<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ___________
Commission File No. 0-16176
McLAREN PERFORMANCE TECHNOLOGIES, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 84-1016459
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
32233 West Eight Mile Road,
Livonia, Michigan 48152
- ---------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
(248) 477-6240
---------------------------
(Issuer's telephone number)
McLaren Automotive Group, Inc.
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [_]
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
There were 9,488,517 shares of the Registrant's common stock outstanding as of
March 31, 2000.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
<PAGE>
McLAREN PERFORMANCE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
Page
Part I. Financial Information 1-6
Item 1. Financial Statements
Consolidated Condensed Unaudited Balance Sheet as of
March 31, 2000 1
Consolidated Condensed Unaudited Statements of Operations
for the three and six month periods ended March 31, 2000
and 1999 2
Consolidated Condensed Unaudited Statements of Cash Flows
for the six month periods ended March 31, 2000 and 1999 3
Notes to Consolidated Condensed Unaudited Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II. Other Information 6
Signatures 7
<PAGE>
PART I.
ITEM 1. FINANCIAL STATEMENTS.
MCLAREN PERFOMANCE TECHOLOGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED BALANCE SHEET AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
MARCH 31,
2000
<S> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 994,100
MARKETABLE SECURITIES 35,800
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE
FOR DOUBTFUL ACCOUNTS OF $15,000 2,204,300
INVENTORIES 60,400
PREPAID EXPENSES AND OTHER 151,500
------------
TOTAL CURRENT ASSETS 3,446,100
PROPERTY AND EQUIPMENT AT COST
NET OF ACCUMULATED DEPRECIATION 4,593,900
OTHER ASSET:
GOODWILL AND OTHER INTANGIBLES,
AT COST, NET OF ACCUMULATED
AMORTIZATION 738,300
------------
TOTAL ASSETS $ 8,778,300
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
LINE OF CREDIT PAYABLE $ 1,180,000
ACCOUNTS PAYABLE 1,302,200
CUSTOMER DEPOSITS 252,600
PAYROLL AND RELATED 174,800
ACCRUED LIABILITIES 164,400
CURRENT PORTION OF NOTES PAYABLE 440,700
------------
TOTAL CURRENT LIABILITIES 3,514,700
NOTES PAYABLE--NET OF CURRENT PORTION 2,731,700
------------
TOTAL LIABILITIES 6,246,400
STOCKHOLDERS EQUITY:
PREFERRED STOCK, $.001 PAR VALUE
AUTHORIZED - 10,000,000 SHARES
NO SHARES ISSUED OR OUTSTANDING --
COMMON STOCK, $.00001 PAR VALUE
AUTHORIZED - 20,000,000 SHARES
ISSUED AND OUTSTANDING - 9,488,517 SHARES
ON MARCH 31, 2000 100
ADDITIONAL PAID IN CAPITAL 13,977,600
ACCUMULATED DEFICIT (11,345,100)
LESS: TREASURY STOCK AT COST (81,900)
ACCUMULATED COMPREHENSIVE LOSS (18,800)
------------
TOTAL STOCKHOLDERS EQUITY 2,531,900
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,778,300
============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
1
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MCLAREN PERFORMANCE TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31 ENDED MARCH 31
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES:
LICENSE AND ROYALTIES $ 200,700 $ -- $ 363,900 $ --
CONTRACT AND OTHER SERVICES 2,977,600 1,025,100 5,638,200 1,128,100
----------- ----------- ----------- -----------
TOTAL REVENUES 3,178,300 1,025,100 6,002,100 1,128,100
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT 306,400 596,100 641,700 1,129,200
COST OF REVENUES 2,251,600 463,400 3,976,600 463,400
SELLING, GENERAL AND ADMINISTRATIVE 1,325,500 1,154,300 2,403,700 1,776,700
----------- ----------- ----------- -----------
3,883,500 2,213,800 7,022,000 3,369,300
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (705,200) (1,188,700) (1,019,900) (2,241,200)
OTHER (EXPENSE) (83,800) (237,300) (147,600) (210,400)
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (789,000) (1,426,000) (1,167,500) (2,451,600)
PROVISION FOR INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
NET LOSS $ (789,000) $(1,426,000) $(1,167,500) $(2,451,600)
=========== =========== =========== ===========
BASIC AND FULLY DILUTED
LOSS PER SHARE $ (0.09) $ (0.16) $ (0.13) $ (0.27)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 9,163,242 8,955,557 9,125,675 8,952,577
=========== =========== =========== ===========
COMPREHENSIVE LOSS:
NET LOSS $ (789,000) $(1,426,000) $(1,167,500) $(2,451,600)
UNREALIZED LOSS ON MARKETABLE
SECURITIES (2,500) (10,700) (4,900) (10,700)
----------- ----------- ----------- -----------
COMPREHENSIVE LOSS $ (791,500) $(1,436,700) $(1,172,400) $(2,462,300)
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
2
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MCLAREN PERFORMANCE TECHNOLGIES, INC.
CONSOLIDATED CONDENSED UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDING MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
MARCH 31 MARCH 31
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(1,167,500) $(2,451,600)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 321,500 141,100
COMPENSATION AND OTHER EXPENSES
RELATED TO ISSUANCE OF STOCK AND OPTIONS 19,000 --
LOSS ON INVESTMENT IN AFFILIATE -- 200,000
LOSS ON DISPOSAL OF EQUIPMENT -- 1,400
CHANGES IN OPERATING ASSETS AND LIABLITIES:
ACCOUNTS RECEIVABLE (429,200) 3,444,700
INVENTORIES (44,900) 3,700
PREPAID EXPENSES AND OTHER (55,800) 44,900
ACCOUNTS PAYABLE 728,700 166,600
PAYROLL AND RELATED 73,200 (48,600)
ACCRUED EXPENSES 9,900 49,900
CUSTOMER DEPOSITS 13,300 18,500
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (531,800) 1,570,600
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASES OF MARKETABLE SECURITIES (400) (353,500)
PROCEEDS FROM SALE OF PROPERTY, PLANT
AND EQUIPMENT -- 10,000
PURCHASES OF PROPERTY, PLANT AND EQUIPMENT (547,600) (332,600)
INVESTMENT IN AFFILIATE, NET OF CASH ACQUIRED -- (1,291,400)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (548,000) (1,967,500)
CASH FLOWS FROM FINANCING ACTIVITIES:
BORROWINGS UNDER LINE OF CREDIT 1,164,000 104,100
PAYMENTS UNDER LINE OF CREDIT (750,000) --
BORROWINGS UNDER NOTES PAYABLE 419,900 --
REPAYMENTS OF NOTES PAYABLE (265,300) (28,100)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 765,900 --
PROCEEDS FROM EXERCISE OF STOCK OPTIONS -- 378,700
----------- -----------
NET CASH FROM FINANCING ACTIVITIES 1,334,500 454,700
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 254,700 57,800
CASH AND CASH EQUIVALENTS, BEGINNING 739,400 2,348,500
----------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 994,100 $ 2,406,300
=========== ===========
NON CASH TRANSACTIONS:
UNREALIZED LOSS ON MARKETABLE SECURITIES $ (4,900) $ (10,700)
=========== ===========
STOCK ISSUED IN CONNECTION WITH ACQUISITION $ -- $ 675,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
3
<PAGE>
NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
PRESENTATION
The financial statements included herein have been prepared by McLaren
Performance Technologies, Inc. (the "Company") without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures are adequate to make
these financial statements not misleading; however, it is suggested that these
financial statements and the accompanying notes be read in conjunction with the
financial statements and notes thereto in the Company's Annual Report on Form
10-KSB for the fiscal year ended September 30, 1999. The financial data for the
interim period may not necessarily be indicative of results to be expected for
the year.
In the opinion of the Company, these unaudited statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of McLaren Performance Technologies, Inc.
as of March 31, 2000, and the results of the Company's operations and its cash
flow for the three months and six months then ended.
REVENUE RECOGNITION
During the three months and six months ended March 31, 2000, the Company
recorded royalty revenues totaling $200,700 and $363,900, respectively from New
Venture Gear, Inc. Royalty revenues are recorded as earned per the terms of the
licensing agreement.
CONCENTRATION OF CREDIT RISK
For the six months ended March 31, 2000, revenue derived from two customers
represented 70% and 12% respectively of the Company's Total Revenues. These
customers accounted for 68% and 19%, respectively of accounts receivable at
March 31, 2000.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is based on the weighted average number of
common and common equivalent shares outstanding. Common stock equivalents were
not considered in the calculation, as their effect would be antidilutive.
INCOME TAX
The Company did not provide for federal income taxes due to net operating
loss carry forwards.
RECLASSIFICATIONS
Certain amounts in prior periods have been reclassified to conform to the
present period's presentation.
EQUITY TRANSACTIONS
On March 15, 2000 the Company sold 400,000 shares of its common stock in a
private placement. In connection with this sale the Company also issued to the
purchaser a warrant to purchase an additional 200,000 shares of common stock of
the Company for $400,000 on or before May 15, 2000. The shares of common stock
and warrant were purchased for a total offering price of $800,000.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The following should be read in conjunction with the Company's Annual
Report on Form 10-KSB and the attached consolidated condensed financial
statements and notes of the Company.
FORWARD-LOOKING STATEMENTS
Statements included in this Report that do not relate to present or
historical conditions are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "1995 Reform Act"). Such
forward-looking statements involve a number of known and unknown risks and
uncertainties. While these statements represent the Company's current judgment
in the future direction of the business, such risks and uncertainties could
cause actual results performance and achievements, or industry results, to
differ materially from those suggested herein. The Company undertakes no
obligation to publicly release the result of any revisions to these forward-
looking statements, which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events. Forward-
looking statements in this Report may include, without limitation, statements
relating to the Company's plans, strategies, objectives, expectations,
intentions and adequacy of resources. All forward-looking statements in this
Report are intended to be made pursuant to the Safe Harbor provisions of the
1995 Reform Act. Factors that could cause results to differ materially from
those projected in the forward-looking statements include: market conditions,
variability of quarterly operations, dependence on management, competition, and
the bureaucratic nature of the automobile industry.
SIX MONTHS ENDED MARCH 31, 2000 VERSUS SIX MONTHS ENDED MARCH 31, 1999
The Company experienced a net loss of $1,166,000 for the six months ended
March 31, 2000 as compared to a net loss of $2,443,000 for the six months ended
March 31, 1999.
This represented a significant improvement over the previous year and was
the result of activities at both divisions. The Company's McLaren Traction
Division implemented a comprehensive cost cutting initiative which reduced the
operating loss from $2,460,467 in the same period last year to $695,589 in the
current period. In addition, the Company's McLaren Engines Division sales in the
period increased 43 percent due to increased business with customers.
Despite these improvements, the Company is still in the process of
addressing the cost structure. For the six months ended March 31, 2000 the
Company expended approximately $580,000 for the following: legal expenses in
connection with the Dana Corporation and Murat Okcuoglu litigation matters,
general patents expenses, transaction costs associated with acquisitions and
other normal corporate matters; professional fees expended for specific due
diligence activities surrounding a potential acquisition target; and consulting
payments to the Company's former Chief Executive Officer and former Chief
Financial Officer. Management anticipates some reduction during the third
quarter as certain of these costs are non-recurring.
A change in business mix at the McLaren Engines Division during the six
month period resulted in a greater proportion of parts sales, which carry a
lower profit margin. This resulted in a reduction in operating margin of
approximately 14 percent for the Division compared to the same period last year.
It is anticipated that this situation will begin to reverse in the third quarter
as other programs commence.
On January 31, 2000 the McLaren Engines Division concluded the renewal of
its line of credit arrangement with Bank One of Michigan. The new loan limit was
increased substantially to the lesser of $1,400,000, or 80 percent of
5
<PAGE>
accounts receivable less than 90 days. The interest rate is at prime. This line
is subject to renewal on January 31, 2001. In addition, the Company had a line
of credit with Montecito Bank and Trust that expired March 6, 2000. The $750,000
Line of Credit was converted to a term note for $500,000 after a paydown of
$250,000. Principal payments of $250,000 are required on March 5, 2001 and
October 31, 2001. Interest is to be paid monthly at a rate of prime plus 1.5%.
Management has developed a proposed public relations and marketing plan
that will begin in the third quarter. Management anticipates that this will
further improve recognition and will further enhance the positive image of the
Company. In addition, the restructuring of the business infrastructure has begun
to provide for improvements in planning and operations.
Management's strategy for the remainder of the year remains consistent
- -- working to improve the Gerodisc business model and sales activity. This
activity has begun to show results in increased requests for proposals for
Gerodisc technology.
The McLaren Engines Division will continue to maximize its potential
with current customers and is evaluating the potential impact to meet those
customer needs.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company entered into a License Agreement in 1994 with Dana Corporation.
On July 21, 1998, Dana terminated the License Agreement. On September 9, 1998,
the Company filed an action alleging that Dana breached the License Agreement.
On April 6, 1999, the Company filed a patent infringement action against Dana.
In its complaint, the Company alleged that Dana infringed upon the Company's
patented Gerodisc system, United States Patent No. 5,888,163 (the "`163
patent"), and the Company is seeking damages and declaratory and injunctive
relief. In response to the patent infringement action, Dana filed a counterclaim
in which it alleged that the `163 patent is invalid, unenforceable, and not
infringed upon by Dana. Dana's counterclaim is a declaratory judgment action in
which no money damages are sought. The patent infringement action and the breach
of contract action have been consolidated for purposes of discovery and trial.
Discovery is now being undertaken in the consolidated action. The case is
pending in the District Court for the Eastern District of Michigan.
On December 30, 1999, Murat Okcuoglu, a former employee of the Company,
filed an action against the Company. In his complaint, Mr. Okcuoglu alleges that
pursuant to his March 1, 1991 employment agreement with the Company, he is
entitled to damages in excess of $5,000,000 based on the Company's improper
commercialization of ideas he allegedly originated. Discovery is now being
undertaken. The case is pending in the Superior Court of Santa Barbara,
California.
ITEM 2. CHANGES IN SECURITIES.
On March 15, the Company sold 400,000 shares of common stock (the
"Purchased Shares") to George Karfunkel (the "Purchaser"). In connection with
this sale, the Company also issued to the Purchaser a warrant to purchase an
additional 200,000 shares of common stock of the Company for $400,000 on or
before May 15, 2000 (the "Warrant"). The Purchased Shares and the Warrant were
purchased for a total offering price of $800,000. The Purchased Shares and the
Warrant have not been registered under the Securities Act. The Company claims
exemption from registration under Section 4(2) of the Securities Act and
Regulation D promulgated thereunder based upon the Purchaser's knowledge,
sophistication, investment intent and status as an "accredited investor", as
well as the private nature of the transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
6
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following exhibits are filed herewith electronically:
EXHIBIT 10.1 Stock Purchase Agreement dated as of March 15, 2000,
between the Company and George Karfunkel
EXHIBIT 10.2 Warrant to Purchase Shares of Common Stock dated as of
March 15, 2000, between the Company and George Karfunkel
EXHIBIT 10.3 Registration Rights Agreement dated as of March 15, 2000
between the Company and George Karfunkel
EXHIBIT 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. The Company filed a report on Form 8-K on March
28, 2000, reporting the dismissal of Arthur Andersen LLP as the Company's
independent auditors on March 22, 2000, and the engagement of Ernst & Young
LLP on the same date as the Company's independent auditors for the fiscal
year ending September 30, 2000.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
McLAREN PERFORMANCE TECHNOLOGIES, INC.
Date: May 15, 2000 By: /s/ Wiley R. McCoy
-----------------------------
Wiley R. McCoy, President
Date: May 15, 2000 By: /s/ Jacqueline K. Kurtz
-----------------------------
Jacqueline K. Kurtz,
Chief Financial Officer
7
<PAGE>
EXHIBIT 10.1
EXHIBIT 10.1 Stock Purchase Agreement dated as of March 15, 2000, between the
Company and George Karfunkel
STOCK PURCHASE AGREEMENT Dated as of March 15, 2000 by and between GEORGE
KARFUNKEL (the "Purchaser") and MC LAREN AUTOMOTIVE GROUP, INC.
(the "Company")
ARTICLE I Purchase and Sale of Common Stock and Warrant 1
Section 1.1 Sale and Purchase 1
Section 1.2 Purchase Price 1
Section 1.3 The Closing 1
Section 1.3.1 Time and Place 1
Section 1.3.2 Actions to be taken by the Company 1
Section 1.3.3 Actions to be taken by the Purchaser 2
ARTICLE II Representations and Warranties 2
Section 2.1 Representation and Warranties of the Company 2
(a) Representation and Warranties of the Company 2
(b) Authorization; Enforcement 2
(c) Capitalization 3
(d) Issuance of Shares 3
(e) No Conflicts 3
(f) Commission Documents, Financial Statements 4
(g) Subsidiaries 5
(h) [Omitted] 5
(i) No Undisclosed Liabilities 5
(j) No Undisclosed Events or Circumstances 5
(k) Indebtedness 5
(l) Title to Assets 6
(m) Actions Pending 6
(n) Compliance with Law 6
(o) Taxes 6
(p) Certain Fees 7
(q) Disclosure 7
(r) Intellectual Property; Operation of Business 7
(s) Books and Records 7
(t) Material Agreements 7
(u) Transactions with Affiliates 7
(v) Securities Act of 1933 8
(w) Governmental Approvals 8
(x) Employees 8
(y) Absence of Certain Developments 8
(z) Use of Proceeds 8
(aa) Public Utility Holding Company Act and Investment Company Act Status 9
(bb) [Omitted] 9
(cc) Acknowledgment Regarding Purchaser's Purchase of Shares. 9
(dd) Commitments. 9
(ee) "Material Adverse Effect" 9
Section 2.2 Representations and Warranties of the Purchaser 9
(a) Acquisition for Investment 9
(b) Accredited Purchaser 10
ARTICLE III Covenants 10
Section 3.1 Securities Compliance. 10
Section 3.2 Registration and Listing 10
Section 3.3 Registration Statement 11
<PAGE>
Section 3.4 Compliance with Laws 11
Section 3.5 Keeping of Records and Books of Account 11
Section 3.6 Reporting Requirements 11
ARTICLE IV Indemnification 11
Section 4.1 General Indemnity 11
Section 4.2 Indemnification Procedure 12
ARTICLE V Miscellaneous 13
Section 5.1 Fees and Expenses 13
Section 5.2 Specific Enforcement, Consent to Jurisdiction 13
Section 5.3 Entire Agreement; Amendment 13
Section 5.4 Notices 14
Section 5.5 Waivers 14
Section 5.6 Headings 15
Section 5.7 Successors and Assigns 15
Section 5.8 No Third Party Beneficiaries 15
Section 5.9 Governing Law 15
Section 5.10 Survival 15
Section 5.11 Counterparts 15
Section 5.12 Publicity 15
Section 5.13 Severability 15
Section 5.14 Further Assurances 16
TABLE OF SCHEDULES
Schedule
Topic
2.1(c)
Capitalization
2.1(g)
Subsidiaries
2.1(i)
Undisclosed Liabilities
2.1(j)
Undisclosed Events or Circumstances
2.1(k)
Indebtedness
2.1(l)
Title to Assets
2.1(m)
Actions Pending
2.1(o)
Taxes
2.1(r)
Intellectual Property
2.1(x)
Employees
2.1(y)
Absence of Certain Developments
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of March 15, 2000
by and between McLAREN AUTOMOTIVE GROUP, INC., a Delaware corporation (the
"Company"), and GEORGE KARFUNKEL, an individual with an office at 6201 15th
Avenue, 3rd Floor, Brooklyn, New York 11219 (the "Purchaser").
For good and valid consideration, the sufficiency of which is acknowledged by
the parties, the parties hereto agree as follows:
ARTICLE I
Purchase And Sale Of Common Stock And Warrant
Section 1.1 -Sale and Purchase. Subject to the terms and conditions of this
Agreement, the Company, on the Closing Date (as defined herein), is selling and
issuing to the Purchaser and the Purchaser is purchasing from the Company, in
reliance upon the representations, warranties and other terms and conditions of
this Agreement, 400,000 shares of Common Stock, par value $0.00001 per share
(the "Common Stock") of the Company (the "Shares"). The Company, for no
additional consideration, shall issue to the Purchaser a warrant to purchase an
additional 200,000 shares of Common Stock in the form attached hereto as Exhibit
A (the "Warrant").
Section 1.2 -Purchase Price. The purchase price for the Shares is eight hundred
thousand ($800,000) Dollars (the "Purchase Price"), and shall be paid by wire
transfer to an account designated by the Company in writing at the Closing.
Section 1.3 -The Closing.
Section 1.3.1 -Time and Place. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Parker Chapin LLP at
10:00 a.m. New York City time on March 15, 2000, or at such other time or on
such other date on location as the parties shall mutually select (the "Closing
Date").
Section 1.3.2 -Actions to be taken by the Company. Subject to the
representations and warranties of the Purchaser being true and correct in all
material respects and the satisfaction of all actions taken by the Purchaser, on
or before the Closing Date, the Company shall deliver to the Purchaser the
following:
(a) stock certificates representing the Shares;
(b) the Warrant;
(c) a duly executed registration rights agreement in the form annexed hereto as
Exhibit B (the "Registration Rights Agreement");
(d) the opinion of Clark Hill PLC, attorneys for the Company, dated as of the
date hereof substantially in the form of Exhibit C attached hereto;
(e) the Certificate of Incorporation of the Company (the "Certificate") and
By-laws of the Company (the "By-laws") as in effect on the date hereof and the
resolutions of the Board of Directors of the Company, certified by the Secretary
of the Company, authorizing the execution, delivery and performance of this
Agreement, the issuance of the Shares and the Warrant, and each of the other
documents and instruments being executed and delivered by the Company herewith;
and
(f) a certificate duly executed by an executive officer of the Company
certifying that the representations and warranties made as of the date hereof
are true and correct in all material respects as of the Closing Date. Section
1.4 -Actions to be taken by the Purchaser.
Subject to the representations and warranties of the Company being true and
correct in all material respects and the satisfaction of all actions to be taken
by the Company under Section 1.3.2, on the Closing Date, the Purchaser shall pay
to the Company the Purchase Price.
ARTICLE II
Representations And Warranties
Section 2.1 -Representation and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchaser:
(a) -Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company and each such subsidiary is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction in which the failure to be so qualified
will not have a material adverse effect on the Company's financial condition.
<PAGE>
(b) -Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and perform this Agreement and to issue and sell the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
This Agreement constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) -Capitalization. The authorized capital stock of the Company is 20,000,000
shares of Common Stock of which there are 9,088,517 shares currently issued and
outstanding and 10,000,000 shares of Preferred Stock par value $0.001, per share
of which there are no shares currently issued and outstanding. All of the
outstanding shares of the Company's Common Stock have been duly and validly
authorized. No shares of Common Stock are entitled to preemptive rights or
registration rights and except as set forth on Schedule 2.1(c) there are no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and as set forth on Schedule 2.1(c), there
are no contracts, commitments, understandings, or arrangements by which the
Company is bound to issue additional shares of the capital stock of the Company
or options, securities or rights convertible into shares of capital stock of the
Company. Except for customary transfer restrictions contained in agreements
entered into by the Company in order to sell restricted securities or Schedule
2.1(c) hereto, the Company is not a party to any agreement granting registration
rights to any person with respect to any of its equity or debt securities. The
Company is not a party to any, and to the Knowledge of the Company there is no,
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable Federal and all applicable state securities laws and no
stockholder has a right of rescission or damages against the Company with
respect thereto. The Company has furnished or made available to the Purchaser
true and correct copies of the Certificate as in effect on the date hereof, and
the By-laws as in effect on the date hereof.
(d) -Issuance of Shares. The Shares to be issued under this Agreement, the
Warrant and the shares of Common Stock to be issued upon exercise of the Warrant
(the "Warrant Shares") have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the terms hereof, the
Shares shall be validly issued and outstanding, fully paid and nonassessable,
and with respect to the Shares and, upon exercise of the Warrant, the Warrant
Shares the Purchaser shall be entitled to all rights accorded to a holder of
Common Stock subject to the restrictions contained herein.
(e) -No Conflicts. The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
therein do not (i) violate any provision of the Company's Certificate or
By-laws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any material property of the
Company under any agreement or any commitment to which the Company is a party or
by which the Company is bound or by which any of its respective material
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries are bound or affected, the violation of which
would have a Material Adverse Effect (as defined below). Excluding the Company's
obligation to register the Shares and the Warrant Shares pursuant to the
Registration Rights Agreement, the Company is not required under Federal, state
or local law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental
<PAGE>
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, or issue and sell the Shares or the Warrant Shares in
accordance with the terms hereof.
(f) -Commission Documents, Financial Statements. The Common Stock of the Company
is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Securities and Exchange Commission (the "Commission") pursuant to
the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing,
including filings incorporated by reference therein, being referred to herein as
the "Commission Documents"). As a result the Company is eligible to file a
registration statement on Form S-3 with the Commission. The Company has
delivered or made available to the Purchaser true and complete copies of the
Commission Documents filed with the Commission since September 30, 1998. As of
their respective dates, the Forms 10-KSB for the years ended September 30, 1998,
September 30, 1999, the Form 8-K filed on January 21, 1999, the Form 8-K/A filed
on February 12, 1999, and the Forms 10-QSB for the fiscal quarters ended
December 31, 1998, March 31, 1999, and June 30, 1999 complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder and other Federal, state and local
laws, rules and regulations applicable to such documents, and, as of their
respective dates, none of the Form 10-KSB, Form 8-K, Form 8-K/A and the Forms
10-QSB referred to above 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. The financial statements of the Company included
in the Commission Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis 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)
and fairly present in all material respects the financial position of the
Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) -Subsidiaries. Schedule 2.1(g) hereto sets forth each subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such subsidiary. For the purposes of this Agreement,
"subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is party to
any, and to the Knowledge of the Company there is no, agreement restricting the
voting or transfer of any shares of the capital stock of any subsidiary.
(h) [Omitted].
(i) -No Undisclosed Liabilities. Except as disclosed in the Commission Documents
or on Schedule 2.1(i) hereto, to the Knowledge of the Company, neither the
Company nor any of its subsidiaries has incurred since September 30, 1999, any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) that would
have a Material Adverse Effect.
<PAGE>
(j) -No Undisclosed Events or Circumstances. Except as disclosed in the
Commission Documents or on Schedule 2.1(j) hereto, to the Knowledge of the
Company, since September 30, 1999, no event or circumstance has occurred or
exists with respect to the Company or its subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, which, is
reasonably likely to have a Material Adverse Effect.
(k) -Indebtedness. All outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments is reflected in the financial statements filed with the Commission
Documents. For the purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $10,000 (other than
trade accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $10,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) -Title to Assets. Each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property having a value in
excess of $10,000 and reflected in the Commission Documents free of any
mortgages, pledges, charges, liens, security interests or other encumbrances,
except for those indicated on Schedule 2.1(l) hereto or such that do not result
in a Material Adverse Effect. All leases which require payments of at least
$10,000 per year of the Company and each of its subsidiaries are valid and
subsisting and in full force and effect.
(m) -Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the Knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as disclosed in the Commission Documents or on
Schedule 2.1(m) hereto, there is no action, suit, claim, investigation or
proceeding pending or, to the Knowledge of the Company, threatened, against or
involving the Company, any subsidiary of the Company or any of their respective
properties or assets. There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or regulatory body
against the Company or any subsidiary.
(n) -Compliance with Law. The business of the Company and the subsidiaries has
been and is presently being conducted in accordance with all applicable Federal,
state and local governmental laws, rules, regulations and ordinances, domestic
and foreign, except where the conduct of the business of the Company in
violation of any of such laws, rules, regulations and ordinances could not
reasonably result in a Material Adverse Effect. The Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) -Taxes. The Company and each of the subsidiaries has accurately prepared and
filed all Federal, state and other tax returns required by law, domestic and
foreign, to be filed by it, has paid or made provisions for the payment of all
taxes shown to be due and all additional assessments, and adequate provisions
have been and are reflected in the financial statements of the Company and the
subsidiaries of the Company for all current taxes and other charges to which the
Company or any subsidiary of the Company is subject and which are not currently
due and payable except where the failure to prepare and file such tax returns or
the failure to pay or make provision for the payment of all such taxes could not
reasonably result in a Material Adverse Effect. Except as disclosed on Schedule
2.1(o) hereto, none of the Federal income tax returns of the Company or any
subsidiary of the Company for the years subsequent to December 31, 1995 have
been audited by the Internal Revenue Service or other foreign governmental tax
agency. To the Knowledge of the Company there are no additional assessments,
adjustments or contingent tax liability (whether federal or state) pending or
threatened against the Company or any subsidiary of the Company for any period
that would have a Material Adverse Effect, nor of any basis for any such
assessment, adjustment or contingency.
<PAGE>
(p) -Certain Fees. No brokers, finders or financial advisory fees or commissions
will be payable by the Company or any subsidiary of the Company with respect to
the transactions contemplated by this Agreement.
(q) -Disclosure. To the Knowledge of the Company, neither this Agreement nor the
Schedules hereto nor any of the Commission Documents furnished to the Purchaser
by or on behalf of the Company or any subsidiary of the Company in connection
with the transactions contemplated by this Agreement contain any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements made herein or therein, in the light of the
circumstances under and at the time at which they were made herein or therein,
not misleading.
(r) -Intellectual Property; Operation of Business. The Company or a subsidiary
of the Company owns, or licenses from third parties, all patents and know how
("Intellectual Property"), free and clear of all liens, charges or encumbrances,
that are necessary in the conduct of its business as now conducted. Neither the
Company, nor its subsidiaries has received a notice of a claim of infringement
relating to the Intellectual Property, except as set forth on Schedule 2.1(r),
and to the Knowledge of the Company there is no reasonable basis for a claim
that such an infringement or violation exists.
(s) -Books and Records. The records and documents of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and its subsidiaries, the location of
their assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company or any subsidiary of the Company.
(t) -Material Agreements. There is no agreement that has not been filed with the
Commission as an exhibit to a registration statement or other applicable form
the omission of which could cause a Material Adverse Effect.
(u) -Transactions with Affiliates. Except for employment agreements and
consulting agreements or other Agreements disclosed in Commission Documents,
there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions exceeding
$60,000 between (a) the Company, any subsidiary of the Company or any of their
respective customers or suppliers on the one hand, and (b) on the other hand,
any officer or director of the Company, or any of its subsidiaries, or any
person owning any capital stock of the Company or any subsidiary of the Company
or any member of the immediate family of such officer, director or stockholder
or any corporation or other entity controlled by such officer, director or
stockholder, or a member of the immediate family of such officer, director or
stockholder.
(v) -Securities Act of 1933. The Company has complied and will comply with all
applicable Federal and state securities laws in connection with the offer,
issuance and sale of the Shares hereunder in order that the issuance and sale of
the Shares will not be subject to the registration provisions of the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state securities
laws. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Shares.
(w) -Governmental Approvals. Except for the filing of any notice prior or
subsequent to the Closing that may be required under applicable state and/or
Federal securities laws and/or other applicable laws of territories in which the
Company conducts business (which if required, shall be filed on a timely basis),
including the filing of a registration statement or statements pursuant to this
Agreement, no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the delivery of the Shares, the Warrant and the
Warrant Shares or for the performance by the Company of its obligations under
this Agreement.
(x) -Employees. Neither the Company nor any subsidiary of the Company has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth on Schedule 2.1(x) hereto. Since December 31, 1998, no
officer, consultant or key employee of the Company or any subsidiary of the
Company whose termination, either individually or in the aggregate, could have a
Material Adverse Effect, has terminated or, to the Knowledge of the Company, has
any present intention of terminating his or her employment or engagement with
the Company or any subsidiary of the Company.
(y) -Absence of Certain Developments. Except as set forth in the Commission
Documents or on Schedule 2.1(y) hereto, since December 31, 1998, neither the
Company nor any subsidiary has:
<PAGE>
(i) sold, assigned or transferred any tangible assets, or canceled any debts or
claims, except in the ordinary course of business;
(ii) suffered any substantial losses or waived any rights of material value,
whether or not in the ordinary course of business; or
(iii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment.
(z) -Use of Proceeds. The proceeds from the sale of the Shares and the Warrant
Shares will be used by the Company and its subsidiaries for paydown of existing
bank debt, payment of litigation expenses and general corporate purposes.
(aa) Public Utility Holding Company Act and Investment Company Act Status. The
Company is not a "holding company" or a "public utility company" as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended. The
Company is not, and as a result of and immediately upon Closing will not be, an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(bb) [Omitted].
(cc) Acknowledgment Regarding Purchaser's Purchase of Shares. The Company
acknowledges and agrees that the Purchaser is acting solely in the capacity of
arm's length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares. The
Company further represents to the Purchaser that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company and its representatives.
(dd) Commitments. The Company does not have any existing commitments for future
capital expenditures in excess of $100,000.
(ee) "Material Adverse Effect" shall mean any effect on the business,
operations, properties or financial condition of the Company that is material
and adverse to the Company and its subsidiaries and affiliates, taken as a whole
and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement or the Registration Rights Agreement
in any material respect.
(ff) "Knowledge of the Company" shall mean the actual knowledge of the current
executive officers of the Company.
Section 2.2 -Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) Acquisition for Investment. Such Purchaser is purchasing the Shares, Warrant
and Warrant Shares solely for its own account for the purpose of investment and
not with a view to or for sale in connection with distribution. The Purchaser
does not have a present intention to sell the Shares, nor a present arrangement
(whether or not legally binding) or intention to effect any distribution of the
Shares, Warrant or Warrant Shares to or through any person or entity; provided,
however, that by making the representations herein, the Purchaser reserves the
right, to dispose of the Shares, Warrant and Warrant Shares at any time in
accordance with Federal securities laws applicable to such disposition. The
Purchaser acknowledges that it is able to bear the financial risks associated
with an investment in the Shares and that it has been given full access to such
records of the Company and the subsidiaries of the Company and to the officers
of the Company and the subsidiaries of the Company as it has deemed necessary or
appropriate to conduct its due diligence investigation. The Purchaser is capable
of evaluating the risks and merits of an investment in the Shares by virtue of
its experience as an investor and its knowledge, experience, and sophistication
in financial and business matters and the Purchaser is capable of bearing the
entire loss of its investment in the Shares.
(b) Accredited Purchaser. The Purchaser is an "accredited investor" as defined
in Regulation D promulgated under the Securities Act.
(c) The Purchaser acknowledges that neither the Shares nor the Warrant Shares
have been registered under the Securities Act, and may not be offered or sold
except pursuant to registration under the Securities Act or an available
exemption therefrom.
<PAGE>
ARTICLE III
Covenants
The Company covenants with the Purchaser as follows, which covenants are for the
benefit of the Purchaser and its permitted assignees (as defined herein).
Section 3.1 -Securities Compliance.
(a) The Company shall notify the Commission and the NASD, if applicable, in
accordance with their rules and regulations, of the transactions contemplated by
this Agreement, and shall take all other necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Shares, the Warrant and the Warrant Shares to the
Purchaser or subsequent holders.
(b) The Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the applicability of Federal and state
securities laws exemptions and the suitability of the Purchaser to acquire the
Shares and the Warrant.
Section 3.2 -Registration and Listing. The Company will cause its Common Stock
to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations under the
Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement, and will not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the NASDAQ
system, if applicable, and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and NASDAQ system.
Section 3.3 -Registration Statement. The Company shall cause to be filed a
registration statement under the Securities Act ("Registration Statement") in
accordance with the Registration Rights Agreement, which Registration Statement
shall provide for the resale of the Shares and the Warrant Shares, if
applicable, purchased by and issued to the Purchaser.
Section 3.4 -Compliance with Laws. The Company shall comply, and cause each
subsidiary of the Company to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.
Section 3.5 -Keeping of Records and Books of Account. The Company shall keep and
cause each subsidiary of the Company to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.6 -Reporting Requirements. The Company shall furnish the following to
the Purchaser so long as such Purchaser shall beneficially own any Shares or
Warrant Shares:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as soon as
available, and in any event within 45 days after the end of each of the first
three fiscal quarters of the Company;
(b) Annual Reports filed with the Commission on Form 10-KSB as soon as
available, and in any event within 90 days after the end of each fiscal year of
the Company; and
(c) Any other filings made with the Commission, any press releases issued or any
communications sent to stockholders.
ARTICLE IV
Indemnification
Section 4.1 -General Indemnity. The Company agrees to indemnify and hold
harmless the Purchaser (and its affiliates, agents, successors and assigns) from
and against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorney's fees, charges and
disbursements) incurred by the Purchaser as a result or arising out of the
negotiation, execution or performance of this Agreement (including but not
limited to those arising from any claims or actions challenging the transaction,
no matter how meritless the claim may be) or any material inaccuracy in or
material breach of the representations, warranties or covenants made by the
Company herein. The Purchaser agrees to indemnify and hold harmless the Company
and its directors, officers, affiliates, agents, successors and assigns from and
against any and all
<PAGE>
losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys fees, charges and disbursements)
incurred by the Company as result of any material inaccuracy in or material
breach of the representations, warranties or covenants made by the Purchaser
herein. Notwithstanding the foregoing, in no event shall either party's
liability pursuant to this Article IV or otherwise exceed the sum of the
Purchase Price and, if the Warrant is exercised, the Purchase Price and the
exercise price of the Warrant.
Section 4.2 -Indemnification Procedure. Any party entitled to indemnification
under this Article IV (the "indemnified party") will give prompt written notice
(the "Notice") to the other party (the "indemnifying party") of any matters
giving rise to a claim for indemnification; provided, that the failure of
indemnified party to indemnification hereunder to give notice as provided herein
shall not relieve the indemnifying party of its obligations under this Article
IV except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any action, proceeding or claim is asserted
against the indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate in and to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises the
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of the Notice to notify,
in writing, the indemnified party of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice. The indemnifying party shall not be liable for any settlement of
any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article IV to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article IV for an action or
claim brought by a third party shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received for expenses related to the legal defense or investigation, so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject pursuant to the law.
ARTICLE V
Miscellaneous
Section 5.1 -Fees and Expenses. The Company and the Purchaser shall each pay all
fees and expenses which it incurs related to the transactions contemplated by
this Agreement; provided, that, the Company is paying at the Closing, attorneys
fees and expenses incurred by the Purchaser of $15,000 in connection with the
preparation, negotiation, execution and delivery of this Agreement and the
transactions contemplated hereunder. The Company shall pay all stamp or other
similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 5.2 -Specific Enforcement; Consent to Jurisdiction.
<PAGE>
(a) The Company and the Purchaser acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement 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 Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably submits to the
jurisdiction of the United States District Court and other courts of the United
States sitting in the Southern District of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section 5.3 -Entire Agreement; Amendment. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Purchaser
makes any representations, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other than
by a written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
Section 5.4 -Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: McLaren Automotive Group, Inc.
32233 West Eight Mile Road
Livonia, Michigan 48152
Attention: Jacqueline K. Kurtz, CFO
Fax: (248) 477-3349
with copies to: Clark Hill PLC
500 Woodward Avenue, Suite 3500
Detroit, MI 48226-3435
Attention: John J. Hern, Jr., Esq.
Fax: (313) 965-8252
If to the Purchaser: George Karfunkel
6201 15th Avenue, 3rd Floor
Brooklyn, New York 11219
Fax: (718) 921-8340
with copies to: Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attention: Henry I. Rothman, Esq.
Fax: (212) 704-6288
Any party hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.
Section 5.5 -Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
<PAGE>
Section 5.6 -Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 5.7 -Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns; provided,
however, that the Company may not assign any rights or obligations hereunder
without the prior written consent of the Purchaser.
Section 5.8 -No 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.
Section 5.9 -Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to the choice of law provisions.
Section 5.10 -Survival. Except as otherwise provided herein, the
representations, warranties and the agreements of the Company and the Purchaser
contained in Articles I, II, IV and V shall survive the execution and delivery
hereof, and the agreements and covenants set forth in Articles III of this
Agreement shall survive the execution and delivery hereof until the Purchaser no
longer owns any Shares or Warrant Shares.
Section 5.11 -Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 5.12 -Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Purchaser, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirement. Any press release regarding this Agreement
shall be agreed to by the parties hereto in advance
Section 5.13 -Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement shall be reformed
and construed as if such invalid or illegal or unenforceable provision, or part
of such provision, had never been contained herein, so that such provisions
would be valid, legal and enforceable to the maximum extent possible.
Section 5.14 -Further Assurances. From and after the date of this Agreement,
upon the request of the Purchaser or the Company, each of the Company and the
Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
Shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
McLAREN AUTOMOTIVE GROUP, INC.
By:/s/ Wiley R. McCoy
Name: Wiley R. McCoy
Title: President
/s/ George Karfunkel
GEORGE KARFUNKEL
Schedule 2.1(c)
Capitalization
The Company's 1994 Stock Option Plan is described in certain Commission
Documents.
Schedule 2.1(g)
Subsidiaries
<PAGE>
The owns 100% of the capital stock of McLaren Engines, Inc., a Michigan
corporation.
Schedule 2.1(i)
Undisclosed Liabilities
None.
Schedule 2.1(j)
Undisclosed Events or Circumstances
None.
Schedule 2.1(l)
Title to Assets
None.
Schedule 2.1(m)
Actions Pending
None.
Schedule 2.1(o)
Taxes
None.
Schedule 2.1(r)
Intellectual Property
The Company entered into a License Agreement in 1994 with Dana
Corporation. On July 21, 1998, Dana terminated the License Agreement. On
September 9, 1998, the Company filed an action alleging that Dana breached the
License Agreement. On April 6, 1999, the Company filed a patent infringement
action against Dana. In its complaint, the Company alleged that Dana infringed
upon its patented Gerodisc system, United States Patent No. 5,888,163 (the "`163
patent"), and the Company is seeking damages and declaratory and injunctive
relief. In response to the patent infringement action, Dana filed a counterclaim
in which it alleged that the `163 patent is invalid, unenforceable, and not
infringed upon by Dana. Dana's counterclaim is a declaratory judgment action in
which no money damages are sought. The patent infringement action and the breach
of contract action have been consolidated for purposes of discovery and trial.
Discovery is now being undertaken in the consolidated action. The case is
pending in the U.S. District Court for the Eastern District of Michigan.
On December 30, 1999, Murat Okcuoglu, a former employee of the Company,
filed an action against the Company. In his complaint, Mr. Okcuoglu alleges that
pursuant to his March 1, 1991, employment agreement with the Company, he is
entitled to damages in excess of $5,000,000 based on the Company's improper
commercialization of ideas he allegedly originated. The Company denies that it
has any obligations to Mr. Okcuoglu arising out of his employment agreement or
otherwise, and the Company intends to vigorously defend itself against Mr.
Okcuoglu's allegations. The case is pending in the Superior Court of Santa
Barbara, California.
Schedule 2.1(x)
Employees
None.
Schedule 2.1(y)
Absence of Certain Developments
None.
<PAGE>
EXHIBIT 10.2
EXHIBIT 10.2 Warrant to Purchase Shares of Common Stock dated as of March 15,
2000, between the Company and George Karfunkel
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR MCLAREN AUTOMOTIVE GROUP, INC. SHALL HAVE
RECEIVED AN OPINION, IN FORM, SCOPE AND SUBSTANCE REASONABLY ACCEPTABLE TO THE
COMPANY, OF COUNSEL, WHO IS REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
MCLAREN AUTOMOTIVE GROUP, INC.
Expires May 15, 2000
No.: W-1 Number of Shares: 200,000
Date of Issuance: March 15, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, McLaren Automotive Group, Inc., a Delaware corporation (together
with its successors and assigns, the "Issuer"), hereby certifies that George
Karfunkel or his permitted assigns are entitled to subscribe for and purchase,
during the period specified in this Warrant, up to 200,000 shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable Common Stock of the Issuer, at an exercise price
per share equal to the Warrant Price then in effect, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth. Capitalized
terms used in this Warrant and not otherwise defined herein shall have the
respective meanings specified in Section 8 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., eastern daylight savings time, on May 15, 2000 (such
period being the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer and Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may be
exercised in whole at any time and from time to time during the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant by the
surrender of this Warrant (with the exercise form attached hereto duly executed)
at the principal office of the Issuer, and by the payment to the Issuer of an
amount of consideration therefor equal to the Warrant Price in effect on the
date of such exercise multiplied by the number of shares of Warrant Stock with
respect to which this Warrant is then being exercised, payable by certified or
official bank check.
(c) Issuance of Stock Certificates. In the event of any exercise of the rights
represented by this Warrant in accordance with and subject to the terms and
conditions hereof, (i) certificates for the shares of Warrant Stock so purchased
shall be dated the date of such exercise and delivered to the Holder hereof
within a reasonable time, not exceeding three (3) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) Transferability of Warrant. Subject to Section 2(e), this Warrant may be
transferred by a Holder without the consent of the Company to a Holder
Affiliate, as
<PAGE>
defined herein. If transferred pursuant to this paragraph and subject to the
provisions of subsection (e) of this Section 2, this Warrant may be transferred
on the books of the Issuer by the Holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant at the principal office of the Issuer,
properly endorsed (by the Holder executing an assignment in the form attached
hereto) and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. This Warrant is exchangeable at the principal
office of the Issuer for Warrants for the purchase of the same aggregate number
of shares of Warrant Stock, each new Warrant to represent the right to purchase
such number of shares of Warrant Stock as the Holder hereof shall designate at
the time of such exchange. All Warrants issued on transfers or exchanges shall
be dated the Original Issue Date and shall be identical with this Warrant except
as to the number of shares of Warrant Stock issuable pursuant hereto. For
purposes of this agreement, a "Holder Affiliate" is any person controlled by or
under common control with such Holder.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this
Warrant or the shares of Warrant Stock to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT OR MCLAREN AUTOMOTIVE GROUP, INC.
SHALL HAVE RECEIVED AN OPINION OF COUNSEL, WHO IS REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT IS NOT
REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon the transfer of this
Warrant or the shares of Warrant Stock to be purchased upon exercise hereof
shall terminate (A) when such securities shall have been resold pursuant to
being effectively registered under the Securities Act (B) upon the Issuer's
receipt of an opinion of counsel, in form and substance reasonably satisfactory
to the Issuer, addressed to the Issuer to the effect that such restrictions are
no longer required to ensure compliance with the Securities Act and state
securities laws. Whenever such restrictions shall cease and terminate as to any
such securities, the Holder thereof shall be entitled to receive from the Issuer
(or its transfer agent and registrar), without expense (other than applicable
transfer taxes, if any), new Warrants (or, in the case of shares of Warrant
Stock, new stock certificates) of like tenor not bearing the applicable legend
required by paragraph (ii) above relating to the Securities Act.
(f) Continuing Rights of Holder. The Issuer will, at the time of or at any time
after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
3. Stock Fully Paid: Reservation and Listing of Shares: Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees that
all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
created by or through Issuer. The Issuer further covenants and agrees that
during the period within which this Warrant may be exercised, the Issuer will at
all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(b) Further Undertakings. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require qualification with any governmental authority under any federal or state
law before such shares may be so issued, the Issuer will in good faith use its
best efforts as
<PAGE>
expeditiously as possible at its expense to cause such shares to be duly
qualified. If the Issuer shall list any shares of Common Stock on any securities
exchange or market it will, at its expense, list thereon, maintain and increase
when necessary such listing, of, all shares of Warrant Stock from time to time
issued upon exercise of this Warrant or as otherwise provided hereunder, and, to
the extent permissible under the applicable securities exchange rules, all
unissued shares of Warrant Stock which are at any time issuable hereunder, so
long as any shares of Common Stock shall be so listed. The Issuer will also so
list on each securities exchange or market, and will maintain such listing of,
any other securities which the Holder of this Warrant shall be entitled to
receive upon the exercise of this Warrant if at the time any securities of the
same class shall be listed on such securities exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without limitation,
amending the Certificate of Incorporation or the by-laws of the Issuer, or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holder hereof against dilution (to the extent specifically
provided herein) or impairment. Without limiting the generality of the
foregoing, the Issuer will (i) not permit the par value, if any, of its Common
Stock to exceed the then effective Warrant Price, (ii) not amend or modify any
provision of the Certificate of Incorporation or by-laws of the Issuer in any
manner that would adversely affect in any way the powers, preferences or
relative participating, optional or other special rights of the Common Stock or
which would adversely affect the rights of the Holders of the Warrants, (iii)
take all such action as may be reasonably necessary in order that the Issuer may
validly and legally issue fully paid and nonassessable shares of Common Stock,
free and clear of any liens, claims, encumbrances and restrictions (other than
as provided herein) upon the exercise of this Warrant, and (iv) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence satisfactory
to the Issuer of the ownership of and the loss, theft, destruction or mutilation
of any Warrant and, in the case of any such loss, theft or destruction, upon
receipt of indemnity or security satisfactory to the Issuer or, in the case of
any such mutilation, upon surrender and cancellation of such Warrant, the Issuer
will make and deliver, in lieu of such lost, stolen, destroyed or mutilated
Warrant, a new Warrant of like tenor and representing the right to purchase the
same number of shares of Common Stock.
(e) Rights and Obligations under the Registration Rights Agreement. The shares
of Warrant Stock are entitled to the benefits and subject to the terms of the
Registration Rights Agreement dated as of even date herewith between the Issuer
and the Holder listed on the signature pages thereof (as amended from time to
time, the "Registration Rights Agreement"). The Issuer shall keep or cause to be
kept a copy of the Registration Rights Agreement, and any amendments thereto, at
its chief executive office and shall furnish, without charge, copies thereof to
the Holder upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The number and kind of
Securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or
Sale.
(i) In case the Issuer after the Original Issue Date shall do any of the
following (each, a "Triggering Event"): (a) consolidate with or merge into any
other Person and the Issuer shall not be the continuing or surviving corporation
of such consolidation or merger, or (b) permit any other Person to consolidate
with or merge into the Issuer and the Issuer shall be the continuing or
surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled (x) upon the exercise
<PAGE>
hereof at any time after the consummation of such Triggering Event, to the
extent this Warrant is not exercised prior to such Triggering Event, to receive
at the Warrant Price in effect at the time immediately prior to the consummation
of such Triggering Event in lieu of the Common Stock issuable upon such exercise
of this Warrant prior to such Triggering Event, the Securities, cash and
property to which such Holder would have been entitled upon the consummation of
such Triggering Event if such Holder had exercised the rights represented by
this Warrant immediately prior thereto, subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments
provided for in Section 4 hereof or (y) to sell this Warrant (or, at such
Holder's election, a portion hereof) concurrently with the Triggering Event to
the Person continuing after or surviving such Triggering Event, or to the Issuer
(if Issuer is the continuing or surviving Person) at a sales price equal to the
amount of cash, property and/or Securities to which a holder of the number of
shares of Common Stock which would otherwise have been delivered upon the
exercise of this Warrant would have been entitled upon the effective date or
closing of any such Triggering Event (the "Event Consideration"), less the
amount or portion of such Event Consideration having a fair value equal to the
aggregate Warrant Price applicable to this Warrant or the portion hereof so
sold.
(ii) Notwithstanding anything contained in this Warrant to the contrary, the
Issuer will not effect any Triggering Event unless, prior to the consummation
thereof, each Person (other than the Issuer) which may be required to deliver
any Securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such shares of Securities, cash
or property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such Person, which
counsel shall be reasonably satisfactory to such Holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
(iii) If with respect to any Triggering Event, the Holder of this Warrant has
exercised its right as provided in clause (y) of subparagraph (i) of this
subsection (a) to sell this Warrant or a portion thereof, the Issuer agrees that
as a condition to the consummation of any such Triggering Event the Issuer shall
secure such right of Holder to sell this Warrant to the Person continuing after
or surviving such Triggering Event and the Issuer shall not effect any such
Triggering Event unless upon or prior to the consummation thereof the amounts of
cash, property and/or Securities required under such clause (y) are delivered to
the Holder of this Warrant. The obligation of the Issuer to secure such right of
the Holder to sell this Warrant shall be subject to such Holder's cooperation
with the Issuer, including, without limitation, the giving of customary
representations and warranties to the purchaser in connection with any such
sale. Prior notice of any Triggering Event shall be given to the Holder of this
Warrant in accordance with Section 12 hereof.
(b) Subdivision or Combination of Shares. If the Issuer, at any time while this
Warrant is outstanding, shall subdivide or combine any shares of Common Stock,
(i) in case of subdivision of shares, the Warrant Price shall be proportionately
reduced (as at the effective date of such subdivision or, if the Issuer shall
take a record of Holders of its Common Stock for the purpose of so subdividing,
as at the applicable record date, whichever is earlier) to reflect the increase
in the total number of shares of Common Stock outstanding as a result of such
subdivision, or (ii) in the case of a combination of shares, the Warrant Price
shall be proportionately increased (as at the effective date of such combination
or, if the Issuer shall take a record of Holders of its Common Stock for the
purpose of so combining, as at the applicable record date, whichever is earlier)
to reflect the reduction in the total number of shares of Common Stock
outstanding as a result of such combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time while this
Warrant is outstanding, shall:
<PAGE>
(i) Stock Dividends. Pay a dividend in, or make any other distribution to its
stockholders (without consideration therefor) of, shares of Common Stock, the
Warrant Price shall be adjusted, as at the date the Issuer shall take a record
of the Holders of the Issuer's Capital Stock for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at the date of
such payment or other distribution), to that price determined by multiplying the
Warrant Price in effect immediately prior to such record date (or if no such
record is taken, then immediately prior to such payment or other distribution),
by a fraction (1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(2) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution (plus in the event
that the Issuer paid cash for fractional shares, the number of additional shares
which would have been outstanding had the Issuer issued fractional shares in
connection with said dividends); or
(ii) Other Dividends. Pay a dividend on, or make any distribution of its assets
upon or with respect to (including, but not limited to, a distribution of its
property as a dividend in liquidation or partial liquidation or by way of return
of capital), the Common Stock (other than as described in clause (i) of this
subsection (c)), or in the event that the Company shall offer options or rights
to subscribe for shares of Common Stock, or issue any Common Stock Equivalents,
to all of its holders of Common Stock, then on the record date for such payment,
distribution or offer or, in the absence of a record date, on the date of such
payment, distribution or offer, the Holder shall receive what the Holder would
have received had it exercised this Warrant in full immediately prior to the
record date of such payment, distribution or offer or, in the absence of a
record date, immediately prior to the date of such payment, distribution or
offer.
(d) Issuance of Additional Shares of Common Stock. If the Issuer, at any time
while this Warrant is outstanding, shall issue any Additional Shares of Common
Stock (otherwise than as provided in the foregoing subsections (a) through (c)
of this Section 4), at a price per share less than the Warrant Price then in
effect or less than the Per Share Price or without consideration, then the
Warrant Price upon each such issuance shall be adjusted to that price (rounded
to the nearest cent) determined by multiplying the Warrant Price then in effect
by a fraction:
(i) the numerator of which shall be equal to the sum of (A) the number of shares
of Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus (B) the number of shares of Common Stock (rounded to
the nearest whole share) which the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued would purchase at a price
per share equal to the greater of the Per Share Price and the Warrant Price then
in effect, and
(ii) the denominator of which shall be equal to the number of shares of Common
Stock outstanding immediately after the issuance of such Additional Shares of
Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (Y) no adjustment was required pursuant to
subsection (e) of this Section 4. No adjustment of the Warrant Price shall be
made under this subsection (d) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more,
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the Warrant Price.
(e) Issuance of Common Stock Equivalents. If the Issuer, at any time while this
Warrant is outstanding, shall issue any Common Stock Equivalent and the price
per share for which Additional Shares of Common Stock may be issuable thereafter
pursuant to such Common Stock Equivalent shall be less than the Warrant Price
then in effect or less than the Per Share Price, or if, after any such issuance
of Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock
<PAGE>
may be issuable thereafter is amended or adjusted, and such price as so amended
shall be less than the Warrant Price or less than the Per Share Price, then the
Warrant Price upon each such issuance or amendment shall be adjusted as provided
in the first sentence of subsection (d) of this Section 4 on the basis that (1)
the maximum number of Additional Shares of Common Stock issuable pursuant to all
such Common Stock Equivalents shall be deemed to have been issued (whether or
not such Common Stock Equivalents are actually then exercisable, convertible or
exchangeable in whole or in part) as of the earlier of (A) the date on which the
Issuer shall enter into a firm contract for the issuance of such Common Stock
Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent,
and (2) the aggregate consideration for such maximum number of Additional Shares
of Common Stock shall be deemed to be the minimum consideration received or
receivable by the Issuer for the issuance of such Additional Shares of Common
Stock pursuant to such Common Stock Equivalent. No adjustment of the Warrant
Price shall be made under this subsection
(e) upon the issuance of any Convertible Security which is issued pursuant to
the exercise of any warrants or other subscription or purchase rights therefor,
if any adjustment shall previously have been made in the Warrant Price then in
effect upon the issuance of such warrants or other rights pursuant to this
subsection (e).
(f) Purchase of Common Stock by the Issuer. If the Issuer at any time while this
Warrant is outstanding shall, directly or indirectly through a Subsidiary or
otherwise, purchase, redeem or otherwise acquire any shares of Common Stock at a
price per share greater than the Per Share Price, then the Warrant Price upon
each such purchase, redemption or acquisition shall be adjusted to that price
determined by multiplying such Warrant Price by a fraction (i) the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such purchase, redemption or acquisition minus the number of shares of
Common Stock which the aggregate consideration for the total number of such
shares of Common Stock so purchased, redeemed or acquired would purchase at the
Per Share Price; and (ii) the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such purchase, redemption or
acquisition. For the purposes of this subsection (f), the date as of which the
Per Share Price shall be computed shall be the earlier of (x) the date on which
the Issuer shall enter into a firm contract for the purchase, redemption or
acquisition of such Common Stock, or (y) the date of actual purchase, redemption
or acquisition of such Common Stock. For the purposes of this subsection (f), a
purchase, redemption or acquisition of a Common Stock Equivalent shall be deemed
to be a purchase of the underlying Common Stock, and the computation herein
required shall be made on the basis of the full exercise, conversion or exchange
of such Common Stock Equivalent on the date as of which such computation is
required hereby to be made, whether or not such Common Stock Equivalent is
actually exercisable, convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this Section 4. The
following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
(i) Computation of Consideration. The consideration received by the Issuer shall
be deemed to be the following: to the extent that any Additional Shares of
Common Stock or any Common Stock Equivalents shall be issued for a cash
consideration, the consideration received by the Issuer therefor, or if such
Additional Shares of Common Stock or Common Stock Equivalents are offered by the
Issuer for subscription, the subscription price, or, if such Additional Shares
of Common Stock or Common Stock Equivalents are sold to underwriters or dealers
for public offering without a subscription offering, the public offering price,
in any such case excluding any amounts paid or receivable for accrued interest
or accrued dividends and without deduction of any compensation, discounts,
commissions, or expenses paid or incurred by the Issuer for or in connection
with the underwriting thereof or otherwise in connection with the issue thereof;
to the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the fair market value of
such consideration at the time of such issuance as determined in good faith by
the Board. The consideration for any Additional Shares of Common Stock issuable
pursuant to any Common Stock Equivalents shall be the consideration received by
the Issuer for issuing such Common Stock Equivalents, plus the additional
consideration payable to the Issuer upon the exercise, conversion or exchange of
such Common Stock Equivalents. In case of the issuance at any time of any
Additional Shares of Common Stock or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of Capital Stock of the Issuer other
than Common Stock, the Issuer shall be deemed to have received for such
Additional Shares of Common Stock or Common Stock Equivalents a consideration
equal to the amount of such dividend so paid or satisfied. In any case in which
the
<PAGE>
consideration to be received or paid shall be other than cash, the Board shall
notify the Holder of this Warrant of its determination of the fair market value
of such consideration prior to payment or accepting receipt thereof. If, within
thirty (30) days after receipt of said notice, the Majority Holders shall notify
the Board in writing of their objection to such determination, a determination
of the fair market value of such consideration shall be made by an Independent
Appraiser selected by the Majority Holders with the approval of the Board (which
approval shall not be unreasonably withheld), whose fees and expenses shall be
paid by the Issuer.
(ii) Readjustment of Warrant Price. Upon the expiration or termination of the
right to convert, exchange or exercise any Common Stock Equivalent the issuance
of which effected an adjustment in the Warrant Price, if such Common Stock
Equivalent shall not have been converted, exercised or exchanged in its
entirety, the number of shares of Common Stock deemed to be issued and
outstanding by reason of the fact that they were issuable upon conversion,
exchange or exercise of any such Common Stock Equivalent shall no longer be
computed as set forth above, and the Warrant Price shall forthwith be readjusted
and thereafter be the price which it would have been (but reflecting any other
adjustments in the Warrant Price made pursuant to the provisions of this Section
4 after the issuance of such Common Stock Equivalent) had the adjustment of the
Warrant Price been made in accordance with the issuance or sale of the number of
Additional Shares of Common Stock actually issued upon conversion, exchange or
issuance of such Common Stock Equivalent and thereupon only the number of
Additional Shares of Common Stock actually so issued shall be deemed to have
been issued and only the consideration actually received by the Issuer (computed
as in clause (i) of this subsection (g)) shall be deemed to have been received
by the Issuer.
(iii) Outstanding Common Stock. The number of shares of Common Stock at any time
outstanding shall (A) not include any shares thereof then directly or indirectly
owned or held by or for the account of the Issuer or any of its Subsidiaries,
and (B) be deemed to include all shares of Common Stock then issuable upon
conversion, exercise or exchange of any then outstanding Common Stock
Equivalents or any other evidences of Indebtedness, shares of Capital Stock or
other Securities which are or may be at any time convertible into or
exchangeable for shares of Common Stock or Other Common Stock.
(h) Other Action Affecting Common Stock. In case after the Original Issue Date
the Issuer shall take any action affecting its Common Stock, other than an
action described in any of the foregoing subsections (a) through (g) of this
Section 4, inclusive, and the failure to make any adjustment would not fairly
protect the purchase rights represented by this Warrant in accordance with the
essential intent and principle of this Section 4, then the Warrant Price shall
be adjusted in such manner and at such time as the Board may in good faith
determine to be equitable in the circumstances.
(i) Adjustment of Warrant Share Number. Upon each adjustment in the Warrant
Price pursuant to any of the foregoing provisions of this Section 4, the Warrant
Share Number shall be adjusted, to the nearest one hundredth of a whole share,
to the product obtained by multiplying the Warrant Share Number immediately
prior to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately before giving effect to such
adjustment and the denominator of which shall be the Warrant Price immediately
after giving effect to such adjustment. If the Issuer shall be in default under
any provision contained in Section 3 of this Warrant so that shares issued at
the Warrant Price adjusted in accordance with this Section 4 would not be
validly issued, the adjustment of the Warrant Share Number provided for in the
foregoing sentence shall nonetheless be made and the Holder of this Warrant
shall be entitled to purchase such greater number of shares at the lowest price
at which such shares may then be validly issued under applicable law. Such
exercise shall not constitute a waiver of any claim arising against the Issuer
by reason of its default under Section 3 of this Warrant.
(j) Form of Warrant after Adjustments. The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5,
each an "adjustment"), the Issuer shall cause its Chief Financial Officer to
prepare and execute a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after
<PAGE>
giving effect to such adjustment, and shall cause copies of such certificate to
be delivered to the Holder of this Warrant promptly after each adjustment. Any
dispute between the Issuer and the Holder of this Warrant with respect to the
matters set forth in such certificate may at the option of the Holder of this
Warrant be submitted to one of the national accounting firms currently known as
the "big five" selected by the Holder, provided that the Issuer shall have ten
(10) days after receipt of notice from such Holder of its selection of such firm
to object thereto, in which case such Holder shall select another such firm and
the Issuer shall have no such right of objection. The firm selected by the
Holder of this Warrant as provided in the preceding sentence shall be instructed
to deliver a written opinion as to such matters to the Issuer and such Holder
within thirty (30) days after submission to it of such dispute. Such opinion
shall be final and binding on the parties hereto. The fees and expenses of such
accounting firm shall be paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be issued in
connection with and exercise hereof, but in lieu of such fractional shares, the
Issuer shall make a cash payment therefor equal in amount to the product of the
applicable fraction multiplied by the Per Share Market Value then in effect.
7. [Omitted.]
8. Definitions. For the purposes of this Warrant, the following terms have the
following meanings:
"Additional Shares of Common Stock" means all shares of Common Stock issued by
the Issuer after the Original Issue Date, and all shares of Other Common, if
any, issued by the Issuer after the Original Issue Date, except (i) the Warrant
Stock, and (ii) any shares of Common Stock issued pursuant to the exercise of
stock options issued by the Company to its employees pursuant to duly approved
Company stock option plans.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
"Common Stock" means the Common Stock, par value $.00001 per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.
"Common Stock Equivalent" means any Convertible Security or warrant, option or
other right to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness, shares of Capital
Stock or other Securities which are or may be at any time convertible into or
exchangeable for Additional Shares of Common Stock. The term "Convertible
Security" means one of the Convertible Securities.
"Governmental Authority" means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
"Holders" mean the Persons who shall from time to time own any Warrant. The term
"Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital
<PAGE>
Stock or assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means McLaren Automotive Group, Inc., a Delaware corporation, and its
successors.
"Majority Holders" means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the Warrants at the time
outstanding.
"Original Issue Date" means March 15, 2000.
"Other Common" means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
"Per Share Market Value" means on any particular date (a) the closing bid price
per share of the Common Stock on such date on NASDAQ or other registered
national stock exchange on which the Common Stock is then listed or if there is
no such price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on NASDAQ or any registered national stock exchange,
the closing bid price for a share of Common Stock in the over-the-counter
market, as reported by the OTC Bulletin Board or in the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the holder,
or (d) if the Common Stock is not then publicly traded the fair market value of
a share of Common Stock as determined by an Independent Appraiser selected in
good faith by the Majority Holders; provided, however, that the Issuer, after
receipt of the determination by such Independent Appraiser, shall have the right
to select an additional Independent Appraiser, in which case, the fair market
value shall be equal to the average of the determinations by each such
Independent Appraiser; and provided, further that all determinations of the Per
Share Market Value shall be appropriately adjusted for any stock dividends,
stock splits or other similar transactions during such period. The determination
of fair market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as between a
willing buyer and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties. In
determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the Common Stock
imposed by agreement or by federal or state securities laws, or to the existence
or absence of, or any limitations on, voting rights.
"Per Share Price" means $2.00; provided, however, that the Per Share Price shall
be appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Purchase Agreement" means the Stock Purchase Agreement dated as of March 15,
2000 among the Issuer and the investor a party thereto.
"Registration Rights Agreement" has the meaning specified in Section 3(e)
hereof.
"Securities" means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. "Security" means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
<PAGE>
"Subsidiary" means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is traded on the over
the counter market as reported by NASDAQ, or (b) if the Common Stock is not
listed on NASDAQ, a day on which the Common Stock is traded on any other
registered national stock exchange; provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then
Trading Day shall mean any day except Saturday, Sunday and any day which shall
be a legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.
"Warrants" means this Warrant, and any other warrants of like tenor issued in
substitution or exchange thereof pursuant to the provisions of Section 2(c),
2(d) or 2(e) hereof or of any of such other Warrants.
"Warrant Price" means $2.00, as such price may be adjusted from time to time as
shall result from the adjustments specified in this Warrant, including Section 4
hereto.
"Warrant Share Number" means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.
9. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders of Common Stock; or
(B) the Issuer shall authorize the granting to all holders of its Common Stock
of rights to subscribe for or purchase any shares of Capital Stock of any class
or of any Common Stock Equivalents or Convertible Securities or other rights; or
(C) there shall be any reclassification of the Capital Stock of the Issuer; or
(D) there shall be any capital reorganization by the Issuer; or
(E) there shall be any (i) consolidation or merger involving the Issuer or (ii)
sale, transfer or other disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Issuer or any partial liquidation of the Issuer or
distribution to holders of Common Stock; then, in each of such cases, the Issuer
shall give written notice to the Holder of the date on which (i) the books of
the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be, shall take place. Such notice also shall
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their certificates for Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding-up, as the case may be.
Such notice shall be given at least twenty (20) days prior to the action in
question and not less than twenty (20) days prior to the record date or the date
on which the Issuer's transfer books are closed in respect thereto. The Issuer
shall give to the Holder notice of
<PAGE>
all meetings and actions by written consent of its stockholders, at the same
time in the same manner as notice of any meetings of stockholders is required to
be given to stockholders who do not waive such notice (or, if such requires no
notice, then two (2) Trading Days written notice thereof describing the matters
upon which action is to be taken). The Holder shall have the right to send two
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This Warrant
entitles the Holder to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Common Stock.
10. Amendment and Waiver. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the Holder;
provided, however, that no such amendment or waiver shall reduce the Warrant
Share Number, increase the Warrant Price, shorten the period during which this
Warrant may be exercised or modify any provision of this Section 10 without the
consent of the Holder of this Warrant.
11. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
12. Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earlier of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice prior to 5:00 p.m., eastern time, on a Business Day,
(ii) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., eastern time, on any date and earlier
than 11:59 p.m., eastern time, on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service
or (iv) actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be with respect to the Holder of
this Warrant or of Warrant Stock issued pursuant hereto, addressed to such
Holder at its last known address or facsimile number appearing on the books of
the Issuer maintained for such purposes, or with respect to the Issuer,
addressed to:
McLaren Automotive Group, Inc.
32233 West Eight Mile Road
Livonia, Michigan 48152
Attention: Jacqueline K. Kurtz, CFO
Tel No.: (248) 477-6240
Fax No.: (248) 474-8852
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Holders shall be sent to Parker Chapin
LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174,
Attention: Henry Rothman, Esq., Facsimile no.: (212) 704-6288.
13. Warrant Agent. The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
14. Remedies. The Issuer stipulates that the remedies at law of the Holder of
this Warrant in the event of any default or threatened default by the Issuer in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
15. Successors and Assigns. This Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors and assigns of the
Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant
<PAGE>
Stock issued pursuant hereto, and shall be enforceable by any such Holder or
Holder of Warrant Stock.
16. Modification and Severability. If, in any action before any court or agency
legally empowered to enforce any provision contained herein, any provision
hereof is found to be unenforceable, then such provision shall be deemed
modified to the extent necessary to make it enforceable by such court or agency.
If any such provision is not enforceable as set forth in the preceding sentence,
the unenforceability of such provision shall not affect the other provisions of
this Warrant, but this Warrant shall be construed as if such unenforceable
provision had never been contained herein.
17. Headings. The headings of the Sections of this Warrant are for convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant. IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
MCLAREN AUTOMOTIVE GROUP, INC.
By:/s/ Wiley R. McCoy
Name: Wiley R. McCoy
Title: President
EXERCISE FORM
[NAME OF ISSUER]
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address _____________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
<PAGE>
EXHIBIT 10.3
EXHIBIT 10.3 Registration Rights Agreement dated as of March 15, 2000 between
the Company and George Karfunkel
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of March 15, 2000 (this "Agreement"),
among MCLAREN AUTOMOTIVE GROUP, INC., a Delaware corporation (the "Company"),
and George Karfunkel (the "Investor").
Pursuant to the Stock Purchase Agreement, dated as of the date hereof, between
the Investor and the Company (the "Purchase Agreement"), the Company has agreed
to issue and sell to the Investor shares of its Common Stock and a Warrant.
In order to induce the Investor to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement.
In consideration of the foregoing and the covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. Definitions.
As used herein, unless the context otherwise requires or unless otherwise
defined, the following terms have the following respective meanings:
"Affiliate": The meaning set forth in Rule 12b-2 under the Exchange Act (as in
effect on the date of this Agreement).
"Agreement": As defined in the first paragraph hereof.
"Blue Sky Filing": As defined in Section 2.7.
"Commission": The Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.
"Common Stock": The Company's common stock, $.00001 par value, such term to
include any stock into which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common Stock, and all other
stock of any class or classes (however designated) of the Company the holders of
which have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference.
"Company": As defined in the first paragraph hereof.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Indemnitees": As defined in Section 2.7.
"Investor": As defined in the first paragraph hereof.
"Investor Affiliate": As defined in Section 7.
"Loss": As defined in Section 2.7.
"Person": A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
"Purchase Agreement": As defined in the second paragraph hereof.
"Registrable Securities": Any (i) shares of Common Stock; (ii) shares of Common
Stock issued upon exercise of the Warrant and (iii) shares of Common Stock
issued or issuable with respect to any such Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger,
<PAGE>
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (b) such
securities shall have been sold pursuant to Rule 144 (or any successor
provision) under the Securities Act or are eligible for sale under Rule 144 (k)
(or any successor provision) (c) such securities shall have been otherwise
transferred to a person who is not an Investor Affiliate of the Investor; or (d)
such securities shall have ceased to be outstanding.
"Registration Expenses": All expenses incident to the Company's performance of
or compliance with this Agreement, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all fees and expenses of listing the Registrable
Securities being registered on any securities exchange, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "comfort" letters
required by or incidental to such performance and compliance, all expenses
incurred by the Investor for its own counsel but excluding any and all selling
expenses relating to the Registrable Securities including underwriting
discounts, non-accountable expenses allowances and commissions, if any;
"Securities Act": The Securities Act of 1933, as amended.
"Warrant": The Warrant issued to the Investor pursuant to the Purchase
Agreement.
2. REGISTRATION UNDER SECURITIES ACT.
2.1 Demand Registration.
(a) -Request. At any time beginning 180 days after the date
hereof, two times only, (but only one time if the Company effects the
registration of the Registrable Securities on Form S-3 or any successor form
that permits a "shelf" registration), upon the written request of holders of at
least 25% of the Registrable Securities, that the Company, effect the
registration under the Securities Act of all or part of the Registrable
Securities, the Company shall promptly give written notice of such request to
all registered holders of Registrable Securities, and thereupon the Company
shall use its best commercially reasonable efforts to effect the registration
under the Securities Act of the Registrable Securities that the Company has been
so requested to register by all such holders for disposition in accordance with
the intended method of disposition stated in such request. Promptly after
receipt of such request, the Company shall give notice thereof to all other
securityholders of the Company, if any, that are entitled to participate in such
registration. The Company shall file the registration statement requested
pursuant to this subsection (a) not later than 30 days following such request,
subject to Section 2.6, and shall use its best commercially reasonable efforts
to have such registration statement declared effective as soon as possible after
the filing thereof.
(b) Underwriting . If the Registration Statement is for an
underwritten offering for Common Stock of the Company, the right of the Investor
to include all or a portion of the Registrable Securities in a registration
pursuant to this Section 2 shall be conditioned upon the Investor's
participation in such underwriting and the inclusion of the Registrable
Securities in the underwriting to the extent provided herein. If the Investor
proposes to distribute the Registrable Securities through such underwriting, it
shall enter into an underwriting agreement in customary form with the managing
underwriter or underwriter(s) selected for such underwriting. Notwithstanding
any other provision of this Agreement, if the managing underwriter determines in
good faith that marketing factors require a limitation of the number of shares
to be underwritten, then the Company and the Investor shall determine the number
of shares each party shall include in such underwriting. If the Investor
disapproves of the terms of any such underwriting, the Investor may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered not later than 10 days prior to the date the Registration Statement is
filed with the Commission. Any Registrable Securities excluded or
<PAGE>
withdrawn from such underwriting shall be excluded and withdrawn from the
registration.
(c) -Registration Statement Form. Registrations under this
Section 2.1 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and as shall be reasonably acceptable to
holders of a majority of the Registrable Securities proposed to be sold and (ii)
as shall permit the disposition of such Registrable Securities in accordance
with the intended method or methods of disposition.
(d) -Expenses. The Company shall pay all Registration Expenses
in connection with any registration requested pursuant to this Section 2.1.
(e) -Effective Registration Statement. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been effected
and shall not be considered the demand registration which may be requested
pursuant to subsection (a) of this Section 2.1 unless (A) a registration
statement with respect thereto has become effective, (B) such registration
statement has remained effective for the later to occur of the following: (i)
two years from the effective date of the registration statement or (ii) the date
such registered securities cease to be Registrable Securities and (C) such
registration statement has not become subject to any stop order, injunction or
other order or requirement of the Commission or other governmental agency or
court for any reason or such registration statement has become effective within
30 days thereafter.
2.2 Incidental Registration.
(a) -Right to Include Registrable Securities. If the Company at any time
proposes to register any of its securities under the Securities Act by
registration on Forms S-1, S-2 or S-3 or any successor or similar form(s),
whether or not for sale for its own account, it shall give prompt written notice
to all holders of Registrable Securities of its intention to do so and of such
holders' rights under this Section 2.2. Upon the written request of any such
holder specifying the Registrable Securities intended to be disposed of by such
holder, made within 15 days after the receipt of any such notice, which request
shall specify the Registrable Securities intended to be disposed of by such
holder, the Company shall use its best commercially reasonable efforts to
include in the registration under the Securities Act all Registrable Securities
which the Company has been so requested to register by the holders thereof, to
the extent requisite to permit the disposition of such Registrable Securities to
be so registered. No registration effected under this Section 2.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 2.1, nor shall it be deemed to have been effected pursuant to Section
2.1. The Company shall pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2.
The Company shall have the right to withdraw or cancel any registration under
this Section 2.2 in its sole discretion at any time, provided, however, that the
Investor shall retain all registration rights pursuant to this Section 2.2.
(b) -Priority in Incidental Registrations. In a registration pursuant to this
Section 2.2 involving an underwritten offering, whether or not for sale for the
account of the Company, if the managing underwriter of such underwritten
offering shall inform the Company by letter of its belief that the number of
securities requested by stockholders to be included in such registration would
substantially interfere with its ability to effect such offering in accordance
with the intended method thereof (such letter to state the basis of such belief
and the approximate number of such securities that may be distributed without
such effect), then the Company may, upon written notice to all holders of such
securities, reduce the number of Registrable Securities requested to be included
in such registration (if and to the extent stated by such managing underwriter
to be necessary to eliminate such effect) and, if such reduction is not
sufficient to eliminate such effect, then reduce pro rata (if and to the extent
stated by such managing underwriter to be necessary to eliminate such effect)
the number of Registrable Securities requested to be registered by the holders
of the Registrable Securities, on the one hand, and the holders of other
securities of the Company (whether issued before or after the date hereof), on
the other hand, in proportion (as nearly as practicable) to the amount of
Registrable Securities owned by the holders thereof participating in such
<PAGE>
registration, on the one hand, and the amount of other securities of the Company
owned by the holders thereof participating in such registration, on the other
hand, so that the aggregate number of securities included in such registration
shall be equal to the number of shares stated in such managing underwriter's
letter; provided, however, that to the extent the Company has granted
"piggyback" registration rights to other holders of its securities prior to the
date hereof and such registration rights do not permit the Company to comply
with this provision, in the reasonable opinion of the Company's counsel, to the
extent such holders request registration of their securities, the Company will
use its best commercially reasonable efforts to achieve as close a result as is
possible to that intended by this Section 2.2 (b) without breaching such other
agreements. The number of securities to be included in such registration by the
holders of Registrable Securities shall be apportioned among all holders thereof
participating in the registration in proportion (as nearly as practicable) to
the amount of Registrable Securities owned by each holder thereof or as they may
otherwise agree. The number of securities to be included in such registration by
the holders of other securities of the Company shall be apportioned among all
holders thereof participating in the registration in proportion (as nearly as
practicable) to the amount of other securities owned by each holder thereof or
as they may otherwise agree.
2.3 Registration Procedures. In connection with the Company's obligations
pursuant to Sections 2.1, and 2.2, the Company and where applicable, the
Investor, will as expeditiously as possible: (a) in the case of a registration
pursuant to Section 2.1, prepare and file with the Commission a registration
statement or registration statements on any appropriate form under the
Securities Act and use its best efforts to cause such registration statement to
become effective and to remain continuously effective for so long as the selling
holders of the Registrable Securities shall request (but in no event longer than
the period set forth in 2.1(e)(B);
(b) in the case of a registration pursuant to Section 2.1, prepare and file with
the Commission such amendments and post-effective amendments to a registration
statement as may be necessary to keep such registration statement effective for
the applicable period; cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
the Securities Act, provided that prior to filing any such amendments or
supplements or any documents that would be incorporated by reference in such
registration statement (filed pursuant to Section 2.1 or 2.2 hereof), the
Company shall furnish to the Investor, its counsel and the underwriters, if any,
copies of all such documents proposed to be filed (other than documents filed
under the Exchange Act), and the Company shall consider all reasonable requests
by the Investor or the underwriters for modifications of any such amendments,
supplements or documents incorporated by reference; and the Company and the
Investor will comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such registration
statement (including Regulation M and any similar successor regulations) during
the applicable period in accordance with the intended methods of disposition by
the sellers thereof set forth in such registration statement or supplement to
such prospectus;
(c) notify the selling holders of Registrable Securities, and the managing
underwriters, if any, as promptly as practicable, and (if requested by any such
Person) confirm such advice in writing, (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to a
registration statement or any post-effective amendment, when it has become
effective, (ii) of any request by the Commission for amendments or supplements
to a registration statement or related prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (iv) if at any time the representations and warranties of the
Company made as contemplated by subsection (k) below cease to be true and
correct, (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation of any proceeding for such purpose,
(vi) of the happening of any event that requires the making of any changes in a
registration statement or related prospectus so that such documents will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (vii) of the Company's
<PAGE>
reasonable determination that a post-effective amendment to a registration
statement would be appropriate;
(d) in the case of a registration pursuant to Section 2.1, make every reasonable
effort to obtain the withdrawal of any order suspending the effectiveness of a
registration statement, or the lifting of any suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction, as soon as
practicable;
(e) in the case of a registration pursuant to Section 2.1, if requested in a
timely manner by the managing underwriters, as promptly as practicable
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriters and the holders of Registrable
Securities being sold in connection with an underwritten offering agree should
be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being sold to such underwriters, the purchase
price being paid therefor by such underwriters and with respect to any other
terms of the offering of the Registrable Securities to be sold in such offering;
make all required filings of such prospectus supplement or post-effective
amendment as soon as practicable after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
supplement or make amendments to any registration statement with respect to
information relating to any holder or the terms of the sale or offering of the
Registrable Securities if requested in a timely manner in writing by any holder
of Registrable Securities covered by such registration statement or any
underwriter of such Registrable Securities;
(f) furnish to the lead managing underwriter and each holder of Registrable
Securities selling Registrable Securities thereunder, without charge, at least
one signed copy of the registration statement or statements and any
post-effective amendment thereto, and to each other selling holder of
Registrable Securities, at least one conformed copy thereof, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(g) deliver to each holder of Registrable Securities and the underwriters, if
any, without charge, as many copies of the prospectus or prospectuses (including
each preliminary prospectus) and any amendment or supplement thereto as such
Persons may reasonably request;
(h) in the case of a registration pursuant to Section 2.1, prior to any public
offering of Registrable Securities, use its best commercially reasonable efforts
to register or qualify or cooperate with the selling holders of Registrable
Securities, the underwriters, if any, and their respective counsel in connection
with the registration or qualification of such Registrable Securities for offer
and sale under the securities or blue sky laws of such jurisdictions as any
selling holder or underwriter reasonably requests in writing, keep each such
registration or qualification effective during the period such registration
statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the applicable registration statement;
provided that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process in any such
jurisdiction where it is not then so subject;
(i) in the case of a registration pursuant to Section 2.1, cooperate with the
selling holders of Registrable Securities and the managing underwriters, if any,
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends unless
required by applicable law; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters may
request at least two business days prior to the closing of any sale of
Registrable Securities to the underwriters; provided that the Company receive
such request in writing not less than 10 days prior to such closing;
(j) in the case of a registration pursuant to Section 2.1, upon the occurrence
of any event contemplated by clause (c)(vi) above, prepare a supplement or
post-effective amendment to the applicable registration statement or related
prospectus
<PAGE>
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the selling holders of the
Registrable Securities, such prospectus will not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(k) in the case of a registration pursuant to Section 2.1, enter into such
agreements (including an underwriting agreement) and take all such other
reasonable actions in connection therewith in order to expedite or facilitate
the disposition of such Registrable Securities and in connection therewith, when
an underwriting agreement is entered into and when the registration is an
underwritten registration, (i) make such representations and warranties to the
underwriters with respect to the registration statement, prospectus and
documents incorporated by reference, if any, in form, substance and scope as are
customarily made by issuers in similar offerings; (ii) obtain opinions of
counsel to the Company (which may be the general counsel) addressed to the
underwriters and updates thereof in the form, scope and substance as are
customary in similar offerings; (iii) enter into an underwriting agreement in
form, scope and substance as is customary in underwritten offerings; (iv)
furnish a signed counterpart, addressed to such underwriters, of a "comfort"
letter, dated the effective date of such registration statement (and dated the
date of the closing under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial statements
included in such registration statement, covering the matters with respect to
such registration statement (and the prospectus included therein) and with
respect to events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to the underwriters in
underwritten public offerings of securities, (v) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification provisions
and procedures of Section 2.7 with respect to all parties to be indemnified
pursuant to such section, with such other indemnification provisions as are
customary and acceptable to the underwriters, the holders of a majority of the
Registrable Securities proposed to be sold and the Company; and (vi) the Company
shall deliver such documents and certificates as may reasonably be requested by
the managing underwriters, if any, to evidence compliance with this paragraph
(k) and with any customary conditions contained in the underwriting agreement.
The above shall be done at each closing under such underwriting or as and to the
extent required thereunder;
(l) otherwise use its best commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its security holders earnings statements satisfying the provisions of Section
11(a) of the Securities Act no later than 90 days after the end of any 12-month
period (i) beginning with the first day of the Company's first fiscal quarter
next succeeding each sale of Registrable Securities after the effective date of
a registration statement and (ii) beginning with the first day of the Company's
first fiscal quarter next succeeding any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm or best efforts underwriting
offering, which statements shall cover such 12-month periods;
(m) use its best commercially reasonable efforts to cause all such Registrable
Securities to be listed on each securities exchange, if any, on which securities
of the class then being registered are listed; and
(n) provide and cause to be maintained a transfer agent and registrar for all
Registrable Securities covered by such registration statement from and after a
date not later than the effective date of such registration statement.
The Company may require each holder of Registrable Securities as to which any
registration is being effected to promptly furnish to the Company such
information regarding such holder and the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing in
order to comply with the Securities Act. Each holder of Registrable Securities
as to which any registration is being effected agrees to notify the Company as
promptly as practicable of any inaccuracy or change in information previously
furnished by such holder to the Company or of the happening of any event as a
result of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such holder or the distribution of such
Registrable Securities or omits to state any material fact regarding such holder
or the distribution of such
<PAGE>
Registrable Securities required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and to promptly furnish to the Company any additional
information required to correct and update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
holder or the distribution of such Registrable Securities, an 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 under which they were made, not misleading.
Each holder of Registrable Securities agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
2.3(c)(ii), (iii), (v), (vi) or (vii), such holder will forthwith discontinue
disposition of such Registrable Securities covered by such registration
statement or prospectus until such holder's receipt of the copies of the
supplemented or amended prospectus relating to such registration statement or
prospectus, or until it is advised in writing by the Company that the use of the
applicable prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated by reference in such Prospectus,
and, if so directed by the Company, such holder will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
holder's possession, of the prospectus covering the Registrable Securities at
the time of receipt of such notice.
2.4 Underwritten Offerings. In the case of any underwritten offering requested
pursuant to Section 2.1, the holders of a majority of the Registrable Securities
proposed to be sold shall select the investment banking firm or firms, which
shall be reasonably satisfactory to the Company. The Company shall enter into an
underwriting agreement which shall contain, customary representations and
warranties and shall be reasonably satisfactory in form and substance to the
holders of a majority of the Registrable Securities proposed to be sold.
If the Company at any time proposes to register any of its securities under the
Securities Act as contemplated by Section 2.2 and such securities are to be
distributed by or through one or more underwriters, the Company shall select the
investment banking firm or firms in its sole discretion and the holders of
Registrable Securities to be distributed therein shall be parties to the
underwriting agreement between the Company and the underwriters.
2.5 Preparation; Reasonable Investigation. In connection with the preparation
and filing of each registration statement under the Securities Act pursuant to
this Agreement, the Company shall give the selling holders of Registrable
Securities, their underwriters, and their respective counsel and accountants, a
reasonable opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto (other than documents filed under
the Exchange Act and incorporated by reference therein), and shall give each of
them such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
2.6 Limitations, Conditions and Qualifications to Obligations Under Registration
Covenants. The obligations of the Company under Section 2.1 to use its best
commercially reasonable efforts to cause the Registrable Securities to be
registered under the Securities Act are subject to each of the following
limitations, conditions and qualifications:
(a) The Company shall be entitled to postpone the filing or effectiveness of any
registration statement otherwise required to be prepared and filed by it
pursuant to Section 2.1 for a reasonable period of time (but not exceeding 60
days) if the Company determines, in its reasonable judgment, that such
registration and offering, or such offers and sales, would interfere with any
financing, acquisition, corporate reorganization or other material transaction
involving the Company or any of its Affiliates or would require the Company to
disclose material non-public information. The Company shall promptly give the
requesting holders of Registrable Securities written notice of such
determination, containing a general statement of the reasons
<PAGE>
for such postponement and an approximation of the anticipated delay. If the
Company shall so postpone the filing of a registration statement, the requesting
holders of Registrable Securities shall have the right to withdraw the request
for registration by giving written notice to the Company within 30 days (or
within the period of postponement if such period is less than 30 days) after
receipt of the notice of postponement in the event of such withdrawal, such
request shall not be deemed a request for registration pursuant to Section 2.1
hereof.
(b) No holder of Registrable Securities may participate in any underwritten
offering hereunder unless such holder (i) agrees to sell such holder's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
2.7 Indemnification.
(a) -Indemnification by the Company. In the event of any registration of
Registrable Securities, the Company shall indemnify, defend and hold harmless
the holder of any Registrable Securities that are covered by such registration
statement, each other Person who participates as an underwriter in the offering
or sale of such securities and each person who controls any such holder or
underwriter within the meaning of the Securities Act, and each of the respective
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against any and all actions, suits, claims, proceedings, costs,
damages, judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto, or
in any filing made in connection with the qualification of the offering under
blue sky or other securities laws of jurisdictions in which the Registrable
Securities are offered ("Blue Sky Filing"), or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein not misleading or (ii) any violation by the
Company of any federal, state or common law, rule or regulation applicable to
the Company and relating to action required of or inaction by the Company in
connection with any such registration, and the Company will defend each
Indemnitee in connection with investigating or defending such Loss and provide
each Indemnitee with counsel reasonably acceptable to such Indemnitee or, if the
Company fails to defend each Indemnitee on a timely basis, as set forth in
Section 2.7(c), reimburse each Indemnitee for any legal or other expenses
reasonably incurred in connection with investigating or defending such Loss;
provided, however, that such indemnification covenant shall not (i) apply to any
Loss arising out of, or based upon, any such untrue statement or alleged untrue
statement, or any such omission or alleged omission, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Indemnitee specifically stating
that it is for use in connection with preparation of the registration statement,
any preliminary prospectus or final prospectus contained in the registration
statement, any such amendment or supplement thereto or any Blue Sky Filing or
(ii) inure to the benefit of any underwriter or person controlling such
underwriter to the extent that any such Loss arises out of such Indemnitee's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Indemnitee and shall survive the
transfer of such securities by any Indemnitee. In no event shall any indemnity
paid by the Company to any indemnified party pursuant to this Section 2.7(a) or
otherwise exceed the net proceeds received by the Investor in such offering.
(b) -Indemnification by the Holders of Registrable Securities . As a condition
to including any Registrable Securities in any registration statement filed
pursuant to Section 2.1 or 2.2, the Company shall have received an undertaking
satisfactory to
<PAGE>
it from each prospective seller of such Registrable Securities to indemnify,
defend and hold harmless (in the same manner and to the same extent as set forth
in subsection (a) of this Section 2.7) the Company, each other person who
participates as an underwriter in the offering or sale of such securities and
each person who controls any such holder or underwriter within the meaning of
the Securities Act, and each of their respective partners, officers, directors,
employees and agents, and each other person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any untrue statement
or alleged untrue statement in, or omission or alleged omission from, such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein or any Blue Sky Filing, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such seller specifically stating that it
is for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller. In no
event shall any indemnity paid by any seller to the Company pursuant to this
Section 2.7(b) or otherwise exceed the net proceeds received by such seller in
such offering.
(c) Indemnification Procedure. Any party entitled to indemnification
under this Section 2.7 (the "indemnified party") will give prompt written notice
(the "Notice") to the other party (the "indemnifying party") of any matters
giving rise to a claim for indemnification; provided, that the failure of
indemnified party to indemnification hereunder to give notice as provided herein
shall not relieve the indemnifying party of its obligations under this Section
2.7 except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any action, proceeding or claim is asserted
against the indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate in and to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises the
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of the Notice to notify,
in writing, the indemnified party of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice. The indemnifying party shall not be liable for any settlement of
any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Section 2.7 to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Section 2.7 for an action or
claim brought by a third party shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received for expenses related to the legal defense or investigation, so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or
<PAGE>
others, and (b) any liabilities the indemnifying party may be subject pursuant
to the law.
2.9 Registration Expenses. All Registration Expenses, shall be borne by the
Company whether or not any registration statement becomes effective. The Company
shall, in any event, pay its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange and the fees and expenses of any Person, including
special experts, retained by the Company.
3. -Amendments and Waivers. This Agreement may be amended with the consent of
the Company and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or omission to act,
of the holders of a majority of the amount of Registrable Securities then
outstanding. Each holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 3, whether
or not such securities shall have been marked to indicate such consent.
4. -Registration Rights. The Company covenants that it will not grant any right
of registration under the Securities Act relating to any of its shares of
capital stock or other securities to any Person other than pursuant to this
Agreement unless the rights so granted to such other Person, except as provided
herein, do not limit or restrict the Investor's rights hereunder.
5. -Nominees for Beneficial Owners. In the event that any Registrable Securities
are held by a nominee for the beneficial owner thereof, such beneficial owner
may, at its election and upon notice to the Company, be treated as the holder of
such securities for purposes of any request or other action by any holder or
holders of securities pursuant to this Agreement or any determination of any
number or percentage of shares of securities held by any holder or holders of
securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
6. Notices. Any notice or demand that is required or provided to be given under
this Agreement shall be deemed to have been sufficiently given and received for
all purposes when delivered by hand, facsimile transmission or courier, or five
days after being sent by certified or registered mail, postage and charges
prepaid, return receipt requested, to the following addresses:
If to the Company: McLaren Automotive Group, Inc.
32233 West Eight Mile Road
Livonia, Michigan 48152
Attention: Jacqueline K. Kurtz
Fax No.: (248) 477-3349
With a copy to: Clark Hill PLC
500 Woodward Avenue, Suite 3500
Detroit, Michigan 48226
Attention: John J. Hern, Jr., Esq.
Fax No.: (313) 965-8252
If to the Investor: George Karfunkel
6201 15th Avenue, 3rd Fl.
Brooklyn, New York 11219
Fax No.: (718) 921-8340
With a copy to: Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attention: Henry I. Rothman, Esq.
Fax No.: (212) 704-6288
<PAGE>
If to any other holder of Registrable Securities, at such address set forth in
the Company's records, or with respect to any party hereto, at any other address
designated in writing in accordance with the provisions of this Section 6.
7. -Assignment. This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
assigns. The rights or any portion thereof of the Investor herein may not be
assigned by the Investor without the written consent of the Company except that
such rights may be assigned by the Investor at its sole discretion (and
thereupon by such assignee) without the consent of the Company to (a) an
Investor Affiliate (as defined below); provided, however, that (A) the Company
is given prior written notice by the assignor stating the name and address of
the permitted assignee and identifying the Registrable Securities with respect
to which such rights are being assigned, and (B) such assignee agrees in writing
to be bound by the terms of this Agreement. For purposes of this Section 7, an
"Investor Affiliate" is any Person controlled by or under common control with
the Investor.
8. -Descriptive Headings. The descriptive headings of the several sections and
paragraphs of this Agreement are inserted for reference only and shall not limit
or otherwise affect the meaning hereof.
9. -Governing Law. The validity and interpretation of this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York, without giving effect to the principles of conflicts of law
thereof;.
10. -Counterparts. This Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
[END OF PAGE]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the date first above written.
MCLAREN AUTOMOTIVE GROUP INC.
By:/s/ Wiley R. McCoy
Name: Wiley R. McCoy
Title: President
INVESTOR
/s/ George Karfunkel
George Karfunkel
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
CONDENSED UNAUDITED BALANCE SHEETS AND STATEMENT OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 994,100
<SECURITIES> 35,800
<RECEIVABLES> 2,204,300
<ALLOWANCES> (15,000)
<INVENTORY> 60,400
<CURRENT-ASSETS> 3,446,100
<PP&E> 4,593,900
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,778,300
<CURRENT-LIABILITIES> 3,514,700
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 2,531,800
<TOTAL-LIABILITY-AND-EQUITY> 8,778,300
<SALES> 6,002,100
<TOTAL-REVENUES> 6,002,100
<CGS> 3,976,600
<TOTAL-COSTS> 3,976,600
<OTHER-EXPENSES> 3,345,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182,600
<INCOME-PRETAX> (1,167,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,167,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,167,500)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
