be allocated a pro rata
portion of such transferor's Maximum Share Amount. Any portion of the
Maximum Share Amount which remains allocated to any person or entity which
does not hold any Preferred Stock shall be allocated to the remaining holders
of shares of Preferred Stock, pro rata based on the number of shares of
Preferred Stock then held by such holders.
The Reserved Amount (including any increases thereto) shall be
allocated by the Company pro rata among the holders of Preferred Shares based
on the number of Preferred Shares issued to each holder. Each increase to
the Reserved Amount shall be allocated pro rata among the holders of
Preferred Shares based on the number of Preferred Shares held by each holder
at the time of the increase in the Reserved Amount. In the event a holder
shall sell or otherwise transfer any of such holder's Preferred Shares, each
transferee shall be allocated a pro rata portion of such transferor's
Reserved Amount. Any portion of the Reserved Amount which remains allocated
to any person or entity which does not hold any Preferred Shares shall be
allocated to the remaining holders of Preferred Shares, pro rata based on the
number of Preferred Shares then held by such holders.
VI. FAILURE TO CONVERT
A. If, at any time, (x) a Notice of Conversion has been sent to the
Company and the Company fails for any reason to deliver, on or prior to the
third Business Day following the expiration of the Delivery Date for such
conversion (said period of time being the "Extended Delivery Period"), such
number of shares of Common Stock to which such Holder is entitled (taking
into account the limitations on conversions imposed by such Holder's
allocated portion of the Maximum Share Amount) upon such conversion, or (y)
the Company provides notice (including by way of public announcement) (the
"Refusal Notice") to any Holder at any time of its intention not to issue
shares of Common Stock upon exercise by any Holder of its conversion rights
in accordance with the terms of this Certificate of Designation (each of (x)
and (y) being a "Conversion Default"), then the Company shall pay to the
affected Holder, in the case of a Conversion Default described in clause (x)
above, and to all Holders of Preferred Stock, in the case of a Conversion
Default described in clause (y) above, an amount equal to 1% of the Face
Amount of the Preferred Stock held by such Holder with respect to which the
Conversion Default exists (which amount shall be deemed to be the aggregate
Face Amount of all outstanding Preferred Stock in the case of a Conversion
Default described in clause (y) above) for each day thereafter until the Cure
Date. "Cure Date" means (i) with respect to a Conversion Default described in
clause (x) of its definition or if a Conversion Notice has been submitted and
the Company has issued a Refusal Notice, the date the Company effects the
conversion of the portion of the Preferred Stock submitted for conversion and
(ii) if no Conversion Notices have been submitted, with respect to a
Conversion Default described in clause (y) of its definition, the date the
Company undertakes in writing to issue Common Stock in satisfaction of all
conversions of Preferred Stock in accordance with the terms of this
Certificate of Designation. Te Company shall promptly provide
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each Holder with notice of the occurrence of a Conversion Default with
respect to any of the other Holders.
B. The payments to which a Holder shall be entitled pursuant to this
Section VI(A) are referred to herein as "Conversion Default Payments."
Conversion Default Payments shall be paid in cash. Such payment shall be
made in accordance with and be subject to the provisions of Article XIII(B).
VII. REDEMPTION DUE TO CERTAIN EVENTS
A. Redemption Events. A "Redemption Event" means any one of the
following (after expiration of any applicable cure period):
(i) The Company fails, and any such failure continues uncured
for seven (7) Business Days after the Company has been notified thereof in
writing by the Holder, to (x) remove any restrictive legend on any
certificate for any shares of Common Stock issued after the Effective Date to
the Holders upon conversion of the Preferred Stock or upon exercise of the
Warrants, or (y) to transfer or cause the Transfer Agent to transfer any
certificate for shares of Common Stock issued to a Holder upon conversion of
the Preferred Stock, in each case as and when required by this Certificate of
Designation, the Warrants, the Securities Purchase Agreement or the
Registration Rights Agreement; or
(ii) The Company fails to fulfill its obligations pursuant to
Section 4.11 or 4.13 of the Securities Purchase Agreement (or makes any
announcement, statement or threat that it does not intend to honor the
obligations described in this paragraph) and any such failure shall continue
uncured (or any announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for ten (10) days after the
Corporation shall have been notified thereof in writing by any holder of
Preferred Stock; or
(iii) The Company fails to make any redemption payment due
pursuant to Article V(C) hereof when due; or
(iv) The Registration Statement filed by the Company pursuant
to the Registration Rights Agreement and declared effective by the SEC on the
Effective Date lapses in effect (or sales of all of the Registrable
Securities cannot be made by the Holders thereunder, whether by reason of the
Company's failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement or otherwise) for more than
forty-five (45) consecutive days or an aggregate of seventy-five (75) days in
any twelve (12) month period after the Effective Date, or the Common Stock is
not listed or included for quotation on a National Exchange or that trading
is halted after the Effective Date for more than an aggregate of twenty (20)
Business Days in any twelve (12) month period.
B. REDEMPTION OF HOLDER'S SHARES. Upon the occurrence and during
the continuation of any Redemption Event, the Company shall, as to each
Holder of the then
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Page 12
outstanding shares of Preferred Stock who have given written notice (the
"Optional Redemption Notice") to the Company of such Redemption Event,
purchase each such Holder's shares of Preferred Stock for an amount per share
equal to the greater of (1) 130% multiplied by the sum of (a) the Face Amount
of the shares to be redeemed, plus (b) any Additional Amounts payable thereon
through the date of payment of the Optional Redemption Amount (as defined
herein) (the "Optional Redemption Date") and (2) the "Parity Value" of the
shares to be redeemed (the greater of such amounts being the "Optional
Redemption Amount"); provided that if such Redemption Event is pursuant to
Article VII(A)(iv), the Company may, at its sole option, in lieu of the
foregoing purchase, pay the Holder an amount equal to the Default Amount (as
defined below) multiplied by the number of shares of Preferred Stock held by
such holder on the date of the Optional Redemption Notice. "Parity Value"
means the product of (a) the number of shares of Common Stock issuable upon
conversion of such shares at such time (treating the Trading Day immediately
preceding the Optional Redemption Date as the "Conversion Date" (as
hereinafter defined), unless the Redemption Event arises as a result of a
breach in respect of a specific Conversion Date in which case such Conversion
Date shall be the Conversion Date), multiplied by (b) the highest Closing
Bid Price for the Common Stock on the principal trading market for such
shares from the period beginning on the date of the first occurrence of the
Redemption Event and ending on such Conversion Date. "Default Amount" shall
mean Two Hundred U.S. Dollars ($200), or such lesser amount as would be
determined in accordance with Section 2(c) of the Registration Rights
Agreement.
In the case of a Redemption Event, if the Company fails to pay
the Default Amount or the Optional Redemption Amount, as applicable, for each
share within five (5) business days of written notice that such amount is due
and payable, then (assuming there are sufficient authorized shares) in
addition to all other available remedies, each holder of Preferred Stock
shall have the right at any time, so long as the Redemption Event continues,
to require the Company, upon written notice, to immediately issue (in
accordance with and subject to the terms of Article V above), in lieu of the
Default Amount or the Optional Redemption Amount, as applicable, with respect
to each outstanding share of Preferred Stock held by such holder, the number
of shares of Common Stock of the Company equal to the Default Amount or the
Optional Redemption Amount, as applicable, divided by any Conversion Price,
as chosen in the sole discretion of the Holder, in effect from the date of
the Redemption Event until the date of exercise of such rights by Holder.
Payment of the Default Amount shall not affect the Holder's ongoing rights
with respect to the then outstanding shares of Preferred Stock or the rights
of such holders to pursue alternate damages in respect of the events giving
rise to such payments.
C. OPTIONAL REDEMPTION BY THE COMPANY. So long as (i) for at least
thirty (30) Business Days prior to the date of any date of redemption under
this Article VII(C) all of the shares of Common Stock issuable upon
conversion of all outstanding shares of Preferred Stock are then (x)
authorized and reserved for issuance, (y) registered for resale under the
1933 Act by the holders of the Preferred Stock (or may otherwise be
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Page 13
resold publicly without restriction) and (z) eligible to be traded on a
National Exchange and (ii) there is not then a continuing Redemption Event or
Shareholder Approval Trigger Date (unless the Share Limit Waiver has
occurred), the Company may, at its option, upon twenty (20) Business Days'
notice, redeem the Preferred Stock, as follows: beginning upon the date that
the Company completes a public offering of its Common Stock of at least
$20,000,000 underwritten by an investment banking firm that holds a seat on
the NYSE, the Company may, at its option, redeem for cash out of funds
legally available therefor, all (but not less than all) of the outstanding
Preferred Shares at 120% of the Face Amount of such shares of Preferred Stock
plus any Additional Amounts payable thereon.
Nothing in this Article VII(C) shall prohibit conversions of
Preferred Stock otherwise permitted pursuant to the terms of this Certificate
of Designation during the pendency of any notice of optional redemption by
the Company hereunder.
D. MATURITY; REQUIRED REDEMPTION. Subject to the limitations
contained in Article VII(F) hereof and so long as there is not then a
continuing Redemption Event, each share of Preferred Stock outstanding on
__,April 30, 2002 (the "Maturity Date") will be redeemed at the Company's
sole option, (a) in cash equal to the aggregate face value thereof and any
other amounts payable thereon or, (b) by delivery of a number of shares of
Common Stock issuable upon conversion of all of the Preferred Stock at the
then-applicable Conversion Price, including any adjustment under Article X;
provided that (i) any necessary approval for the issuance of additional
shares has been obtained if the Maximum Share Amount has been reached (or
will be exceeded as a result of any conversion at maturity) or the Company is
able to issue shares of Common Stock without violating applicable rules of
the principal National Exchange on which the Common Stock is then traded (but
only to the extent such rules would not be violated), and (ii) all shares of
Common Stock issuable upon conversion of all outstanding shares of Preferred
Stock are then (x) authorized and reserved for issuance, (y) registered under
the Securities Act for resale by all Holders of such Preferred Shares and (z)
eligible to be traded on a National Exchange. The Maturity Date shall be
delayed by one (1) Business Day each for each Business Day occurring prior
thereto and prior to the full conversion of the Preferred Stock that any
Redemption Event (as defined in Article V(A)) exists, without regard to
whether any cure periods shall have run, and for each Business Day that the
Registration Statement is not effective or that the Common Stock is not then
listed for trading beyond days during which such events are permitted without
penalty pursuant to the Registration Rights Agreement. The Company will
notify each Holder at least ten Business Days prior to the Maturity Date if
the Company intends to redeem all or any portion of the Preferred Stock held
by such Holder in cash.
E. REDEMPTION DEFAULTS. If the Company fails to pay any Holder the
redemption consideration with respect to any share of Preferred Stock, as
provided in this Article VII, within five (5) Business Days of its receipt or
delivery, as applicable, of a notice requiring such redemption (the
"Redemption Notice"), then each Holder (i) shall be entitled to interest on
the redemption consideration not paid at a per annum rate equal
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Page 14
to the lower of (x) the sum of prime rate published from time to time by the
Wall Street Journal plus three percent (3%) and (y) the highest interest rate
permitted by applicable law from the date of the Redemption Notice until the
date of redemption hereunder. In the event the Company is not able to redeem
all of the shares of Preferred Stock subject to Redemption Notices, the
Company shall redeem shares of Preferred Stock from each Holder, pro rata,
based on the total number of shares of Preferred Stock included in the
Redemption Notice relative to the total number of shares of Preferred Stock
in all of the Redemption Notices. In the case of a Redemption Event, if the
Company fails to pay the Optional Redemption Amount for each share for any
reason (including, without limitation, the circumstances specified in
paragraph VII(F)), within five (5) Business Days of the applicable Redemption
Notice then (assuming there are sufficient authorized shares) in addition to
all other available remedies, each Holder of Preferred Stock shall have the
right at any time, so long as the Redemption Event continues, to convert,
upon written notice, in lieu of the Optional Redemption Amount, each
outstanding share of Preferred Stock held by such Holder, into the number of
shares of Common Stock of the Company equal to the Optional Redemption
Amount, divided by the Conversion Price then in effect, subject in all cases
to each such Holder's Maximum Share Amount.
F. CAPITAL IMPAIRMENT. In the event that any Section 302A.551 of
the Minnesota Business Corporation Act ("BCA"), would be violated by the
redemption of any shares of Preferred Stock that are otherwise subject to
redemption pursuant to this Article VII, the Company: (i) will redeem the
greatest number of shares of Preferred Stock possible without violation of
said Article; (ii) the Company thereafter shall use its best efforts to take
all necessary steps permitted pursuant to this Certificate of Designation and
the agreements entered into in connection with the issuance of Preferred
Stock pursuant hereto in order to remedy its capital structure in order to
allow further redemptions without violation of said Article; and (iii) from
time to time thereafter as promptly as possible the Company shall redeem
shares of Preferred Stock at the request of the Holders to the greatest
extent possible without causing a violation of the BCA.
VIII. RANK; PARTICIPATION
A. RANK. All shares of the Preferred Stock shall rank (i) prior to
the Common Stock; (ii) prior to any class or series of capital stock of the
Company hereafter created (unless, with the consent of the Holders of a
majority of the outstanding shares of Preferred Stock obtained in accordance
with Article XII hereof, such class or series of capital stock specifically,
by its terms, ranks senior to or pari passu with the Preferred Stock)
(collectively, with the Common Stock, "Junior Securities"); (iii) pari passu
with the Series B Preferred Stock and Series C Preferred Stock and pari passu
with any class or series of capital stock of the Company hereafter created
(with the consent of the Holders of a majority of the outstanding shares of
Preferred Stock obtained in accordance with Article XII hereof), specifically
ranking, by its terms, on parity with the Preferred Stock (the "Pari Passu
Securities"); and (iv) junior to any class or series of capital stock of the
Company hereafter created (with the consent of the Holders of a majority of
the outstanding shares of Preferred Stock obtained in accordance with Article
XII hereof)
<PAGE> Page 15
specifically ranking, by its terms, senior to the Preferred Stock
(the "Senior Securities"), in each case as to distribution of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary.
B. PARTICIPATION. Subject to the rights of the holders (if any) of
Pari Passu Securities and Senior Securities, the Holders shall, as such
Holders, be entitled to such dividends paid and distributions made to the
holders of Common Stock to the same extent as if such Holders had converted
their shares of Preferred Stock into Common Stock (without regard to any
limitations on conversion herein or elsewhere contained) and had been issued
such Common Stock on the day before the record date for said dividend or
distribution. Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common Stock.
IX. LIQUIDATION PREFERENCE
A. LIQUIDATION OF THE COMPANY. If the Company shall commence a
voluntary case under the U.S. Federal bankruptcy laws or any other applicable
bankruptcy, insolvency or similar law, or consent to the entry of an order
for relief in an involuntary case under any law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property,
or make an assignment for the benefit of its creditors, or admit in writing
its inability to pay its debts generally as they become due, or if a decree
or order for relief in respect of the Company shall be entered by a court
having jurisdiction in the premises in an involuntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law resulting in the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Company
or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and any such decree or order shall be unstayed
and in effect for a period of sixty (60) consecutive days and, on account of
any such event, the Company shall liquidate, dissolve or wind up, or if the
Company shall otherwise liquidate, dissolve or wind up (a "Liquidation
Event"), no distribution shall be made to the holders of any shares of
capital stock of the Company (other than Senior Securities and, together with
the Holders of Preferred Stock and the Pari Passu Securities) upon
liquidation, dissolution or winding up unless prior thereto the Holders shall
have received the Liquidation Preference (as herein defined) with respect to
each Preferred Share. If, upon the occurrence of a Liquidation Event, the
assets and funds available for distribution among the Holders and holders of
Pari Passu Securities shall be insufficient to permit the payment to such
Holders of the preferential amounts payable thereon, then the entire assets
and funds of the Company legally available for distribution to the Preferred
Stock and the Pari Passu Securities shall be distributed ratably among such
shares in proportion to the ratio that the Liquidation Preference payable on
each such share bears to the aggregate Liquidation Preference payable on all
such shares.
B. CERTAIN ACTS NOT A LIQUIDATION. The purchase or redemption by
the Company of stock of any class, in any manner permitted by law, shall not,
for the
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purposes hereof, be regarded as a liquidation, dissolution or winding up of
the Company. Subject to the provisions of Section X(B), neither the
consolidation or merger of the Company with or into any other entity nor the
sale or transfer by the Company of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Company.
C. DEFINITION OF LIQUIDATION PREFERENCE. The "Liquidation
Preference" with respect to a share of Preferred Stock means an amount equal
to the Face Amount thereof plus any other amounts (including Additional
Amounts) that may be due from the Company with respect thereto pursuant to
this Certificate of Designation, the Securities Purchase Agreement or the
Registration Rights Agreement. The Liquidation Preference with respect to
any Pari Passu Securities shall be as set forth in the Certificate of
Designation filed in respect thereof.
X. ADJUSTMENTS TO THE CONVERSION PRICE; CERTAIN PROTECTIONS The
Conversion Price shall be subject to adjustment from time to time as follows:
A. STOCK SPLITS, STOCK DIVIDENDS, ETC. If at any time on or after
the Closing Date, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend, reclassification or other similar
event, the number of shares of Common Stock issuable upon conversion of the
Preferred Shares shall be proportionately increased, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the number
of shares of Common Stock issuable upon conversion of the Preferred Shares
shall be proportionately reduced. In such event, the Company shall notify
the Company's Transfer Agent of such change on or before the effective date
thereof.
B. MAJOR TRANSACTIONS. If the Company shall consolidate with or
merge into any corporation, sell all or substantially all of its assets,
effectuate a transaction or series of transactions in which 50% or more of
the voting power of the Company is disposed of or reclassify its outstanding
shares of Common Stock (other than by way of subdivision or reduction of such
shares) (each a "Major Transaction"), then each Holder shall thereafter be
entitled to receive consideration, in exchange for each share of Preferred
Stock held by it, equal to the greater of, as determined in the sole
discretion of the Holders of at least 50.1% of the outstanding shares of
Preferred Stock: (i) the number of shares of stock or securities or property
of the Company, or of the entity resulting from such consolidation or merger
(the "Major Transaction Consideration"), to which a Holder of the number of
shares of Common Stock delivered upon conversion of such shares of Preferred
Stock would have been entitled upon such Major Transaction (without regard to
any limitations on conversion herein contained) and had such Common Stock
been issued and outstanding and had such Holder been the holder of record of
such Common Stock at the time of such Major Transaction, and the Company
shall make lawful provision therefore as a part of such consolidation, merger
or reclassification; and (ii) the Optional Redemption Amount, in cash.
Subject to the provisions of this Article X, but in any event not later than
five (5) Business Days prior to the consummation of the Major
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Page 17
Transaction, but not prior to the public announcement of such Major
Transaction, the Company shall deliver written notice ("Notice of Major
Transaction") to each Holder, which Notice of Major Transaction shall be
deemed to have been delivered one (1) Business Day after the Company's
sending such notice by telecopy (provided that the Company sends a confirming
copy of such notice on the same day by overnight courier). Such Notice of
Major Transaction shall indicate the amount an type of the Major Transaction
Consideration which such Holder would receive under clause (i) of this
Article X(B). If the Major Transaction Consideration does not consist
entirely of United States dollars, the value of such other property shall be
determined by a reputable accounting firm selected by the Company that is
reasonably acceptable the Holders of a majority of the outstanding Preferred
Stock. The Holder shall, within two (2) Business Days following receipt of
the Notice of Major Transactions, notify the Company of the type of
consideration it elects to receive under this Article X(B).
C. ADJUSTMENT DUE TO DISTRIBUTION. If at any time after the Closing
Date, the Company shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Company's stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off))
(a "Distribution"), then the minimum Conversion Price per share shall be
reduced by the value of such Distribution per share. If the Distribution
does not consist entirely of U.S. Dollars, the value of such other property
shall be determined by a reputable accounting firm selected by the Company
that is reasonably acceptable to the Holders of a majority of the outstanding
shares of Preferred Stock.
D. PURCHASE RIGHTS. If at any time after the Closing Date, the
Company issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to
the record holders of any class of Common Stock, then the Holders of
Preferred Stock will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such Holder could
have acquired if such Holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Preferred Stock (without regard to
any limitations on conversion or exercise herein or elsewhere contained)
immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
E. ADJUSTMENT TO CONVERSION PRICE. If at any time when Preferred
Stock is issued and outstanding, the number of outstanding shares of Common
Stock is increased or decreased by a stock split, stock dividend,
combination, reclassification, below-market price rights offering to all
holders of Common Stock or other similar event, which event shall have taken
place during the reference period for determination of the Conversion Price
for the Preferred Stock, then the Conversion Price shall be calculated giving
appropriate effect to the stock split, stock dividend, combination,
reclassification or other similar event during the calculation period
preceding the Conversion Date. In
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such event, the Company shall notify the Transfer Agent of such change on or
before the effective date thereof.
F. ADJUSTMENT FOR RESTRICTED PERIODS. If (i) the Company fails to
obtain effectiveness of the Registration Statement prior to one-hundred
twenty (120) days following the Closing Date, or (ii) the Registration
Statement, once effective, lapses in effect or sales cannot otherwise be made
thereunder, whether by reason of the Company's failure or inability to amend
or supplement the prospectus included therein ("Prospectus") in accordance
with the Registration Rights Agreement or otherwise, then the Pricing Period
used for determining the "Market Price" shall be extended to include (x) in
the case of an event described in clause (i), the 20 Business Days
immediately preceding the 120th day following the Closing Date plus all
Trading Days through and including the date of effectiveness of the
Registration Statement and (y) in the case of an event described in clause
(ii), the number of Business Days preceding the date on which the Holder is
first notified that sales may not be made under the Prospectus, which would
otherwise then be included in the Lookback Period plus all Business Days
through and including the date on which the Holder is notified that sales may
again be made under the Prospectus. If a Holder of the Preferred Stock
reasonably determines that sales may not be made pursuant to the Prospectus,
it shall notify the Company in writing and, unless the Company provides
Holder with an opinion of Company's counsel to the contrary, such
determination shall be binding for purposes of this paragraph.
G. ADJUSTMENT TO CONVERSION PRICE FOR MAJOR ANNOUNCEMENTS. In the
event the Company (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Company is the surviving or continuing corporation and its capital stock
is unchanged) or sell or transfer all or substantially all of the assets of
the Company or (ii) any person, group or entity (including the Company)
publicly announces a tender offer to purchase 50% or more of the Company's
Common Stock or otherwise publicly announces an intention to replace a
majority of the Corporation's Board of Directors by waging a proxy battle or
otherwise (the date of the announcement referred to in clause (i) or (ii) is
hereinafter referred to as the "Announcement Date"), then the Conversion
Price shall, effective upon the Announcement Date and continuing through the
Adjusted Conversion Price Termination Date (as defined below), be equal to
the lower of (x) the Conversion Price which would have been applicable for an
Optional Conversion occurring on the Announcement Date and (y) the Conversion
Price that would otherwise be in effect. From and after the Adjusted
Conversion Price Termination Date, the Conversion Price shall be determined
as set forth in Article II. For purposes hereof, "Adjusted Conversion Price
Termination Date" shall mean, with respect to any proposed transaction,
tender offer or removal of the majority of the Board of Directors which a
public announcement as contemplated by this Article X.H. has been made, the
date upon which the Company (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) consummates or publicly
announces the termination or abandonment of the proposed transaction or
tender offer which caused this Article X.H. to become operative.
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H. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Section X, the Company,
at its expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to each Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request at any time of any Holder, furnish to such Holder a like certificate
setting forth (i) such adjustment or readjustment, (ii) the Conversion Price
at the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon conversion of a share of Preferred Stock.
XI. VOTING RIGHTS
The holders of the Preferred Stock have no voting power whatsoever,
except as otherwise provided by the ("BCA"), in this Article XI, and in
Article XII below.
Notwithstanding the above, the Company shall provide each holder of
Preferred Stock with prior notification of any meeting of the shareholders
(and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Company of a record of its shareholders for
the purpose of determining shareholders who are entitled to receive payment
of any dividend or other distribution, any right to subscribe for, purchase
or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders
who are entitled to vote in connection with any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company, or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall mail a notice to each holder, at least ten (10) days prior to the
record date specified therein (or thirty (30) days prior to the consummation
of the transaction or event, whichever is earlier), of the date on which any
such record is to be taken for the purpose of such dividend, distribution,
right or other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event, and a brief
statement regarding the amount and character of such dividend, distribution,
right or other event to the extent known at such time.
No Holder of the Preferred Stock shall be entitled to vote on any
matter submitted to the shareholders of the Company for their vote, waiver,
release or other action, except as may be otherwise expressly required by law.
XII. PROTECTION PROVISIONS
So long as any Preferred Shares are outstanding, the Company shall
not, without first obtaining the approval of the Holders of majority of the
outstanding shares of Preferred Stock: (a) alter or change the rights,
preferences or privileges of the Preferred Stock; (b) alter or change the
rights, preferences or privileges of any capital stock of the Company so as
to affect adversely the Preferred Stock; (c) create or issue any Senior
Securities; (d)
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Page 20
create or issue any Pari Passu Securities; (e) increase the authorized number
of shares of Preferred Stock; (f) increase the par value of the Common Stock;
or (g) do any act or thing not authorized or contemplated by this Certificate
of Designation which would result in any taxation with respect to the
Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as
amended, or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended, (or otherwise suffer to exist any such
taxation as a result thereof).
XIII. MISCELLANEOUS
A. LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Company shall not be
obligated to reissue such lost, stolen, destroyed or mutilated Preferred
Stock Certificate(s) if the Holder contemporaneously requests the Company to
convert such Preferred Stock.
B. PAYMENT OF CASH; DEFAULTS. Whenever the Company is required to
make any cash payment to a Holder under this Certificate of Designation (as a
Conversion Default Payment, Optional Redemption Amount or otherwise), such
cash payment shall be made to the Holder by the method (by certified or
cashier's check or wire transfer of immediately available funds) elected by
such Holder. If such payment is not delivered when due such Holder shall
thereafter be entitled to interest on the unpaid amount until such amount is
paid in full to the Holder at a per annum rate equal to the lower of (x) the
sum of prime rate published from time to time by the Wall Street Journal plus
three percent (3%) and (y) the highest interest rate permitted by applicable
law.
C. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under
this Certificate of Designation, at law or in equity (including a decree of
specific performance and/or other injunctive relief), no remedy contained
herein shall be deemed a waiver of compliance with the provisions giving rise
to such remedy and nothing herein shall limit a Holder's right to pursue
actual damages for any failure by the Company to comply with the terms of
this Certificate of Designation. Company covenants to each Holder that there
shall be no characterization concerning this instrument other than as
expressly provided herein; provided, however, that the Company shall be
entitled to prepare summaries of this Certificate of Designation for purposes
of complying with its disclosure obligations and in connection with bona fide
disputes as to the operations of the provisions of this Certificate of
Designation.
D. FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
part of a Holder in the exercise of any power, right or privilege hereunder
shall operate as
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Page 21
a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
E. NOTICES. Any notice from a Holder to the Company hereunder shall
be given to the Company in accordance with Section 8(f) of the Securities
Purchase Agreement. Any notices from the Company to a Holder shall be given
to such Holder at such Holder's address as shown in the stock register of the
Company and otherwise in accordance with Section 8(f) of the Securities
Purchase Agreement.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 30, 1999 (the
"AGREEMENT"), is made by and between EXCELSIOR-HENDERSON MOTORCYCLE
MANUFACTURING COMPANY, a Minnesota corporation (the "COMPANY"), and the
investors named on the signature pages hereto (the "INITIAL INVESTORS").
W I T N E S S E T H :
WHEREAS, in connection with the Securities Purchase Agreement dated
April 30, 1999 between the Initial Investors and the Company (the "PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of said Purchase Agreement, to issue and sell to the Initial
Investors Ten Million U.S. Dollars ($10,000,000) face amount of the Company's
Series D Convertible Preferred Stock ("PREFERRED SHARES") convertible into
shares of the Company's common stock, par value $0.01 per share (the "COMMON
STOCK"), together with Stock Purchase Warrants (the "WARRANTS") to purchase
additional shares of Common Stock. The shares of Common Stock of the Company
issuable upon conversion of or otherwise pursuant to the Preferred Shares are
collectively referred to herein as the "COMMON SHARES." The shares of Common
Stock issuable upon exercise or otherwise pursuant to the Warrants are
collectively referred to as the "WARRANT SHARES." The rights and privileges
of the holders of the Preferred Shares are set forth in the Statement of
Designation of Rights, Preferences and Limitations of Series D Convertible
Preferred Stock of the Company ("CERTIFICATE OF DESIGNATION").
WHEREAS, to induce the Initial Investors to execute and deliver the
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws with respect to the Common
Shares and Warrant Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
(a) "HOLDERS" are stockholders of the Company who, by virtue of
agreements with the Company, are entitled to include their securities in
certain Registration Statements filed by the Company.
<PAGE>
Excelsior-Henderson Motorcycle Manufacturing Company Page 2
Registration Rights Agreement
(b) "INVESTORS" means the Initial Investors and any transferees or
assignees of the Initial Investors who agree to become bound by the
provisions of this Agreement in accordance with Section 9 hereof.
(c) "REGISTRABLE SECURITIES" means the Common Shares and Warrant
Shares issued or issuable with respect to the Preferred Shares and the
Warrants (without regard to any limitations on conversion or exercise) and
any shares of capital stock issued or issuable, from time to time (with any
adjustments), on or in exchange for or otherwise with respect to the
foregoing.
(d) "REGISTRATION PERIOD" means the period between the date of
this Agreement and the earlier of (i) the date on which all of the
Registrable Securities have been sold and no further Registrable Securities
may be issued in the future, or (ii) the date on which all the Registrable
Securities relating to the Preferred Shares (in the opinion of Investors'
counsel) may be immediately sold without registration and without restriction
(including without limitation as to volume by each holder thereof) as to the
number of Registrable Securities to be sold pursuant to Rule 144 (as defined
herein) or otherwise.
(e) "REGISTRATION STATEMENT" means, collectively, each
registration statement filed with the Securities and Exchange Commission (the
"SEC") under the 1933 Act pursuant to the terms hereof.
(f) The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing a Registration Statement
or Statements in compliance with the 1933 Act and pursuant to Rule 415 under
the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415") and applicable rules and regulations
thereunder, and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company will file a Registration
Statement on Form S-3 with the SEC registering the Registrable Securities and
no other securities (other than (i) shares of Common Stock issuable upon
exercise of warrants issued to Shoreline (as defined below) in connection
with the transactions contemplated hereby and under the Securities Purchase
Agreement or (ii) issued or issuable to holders with registration rights
pursuant to the previously granted stock purchase warrants as described in
Section 3.3 of the Purchase Agreement) for resale within twenty (20) business
days of the closing of the initial purchase of the Preferred Shares (the
"CLOSING DATE"). To the extent allowable under the 1933 Act and the rules
promulgated thereunder (including Rule 416), the Registration Statement shall
include the Common Shares and the Warrant Shares and such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Preferred Shares and exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar
transactions. The number of shares of Common Stock initially included in
<PAGE>
Page 3
such Registration Statement shall be no less than (a) the number of shares of
Common Stock issuable upon exercise of the Warrants plus (b) two (2) times
the number of Common Shares that would be issuable upon conversion of the
Preferred Shares at the Market Price (as defined in the Certificate of
Designation) on the Closing Date.
The Company shall use its best efforts to cause such Registration Statement
to be declared effective by the SEC as soon as practicable after filing and
in any event no later than the one hundred twentieth (120th)day following the
Closing Date (the "REQUIRED EFFECTIVE DATE"). Such best efforts shall
include, but not be limited to, promptly responding to all comments received
from the staff of the SEC. Should the Company receive notification from the
SEC that the Registration Statement will receive no action or no review from
the SEC, the Company shall cause such Registration Statement to become
effective within five (5) business days of such SEC notification. Once
declared effective by the SEC, the Company shall cause such Registration
Statement to remain effective throughout the Registration Period, except as
permitted pursuant to Section 3(a).
If (i) at any time after effectiveness of the Registration Statement
sales cannot be made thereunder for any reason for a period of more than ten
(10) consecutive business days, or thirty (30) days in the aggregate, during
any twelve (12) month period or (ii) the Common Stock is not listed or
included for quotation on Nasdaq, Nasdaq SmallCap, the NYSE or AMEX for more
than an aggregate of ten (10) business days in any twelve month period, the
Company will thereafter make cash payments to the Investors as partial
compensation for such delay in an amount equal to one and one-half percent
(1.5%) of the Outstanding Face Amount (as defined below) for each month that
sales cannot be made under the effective Registration Statement or the Common
Stock is not listed or included for quotation on Nasdaq, Nasdaq SmallCap, the
NYSE or AMEX, continuing through the date that sales can be made under the
effective Registration Statement or the Common Stock is not listed or
included for quotation on Nasdaq, Nasdaq SmallCap, the NYSE or AMEX
("ILLIQUIDITY PAYMENTS"). "OUTSTANDING FACE AMOUNT" shall mean the sum of
(x) the Face Amount of the then-outstanding Preferred Shares and (y) in the
case of Registrable Securities issued upon conversion of Preferred Shares and
not previously sold by such Investor, the Face Amount of the Preferred Shares
from which such Registrable Securities were converted. Such payments will be
prorated on a daily basis for partial months and will be paid to each
Investor in cash within five (5) business days following the end of each
month during which Illiquidity Payments accrue or, at each Investor's option,
may be added to the Face Value of the Preferred Shares and thereafter be
convertible into Common Stock at the Conversion Price (as defined in the
Certificate of Designation).
(b) LATE REGISTRATION PAYMENTS. If the Registration Statement
required pursuant to Section 2(a) above has not been declared effective by
the Required Effective Date, the Company will make cash payments to each
Investor as partial compensation for such delay (the "LATE REGISTRATION
PAYMENTS"). The Late Registration Payments will be equal to one and one-half
percent (1.5%) of the Outstanding Face Amount for each month following the
Required Effective Date, continuing through the date the Registration
Statement is declared effective by the SEC. The Late Registration Payments
will be prorated on a daily basis for partial months and will be paid to the
Initial Investors in cash within five (5) business days following the earlier
<PAGE>
Page 4
of: (i) the end of each month following the Required Effective Date, or (ii)
the effective date of the Registration Statement. Nothing herein shall limit
the Investors' right to pursue actual damages for the Company's failure to
file a Registration Statement or to have it declared effective by the SEC on
or prior to the Required Effective Date in accordance with the terms of this
Agreement.
(c) LIMITATION ON LATE REGISTRATION PAYMENTS AND ILLIQUIDITY
PAYMENTS. Notwithstanding anything in this Agreement or in the Certificate
of Designation to the contrary, (i) the aggregate Late Registration Payments
payable hereunder, if any, together with any Default Amounts (as defined in
the Certificate of Designation) payable with respect to any of the Preferred
Shares pursuant to the Certificate of Designation as a result of a failure to
timely obtain effectiveness of the Registration Statement, shall not exceed
30% of the Face Amount of the Preferred Shares outstanding on the date of
payment, and (ii) the aggregate Illiquidity Payments payable with respect to
any period after effectiveness of the Registration Statement during which
sales cannot be made thereunder or during which the Common Stock is not
listed or included for quotation on Nasdaq, Nasdaq SmallCap, the NYSE or
AMEX, if any, together with any Default Amounts payable with respect to any
of the Preferred Shares as a result of such period of ineffectiveness
pursuant to the Certificate of Designation, shall not exceed 30% of the Face
Amount of the Preferred Shares outstanding on the date of payment. To the
extent the Late Registration Payments or Illiquidity Payments, as applicable,
together with any Default Amounts would exceed the respective limits
specified above in this Section 2(c), the aggregate Default Amounts will be
reduced so that the aggregate Late Registration Payments or Illiquidity
Payments, when added to the Default Amounts paid with respect to such event,
do not exceed such limits, and no further Late Registration Payments or
Illiquidity Payments, as applicable, will thereafter be payable with respect
to any such event.
(d) PIGGYBACK REGISTRATIONS. If, at any time prior to the
expiration of the Registration Period, the Registration Statement is not
effective with respect to all of the Registrable Securities and the Company
decides to register any of its securities for its own account or for the
account of others (excluding registrations by the Company on Form S-4 or S-8
or their equivalents relating to equity securities to be issued solely in
connection with an acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans),
the Company will promptly give the Investors written notice thereof, and will
use its best efforts to include in such registration all or any part of the
Registrable Securities so requested by such Investors (excluding any
Registrable Securities previously included in a Registration Statement).
Each Investor's request for registration must be given to the Company in
writing within fifteen (15) days after receipt of the notice from the
Company. If the registration for which the Company gives notice is a public
offering involving an underwriting, the Company will so advise the Investors
as part of the above-described written notice. In such event, if the
managing underwriter(s) of the public offering impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, such limitation would be
necessary to effect an orderly public distribution, then the Company will be
obligated to include only such limited portion, if any, of the Registrable
Securities with respect to which such Investors have requested inclusion
hereunder. Any exclusion of Registrable Securities shall be made pro-rata
among all
<PAGE>
Page 5
Holders of the Company's securities seeking to include shares of Common Stock
in proportion to the number of shares of Common Stock sought to be included
by such Holders; provided, however, that the Company will not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities the Holders of which are not entitled by right to inclusion of
securities in such Registration Statement or are not entitled pro rata
inclusion with the Registrable Securities. No right to registration of
Registrable Securities under this Section 2(d) shall be construed to limit in
any way the registration required under Section 2(a) above. The obligations
of the Company under this Section 2(d) will expire upon the earlier of: (i)
the effectiveness of the Registration Statement filed pursuant to Section
2(a) above; (ii) after the Company has afforded the opportunity for the
Investors to exercise registration rights under this Section 2(d) for two
registrations; provided, however, that any Investor who shall have had any
Registrable Securities excluded from any Registration Statement in accordance
with this Section 2(d) shall be entitled to include in any additional
Registration Statement filed by the Company the Registrable Securities so
excluded; or (iii) when all of the Registrable Securities held by any
Investor may be sold by such Investor under Rule 144 under the 1933 Act
without being subject to any volume restrictions.
(e) ELIGIBILITY FOR FORM S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of
the sale by the Investors of the Registrable Securities. The Company shall
file all reports required to be filed by the Company with the SEC in a timely
manner so as to preserve its eligibility for the use of Form S-3.
3. ADDITIONAL OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall have the
following additional obligations:
(a) The Company shall keep the Registration Statement effective
pursuant to Rule 415 under the 1933 Act at all times during the Registration
Period as defined in Section 1(d) above; provided, however, that the
Investors agree that (i) use of the prospectus under the Registration
Statement may be suspended pursuant to Section 3(f) and (ii) upon receipt of
any notice from the Company that, in the judgment of the Company's Board of
Directors, it is advisable to suspend use of the prospectus for a discrete
period of time due to pending corporate developments, public filing with the
SEC or similar events, the Investors will forthwith discontinue, for a period
of up to ten (10) consecutive business days, disposition of such Registrable
Securities covered by such Registration Statement or prospectus until advised
in writing by the Company that use of the applicable prospectus may be
resumed, and until each such Investor has received copies of any additional
or supplemented filings that are incorporated or deemed to be incorporated by
reference in such prospectus. The Company shall use all reasonable efforts to
ensure that the use of the prospectus may be resumed as soon as practicable,
and in any event shall not be entitled to require the Investors to suspend
use of any prospectus for more than thirty (30) days in any twelve month
period.
(b) The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) filed by the Company
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made,
<PAGE>
Page 6
not misleading. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to permit sales pursuant to the
Registration Statement at all times during the Registration Period, and,
during such period, shall comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement until the termination of the
Registration Period, or if earlier, such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement
(c) The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with
the SEC or received by the Company, one copy of the Registration Statement
and any amendment thereto; each preliminary prospectus and final prospectus
and each amendment or supplement thereto; and, in the case of the
Registration Statement required under Section 2(a) above, each letter written
by or on behalf of the Company to the SEC and each item of correspondence
from the SEC or the staff of the SEC, in each case relating to such
Registration Statement (other than any portion of any item thereof which
contains information for which the Company has sought confidential
treatment); and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto, and such
other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Investor.
(d) The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement
under such other securities or blue sky laws of such jurisdictions as each
Investor who holds (or has the right to hold) Registrable Securities being
offered reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (iv) take all
other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions. Notwithstanding the foregoing
provision, the Company shall not be required in connection therewith or as a
condition thereto to (i) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), (ii)
subject itself to general taxation in any such jurisdiction, (iii) file a
general consent to service of process in any such jurisdiction, (iv) provide
any undertakings that cause material expense or burden to the Company, or (v)
make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of
the Company and its stockholders.
(e) In the event Investors who hold a majority in interest of the
Registrable Securities being offered in an offering pursuant to a
Registration Statement or any amendment or supplement thereto under Section
2(a) or 3(b) select underwriters reasonably acceptable to the Company for
such offering, the Company shall enter into and perform its obligations under
an
<PAGE>
Page 7
underwriting agreement in usual and customary form including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering.
(f) The Company shall notify (by telephone and also by facsimile
and reputable overnight courier) each Investor who holds Registrable
Securities being sold pursuant to a Registration Statement of the happening
of any event of which the Company has knowledge as a result of which the
prospectus included in the 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 the statements therein, in
light of the circumstances under which they were made, not misleading (a
"SUSPENSION EVENT"). The Company shall make such notification as promptly as
practicable after the Company becomes aware of such Suspension Event, shall
promptly use its best efforts (but in any event within five business (5)
days) to prepare a supplement or amendment to the Registration Statement to
correct such untrue statement or omission, and shall deliver a number of
copies of such supplement or amendment to each Investor as such Investor may
reasonably request. Notwithstanding anything contained herein or in the
Securities Purchase Agreement, in the event that the use of the Registration
Statement is suspended by the Company, the Company shall promptly notify all
Investors whose securities are covered by the Registration Statement of such
suspension, and shall promptly notify each such Investor as soon as the use
of the Registration Statement may be resumed. Notwithstanding anything to
the contrary, the Company shall cause the Transfer Agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Purchase Agreement in connection with any
sale of Registrable Securities with respect to which such Investor has
entered into a contract for sale prior to receipt of notice of such
suspension and for which such Investor has not yet settled.
(g) Subject to the Company's rights under Section 3(a), the
Company shall use its best efforts to prevent the issuance of any stop order
or other suspension of effectiveness of a Registration Statement and, if such
an order is issued, shall use its best efforts to obtain the withdrawal of
such order at the earliest possible time and to notify each Investor who
holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof.
(h) The Company shall permit a single firm of counsel designated
by the Investors who hold a majority in interest of the Registrable
Securities being sold pursuant to such registration to review the
Registration Statement and all amendments and supplements thereto (as well as
all requests for acceleration or effectiveness thereof) a reasonable period
of time prior to their filing with the SEC, and shall not file any document
in a form to which such counsel reasonably objects, unless required by law in
the opinion of the Company's counsel. The sections of such Registration
Statement covering information with respect to the Investors, the Investors'
beneficial ownership of securities of the Company or the Investors' intended
method of disposition of Registrable Securities shall conform to the
information provided to the Company by each of the Investors.
<PAGE>
Page 8
(i) The Company shall make generally available to its security
Holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement in a form
complying with the provisions of Rule 158 under the 1933 Act.
(j) At the request of the Investors who hold a majority in
interest of the Registrable Securities being sold pursuant to such
registration, the Company shall furnish on the date that Registrable
Securities are delivered to an underwriter for sale in connection with the
Registration Statement (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters; and (ii)
an opinion, dated such date, from counsel representing the Company for
purposes of such Registration Statement, in form and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters and Investors.
(k) The Company shall make available for inspection by any
Investor whose Registrable Securities are being sold pursuant to such
registration, any underwriter participating in any disposition pursuant to
the Registration Statement, and any attorney, accountant or other agent
retained by any such Investor or underwriter (collectively, the
"INSPECTORS"), all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "RECORDS"), as
shall be reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential,
and of which determination the Inspectors are so notified, unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court or government body
of competent jurisdiction, or (iii) the information in such Records has been
made generally available to the public other than by disclosure in violation
of this or any other agreement (to the knowledge of the relevant Investor).
The Company shall not be required to disclose any confidential information in
such Records to any Inspector until and unless such Inspector shall have
entered into confidentiality agreements (in form and substance satisfactory
to the Company) with the Company with respect thereto, substantially in the
form of this Section 3(k). Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
the Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein shall be deemed to
limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.
(l) The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant hereto unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the
<PAGE>
Page 9
disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a
court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees
that it shall, upon learning that disclosure of such information concerning
an Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor
prior to making such disclosure and allow such Investor, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information.
(m) The Company shall cause the listing and the continuation of
listing of all the Registrable Securities covered by the Registration
Statement on the Nasdaq National Market System, the Nasdaq Small Cap Market,
the New York Stock Exchange, the American Stock Exchange or any successor
national exchange or market, and cause the Registrable Securities to be
quoted or listed on each additional national securities exchange or quotation
system upon which the Common Stock is then listed or quoted.
(n) The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than
the effective date of the Registration Statement.
(o) The Company shall cooperate with the Investors who hold
Registrable Securities being sold and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable
such certificate to be in such denominations or amounts as the case may be,
and registered in such names as the managing underwriter or underwriters, if
any, or the Investors may reasonably request, all in accordance with the
provisions set forth in Section V of the Purchase Agreement.
(p) At the request of any Investor, the Company shall promptly
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary in
order to change the plan of distribution set forth in such Registration
Statement.
(q) The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the 1933 Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated by the SEC).
(r) The Company shall take all other reasonable actions as any
Investor or the underwriters, if any, may reasonably request to expedite and
facilitate disposition by such Investor of the Registrable Securities
pursuant to the Registration Statement.
<PAGE>
Page 10
(s) Subject to registration rights of holders of warrants referred
to in Section 2(a) hereof, from and after the date of this Agreement, the
Company shall not, and shall not agree to, allow the holders of any
securities of the Company to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or
supplement thereto under Section 3(b) hereof without the consent of the
holders of a majority-in-interest of the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of each Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect
the registration of the Registrable Securities. At least ten (10) business
days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the
Company requires from each such Investor (the "REQUESTED INFORMATION") if
such Investor elects to have any of such Investor's Registrable Securities
included in the Registration Statement. If within three (3) business days
prior to the filing date the Company has not received the Requested
Information from an Investor (a "NON-RESPONSIVE INVESTOR"), then the Company
may file the Registration Statement without including Registrable Securities
of such Non-Responsive Investor.
(b) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and,
if so directed by the Company, such Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession (other
than a limited number of file copies), of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(d) Without limiting any Investor's rights under Sections 2(a)
hereof, no Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii)
<PAGE>
Page 11
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the
terms of such underwriting arrangements, and (iii) agrees to pay its pro rata
share of all underwriting discounts and commissions and other fees and
expenses of investment bankers and any manager or managers of such
underwriting and legal expenses of the underwriter applicable with respect to
its Registrable Securities, in each case to the extent not payable by the
Company pursuant to the terms of this Agreement.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company, and the reasonable fees and disbursements of one counsel
selected by the Initial Investors pursuant to Section 3(e) hereof, shall be
borne by the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the 1933
Act or the Exchange Act, any underwriter (as defined in the 1933 Act) for the
Investors, the directors, if any, of such underwriter and the officers, if
any, of such underwriter, and each person, if any, who controls any such
underwriter within the meaning of the 1933 Act or the Exchange Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, expenses or
liabilities (joint or several) (collectively together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened in respect thereof, "CLAIMS") to which any of
them become subject under the 1933 Act, the Exchange Act or otherwise,
insofar as such Claims arise out of or are based upon any of the following
statements, omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any post-effective amendment thereof or 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,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the prospectus (as amended or supplemented, if the Company files
any amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or
alleged violation by the Company of the 1933 Act, the Exchange Act or any
other law, including without limitation any state securities law or any rule
or regulation thereunder (the matters in the foregoing clauses (i) through
(iii) being, collectively, "VIOLATIONS"). Subject to the restrictions set
forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Investors and each such underwriter or
controlling person and each such other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by
<PAGE>
Page 12
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (A) shall not
apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; and (B) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Indemnified Persons and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the Exchange Act, and any other stockholder
selling securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such stockholder within the
meaning of the 1933 Act or the Exchange Act (an "INDEMNIFIED PARTY"and,
collectively, "INDEMNIFIED PARTIES"), against any Claim to which any of them
may become subject, under the 1933 Act, the Exchange Act or otherwise,
insofar as such Claim arises out of or is 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 to the
Company by such Investor expressly for use in connection with such
Registration Statement, and subject to Section 6(c), such Investor will
promptly reimburse any legal or other expenses (promptly as such expenses are
incurred and due and payable) reasonably incurred by all Indemnified Parties
in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b)
and Section 7) for only that amount of a Claim as does not exceed the net
proceeds actually received by such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 9.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and this 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 control of the defense thereof with counsel
<PAGE>
Page 13
mutually satisfactory to the indemnifying parties and the Indemnified Person
or the Indemnified Party, as the case may be; provided, however, that such
Indemnified Party shall diligently pursue such defense and that such
Indemnified Party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party,
the representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action including both the Indemnified Person or the Indemnified Party and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified
Party which are different from or in addition to those available to such
indemnifying party. The Company shall pay for only one separate legal counsel
for the Investors; such legal counsel shall be selected by the Investors
holding a majority in interest of the Registrable Securities. The failur to
deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification provided for
herein is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that (i) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the
fault standards set forth in Section 6, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any
seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification
or other obligations under this Agreement) by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the 1933 Act or any
similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without
registration ("RULE 144"), the Company agrees to:
(a) File with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company under the
1933 Act and the Exchange Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 4.3 of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents is
required for the applicable provisions of Rule 144; and
<PAGE>
Page 14
(b) Furnish to each Investor so long as such Investor holds
Preferred Shares, Warrants or Registrable Securities, promptly upon request,
(i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the 1933 Act and the Exchange Act, (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 to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Investors
hereunder, including the right to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by the
Investors to transferees or assignees of all or any portion of such
securities only if (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (ii) the Company
is, within a reasonable time after such transfer or assignment, furnished
with written notice of the name and address of such transferee or assignee
and the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (iv) at
or before the time the Company received the written notice contemplated by
clause (ii) of this sentence, the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement including, but not limited to, the
covenant of each Investor that it will not transfer any of the Securities in
violation of federal and state securities laws, and (vi) such transferee
shall be an "ACCREDITED INVESTOR" as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the Company and Investors who hold a majority interest of
the Registrable Securities (but not an Investor who no longer owns any
Warrants or Registrable Securities and who is not affected by such amendment
or waiver). Any amendment or waiver effected in accordance with this Section
10 shall be binding upon each Investor and the Company. Notwithstanding the
foregoing, no amendment or waiver shall retroactively affect any Investor
without its comment or prospectively adversely affect any Investor who no
longer owns any Warrants or Registrable Securities without its consent.
Neither Article 6 nor Article 7 hereof may be amended or waived in a manner
adverse to an Investor without its consent.
11. MISCELLANEOUS.
(a) CONFLICTING INSTRUCTIONS. A person or entity is deemed to be
a holder of Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or
<PAGE>
Page 15
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(with return receipt requested) or delivered personally or by courier
(including a nationally recognized overnight delivery service) or by
facsimile transmission. Any notice so given shall be deemed effective three
days after being deposited in the U.S. Mail, or upon receipt if delivered
personally or by courier or facsimile transmission, in each case addressed to
a party at the following address or such other address as each such party
furnishes to the other in accordance with this Section 11(b):
IF TO THE COMPANY:
Excelsior-Henderson Motorcycle Manufacturing Company
805 Hanlon Drive
Belle Plaine, MN 56011
Telephone: (612) 873-5826
Fax: (612) 873-5956
Attention: Chief Financial Officer
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attn: Gale Mellum
Tel: (612) 336-3139
Fax: (612) 336-3026
in each case with a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telephone: (415) 332-7800
Telecopy: (415) 332-7808
Attention: General Counsel
If to an Investor: To the address set forth immediately below such
Investor's name on the signature pages hereto.
<PAGE>
Page 16
Each party shall provide written notice to the other parties of any change in
address.
(c) WAIVER. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
(d) GOVERNING LAW. This Agreement shall be enforced, governed by
and construed in accordance with the laws of the State of Delaware applicable
to the agreements made and to be performed entirely within such state,
without giving effect to rules governing the conflict of laws, and any
disputes arising hereunder will be adjudicated in federal or state court
situated in Delaware. Each party hereto consents to such venue in Delaware
and to the personal and subject matter jurisdiction of said courts and, to
the extent permitted by applicable law, agrees to waive any objection as to
such jurisdiction or venue, and agrees not to assert any defense based on
lack of jurisdiction or venue.
(e) SEVERABILITY. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(f) ENTIRE AGREEMENT. This Agreement, the Securities Purchase
Agreement, the Certificate of Designation, the Escrow Agreement and the
Warrant (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein or therein. This Agreement
supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
(g) SUCCESSORS AND ASSIGNS. Subject to the requirements of
Section 9 hereof, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
Notwithstanding anything to the contrary herein, including without
limitation, Section 9, the rights of an Investor hereunder shall be
assignable to and exercisable by a bona fide pledgee of the Registrable
Securities in connection with an Investor's margin or brokerage accounts.
(h) USE OF PRONOUNS. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
(i) HEADINGS. The headings and subheadings in the Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
<PAGE>
Page 17
(j) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by facsimile
transmission, and facsimile signatures shall be binding on the parties hereto.
(k) FURTHER ACTS. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) CONSENTS. All consents and other determinations to be made by
the Investors pursuant to this Agreement shall be made by the Initial
Investors or the Investors holding a majority of the Registrable Securities,
determined as if all Preferred Shares and all Warrants then outstanding had
been converted into or exercised for Registrable Securities.
<PAGE>
Page 18
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
COMPANY:
- --------
EXCELSIOR-HENDERSON MOTORCYCLE
MANUFACTURING COMPANY
By:
-----------------------------------
Name:
Title:
INITIAL INVESTORS:
- ------------------
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By:
----------------------------------
Name:
Its: Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Fax: (610) 617-0570
Telephone: (610) 617-5900
Attn: Mr. Wayne D. Bloch
<PAGE>
Page 19
SOCIETE GENERALE
By:
----------------------------------
Name:
Its:
RESIDENCE: France
ADDRESS:
c/o SG Cowen Securities Corporation
1221 Avenue of the Americas
6th Floor
New York, New York 10020
Fax: (212) 278-5260
Telephone: (212) 278-4527
Attn: Mr. Guillaume Pollet
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: April 30, 1999
to Purchase [Number] Shares of Common Stock of
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY, a Minnesota
corporation (the "COMPANY"), hereby certifies that [holder], its permissible
transferees, designees, successors and assigns (collectively, the "HOLDER"),
for value received, is entitled to purchase from the Company at any time
commencing on May 3, 1999 ("ISSUANCE DATE") and terminating on the fifth
anniversary of the Issuance Date (or such earlier date as is specified in a
duly delivered Call Notice (as defined below)) up to [number] shares (each a
"SHARE" and collectively the "SHARES") of the Company's common stock (the
"COMMON STOCK"), at an exercise price of $8.4375 (the "EXERCISE PRICE"). The
number of Shares purchasable hereunder is subject to adjustment as provided
in Section 4 hereof.
1. EXERCISE OF WARRANTS.
(a) Upon presentation and surrender of this Common Stock
Purchase Warrant Certificate ("WARRANT CERTIFICATE" or "CERTIFICATE"), or a
Lost Certificate Affidavit (as defined below), accompanied by a completed
Election to Purchase in the form attached hereto as Exhibit A (the "ELECTION
TO PURCHASE") duly executed, at the principal office of the Company at 805
Hanlon Drive, Belle Plaine, Minnesota 56011, Attn: Chief Financial Officer,
together with a check payable to the Company in the amount of the Exercise
Price multiplied by the number of Shares being purchased, the Company or the
Company's Transfer Agent as the case may be, shall, within three (3) trading
days of receipt of the foregoing, deliver to the Holder hereof, certificates
of fully paid and non-assessable Common Stock which in the aggregate
represent the number of Shares being purchased. The certificates so
delivered shall be in such denominations as may be reasonably requested by
the Holder and shall be registered in the name of the Holder or such other
name as shall be designated by the Holder. All or less than all of the
Warrants represented by this Certificate may be exercised and, in case of the
exercise of less than all, the
<PAGE>
Excelsior-Henderson Motorcycle Manufacturing Company Page 2
Common Stock Purchase Warrant Certificate
Company, upon surrender hereof, will at the Company's expense deliver to the
Holder a new Warrant Certificate or Certificates (in such denominations as
may be requested by the Holder) of like tenor and dated the date hereof
entitling said holder to purchase the number of Shares represented by this
Certificate which have not been exercised and to receive Registration Rights
with respect to such Shares, and all other rights with respect to the shares
which the Holder has on the date hereof.
(b) CASHLESS EXERCISE. Notwithstanding the foregoing provision
regarding payment of the Exercise Price in cash, the Holder may elect, with
the prior written consent of the Company, which may be granted or withheld in
the Company's sole discretion on a case by case basis, to receive a reduced
number of Shares in lieu of tendering the Exercise Price in cash ("CASHLESS
EXERCISE"); PROVIDED that the Holder shall be entitled, without the consent
of the Company, to elect Cashless Exercise at any time that the resale of the
Warrant Shares by the Holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"). In such case, the number of Shares to be issued to the
Holder shall be computed using the following formula:
X = Y(A-B)
------
A
where: X = the number of Shares to be issued to the Holder;
Y = the number of Shares to be exercised under this Warrant
Certificate;
A = the Market Value (defined below) of one share of Common
Stock on the trading day immediately prior to the date that the
Election to Purchase is duly surrendered to the Company for full
or partial exercise; and
B = the Exercise Price.
The term "Market Value" means, for any security as of any date, the five-day
average closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded as
reported by Bloomberg Financial Markets or a comparable reporting service of
national reputation selected by the Company and reasonably acceptable to the
Holder if Bloomberg Financial Markets is not then reporting closing bid
prices of such security (collectively, "Bloomberg"), or if the foregoing does
not apply, the last reported sale price of such security in the
over-the-counter market or the electronic bulletin board of such security as
reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such
security that are reported in the "pink sheets" by the National Quotation
Bureau, Inc. If the Market Value cannot be calculated for such security on
such date on any of the foregoing bases, the Market Value of such security on
such date shall be the fair market value as reasonably determined by an
investment banking firm selected by the Company and reasonably acceptable to
the Holder with the costs of such appraisal to be borne by the Company.
2. EXCHANGE, TRANSFER AND REPLACEMENT. (a) At any time prior to the
exercise hereof, this Warrant Certificate may be exchanged upon presentation
and surrender to the Company, alone or with other Warrant Certificates of
like tenor of different denominations registered in the name of the same
Holder, together with a duly executed Assignment in
<PAGE>
Page 3
substantially the form and substance of the Form of Assignment which
accompanies this Warrant Certificate. The Warrant Certificate or Certificates
shall be exchanged for another Warrant Certificate or Certificates of like
tenor in the name of such Holder and/or the transferees named in such
Assignment, exercisable for the aggregate number of Shares as the Certificate
or Certificates surrendered, provided that the Company shall not be obligated
to issue exchange or transfer Certificates for an exchange or transfer of
less than 10,000 shares. The Company shall issue any Warrant Certificates
reflecting such transfer or assignment (including such portion of this
Warrant Certificate, if any, as shall not have been transferred or assigned)
within three (3) business days after receipt of the requisite Warrant
Certificate(s) and duly completed Assignment.
(b) REPLACEMENT OF WARRANT CERTIFICATE. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant Certificate and, in the case of
any such loss, theft, or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company (collectively, a
"LOST CERTIFICATE AFFIDAVIT"), or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant Certificate, the Company, at its
expense, will execute and deliver in lieu thereof, a new Warrant Certificate
of like tenor.
(c) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant Certificate in connection with any transfer, exchange or
replacement as provided in this Section 2, this Warrant Certificate shall be
promptly canceled by the Company. The Company shall pay all taxes (other
than securities transfer taxes) and all other expenses (other than legal
expenses, if any, incurred by the Holder or transferees) and charges payable
in connection with the preparation, execution and delivery of Warrant
Certificates pursuant to this Section 2.
(d) WARRANT REGISTER. The Company shall maintain, at its
principal executive offices (or at the offices of the transfer agent for the
Warrant Certificate or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant
Certificate (the "WARRANT REGISTER"), in which the Company shall record the
name and address of the person in whose name this Warrant Certificate has
been issued, as well as the name and address of each permitted transferee and
each prior owner of this Warrant Certificate.
(e) MANDATORY EXERCISE RIGHT. The Company shall be entitled,
on any day following the third anniversary of the Issuance Date on which the
average of the closing bid prices of the Common Stock (as reported by
Bloomberg, L.P.) during the ten (10) consecutive trading day period ending on
the trading day immediately preceding such date (the "Calculation Date"), is
equal to or greater than $13.50 per Share (subject to adjustment in
accordance with Section 4 hereof), to deliver a written notice (the
"Mandatory Exercise Notice") to the Holder requiring such Holder to exercise
this Warrant Certificate in accordance with Section 1 hereof on the date
which is twenty (20) trading days following the date of such notice (the
"Exercise Date"); provided, however, that the Company shall have such right
if and only if (x) for a period of thirty (30) consecutive trading days prior
to such Calculation Date, and (y) at all times during such ten (10)
consecutive trading day period of time and continuing through the Exercise
Date, the Shares of Common Stock issuable upon exercise of the Warrants are
(i) authorized and reserved for issuance, and (ii) listed for trading on each
principal exchange or market on which
<PAGE>
Page 4
the shares of Common Stock of the Company were then traded; provided further,
that the Holder shall not be required to exercise this Warrant with respect
to any such notice unless the closing bid price of the Common Stock on the
trading day immediately preceding the Exercise Date is at least equal to
$11.8125 (subject to adjustment in accordance with Section 4 hereof).
Nothing in this Section 2(e) shall prohibit exercise of the Warrant otherwise
permitted pursuant to the terms of this Warrant during the pendency of any
Mandatory Exercise Notice.
3. RIGHTS AND OBLIGATIONS OF HOLDERS OF THIS CERTIFICATE. The Holder
of this Certificate shall not, by virtue hereof, be entitled to any rights of
a stockholder in the Company, either at law or in equity; provided, however,
that in the event any certificate representing shares of Common Stock or
other securities is issued to the holder hereof upon exercise of some or all
of the Warrants, such holder shall, for all purposes, be deemed to have
become the holder of record of such Common Stock on the date on which this
Certificate, together with a duly executed Purchase Form, was surrendered and
payment of the aggregate Exercise Price was made, irrespective of the date of
delivery of such share certificate.
4. ADJUSTMENTS.
(a) STOCK DIVIDENDS, RECLASSIFICATIONS, RECAPITALIZATIONS, ETC.
In the event the Company: (i) pays a dividend in Common Stock or makes a
distribution in Common Stock, (ii) subdivides its outstanding Common Stock
into a greater number of shares, (iii) combines its outstanding Common Stock
into a smaller number of shares or (iv) increases or decreases the number of
shares of Common Stock outstanding by reclassification of its Common Stock
(including a recapitalization in connection with a consolidation or merger in
which the Company is the continuing corporation), then (1) the Exercise Price
on the record date of such division or distribution or the effective date of
such action shall be adjusted by multiplying such Exercise Price by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event,
and (2) the number of shares of Common Stock for which this Warrant
Certificate may be exercised immediately before such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the
Exercise Price immediately before such event and the denominator of which is
the Exercise Price immediately after such event.
(b) CASH DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that
at any time or from time to time the Company shall distribute to all holders
of Common Stock (i) any dividend or other distribution of cash, evidences of
its indebtedness, shares of its capital stock or any other properties or
securities or (ii) any options, warrants or other rights to subscribe for or
purchase any of the foregoing (other than in each case, (w) the issuance of
any rights under a shareholder rights plan, (x) any dividend or distribution
described in Section 4(a), (y) any rights, options, warrants or securities
described in Section 4(c) and (z) any cash dividends or other cash
distributions from current earnings), then the number of shares of Common
Stock issuable upon the exercise of each Warrant Certificate shall be
increased to a number determined by multiplying the number of shares of
Common Stock issuable upon the exercise of such Warrant Certificate
immediately prior to the record date for any such dividend or distribution by
a
<PAGE>
Page 5
fraction, the numerator of which shall be such Market Value (as hereinafter
defined) per share of Common Stock on the record date for such dividend or
distribution, and the denominator of which shall be such Market Value per
share of Common Stock on the record date for such dividend or distribution
less the sum of (x) the amount of cash, if any, distributed per share of
Common Stock and (y) the fair value (as determined in good faith by the Board
of Directors of the Company, whose determination shall be evidenced by a
board resolution, a copy of which will be sent to the Holders upon request)
of the portion, if any, of the distribution applicable to one share of Common
Stock consisting of evidences of indebtedness, shares of stock, securities,
other property, warrants, options or subscription or purchase rights; and the
Exercise Price shall be adjusted to a number determined by dividing the
Exercise Price immediately prior to such record date by the above fraction.
Such adjustments shall be made whenever any distribution is made and shall
become efective as of the date of distribution, retroactive to the record
date for any such distribution. No adjustment shall be made pursuant to this
Section 4(b) which shall have the effect of decreasing the number of shares
of Common Stock issuable upon exercise of each Warrant Certificate or
increasing the Exercise Price. No adjustments shall be made under this
Section 4(b) unless the adjustments to be made to the Exercise Price would,
individually or together with any prior adjustments to the Exercise Price,
exceed $.10. If such rights, options and warrants expire unexercised, any
such adjustments shall be reversed or adjusted to reflect such expiration.
(c) RIGHTS ISSUE. In the event that at any time, or from time
to time, the Company shall issue rights, options or warrants entitling the
holders thereof to subscribe for shares of Common Stock, or securities
convertible into or exchangeable or exercisable for Common Stock to all
holders of Common Stock (other than in connection with the adoption of a
shareholder rights plan by the Company, or any stock option plan or employee
stock purchase plan) without any charge, entitling such holders to subscribe
for or purchase shares of Common Stock at a price per share that as of the
record date for such issuance is less than the then Market Value per share of
Common Stock, the number of shares of Common Stock issuable upon the exercise
of each Warrant Certificate shall be increased to a number determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of each Warrant Certificate by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options, warrant or securities plus the number of
additional shares of Common Stock offered for subscription or purchase or
into or for which such securities that are issued are convertible,
exchangeable or exercisable, and the denominator of which shall be the number
of shares of Common Stock outstanding on the date of issuance of such rights,
option, warrants or securities plus the total number of shares of Common
Stock which the aggregate consideration expected to be received by the
Company (assuming the exercise or conversion of all such rights, options,
warrants or securities) would purchase at the then Market Value per share of
Common Stock. In the event of any such adjustment, the Exercise Price shall
be adjusted to a number determined by dividing the Exercise Price immediately
prior to such date of issuance by the aforementioned fraction. Such
adjustment shall be made immediately after such rights, options or warrants
are issued and shall become effective, retroactive to the recod date for the
determination of stockholders entitled to receive such rights, options,
warrants or securities. No adjustment shall be made pursuant to this Section
4(c) which shall have the effect of decreasing the number of shares of Common
Stock purchasable upon exercise or each Warrant Certificate or of increasing
the Exercise Price. No
<PAGE>
Page 6
adjustments shall be made under this Section 4(b) unless the adjustments to
be made to the Exercise Price would individually or together with any prior
adjustments to the Exercise Price exceed $.10. If such rights, options and
warrants expire unexercised, any such adjustments shall be reversed or
adjusted to reflect such expiration.
(d) COMBINATION: LIQUIDATION. (i) In the event of a Combination
(as defined below), each Holder shall have the right to receive upon exercise
of the Warrant Certificates the kind and amount of shares of capital stock
or other securities or property which such Holder would have been entitled to
receive upon or as a result of such Combination had such Warrant Certificate
been exercised immediately prior to such event (subject to further adjustment
in accordance with the terms hereof). If agreed to by the Successor Company
(as defined below) the Company shall provide that the surviving or acquiring
Person (the "SUCCESSOR COMPANY") in such Combination will assume by written
instrument the obligations under this Section 4 and the obligations to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to
acquire. If the Successor Company does not agree, or if the Holder otherwise
determines in its sole discretion that it elects to receive cash
consideration as a result of such Combination, the Warrant will be, upon
notice from the Holder to that effect, purchased by the Company within three
(3) business days following such Combination at a price per share of Common
Stock for which the Warrant is then exercisable equal to (x) on and prior to
the first anniversary of the Issuance Date, $1.6875, (y) on and prior to the
second anniversary of the Issuance Date, $3.375, and (z) thereafter, $5.0625.
The provisions of this Section 4(d)(i) shall similarly apply to successive
Combinations involving any Successor Company. "Combination" means an event
in which the Company consolidates with, mergers with or into, or sells all or
substantially all of its assets to another Person, where "Person" means any
individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or
any other entity.
(ii) Subject to the Holder's right to have this Warrant
purchased by the Company pursuant to Section 4(d)(i), in the event of (x) a
Combination where consideration to the holders of Common Stock in exchange
for their shares is payable solely in cash or (y) the dissolution,
liquidation or winding-up of the Company, the Holders shall be entitled to
receive, upon surrender of their Warrant Certificates, distributions on an
equal basis with the holders of Common Stock or other securities issuable
upon exercise of the Warrant Certificates, as if the Warrant Certificates had
been exercised immediately prior to such event, less the Exercise Price. In
case of any Combination described in this Section 4(d)(ii), Successor Company
and, in the event of any dissolution, liquidation or winding-up of the
Company, the Company, shall deposit promptly following the consummation of
such combination or at the time of such dissolution, liquidation or
winding-up with an agent or trustee for the benefit of the Holders of the
funds, if any, necessary to pay to the Holders the amounts to which they are
entitled as described above. After such funds and the surrendered Warrant
Certificates are received, the Company is required to deliver a check in such
amount as is appropriate (or, in the case of consideration other than cash,
such other consideration as is appropriate) to such Person or Persons as it
may be directed in writing by the Holders surrendering such Warrant
Certificates.
<PAGE>
Page 7
(e) NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, issuable upon
exercise of the Warrant Certificates is adjusted, as herein provided, the
Company shall deliver to the holders of the Warrant Certificates in
accordance with Section 10 a certificate of the Company's Chief Financial
Officer setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including
a description of the basis on which (i) the Board of Directors determined the
fair value of any evidences of indebtedness, other securities or property or
warrants, options or other subscription or purchase rights and (ii) the
Market Value of the Common Stock was determined, if either of such
determinations were required), and specifying the Exercise Price and number
of shares of Common Stock issuable upon exercise of Warrant Certificates
after giving effect to such adjustment.
(f) PURCHASE PRICE ADJUSTMENT. In the event that the Company
issues or sells any Common Stock or securities which are convertible into or
exchangeable for its Common Stock or any convertible securities, or any
warrants or other rights to subscribe for or to purchase or any options for
the purchase of its Common Stock or any such convertible securities (other
than shares or options issued or which may be issued pursuant to the
Company's employee or director option plans or shares issued upon exercise of
options, warrants or rights outstanding on the date of the Agreement and
listed in the Company's most recent periodic report filed under the Exchange
Act) at a purchase price per share on the date of original issuance of such
security which is less than 95% of the Market Value of the Common Stock on
the trading day next preceding such issue or sale, then in each such case,
the Exercise Price in effect immediately prior to such issue or sale shall be
reduced effective concurrently with such issue or sale to an amount
determined by multiplying the Exercise Price then in effect by a fraction,
(x) the numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale, plus (2)
the number of shares of Common Stock which the aggregate consideration
received by the Company for such additional shares would purchase at such
Market Value; and (y) the denominator of which shall be the number of shares
of Common Stock of the Company outstanding immediately after such issue or
sale. Notwithstanding the forgoing, no adjustment shall be made if such
adjustment would be less than $.10.
For the purposes of the foregoing adjustment, in the case of the issuance of
any convertible securities, warrants, options or other rights to subscribe
for or to purchase or exchange for, shares of Common Stock ("CONVERTIBLE
SECURITIES"), the maximum number of shares of Common Stock that would be
issuable upon exercise, exchange or conversion of such Convertible Securities
(assuming that shares of Common Stock were trading at the then Market Value
at the time of conversion) shall be deemed to be outstanding, provided that
no further adjustment shall be made upon the actual issuance of Common Stock
upon exercise, exchange or conversion of such Convertible Securities;
provided, further that if such Convertible Securities expire or are redeemed
without conversion or exercise, the Exercise Price shall be further adjusted
to reflect that the same are no longer outstanding.
If there is a change at any time in (i) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
of any Convertible Securities; or (ii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other
<PAGE>
Page 8
than under or by reason of provisions designed to protect against dilution),
the Exercise Price in effect at the time of such change will be readjusted to
the Exercise Price which would have been in effect at such time had such
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(g) NOTICE OF CERTAIN TRANSACTIONS. In the event that the
Company shall propose (a) to pay any dividend payable in securities of any
class to the holders of its Common Stock or to make any other non-cash
dividend or distribution to the holders of its Common Stock, (b) to offer the
holders of its Common Stock rights to subscribe for or to purchase any
securities convertible into shares of Common Stock or shares of stock of any
class or any other securities, rights or options, (c) to effect any capital
reorganization, reclassification, consolidation or merger affecting the class
of Common Stock, as a whole, or (d) to effect the voluntary or involuntary
dissolution, liquidation or winding-up of the Company, the Company shall,
within the time limits specified below, send to each Holder a notice of such
proposed action or offer. Such notice shall be mailed to the Holders at
their addresses as they appear in the Warrant Register (as defined in Section
2(d)), which shall specify the record date for the purposes of such dividend,
distribution or rights, or the date such issuance or event is to take place
and the date of participation therein by the holders of Common Stock, if any
such date is to be fixed, and shall briefly indicate the effect of such
action on the number of shares of Common Stock and on the number and kind of
any other shares of stock and on other property, if any, and the number of
shares of Common Stock and other property, if any, issuable upon exercise of
each Warrant Certificate and the Exercise Price after giving effect to any
adjustment pursuant to Section 4 which will be required as a result of such
action. Such notice shall be given as promptly as possible and (x) in the
case of any action covered by clause (a) or (b) above, at least 10 days prior
to the record date for determining holders of the Common Stock for purposes
of such action or (y) in the case of any other such action, at least 20 days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Common Stock, whichever shall be the
earlier.
(h) OTHER ADJUSTMENTS. In the event of any other transaction
of the type contemplated by this Section 4, but not expressly provided for by
the provisions hereof, the Board of Directors of the Company will make
appropriate adjustment in the Exercise Price so as to equitably protect the
rights of the Holder.
(i) NO IMPAIRMENT OF HOLDER'S RIGHTS. The Company will
not, by amendment of its articles of organization or bylaws or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, except as contemplated
hereby, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant Certificate, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all action as may
be necessary or appropriate in order to protect the rights of the Holder
against dilution or other impairment.
5. COMPANY'S REPRESENTATIONS.
<PAGE>
Page 9
(a) The Company covenants and agrees that all shares of Common
Stock issuable upon exercise of this Warrant Certificate will, upon delivery,
be duly and validly authorized and issued, fully-paid and non-assessable and
free from all taxes, liens, claims and encumbrances.
(b) The Company covenants and agrees that it will at all times
reserve and keep available an authorized number of shares of its Common Stock
and other applicable securities sufficient to permit the exercise in full of
all outstanding options, warrants and rights, including this Warrant
Certificate.
(c) The Company shall promptly secure the listing of the Shares
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject
to official notice of issuance upon exercise of this Warrant Certificate) and
shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all shares of Common Stock from time to time issuable
upon the exercise of this Warrant Certificate; and the Company shall so list
on each national securities exchange or automated quotation system, as the
case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant Certificate
if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) The Company has taken all necessary action and proceedings
as required and permitted by applicable law, rule and regulation, including,
without limitation, the notification of the principal market on which the
Common Stock is traded, for the legal and valid issuance of this Warrant
Certificate to the Holder under this Warrant Certificate.
(e) With a view to making available to Holder the benefits of
Rule 144 promulgated under the Act and any other rule or regulation of the
Securities and Exchange Commission ("SEC") that may at any time permit Holder
to sell securities of the Company to the public without registration, the
Company agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"); and
(iii) furnish to any Holder forthwith upon request a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and of the Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents so filed by the Company as may be reasonably requested to
permit any such Holder to take advantage of any rule or regulation of the SEC
permitting the selling of any such securities without registration.
<PAGE>
Page 10
6. REGISTRATION RIGHTS. The initial Holder is entitled to the benefit
of such registration rights in respect of the Shares as are set forth in the
Registration Rights Agreement dated as of April 30, 1999, by and between the
Company, the Holder and the other investors parties thereto ("REGISTRATION
RIGHTS AGREEMENT"), including the right to assign such rights to certain
assignees as set forth therein.
7. ISSUANCE OF CERTIFICATES. Within two (2) trading days of receipt
of a duly completed Election to Purchase form, together with this Certificate
and payment of the Exercise Price, the Company, at its expense, will cause to
be issued in the name of and delivered to the Holder of this Warrant, a
certificate or certificates for the number of fully paid and non-assessable
shares of Common Stock to which that holder shall be entitled on such
exercise. In the event the shares of Common Stock are not timely delivered
to the Holder, the Company agrees to (a) indemnify Holder for all damages,
including consequential and special damages, lost profits and expenses,
including legal fees, and (b) beginning on the fifth (5th) day following the
Company's receipt of a duly completed Election to Purchase form, pay a
default premium of 2% per day of the value of underlying shares (based on the
highest closing price during the two (2) day period preceding the date of
surrender of the Warrant Certificate). In lieu of issuance of a fractional
share upon any exercise hereunder, the Company will pay the cash value of
that fractional share, calculated on the basis of the Exercise Price. The
shares of Common Stock underlying this Warrant Certificate shall bear legends
only as set forth in Article V of the Securities Purchase Agreement.
8. DISPOSITION OF WARRANTS OR SHARES. The Holder of this Warrant
Certificate, each transferee hereof and any holder and transferee of any
Shares, by his or its acceptance thereof, agrees that no public distribution
of Warrants or Shares will be made in violation of the provisions of the 1933
Act. Transfer of the Warrant or the Shares is subject to the restrictions
set forth in the Securities Purchase Agreement. Furthermore, it shall be a
condition to the transfer of the Warrants that any transferee thereof deliver
to the Company his or its written agreement to accept and be bound by all of
the relevant terms and conditions contained in this Warrant Certificate and
in the Securities Purchase Agreement.
9. NOTICES. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by certified or
registered U.S. mail with return receipt requested and postage prepaid; by
private overnight delivery service (e.g. Federal Express); by facsimile
transmission (if no original documents or instruments must accompany the
notice); or by personal delivery. Any such notice shall be deemed to have
been given (a) five business days following the mailing thereof, if mailed by
certified or registered U.S. mail as specified above; (b) on the business day
immediately following deposit with a private overnight delivery service if
sent by said service; (c) upon receipt of confirmation of transmission if
sent by facsimile transmission; or (d) upon personal delivery of the notice.
All such notices shall be sent to the following addresses (or to such other
address or addresses as a party may have advised the other in the manner
provided in this Section 10):
If to the Company:
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Page 11
Excelsior-Henderson Motorcycle Manufacturing Company
805 Hanlon Drive
Belle Plaine, MN 56011
Attn: Chief Executive Officer
Tel: (612) 873-5826
Fax: (612) 873-5956
With a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attn: Gale Mellum
Tel: (612) 336-3139
Fax: (612) 336-3026
If to the Holder:
[Holder]
[Address]
[Contact]
[Phone]
[Fax]
in each case with a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telephone: (415) 332-7800
Telecopy: (415) 332-7808
Attention: General Counsel
Notwithstanding the time of effectiveness of notices set forth in this Section,
an Election to Purchase shall not be deemed effectively given until it has been
duly completed and submitted to the Company together with the original Warrant
Certificate to be exercised and payment of the Exercise Price in a manner set
forth in this Section.
10. Notwithstanding anything in this Warrant Certificate to the
contrary, in no event shall the holder of this Warrant Certificate be entitled
to exercise with respect to a number of
<PAGE>
Page 12
shares of Common Stock to the extent that following such exercise the sum of
(i) the number of shares of Common Stock beneficially owned by the holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised Warrant
Certificates or other securities containing restrictions on conversion or
exercise analogous to the provisions in this paragraph), and (ii) the number
of shares of Common Stock issuable upon exercise of the Warrant Certificates
(or portions thereof) with respect to which the determination described
herein is being made, would result in beneficial ownership by the holder and
its affiliates of more than 4.99% of the outstanding shares of Common Stock.
For purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Rules 13(d)-(g) thereunder, except as
otherwise provided in clause (i) hereof.
11. GOVERNING LAW. This Warrant Certificate and all rights and
obligations hereunder shall be deemed to be made under and governed by the laws
of the State of Delaware without giving effect to its conflicts of laws
provisions. The Holder hereby irrevocably consents to the venue and
jurisdiction of the State and Federal Courts located in the State of Delaware.
12. SUCCESSORS AND ASSIGNS. This Warrant Certificate shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
13. HEADINGS. The headings of various sections of this Warrant
Certificate have been inserted for reference only and shall not affect the
meaning or construction of any of the provisions hereof.
14. SEVERABILITY. If any provision of this Warrant Certificate is
held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant Certificate, and the balance hereof shall be interpreted as if
such provision were so excluded.
15. MODIFICATION AND WAIVER. This Warrant Certificate and any
provision hereof may be amended, waived, discharged or terminated only by an
instrument in writing signed by the Company and the Holder.
16. SPECIFIC ENFORCEMENT. The Company and the Holder acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Warrant Certificate were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Warrant Certificate and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which either of them may be entitled by law or equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or by facsimile, by one of its officers thereunto
duly authorized.
EXCELSIOR-HENDERSON MOTORCYCLE
MANUFACTURING COMPANY, a Minnesota
corporation
Date:_________________ By:_________________________________
Name:
Title:
<PAGE>
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
April 30, 1999, by and among EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING
COMPANY, a Minnesota corporation, with headquarters located at 805 Hanlon
Drive, Belle Plaine, Minnesota 56011 (the "COMPANY"), and the Buyers set
forth on the signature page hereto, together with their permitted transferees
(the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by Section 4(2) of the Securities Act of 1933, as amended (the
"1933 ACT"), and Rule 506 under Regulation D ("REGULATION D") as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
1933 Act;
B. Buyers desire, upon the terms and conditions stated in this
Agreement, to purchase (i) shares of the Company's Series D Convertible
Preferred Stock (the "PREFERRED STOCK"), convertible into shares of the
Company's common stock, par value $0.01 per share (the "COMMON STOCK" ), for
an aggregate purchase price of Ten Million U.S. Dollars ($10,000,000). In
consideration for each such purchase, the Buyers will receive Stock Purchase
Warrants (the "WARRANTS") to acquire additional shares of Common Stock. The
Warrants to be issued in connection with the Preferred Stock shall be in the
form attached hereto as EXHIBIT A. The purchase price per share of Preferred
Stock shall be $1,000. The purchase of the Preferred Stock will be funded in
a closing (the " CLOSING"), subject to the terms and conditions stated in
this Agreement. The shares of Preferred Stock purchased by the Buyers
hereunder are sometimes referred to herein as the "PREFERRED SHARES." The
shares of Common Stock issuable upon conversion of the Preferred Shares or
otherwise pursuant to the terms of the Certificate of Designation (as defined
below) or the Registration Rights Agreement (as defined below) are referred
to herein as the "COMMON SHARES". The shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrants are referred to herein as
"WARRANT SHARES". The Preferred Shares, Common Shares, Warrants, and Warrant
Shares are collectively referred to herein as the "SECURITIES".
C. The Preferred Stock has the voting powers, preferences, and
rights set forth in the Statement of Designation of Rights, Preferences and
Limitations of Series D Convertible Preferred Stock attached hereto as
EXHIBIT G (the "CERTIFICATE OF DESIGNATION").
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement in the form attached hereto as EXHIBIT B (the "REGISTRATION
RIGHTS AGREEMENT"), pursuant to which the Company has agreed to provide
certain registration rights under the 1933 Act, the rules and regulations
promulgated thereunder and applicable state securities laws.
<PAGE>
Excelsior-Henderson Motorcycle Manufacturing Company Page 2
Securities Purchase Agreement
NOW THEREFORE, the Company and each Buyer hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1 CLOSING. Subject to the terms and satisfaction or waiver of
the conditions of this Agreement, the issuance, sale and purchase of the
Preferred Stock shall be consummated at the Closing. On the date of the
Closing, subject to the satisfaction or waiver of the conditions set forth in
Article VI, the Company shall issue and sell to the Buyers, and each Buyer
agrees, on a several and not a joint basis, to purchase from the Company, the
number of shares of Preferred Stock set forth under such Buyer's name on the
signature page hereto executed by each Buyer.
1.2 FORM OF PAYMENT. The Buyers shall pay their respective
purchase price for the Preferred Shares by wire transfer to the account
designated pursuant to the Escrow Agreement by and among the Company, the
Buyers, and the escrow agent ("ESCROW AGENT") designated therein in the form
attached hereto as EXHIBIT C (the "ESCROW AGREEMENT"), upon delivery by the
Company to the Escrow Agent of the applicable Preferred Shares and Warrants,
all in accordance with the terms of the Escrow Agreement, and upon
satisfaction of the other conditions to the Closing.
1.3 CLOSING DATE. Subject to the satisfaction or waiver of the
conditions thereto set forth in Article VI below, and further subject to the
terms and conditions of the Escrow Agreement, the date and time of the
Closing shall be 10:00 a.m. Pacific Standard Time on May 3, 1999, or such
other mutually agreed upon date or time (the "Closing Date").
1.4 WARRANTS. In consideration of the purchase by Buyers of the
Preferred Shares, the Company shall, upon the Closing, issue Warrants to each
Buyer to acquire, in the aggregate, Thirty-five Thousand (35,000) Common
Shares for each One Million Dollars ($1,000,000) of Preferred Shares
purchased by such Buyer at the Closing, and each such Warrant shall have an
exercise price per share equal to (i) for one-half (1/2) of such Warrants,
125% of the Closing Bid Price (as defined in the Certificate of Designation)
on the Business Day (as defined in the Certificate of Designation) prior to
the Closing Date and (ii) for the other one-half (1/2) of such Warrants, 125%
of the average Closing Bid Price (as defined in the Certificate of
Designation) of the Common Stock over the five trading days ending on
November 30, 1999.
ARTICLE II
BUYER'S REPRESENTATIONS AND WARRANTIES.
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Page 3
Each Buyer represents and warrants to the Company as of the date
hereof and as of the date of the Closing, severally and solely with respect
to itself and its purchase hereunder and not with respect to any other Buyer,
as set forth in this Article II. Each Buyer makes no other representations
or warranties, express or implied, to the Company in connection with the
transactions contemplated hereby and any and all prior representations and
warranties, if any, which may have been made by the Buyers to the Company in
connection with the transactions contemplated hereby shall be deemed to have
been merged in this Agreement and any such prior representations and
warranties, if any, shall not survive the execution and delivery of this
Agreement.
2.1 INVESTMENT PURPOSE. Buyer is purchasing the Securities for
its own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act; provided, however, that by making the
representation herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of
the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
2.2 ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D. Buyer has
delivered an Investor Questionnaire in the form of EXHIBIT D to the Company
and Shoreline Pacific Institutional Finance, the Institutional Division of
Financial West Group ("SHORELINE PACIFIC").
2.3 RELIANCE ON EXEMPTIONS. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Securities.
2.4 INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer
and its advisors, if any, have been afforded the opportunity to ask questions
of the Company. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Article III below. The Buyer
acknowledges and understands that its investment in the Securities involves a
significant degree of risk, including the risks reflected in the SEC
Documents (as defined below).
2.5 GOVERNMENTAL REVIEW. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
2.6 TRANSFER OR RESALE. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under
<PAGE>
Page 4
the 1933 Act or any applicable state securities laws and consequently the
Buyer may have to bear the risk of owning the Securities for an indefinite
period of time, and the Securities may not be transferred unless (a) the
resale of the Securities is registered pursuant to an effective registration
statement under the 1933 Act; (b) the Buyer shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (c) the
Securities are sold or transferred pursuant to Rule 144 promulgated under the
1933 Act (or a successor rule) ("RULE 144") or (d) the Securities are sold or
transferred to an affiliate (as defined in Rule 144) of the Buyer; (ii) any
sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of
the SEC thereunder; and (iii) neither the Company nor any other person is
under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). The Buyer covenants it will not make any sale, transfer or
other disposition of the Securities in violation of federal or state
securities laws.
2.7 LEGENDS. The Buyer understands that until (i) the Preferred
Shares and the Warrants may be sold by the Buyer under Rule 144(k) or any
successor rule that would permit sale of such Securities without restriction
as to the number of securities that can then be immediately sold ("RULE
144(k)") and (ii) such time as the resale of the Common Shares and the
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, or otherwise may be sold by the Buyer under
Rule 144(k), the certificates representing the Securities will bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any certificate upon
which it is stamped in accordance with the terms specified in the Transfer
Agent Instructions referred to in Article V hereof, and otherwise in
accordance with the terms of Article V.
<PAGE>
Page 5
2.8 AUTHORIZATION; ENFORCEMENT. This Agreement, the Registration
Rights Agreement and the Escrow Agreement have been duly and validly
authorized, executed and delivered on behalf of the Buyer and are valid and
binding agreements of the Buyer enforceable in accordance with their terms,
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of equity.
2.9 RESIDENCY. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyers that:
3.1 ORGANIZATION AND QUALIFICATION. The Company is duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used, operated and
conducted. The Company has no subsidiaries. The Company is duly qualified to
do business and is in good standing in every jurisdiction in which the nature
of the business conducted by it makes such qualification necessary except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on (i) the business, operations, assets or financial condition
of the Company, or (ii) on the ability of the Company to perform its
obligations pursuant to the transactions contemplated hereby or under the
agreements or instruments to be entered into or filed in connection herewith,
or (iii) the Securities.
3.2 AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to file and perform its obligations under the
Certificate of Designation, to enter into and to perform its obligations
under this Agreement, the Registration Rights Agreement, the Escrow Agreement
and to consummate the transactions contemplated hereby and thereby and to
issue the Securities, in accordance with the terms hereof and thereof, (ii)
the execution, delivery and performance of this Agreement, the Registration
Rights Agreement and the Warrants by the Company and the consummation by it
of the transactions contemplated hereby and thereby (including without
limitation the filing of the Certificate of Designation, issuance of the
Preferred Shares, and the issuance and reservation for issuance of the Common
Shares in accordance with the Certificate of Designation and the Warrant
Shares issuable in accordance with the terms of the Warrants) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board or Directors, or its shareholders is
required, (iii) this Agreement, the Registration Rights Agreement, the Escrow
Agreement and the Warrants have been duly executed and the Certificate of
Designation has been duly filed by the Company, and (iv) each of this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Certificate of Designation and the Warrants constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in
<PAGE>
Page 6
accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, or moratorium or similar laws
affecting the rights of creditors generally and the application of general
principles of equity.
3.3 CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 25,000,000 shares of $.01 par value
Common Stock of which 13,583,076 shares are issued and outstanding, 1,200,000
shares are reserved for issuance pursuant to the Company's employee and
director stock option plans and an additional 1,000,000 shares have been
approved by the Board of Directors for issuance under such plans, pending
shareholder approval, 300,000 shares are reserved for issuance pursuant to
the Company's employee stock purchase plan, 999,910 shares are reserved for
issuance pursuant to securities (other than securities issued under the
foregoing plans) exercisable for, or convertible into or exchangeable for
shares of Common Stock; and (ii) 7,000,000 shares of preferred stock, par
value $0.01 per share, of which 10,000 shares are designated as Series B
Convertible Preferred Stock, and of which 6,750 are issued and outstanding,
and 3,000 shares are designated as Series C Convertible Preferred Stock and
of which 3,000 are issued and outstanding. All of such outstanding shares of
capital stock are, or upon issuance will be, duly authorized, validly issued,
fully paid and nonassessable. No shares of capital stock of the Company,
including the Preferred Shares, the Common Shares and the Warrant Shares
issuable pursuant to this Agreement, are subject to preemptive rights or any
other similar rights of the stockholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in SCHEDULE 3.3 and except for the transactions
contemplated hereby, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or securities
or rights convertible into, exercisable for, or exchangeable for any shares
of capital stock of the Company, or arrangements by which the Company is or
may become bound to issue additional shares of capital stock of the Company,
and (ii) there are no agreements or arrangements under which the Company is
obligated to register the sale of any of its or their securities under the
1933 Act (except the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued
by the Company (or in any agreement providing rights to security holders)
that will be triggered by the issuance of the Securities. The Company has
furnished to the Buyers true and correct copies of the Company's Articles of
Incorporation, as amended, as in effect on the date hereof ("ARTICLES OF
INCORPORATION"), the Company's By-laws as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable
for Common Stock of the Company and the material rights of the holders
thereof in respect thereto.
3.4 ISSUANCE OF SECURITIES. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims, encumbrances, and charges with respect to the issue
thereof and shall not be subject to preemptive rights or other similar rights
of stockholders of the Company and will not impose personal liability on the
holders thereof. The Common Shares and Warrant Shares are duly authorized
and reserved for issuance, and, upon conversion of the Preferred Shares and
exercise of the Warrants in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable, and free from all taxes,
liens,
<PAGE>
Page 7
claims and encumbrances and will not be subject to preemptive rights or other
similar rights or stockholders of the Company and will not impose personal
liability upon the holder thereof.
3.5 ACKNOWLEDGEMENT OF COMPANY. The Company understands and
acknowledgesthat, the maximum number of shares that the Company is obligated
to issue upon conversion of all of the Preferred Shares is 2,716,615 (the
"MAXIMUM SHARE AMOUNT") which shall be allocated pro-rata among the Buyers as
described in Section V.D. of the Certificate of Designation. In addition, up
to 350,000 shares of Common Stock may be issued upon exercise of the Warrants
issued or issuable in connection with all of the Preferred Shares. Any Face
Amount (as defined in the Certificate of Designation) of the Preferred Shares
remaining when the Maximum Share Amount is reached will be redeemed in cash,
or, if the Company agrees to waive such limit after obtaining all necessary
shareholder approvals, such remaining Face Amount will be converted into a
number of additional shares of Common Stock determined by dividing the
then-outstanding Face Amount by the Conversion Price (as defined in the
Certificate of Designation) in effect from time to time. The Company
acknowledges that, subject to the limitations and the option to redeem for
cash described above, its obligation to issue shares of Common Stock upon
conversion of the Preferred Stock and exercise of the Warrants in accordance
with the terms of the Certificate of Designation and the Warrants is absolute
and unconditional.
3.6 SERIES OF PREFERRED STOCK. The terms, designations, powers,
preferences and relative, participating and optional or special rights, and
the qualifications, limitations and restrictions of each series of preferred
stock of the Company (other than the Preferred Shares) are as stated in the
Articles of Incorporation, filed on or prior to the date hereof, and the
Bylaws. The terms, designations, powers, preferences and relative,
participating and optional or special rights, and the qualifications,
limitations and restrictions of the Preferred Stock are as stated in the
Certificate of Designation.
3.7 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrants and the Escrow
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the issuance and reservation for issuance of the Preferred Shares, Common
Shares, Warrants, and Warrant Shares) will not (i) conflict with or result in
a violation of any provision of the Articles of Incorporation or By-laws or
(ii) except as described in SCHEDULE 3.7, violate or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give
to others any rights of termination, amendment (including without limitation,
the triggering of any anti-dilution provision), acceleration or cancellation
of, any agreement, indenture, patent, patent license, or instrument to which
the Company is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable
to the Company or by which any property or asset of the Company is bound or
affected (except for such conflicts, breaches, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Except as
described in Schedule 3.7, the Company
<PAGE>
Page 8
is not in violation of its Articles of Incorporation, By-laws or other
organizational documents and the Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default) under, and the Company has not taken any action or failed to take
any action that (and no event has occurred which, without notice or lapse of
time or both) would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which the Company is a party or by which any property or assets of the
Company is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The
business of the Company is not being conducted, and shall not be conducted so
long as a Buyer owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, the failure to comply
with which would, individually or in the aggregate, have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws or any
listing agreement with any securities exchange or automated quotation system,
the Company is not required to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency or
any regulatory or self regulatory agency in order for it to execute, deliver
or perform any of its obligations under this Agreement, the Warrants or the
Registration Rights Agreement, in each case in accordance with the terms
hereof or thereof or to issue and sell the Preferred Shares and Warrants in
accordance with the terms hereof and to issue the Conversion Shares upon
conversion of the Preferred Shares and the Warrant Shares upon exercise of
the Warrants. Except as set forth in SCHEDULE 3.7, all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of
the listing requirements of Nasdaq (as defined below) and does not reasonably
anticipate that the Common Stock will be delisted by Nasdaq in the
foreseeable future. The Company is unaware of any facts or circumstances
which might give rise to the foregoing.
3.8 SEC DOCUMENTS, FINANCIAL STATEMENTS. Since the date of the
Company's initial public offering, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 ACT") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits) incorporated by reference therein,
being hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to each Buyer, or each Buyer has had access to, true and complete
copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act or the 1933 Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
<PAGE>
Page 9
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set
forth in the financial statements included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than liabilities incurred
in the ordinary course of business subsequent to January 2, 1999, and
liabilities of the type not required under generally accepted accounting
principles to be reflected in such financial statements. Such liabilities
incurred subsequent to January 2, 1999 are not, in the aggregate, material to
the financial condition or operating results of the Company.
3.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Documents or as described in Schedule 3.9, since January 2, 1999, there has been
no material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, prospects or
results of operations of the Company.
3.10 ABSENCE OF LITIGATION. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its officers or directors acting as such that could, individually or in the
aggregate, have a Material Adverse Effect. The Company is not aware of any
facts or circumstances which would reasonably be expected to give rise to any
action or proceeding described in the foregoing sentence. SCHEDULE 3.10
contains a complete list and summary description of any pending or, to the
knowledge of the Company, threatened litigation against the Company (or
litigation in which the Company is named), without regard to whether it could
have a Material Adverse Effect.
3.11 PATENTS, COPYRIGHTS, ETC. The Company owns or possesses the
requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights ("INTELLECTUAL
PROPERTY") necessary to enable it to conduct its business as now operated (and,
except as set forth in SCHEDULE 3.11 hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); there is no
claim or action by any person pertaining to, or proceeding pending, or to the
Company's knowledge threatened, which challenges the right of the Company with
respect to any Intellectual Property necessary to enable it to conduct its
business as now operated (and, except as set forth in SCHEDULE 3.11 hereof, to
the best of the Company's knowledge, as presently contemplated to be operated in
the future); to the best of the Company's knowledge, the Company's current and
intended products, services and processes do not infringe on any Intellectual
Property or other rights held by any person; and the Company is unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of its Intellectual Property.
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Page 10
3.12 NO MATERIALLY ADVERSE CONTRACTS, ETC. The Company is not subject
to any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the reasonable judgment of the Company's
officers has or is expected in the future, individually or in the aggregate, to
have a Material Adverse Effect. The Company is not a party to any contract or
agreement which in the reasonable judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
3.13 TAX STATUS. Except as set forth on SCHEDULE 3.13, the Company
has made or filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. Except as set forth on
SCHEDULE 3.13, none of the Company's tax returns is presently being audited by
any taxing authority.
3.14 CERTAIN TRANSACTIONS. Except as disclosed in the SEC Documents
or as set forth on SCHEDULE 3.14 and except for arm's-length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties
and other than the grant of stock options, employment agreements or the
ownership of other securities and rights disclosed on SCHEDULE 3.3 none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or employee
has a substantial interest or is an officer, director, trustee or partner.
3.15 DISCLOSURE. All information relating to or concerning the
Company set forth in this Agreement and provided to the Buyers pursuant to
Section 2.4 hereof and otherwise in connection with the transactions
contemplated hereby contained no untrue statement of a material fact and the
Company has not omitted to state any material fact necessary in order to make
the statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or its business, properties,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed (assuming for this purpose that
the
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Page 11
Company's reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by the Company under the 1933 Act).
3.16 ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. The
Company acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and that any statement made by any Buyer or any of their
respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is not advice or a recommendation and is
merely incidental to the Buyer's purchase of the Securities and has not been
relied on by the Company, its officers or directors in any way. The Company
further represents to each Buyer that the Company's decision to enter into
this Agreement has been based solely on an independent evaluation by the
Company and its representatives.
3.17 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers
to buy any security under circumstances that would require registration under
the 1933 Act of the issuance of the Securities to the Buyers. The issuance
of the Securities to the Buyers will not be integrated with any other
issuance of the Company's securities (past, current or future, including, but
not limited to, the issuance of the Company's Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), the Company's Series C Preferred
Stock (the "Series C Preferred Stock"), the Warrants issued in connection
with the Series B Preferred Stock (the "Series B Warrants") and the Series C
Preferred Stock (the "Series C Warrants"), and any shares of Common Stock
issuable upon conversion of or exercise of, or otherwise, pursuant to the
Series B Preferred Stock, the Series C Preferred Stock, the Series B Warants
or the Series C Warrants) for purposes of the 1933 Act or any applicable
rules of Nasdaq (including Rule 4460(i)). Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, will take a
position, with the SEC, Nasdaq or otherwise, that the Securities should be
integrated with any other issuance of the Company's securities (past, current
or future, including, but not limited to, the issuance of the Series B
Preferred Stock, the Series C Preferred Stock, the Series B Warrants and the
Series C Warrants, and any shares of Common Stock issuable upon conversion of
or exercise of, or otherwise, pursuant to the Series B Preferred Stock, the
Series C Preferred Stock, the Series B Warants or the Series C Warrants) for
purposes of the 1933 Act or any applicable rules of Nasdaq (including Rule
4460(i)).
3.18 NO BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with Shoreline Pacific, whose commissions and
fees will be paid for by the Company.
3.19 PERMITS; COMPLIANCE. The Company is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own,
lease and operate its properties and to carry on its
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business as it is now being conducted except those the failure of which to
possess would not, individually or in the aggregate, have a Material Adverse
Effect (collectively, the "COMPANY PERMITS"), and there is no action pending
or, to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits. The Company is not in conflict
with, or in default or violation of, any of the Company Permits, except for
any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. Since January 2, 1999, the Company has not received any notification
with respect to possible conflicts, defaults or violations of applicable
laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
3.20 TITLE TO PROPERTY. The Company has good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company. Any real property and facilities held under lease by the Company
are held by it under valid, subsisting and enforceable leases with such
exceptions as would not have a Material Adverse Effect.
3.21 INSURANCE. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has no reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not have a Material Adverse Effect.
3.22 INTERNAL ACCOUNTING CONTROLS. The Company maintains a system
of internal accounting controls sufficient, in the judgment of the Company's
board of directors, to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
3.23 EMPLOYMENT MATTERS. The Company is in compliance with all
federal, state, local and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours except where failure to be in compliance would not have a Material
Adverse Effect. There are no pending investigations involving the Company by
the U.S. Department of Labor or any other governmental agency responsible for
the enforcement of such federal, state, local or foreign laws and
regulations. There is no unfair labor practice charge or complaint against
the Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company. Except as set forth in SCHEDULE 3.23, no
representation question exists respecting the employees of the Company, and
no collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance
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or arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company. No material labor dispute with the
employees of the Company exists or, to the knowledge of the Company, is
imminent.
3.24 INVESTMENT COMPANY STATUS. The Company is not and upon
consummation of the sale of the Securities will not be an "investment
company," a company controlled by an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.
3.25 NO GENERAL SOLICITATION. Assuming the accuracy of the
representations and warranties of Shoreline Pacific in its letter to the
Company dated as of April 30, 1999 (a copy of which is attached as SCHEDULE
3.25 hereto) to the extent relevant for such determination, neither the
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the
Company, or any such distributor, has conducted any "general solicitation,"
as such term is defined in Regulation D, with respect to any of the
Securities being offered hereby.
IV
COVENANTS.
4.1 COMMERCIALLY REASONABLE EFFORTS. The parties shall use their
commercially reasonable efforts to satisfy timely each of the conditions
described in Article VI of this Agreement.
4.2 FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide
a copy thereof to each Buyer promptly after such filing. The Company shall,
on or before the date of the Closing, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers on or prior to the date of the Closing. The Company agrees to file a
Form 8-K disclosing this Agreement and the transactions contemplated hereby
with the SEC within ten (10) business days following the date of the Closing.
4.3 REPORTING STATUS; ELIGIBILITY TO USE FORM S-3. The Company's
Common Stock is registered under Section 12(g) of the 1934 Act. Throughout
the Registration Period (as defined in the Registration Rights Agreement),
the Company shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as
an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would permit such termination. The
Company currently meets, and will take all
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reasonably necessary action to continue to meet, the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 for the
registration of securities for the account of shareholders of the Company.
4.4 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Securities for general corporate purposes and shall not
otherwise, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other entity.
4.5 EXPENSES. The Company and the Buyers shall each be liable
for their own expenses incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without
limitation, attorneys' and consultants' fees and expenses.
4.6 FINANCIAL INFORMATION. The Company agrees to file all
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the 1934
Act. The financial statements of the Company will be prepared in accordance
with United States generally accepted accounting principles, consistently
applied, and will fairly present in all material respects the consolidated
financial position of the Company and results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). The Company agrees to
send the following reports to each Buyer until such Buyer transfers, assigns,
or sells all of the Securities owned by it: (i) within ten (10) days after
the filing with the SEC, a copy of its Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii)
within one (1) day after release, copies of all press releases issued by the
Company; and (iii) contemporaneously with the making available or giving to
the stockholders of the Company, copies of any notices or other information
the Company makes available or gives to such stockholders.
4.7 LISTING. The Company shall promptly secure the listing of the
Common Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and, so long as any
Buyer owns any of the Securities, shall maintain such listing of all such
Common Shares and Warrant Shares. The Company will use its best efforts to
obtain and, so long as any Buyer owns any of the Securities, maintain the
listing and trading of its Common Stock on the Nasdaq National Market System
("NASDAQ"), the American Stock Exchange ("AMEX") or the New York Stock
Exchange ("NYSE"), and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Nasdaq or other exchanges, as applicable. The Company shall promptly provide
to each Buyer copies of any notices it receives regarding the continued
eligibility of the Common Stock for listing on the Nasdaq or other principal
exchange or quotation system on which the Common Stock is listed or traded.
4.8 SOLVENCY; COMPLIANCE WITH LAW. The Company (both before and
after giving effect to the transactions contemplated by this Agreement) is
solvent (i.e., its assets have a fair
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Page 15
market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any
action that would impair, its ability to pay its debts from time to time
incurred in connection therewith as such debts mature. The Company will
conduct its business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business,
including, without limitation, all applicable local, state and federal
environmental laws and regulations the failure to comply with which would
have a Material Adverse Effect.
4.9 INSURANCE. The Company shall maintain liability, casualty and
other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size to the Company.
7.14 NO INTEGRATION. The Company shall not make any offers or sales
of any security (other than the Securities) under circumstances that would cause
the offering of Securities to be integrated with any other offering of
securities by the Company (i) for the purpose of any stockholder approval
provision applicable to the Company or its securities or (ii) for purposes of
any registration requirement under the 1933 Act.
4.11 RESERVATION OF SHARES. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Common Shares in connection therewith
(based on the Conversion Price of the Preferred Shares in effect from time to
time) and the full exercise of the Warrants and the issuance of the Warrant
Shares in connection therewith (based upon the Exercise Price of the Warrants in
effect from time to time). The Company shall not reduce the number of shares of
Common Stock reserved for issuance upon conversion of the Preferred Shares or
exercise of the Warrants without the consent of all the Buyers. The Company
shall use its best efforts at all times to maintain the number of shares of
Common Stock so reserved for issuance at no less than 3,066,615 shares of Common
Stock. If at any time the number of shares of Common Stock authorized and
reserved for issuance is below the number of Conversion Shares and Warrant
Shares issued and issuable upon conversion of the Preferred Shares and exercise
of the Warrants (based on the Conversion Price of the Preferred Shares and
Exercise Price of the Warrants then in effect), the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of shareholders
to authorize additional shares to meet the Company's obligations under this
Section 4.11, in the case of an insufficient number of authorized shares, and
using its best efforts to obtain shareholder approval of an increase in such
authorized number of shares.
4.12 LIMITATION ON SHORT SALES.
(a) Each Buyer agrees to conduct all sales of shares of Common Stock
(including all short sales or other hedging activities) in compliance with all
relevant securities laws and regulations.
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(b) Each Buyer agrees that during any period of
determination of any Market Price (as defined in the Certificate of
Designation), if Buyer (or others controlling, controlled by, or under common
control with Buyer) engages in short sale transactions or other hedging
activities which involve, among other things, sales of common shares, Buyer
(or others controlling, controlled by, or under common control with Buyer)
will place its sale orders for such shares of Common Stock in the course of
such activities so as not to complete or effect any such sale on any trading
day during such period at a price which is lower than the lowest trading
price effected for shares of Common Stock on such day by persons other than
Buyer (or others controlling, controlled by, or under common control with
Buyer ).
(c) Buyer will not create new trading lows through sales of
common shares in order to create a lower Market Price applicable to
conversions of Preferred Stock.
(d) In connection with the sale of any shares of Common Stock
(a "Common Stock Sale") by a Buyer (or by others controlling, controlled by
or under common control with such Buyer) at any time after the Effective Date
of the Registration Statement (as defined in Section 4.13 below) and prior to
the first anniversary of the Closing (the "Common Stock Sale Period") at a
price greater than 110% of the Fixed Conversion Price (as defined in the
Certificate of Designation), each Buyer convenants and agrees that it will
issue a Notice of Conversion (as defined in the Certificate of Designation)
and shall convert Preferred Stock into such number of Common Shares equal to
the number of such shares of Common Stock sold by such Buyer within twenty
(20) business days following such sale.
4.13 RESTRICTION ON BELOW MARKET ISSUANCE OF SECURITIES. (a) For a
period from the date of the Closing through the later to occur of (a) six
months following the effective date of the "REGISTRATION STATEMENT" required
to be filed pursuant to Section 2(a) of the Registration Rights Agreement
(the "EFFECTIVE DATE") (plus any days in which sales cannot be made
thereunder) and (b) the first anniversary of the Closing, neither the Company
nor any subsidiary of the Company ("SUBSIDIARY") shall issue or agree to
issue, (except (i) to Buyers pursuant to this Agreement, (ii) pursuant to any
employee stock option, stock purchase or restricted stock plan of the Company
in effect on the date hereof, or any such plan established after the date
hereof and approved by the Board of Directors of the Company, (iii) pursuant
to any existing security, option, warrant, scrip, call or commitment or right
in each case or disclosed on SCHEDULE 3.3 hereof or (iv) pursuant to a
strategic joint venture or partnership entered into by the Company or any
Subsidiary, undertaken at the reasonable discretion of the Board of Directors
of the Company, the primary purpose of which is not to raise equity capital),
any equity securities (including debt securities with an equity component) of
the Company or any Subsidiary (or any security convertible into or
exercisable or exchangeable, directly or indirectly, for equity securities of
the Company or any Subsidiary) if such securities (x) are issued at a price
(or in the case of securities convertible into or exercisable or
exchangeable, directly or indirectly, for Common Stock such securities
provide for a conversion, exercise or exchange price) which may be less than
the then current market price for Common Stock on the date of issuance of
such Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock (taking into account the value of any warrants
or options to acquire Common Stock issued in connection therewith, but only
if the number of such warrants or options exceeds 25% of the transaction
based upon the dollar value
<PAGE>
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of the transaction divided by the then current market price for the Common
Stock and provided, further, that no such warrant or option is exercisable at
a price less than the current market price for the Common Stock on the date
of issuance of the securities issued in connection with such warrants or
options), (y) are convertible into an indeterminate number of shares of
Common Stock or (z) are redeemable at a premium to the purchase price of such
securities. During such period neither the Company nor any Subsidiary shall
issue or agree to issue any security convertible into or exercisable or
exchangeable for, directly or indirectly, equity securities of the Company or
any such Subsidiary based on a variable conversion exercise or exchange price
or formula.
V
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS
The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Buyer or its nominee, for the Common Shares
and the Warrant Shares in such amounts as determined in accordance with this
Agreement and the Warrants. All such certificates shall bear the restrictive
legend, except as specified in this Article V. In addition, the Company will
issue the irrevocable Transfer Agent Instructions to the transfer agent in
the form of EXHIBIT F hereto. The Company warrants that no instruction other
than as referred to in this Article V, and stop transfer instructions to give
effect to Section 2.7 hereof (prior to registration of Common Shares and
Warrant Shares under the 1933 Act), will be given by the Company to its
transfer agent. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement set forth in this Article V hereof to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Common Shares and Warrant Shares.
If, unless otherwise required by applicable state securities laws, (a)
the resale of the Securities has been registered under an effective
registration statement filed under the 1933 Act, or (b) such holder provides
the Company and the Transfer Agent with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Securities
may be made without registration under the 1933 Act and such sale either has
occurred or may occur without restriction on the manner of such sale or
transfer, or (c) such holder provides the Company and the Transfer Agent with
reasonable assurances that such Securities can be sold under Rule 144 under
the 1933 Act (or a successor rule thereto), or (d) the Securities can be sold
without restriction as to the number of securities as of a particular date
that can then be immediately sold under Rule 144(k), the Company shall permit
the transfer of the Common Shares or Warrant Shares, and the Transfer Agent
shall issue one or more certificates, free from any restrictive legend in
such name and in such denominations as specified by such Buyer.
Notwithstanding anything herein to the contrary, but subject to the following
proviso, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement; provided that this
shall not alter the provisions of this Article V with respect to the removal
of restrictive legends.
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The Buyer agrees to sell all Securities in compliance with applicable
prospectus delivery requirements, if any, or otherwise in compliance with the
requirements for an exemption from registration under the 1933 Act and the
rules and regulations promulgated thereunder.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer, by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under
this Article V will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Buyer shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
VI
CONDITIONS TO THE CLOSING.
6.1 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL THE PREFERRED
STOCK. The obligation of the Company hereunder to issue and sell the
Preferred Stock to each Buyer at the Closing is subject to the satisfaction
by such Buyer, at or before such date of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(a) On or before the Closing, each Buyer shall have
executed this Agreement, the Registration Rights Agreement and the Escrow
Agreement, and delivered the same to the Company and the Escrow Agent.
(b) Each Buyer shall have delivered the purchase price for
the Preferred Stock to the Escrow Agent in accordance with this Agreement.
(c) The representations and warranties of each Buyer shall
be true and correct in all material respects as of the Closing as though made
at that time (except for representations and warranties that speak as of a
specific date which representations and warranties shall be correct as of
such date), and each Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by each Buyer
at or prior to the Closing.
(d) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
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(e) The Certificate of Designation shall have been accepted
by the Secretary of State of the State of Minnesota, and evidence thereof
reasonably satisfactory to the Company shall have been received by the
Company.
6.2 CONDITIONS TO BUYERS' OBLIGATION TO PURCHASE THE PREFERRED
STOCK. The obligation of each Buyer hereunder to purchase the Preferred Stock
from the Company at the Closing is subject to the satisfaction, at or before
such date of each of the following conditions, provided that these conditions
are for each such Buyer's respective benefit and may be waived by each such
Buyer at any time in its sole discretion:
(a) On or before the Closing, the Company shall have
executed this Agreement, the Registration Rights Agreement and the Escrow
Agreement, and delivered the same to the Buyer.
(b) The Certificate of Designation shall have been filed
with and accepted by the Secretary of State of the State of Minnesota, and
evidence thereof reasonably satisfactory to the applicable Buyer shall have
been delivered to such Buyer.
(c) The Company shall have delivered to the Escrow Agent
duly executed certificates representing the Preferred Stock and duly executed
Warrants in the amounts specified in Section 1.4.
(d) The representations and warranties of the Company shall
be true and correct in all material respects as of the Closing as though made
at such time (except for representations and warranties that speak as of a
specific date which representations and warranties shall be true and correct
as of such date) and the Company shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the date of the Closing. The Buyers shall have
received a certificate or certificates, executed by the Chief Executive
Officer or the Chief Financial Officer of the Company, dated as of the
Closing, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, but not limited to,
certificates with respect to the Company's Articles of Incorporation,
By-laws, Board of Directors' resolutions relating to the transactions
contemplated hereby and the incumbency and signatures of each of the officers
of the Company who shall execute on behalf of the Company any document
delivered on the date of the Closing.
(e) No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
(f) Trading and listing of the Common Stock on Nasdaq shall
not have been suspended by the SEC or Nasdaq.
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(g) The Buyers shall have received an opinion of the
Company's counsel, dated as of the Closing, in form, scope and substance
reasonably satisfactory to the Buyers and in substantially the same form as
EXHIBIT E attached hereto.
(h) The Irrevocable Transfer Agent Instructions in respect
of the Preferred Stock, in form and substance satisfactory to the Buyers,
shall have been delivered to the Company's transfer agent and acknowledged in
writing by such transfer agent.
(i) LETTER AGREEMENTS REGARDING VOTING. The Company shall
have caused Dave, Dan and Jennifer Hanlon to execute letter agreements, in
substantially the form of EXHIBIT I hereto pursuant to which they will agree
to vote in favor of the Stockholder Approval (as defined in Article V(B)(ii)
of the Certificate of Designation).
VII
GOVERNING LAW; MISCELLANEOUS.
7.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws. The parties hereto
hereby submit to the exclusive jurisdiction of the United States Federal and
state courts located in Delaware with respect to any dispute arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
7.2 COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in two or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
7.3 HEADINGS. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of,
this Agreement.
7.4 SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
7.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any
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Buyer makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be
charged with enforcement.
7.6 NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular U.S. mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a
party. The addresses for such communications shall be:
If to the Company:
Excelsior-Henderson Motorcycle Manufacturing Company
805 Hanlon Drive
Belle Plaine, MN 56011
Attn: Chief Financial Officer
Tel: (612) 873-5826
Fax: (612) 873-5956
With a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attn: Gale Mellum
Tel: (612) 336-3139
Fax: (612) 336-3026
With a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Attn: General Counsel
Phone: (415) 332-7800
Fax: (415) 332-7808
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide written notice to the other party of any
change in address.
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7.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Buyer may assign all or part of its rights
and obligations hereunder to any of its "affiliates," as that term is defined
under the 1933 Act, without the consent of the Company so long as such
affiliate is an accredited investor (within the meaning of Regulation D under
the 1933 Act) and agrees in writing to be bound by this Agreement. This
provision shall not limit the Buyer's right to transfer the Securities
pursuant to the terms of this Agreement or to assign the Buyer's rights
hereunder to any such transferee pursuant to the terms of the Agreement.
7.8 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
7.9 SURVIVAL/REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company and the agreements and covenants set forth
herein shall survive the closing hereunder. The Company makes no
representations or warranties in any oral or written information provided to
Buyers, other than the representations and warranties included herein. The
Company agrees to indemnify and hold harmless each Buyer and all such Buyer's
respective officers, directors, employees, partners, members, affiliates, and
agents for loss or damage arising as a result of or related to any breach by
the Company of any of its representations, warranties, covenants and
obligations under this Agreement or the Registration Rights Agreement.
7.10 PUBLICITY. The Company and each Buyer shall have the right to
review, a reasonable period of time before issuance thereof, any press
releases, or relevant portions of any SEC or Nasdaq filings, or any other
public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Buyers, to make any press release or SEC or Nasdaq filings
with respect to such transactions as are required by applicable law and
regulations including NASD requirements (although the Company shall make
reasonable efforts to consult with the Buyers in connection with any such
press release prior to its release and filing and the Buyers shall be
provided with a copy thereof and be given an opportunity to comment thereon).
7.11 FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, Certificate, instruments and
documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.
7.12 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against
any party.
<PAGE>
Page 23
7.13 EQUITABLE RELIEF. The Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations
under this Agreement, any remedy at law may prove to be inadequate relief to
the Buyers. The Company therefore agrees that the Buyers shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
7.14 CONSENTS UNDER PRIOR CERTIFICATES OF DESIGNATION. Pursuant to
Section XII of that certain Statement of Designation relating to the Series B
Convertible Preferred Stock of the Company and Section XII of that certain
Statement of Designation relating to the Series C Convertible Preferred Stock
of the Company, RGC International Investors, LDC (a Buyer hereunder) hereby
gives its approval of and consents to the entering into and performance of
this Agreement and all related documents by the Company and each Buyer and
the issuance of the Securities as described herein.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
Page 24
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
By:
-----------------------------------
Name:
Title:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
Page 25
BUYERS:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By:
-----------------------------------
Name:
Its: Managing Director
Aggregate Subscription Amount: $2,500,000
No. of Shares of Preferred Stock: 2,500
No. of Warrants 87,500
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Fax: (610) 617-0570
Telephone: (610) 617-5900
Attn: Wayne D. Bloch
<PAGE>
Page 26
BUYERS:
SOCIETE GENERALE
(not as to Section 7.14)
By:
----------------------------------
Name:
Its:
Aggregate Subscription Amount: $7,500,000
No. of Shares of Preferred Stock: 7,500
No. of Warrants 262,500
RESIDENCE: France
ADDRESS:
c/o SG Cowen Securities Corporation
1221 Avenue of the Americas
6th Floor
New York, New York 10020
Fax: (212) 278-4527
Telephone: (212) 278-5260
Attn: Guillaume Pollet
<PAGE>
EXHIBIT 99
FOR IMMEDIATE RELEASE
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
ANNOUNCES THE SALE OF $10 MILLION OF
SERIES D CONVERTIBLE PREFERRED STOCK
CONTACT: EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
THOMAS M. ROOTNESS
CHIEF FINANCIAL OFFICER
(612) 873-7000
BELLE PLAINE, MN, MAY 3, 1999 -- Excelsior-Henderson Motorcycle
Manufacturing Company (NASDAQ: BIGX) today announced the closing of a
private placement of $10 million of Series D Convertible Preferred Stock with
two institutional investors. The financing was arranged by Shoreline Pacific
Institutional Finance, the Institutional Division of Financial West Group of
Sausalito, California.
"The proceeds of this private placement will be used primarily to fund
working capital needs and for general corporate purposes," said Thomas M.
Rootness, Senior Vice President and Chief Financial Officer.
The conversion price of the Series D Preferred Stock is $7.65, a ten percent
premium over the recent market price, and is fixed for at least the first
twelve months after closing. Thereafter, the conversion price may vary based
upon the market price of the Company's common stock during the period
immediately preceding conversion. The Series D Preferred Stock includes a
dividend of six percent payable in cash or stock at the Company's option.
The investors also received warrants to purchase 350,000 shares of the
Company's common stock.
Excelsior-Henderson Motorcycle Manufacturing Company manufactures, markets
and sells premium heavyweight American cruiser motorcycles, as well as
related parts, apparel and accessories branded with a name that evokes an
authentic American motorcycling heritage and lifestyle. The Company
distributes its products through a national dealer network.
Excelsior-Henderson is one of only two authentic American motorcycle
companies exclusively committed to the manufacture of motorcycles.
###
