<PAGE> 1
As filed with the Securities and Exchange Commission on November 12, 1999
REGISTRATION NO. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
BIKERS DREAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 33-0140149
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3810 WACKER DRIVE
MIRA LOMA, CALIFORNIA 91752
(909) 360-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MR. HERM ROSENMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
3810 WACKER DRIVE
MIRA LOMA, CALIFORNIA 91752
(909) 360-2500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------------
COPIES OF COMMUNICATIONS TO:
HOWARD J. UNTERBERGER, ESQ.
CHRISTINA LYCOYANNIS, ESQ.
MILLER & HOLGUIN
1801 CENTURY PARK EAST, SEVENTH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 556-1990
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING
BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED
ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT
OF 1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR
INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
<PAGE> 2
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE
434, PLEASE CHECK THE FOLLOWING BOX. [ ]
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Common stock 1,273,945(1) $1.2969(2) $1,652,179 $459.31
====================================================================================================================
</TABLE>
(1) Of this total, 679,800 shares are issuable upon conversion of Series D
Preferred Stock and 23,333 shares are issuable upon exercise of warrants
issued in connection with the Series D Preferred Stock. Also registered
hereunder are an indeterminate number of additional shares of common
stock which may become issuable by virtue of anti-dilution provisions of
preferred stock and warrants.
(2) Estimated solely for the purpose of calculating the registration fee,
and based, pursuant to Rule 457(c), on the average of the high and low
prices of the Registrant's common stock as reported by Nasdaq for
November 8, 1999, which date is within 5 business days prior to the
initial filing date of this Registration Statement.
(3) Does not include an additional 3,257,240 shares of common stock
previously registered by the Registrant under its Registration Statement
on Form S-3 (File No. 333-72167) which are included in a combined
prospectus herein pursuant to Rule 429 under the Securities Act of 1933.
A registration fee of $3,391.32 was previously paid in connection with
Registration Statement No. 333-72167.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT CONTAINS A COMBINED PROSPECTUS THAT ALSO RELATES TO REGISTRATION
STATEMENT NO. 333-72167 ON FORM S-3 PREVIOUSLY FILED BY THE REGISTRANT ON
FEBRUARY 11, 1999, AMENDED ON MAY 13, 1999 AND AUGUST 25, 1999, AND DECLARED
EFFECTIVE ON AUGUST 27, 1999.
================================================================================
<PAGE> 3
Prospectus
DATED NOVEMBER 12, 1999 SUBJECT TO COMPLETION
BIKERS DREAM, INC.
4,531,185 SHARES OF COMMON STOCK
Shareholders of Bikers Dream, Inc. may offer and sell up to 4,531,185
shares of Bikers Dream common stock. The selling shareholders may, from time to
time, offer their shares through public or private transactions at prevailing
market prices or privately negotiated prices.
Bikers Dream's common stock is traded on the Nasdaq SmallCap Market
System under the symbol BIKR. On November 8, 1999, the last reported sale price
of our common stock on Nasdaq was $1.3125.
--------------------------
AN INVESTMENT IN THESE SECURITIES IS RISKY. YOU SHOULD ONLY PURCHASE
THESE SHARES IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT.
PLEASE SEE THE RISK FACTORS BEGINNING ON PAGE 2 TO
READ ABOUT CERTAIN FACTORS YOU SHOULD CONSIDER
BEFORE BUYING SHARES OF COMMON STOCK.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ADEQUACY OF ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is __________________, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Company................................................................ 2
Risk Factors............................................................... 2
Sales by Selling Shareholders.............................................. 7
Plan of Distribution....................................................... 13
Legal Matters.............................................................. 15
Experts.................................................................... 15
Where You Can Find More Information........................................ 16
</TABLE>
NOTICE ABOUT FORWARD-LOOKING STATEMENTS
To the extent that the information presented in this prospectus, and in
other documents which are incorporated by reference in this prospectus under the
section of this prospectus entitled "Where You Can Find More Information,"
discusses financial projections, information or expectations about our business
plans, results of operations, products or markets, or otherwise makes statements
about future events, such statements are forward-looking. Such forward-looking
statements can be identified by the use of words such as "intends,"
"anticipates," "believes," "estimates," "projects," "forecasts," "expects,"
"plans," and "proposes." Although we believe that the expectations reflected in
these forward-looking statements are based on reasonable assumptions, there are
a number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These include, among others,
the cautionary statements in the "Risk Factors" section of this prospectus
beginning on page 2. These cautionary statements identify important factors that
could cause actual results to differ materially from those described in the
forward-looking statements. When considering forward-looking statements in this
prospectus, you should keep in mind the cautionary statements in the "Risk
Factors" section and other sections of this prospectus, and other cautionary
statements in documents which are incorporated by reference in this prospectus
under the section of this prospectus entitled "Where You Can Find More
Information."
<PAGE> 5
THE COMPANY
Bikers Dream is a manufacturer, distributor and retailer of
quality-built, American heavyweight cruiser motorcycles under the "Ultra Cycles"
brand name. Our principal executive offices are located at 3810 Wacker Drive,
Mira Loma, California 91752, and our telephone number is (909) 360-2500.
RISK FACTORS
An investment in shares of Bikers Dream common stock involves a high
degree of risk. You should carefully consider the following factors as well as
the other information contained and incorporated by reference in this prospectus
before deciding to invest.
BIKERS DREAM MAY NOT BE ABLE TO ACHIEVE AND MAINTAIN PROFITABILITY IN
FUTURE PERIODS IF IT CANNOT SUCCESSFULLY CONTINUE TO EXPAND ITS DEALER NETWORK
AND INCREASE ITS MANUFACTURING CAPABILITY. Bikers Dream has a history of
operating losses and accumulated deficits. Bikers Dream had operating net losses
of approximately $4.5 million, $5.1 million and $4 million for the fiscal years
ended December 31, 1998, 1997 and 1996, respectively. As of December 31, 1998,
Bikers Dream's accumulated deficit was approximately $17.6 million. Bikers Dream
may not be able to achieve and maintain profitability in future periods if it
cannot successfully continue to expand its dealer network and to increase its
manufacturing capability on a cost-effective basis.
BIKERS DREAM HAS LIMITED EXPERIENCE WITH MANUFACTURING OPERATIONS.
Bikers Dream entered the motorcycle manufacturing business in 1997 through the
acquisition of the assets of its Ultra Cycles division. Previously, Bikers
Dream's operations had involved only the operation of retail stores selling new
and used motorcycles and motorcycle parts and accessories. Although we have
acquired considerable direct experience with motorcycle manufacturing since our
acquisition of the Ultra Cycles division in 1997, such experience is more
limited than that of other motorcycle manufacturers which have been in operation
for a longer period of time.
BIKERS DREAM MAY NOT BE ABLE TO MAINTAIN OR INCREASE ITS CURRENT LEVEL
OF SALES IF CHANGES IN POPULAR TRENDS OR ECONOMIC CONDITIONS CAUSE A DECLINE IN
MARKET DEMAND FOR HEAVYWEIGHT CRUISER MOTORCYCLES. The base retail price of one
of our heavyweight cruiser motorcycles ranges approximately from $18,000 to
$26,000. Motorcycles within this price range are luxury goods. Therefore, market
demand for heavyweight cruisers such as ours may be particularly susceptible to
changes in popular trends and economic conditions. If such changes cause a
decline in market demand for heavyweight cruiser motorcycles, we may not be able
to maintain or increase our current level of sales.
BIKERS DREAM MAY NOT BE ABLE TO MAINTAIN OR INCREASE ITS CURRENT LEVEL
OF SALES IF IT DOES NOT CONTINUE TO EXPAND ITS DEALER NETWORK. Motorcycles
manufactured by Bikers Dream are sold through our five owned Bikers Dream
Superstores, approximately 40 independently owned Bikers Dream Superstores and
approximately 65 independent Ultra Cycles dealers. Approximately 75% of the
motorcycles sold by Bikers Dream during the year ended December 31, 1998 were
sold through the independent dealer network. We may not be able to maintain or
increase our current level of sales if we do not continue to expand our dealer
network, and there is no assurance that we will be able to do so.
2
<PAGE> 6
BIKERS DREAM'S COMPETITIVE POSITION WITHIN ITS NICHE OF THE HEAVYWEIGHT
CRUISER MOTORCYCLE MARKET COULD SUFFER IF EXISTING COMPETITORS EXPAND OPERATIONS
OR OTHER MOTORCYCLE MANUFACTURERS INSTITUTE SIMILAR PRODUCT OFFERINGS. Bikers
Dream seeks to avoid direct competition with Harley-Davidson, Inc., which has
the largest share of the heavyweight cruiser motorcycle market, by competing
within a specialized niche. Our competitive strategy focuses on product
performance and style, pricing and service. For example, we offer on all models,
at no additional charge over base prices, customized features like polished or
painted high-performance engines and a four-year, unlimited mileage warranty.
Our main competitors within this niche of the heavyweight cruiser motorcycle
market are Titan Motorcycles, Big Dog Motorcycles and California Motorcycle
Corp. In the event that our existing competitors expand their manufacturing
operations, or other motorcycle manufacturers institute product offerings on
terms similar to ours, our competitive position within our niche of the
heavyweight cruiser motorcycle market could suffer.
A DECLINE IN THE POPULARITY OF MOTORCYCLES MAY CAUSE A DECLINE IN THE
PROFITABILITY OF BIKERS DREAM'S RETAIL STORE OPERATIONS. Bikers Dream depends on
the continued popularity of motorcycles and motorcycle-related products to
maintain sales volume at its company-owned superstores. Without sufficient sales
volume, our stores will lose the benefit of economies of scale associated with
the superstore concept. Therefore, a decline in the popularity of motorcycles
and motorcycle-related products may cause a decline in the profitability of our
retail store operations.
BIKERS DREAM'S ABILITY TO COMPETE IN A LARGELY FRAGMENTED RETAIL MARKET
COULD SUFFER IF EXISTING RETAIL COMPETITORS BEGIN COMPETING ON A LARGER SCALE OR
NEW COMPETITORS ENTER THE RETAIL MARKET. Superstores owned by Bikers Dream must
compete with thousands of independent motorcycle retail outlets throughout the
United States which provide aftermarket parts, services and accessories. Most of
these competitors are small, privately owned businesses. Our ability to compete
in the retail marketplace could suffer if existing motorcycle retail outlets
expand their facilities and begin competing on a larger scale, or new
competitors with substantial capital and other resources enter the retail
market.
THERE IS NO ASSURANCE THAT BIKERS DREAM WILL BE ABLE TO OBTAIN THE
ADDITIONAL DEBT AND EQUITY FINANCING IT NEEDS TO CONTINUE EXPANDING ITS
MANUFACTURING OPERATIONS, AND IF OBTAINED, EQUITY FINANCING MAY DILUTE EXISTING
SHAREHOLDERS' INTERESTS AND DEBT FINANCING MAY SUBSTANTIALLY RESTRICT BIKERS
DREAM'S ABILITY TO OPERATE AND RAISE ADDITIONAL FUNDS. Although we believe that
we can, at our current level of operations, adequately service our existing
indebtedness and meet our working capital needs by using available internal
cash, we will require additional outside sources of debt and equity capital to
continue to expand our manufacturing operations. There can be no assurance that
additional capital will be made available on satisfactory terms. Any additional
equity financing may be dilutive to shareholders, and any additional debt
financing may impose substantial restrictions on the ability of Bikers Dream to
operate and raise additional funds.
We are currently negotiating an inventory and accounts receivable-based
revolving line of credit facility of up to $10 million which would be used to
pay off all or part of our existing indebtedness, as described below, and to
finance our general business operations and working capital needs. We believe
that such a revolving credit facility, combined with the proceeds of our $2
million Series D Preferred Stock offering, which was completed in February and
October of
3
<PAGE> 7
this year, would provide Bikers Dream with sufficient working capital for the
current year. If Bikers Dream does not obtain a revolving credit facility, it
will be unable to meet its expansion goals unless it obtains other debt or
equity financing on acceptable terms. Bikers Dream is continually in discussions
with lenders and potential equity partners regarding funding options to fuel its
growth strategy. The Board of Directors will determine the terms of any
financing based upon management's good faith evaluation of the best interests of
Bikers Dream and its shareholders.
In order to finance its working capital needs, Bikers Dream currently is
relying on a $300,000 bridge loan which Bikers Dream obtained in October 1998
from MD Strategic L.P., a partnership affiliated with Don Duffy, another
director of Bikers Dream. The MD Strategic loan is evidenced by an unsecured
note bearing interest at 18% per annum and is due, together with accrued
interest, on the earlier of December 31, 1999 or upon receipt by Bikers Dream of
funds from a third-party lender. Bikers Dream has also borrowed $390,000 under
an inventory flooring line of credit which it obtained in May, 1998 from Cana
Capital Corporation, a company owned by Bruce Scott, a former director of Bikers
Dream. Advances under the Cana Capital line of credit bear interest at a rate of
2% over the prime rate if used to finance the acquisition of new vehicles, and
5% over the prime rate if used to finance the acquisition of used vehicles. As
of November 9, 1999, the interest rate for advances on new vehicles and used
vehicles was 10.6% and 13.6%, respectively.
Bikers Dream also is relying on a three-year term loan in the amount of
$4,500,000 which it obtained in June 1998 from Tandem Capital of Nashville,
Tennessee. The loan bears interest at 12% per annum and is secured by a first
lien on Bikers Dream's assets. Bikers Dream used the proceeds of the Tandem loan
to repay $2.5 million of then existing long-term debt and to expand Bikers
Dream's motorcycle manufacturing operations.
Our most recent equity capital financing was in October 1999, when we
completed an offering of $500,000 of Series D Preferred Stock. The investors in
the October Series D Preferred Stock offering previously purchased $1,500,000 of
Series D Preferred Stock in February 1999. The same investors have committed to
purchase an additional $1 million in Series D Preferred Stock following the
effectiveness of a registration statement with respect to the shares of common
stock underlying the shares of Series D Preferred Stock issued in October 1999.
THE LOSS OF HERM ROSENMAN'S SERVICES MAY HAVE A MATERIAL ADVERSE EFFECT
ON BIKERS DREAM'S RESULTS OF OPERATIONS. Bikers Dream depends highly on the
services of Herm Rosenman, its President and Chief Executive Officer. Bikers
Dream entered into an employment agreement with Mr. Rosenman which expires in
2002, but has not obtained key man insurance for Mr. Rosenman. The loss of Mr.
Rosenman could jeopardize the effective management of Bikers Dream, which could
have a material adverse effect on its results of operations.
VOLATILITY OF STOCK PRICE MAY INCREASE NUMBER OF SHARES ISSUABLE UPON
CONVERSION OF PREFERRED STOCK. The stock market from time to time experiences
significant price and volume fluctuations, some of which are unrelated to the
operating performance of particular companies. We believe that a number of
factors can cause the price of Bikers Dream common stock to fluctuate, perhaps
substantially. These factors include, among others:
4
<PAGE> 8
- Announcements of financial results and other developments relating
to our business;
- Changes in the general state of the economy; and
- Changes in market analyst estimates and recommendations for Bikers
Dream common stock.
As an example, in late December 1998, Bikers Dream's stock price and
trading volume fluctuated significantly following announcement of our plans to
engage in Internet related commerce.
Significant downward fluctuations of Bikers Dream's stock price may
substantially increase the number of shares of common stock issuable upon
conversion of outstanding Series D Preferred Stock as a result of the conversion
formula, which is tied to the market price of the common stock. The consequences
of decreases in the common stock price are more fully discussed below under the
risk factor entitled "The issuance of additional shares of common stock upon
conversion of preferred stock may cause significant dilution of existing
shareholders' interests and exert downward pressure on the price of our common
stock."
THE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK UPON CONVERSION OF
PREFERRED STOCK MAY CAUSE SIGNIFICANT DILUTION OF EXISTING SHAREHOLDERS'
INTERESTS AND EXERT DOWNWARD PRESSURE ON THE PRICE OF OUR COMMON STOCK.
Significant dilution of existing shareholders' interests may occur if Bikers
Dream issues additional shares of common stock underlying outstanding shares of
preferred stock. As of November 9, 1999, Bikers Dream had 702,194 shares of
Series B Preferred Stock and 2,060 shares of Series D Preferred Stock
outstanding. The number of shares of common stock issuable upon conversion of
the outstanding Series B Preferred Stock is less than 5% of the outstanding
common stock of Bikers Dream as of November 9, 1999. However, the number of
shares of common stock issuable upon conversion of the Series D Preferred Stock
may constitute a significantly greater percentage of the total outstanding
shares of Bikers Dream common stock, as such conversion is based on a formula
pegged to the market price of the common stock. The formula provides,
specifically, that the number of shares of common stock issuable upon the
conversion of one share of Series D Preferred Stock is calculated as $1,000
(plus any accrued and unpaid dividends on such share) divided by the conversion
price. The conversion price is equal to the lesser of (1) 110% of the closing
bid price of the common stock on the last trading day before the date of
issuance of the share of Series D Preferred Stock being converted, or (2) 90% of
the average of the four lowest closing bid prices of the common stock during the
last 22 trading days before the date of conversion. Therefore, there is a
possibility that the Series D Preferred Stock may convert to common stock at a
rate which may be below the prevailing market price of the common stock at the
time of conversion.
The exact number of shares of common stock into which currently
outstanding Series D Preferred Stock may ultimately be convertible will vary
over time as the result of ongoing changes in the trading price of Bikers Dream
common stock. Decreases in the trading price of Bikers Dream common stock are
likely to result in increases in the number of shares of common stock issuable
upon conversion of the Series D Preferred Stock. The following consequences
could result:
- If the market price of Bikers Dream common stock declines, thereby
proportionately increasing the number of shares of common stock
issuable upon conversion of the
5
<PAGE> 9
Series D Preferred Stock, an increasing downward pressure on the
market price of the common stock might result (sometimes referred to
as a downward "spiral" effect).
- The dilution caused by conversion of Series D Preferred Stock and
sale of the underlying shares could also cause downward pressure on
the market price of the common stock.
- Once downward pressure is placed on the market price of the
Company's stock, the pressure could encourage short sales by holders
of Series D Preferred Stock and others, thus placing further
downward pressure in the price of the Common Stock.
- The conversion of Series D Preferred Stock would dilute the book
value and earnings per share of common stock held by existing
shareholders of Bikers Dream.
Under the rules of The Nasdaq Stock Market, prior to the receipt of
shareholder approval, the maximum number of shares which were originally
issuable upon conversion of the Series D Preferred Stock could not exceed
1,027,996. This number represented 19.9% of Bikers Dream's outstanding common
stock as of the date the Series D Preferred Stock was originally issued. Bikers
Dream obtained shareholder approval of the terms of the Series D transaction on
September 23, 1999. Pursuant to the terms of the Series D Preferred Stock, after
shareholder approval was obtained, the cap was removed on the number of common
shares into which shares of Series D Preferred Stock can be converted.
HOLDERS OF SERIES D PREFERRED STOCK COULD SEEK TO MANIPULATE BIKERS
DREAM'S STOCK PRICE THROUGH SHORT SALES. Holders of Series D Preferred Stock
could potentially seek to manipulate the market price of Bikers Dream common
stock downward so as to increase the number of common shares they would receive
upon converting their Series D Preferred Stock. For example, just before
converting their Series D shares, holders might engage in short sales in an
effort to cause a market price decline. One holder of Series D Preferred Stock
has been named in two lawsuits by companies other than Bikers Dream alleging
manipulation through short sales.
THE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK UNDERLYING OPTIONS AND
WARRANTS MAY CAUSE SIGNIFICANT DILUTION OF EXISTING SHAREHOLDERS' INTERESTS. As
of November 9, 1999, 1,422,583 previously issued warrants were outstanding at
exercise prices ranging from $1.82 to $5.00. As of November 9, 1999, 1,133,894
options were outstanding at prices ranging from $3.00 to $7.50, and 623,494 of
the options were fully vested. In addition, under the terms of the agreement
governing its $4.5 million term loan from Tandem Capital, Bikers Dream is
obligated to issue to Tandem Capital on each anniversary of the closing date of
the term loan, until such loan is paid in full, a warrant to purchase 200,000
additional shares of common stock at an exercise price equal to the greater of
(1) $4.00, or (2) 80% of the average closing bid price of the common stock for
the 20 days preceding such anniversary date. See discussion in Risk Factor
entitled "There is no assurance that Bikers Dream will be able to obtain the
additional debt and equity financing it needs to continue expansion of its
manufacturing operations, and if obtained, equity financing may dilute existing
shareholders' interests and debt financing may substantially restrict Bikers
Dream's ability to operate and raise additional funds" on page 3. The issuance
of additional shares of common stock upon exercise of the warrants and options
described in this paragraph could result in significant dilution to existing
security holders of Bikers Dream.
6
<PAGE> 10
BIKERS DREAM'S ABILITY TO CONTINUE OPERATIONS MAY BE MATERIALLY IMPAIRED
IF IT HAS INSUFFICIENT CASH TO REDEEM SERIES D PREFERRED STOCK UPON A MANDATORY
REDEMPTION. Bikers Dream is required to redeem Series D Preferred Stock after an
event triggering mandatory redemption pursuant to the terms of the documents
governing the terms of the Series D Preferred Stock. Such triggering events
include, among other things:
- Failure of Bikers Dream to pay dividends in accordance with the
terms governing the Series D Preferred Stock;
- Material breaches of Bikers Dream's agreements with purchasers of
Series D Preferred Stock, including failure to register the common
stock issuable upon conversion of Series D Preferred Stock and
failure to maintain the effectiveness of any such registration;
- Failure to maintain a Nasdaq listing for Bikers Dream's common
stock; and
- Failure to deliver common stock certificates in a timely fashion
after the conversion of Series D Preferred Stock.
It is unlikely that Bikers Dream would have sufficient cash to redeem
the Series D Preferred Stock if required to do so. Moreover, Bikers Dream is
prohibited under its existing credit agreement with Tandem Capital from
redeeming any shares of its capital stock. If a redemption were to occur, Tandem
would have the option of charging an additional 7% on its existing term loan, as
described above, or demanding full repayment on all outstanding indebtedness
plus accrued interest. As of November 9, 1999, $4.5 million remained outstanding
on the Tandem loan. As a result, the occurrence of an event triggering mandatory
redemption of the Series D Preferred Stock could materially impair our ability
to continue to operate our business.
THE POSSIBLE ISSUANCE OF ADDITIONAL PREFERRED STOCK MAY ADVERSELY AFFECT
RIGHTS OF HOLDERS OF COMMON STOCK AND MAY RENDER MORE DIFFICULT CERTAIN
UNSOLICITED TAKEOVER PROPOSALS WHICH WOULD BE IN THE BEST INTEREST OF
SHAREHOLDERS. As of the date of this prospectus, Bikers Dream has 704,255 shares
of preferred stock outstanding. The Articles of Incorporation of Bikers Dream
permit the Board of Directors to designate the terms of, and issue, up to
9,295,745 additional shares of preferred stock without further shareholder
approval. The issuance of additional shares of preferred stock could adversely
affect the rights of holders of common stock by, among other things,
establishing preferential dividends, liquidation rights and voting power. In
addition, the issuance of preferred stock might render more difficult, and
therefore discourage, certain unsolicited takeover proposals which would be in
the best interest of shareholders, such as a tender offer, proxy contest or
removal of incumbent management.
SALES BY SELLING SHAREHOLDERS
The selling shareholders are offering hereby a total of 4,531,185 shares
of Bikers Dream common stock. The following table sets forth as of the date of
this prospectus, the name of each of the selling shareholders, the number of
shares of common stock that each such selling shareholder beneficially owns as
of November 9, 1999, the number of shares of common stock beneficially owned by
each selling shareholder that may be offered for sale from time to time by this
prospectus and the number of shares and percentage of common stock to be held by
each such selling shareholder assuming the sale of all the common stock offered
hereby.
7
<PAGE> 11
Except as indicated, none of the selling shareholders has held any
position or office or had a material relationship with Bikers Dream or any of
its affiliates within the past three years other than as a result of the
ownership of Bikers Dream common stock. Bikers Dream may amend or supplement
this prospectus from time to time to update the disclosure set forth herein.
<TABLE>
<CAPTION>
SECURITIES SECURITIES PERCENTAGE
NAME OF BENEFICIALLY SECURITIES BENEFICIALLY OWNERSHIP
SELLING OWNED PRIOR TO OFFERED OWNED AFTER AFTER
SHAREHOLDER OFFERING(1) FOR SALE OFFERING(2) OFFERING(3)
----------- -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Bulldog Capital 398,834 398,834(4) 0 *
Management Limited
Partnership
Polaris Prime 54,387 54,387(5) 0 *
Directional Hedge, L.P.
MD Strategic L.P. 933,448 793,798(6) 139,650 2.7%
MDV IV L.P. 164,010 164,010(7) 0 *
Peter Tapinis 9,501 9,501(8) 0 *
Mary Whalen 62,005 62,005(9) 0 *
Thomas Scarola 9,501 9,501(10) 0 *
David Whalen 12,001 12,001(11) 0 *
Michael Whalen 12,001 12,001(12) 0 *
Michael Petrycki 19,002 19,002(13) 0 *
Castle Rock Partners 38,004 38,004(14) 0 *
Greg Brundage 8,849 8,849(15) 0 *
William James Bell 47,505 47,505(16) 0 *
1993 Trust
Craig Macnab 38,004 38,004(17) 0 *
NMDA Associates L.P. 28,503 28,503(18) 0 *
Cruttenden Family, 37,787 37,787(19) 0 *
L.P.
Robert London 15,000 15,000(20) 0 *
Jack Baker 10,000 10,000(21) 0 *
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
SECURITIES SECURITIES PERCENTAGE
NAME OF BENEFICIALLY SECURITIES BENEFICIALLY OWNERSHIP
SELLING OWNED PRIOR TO OFFERED OWNED AFTER AFTER
SHAREHOLDER OFFERING(1) FOR SALE OFFERING(2) OFFERING(3)
----------- -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Steve Balog 5,000 5,000(22) 0 *
John Bay 5,000 5,000(23) 0 *
Dennis Cameroon 2,000 2,000(24) 0 *
Fred Fraenkel 1,000 1,000(25) 0 *
Frederick L. Friedman 20,000 20,000(26) 0 *
Impley Investments 2,500 2,500(27) 0 *
Gavin Kleinknecht 1,500 1,500(28) 0 *
Keir Kleinknecht 1,500 1,500(29) 0 *
Peter Kleinknecht 1,000 1,000(30) 0 *
Sabrina Kleinknecht 1,500 1,500(31) 0 *
Robert Lavinia 5,000 5,000(32) 0 *
Len Lichter 10,000 10,000(33) 0 *
ADMN Associates 103,722 103,000(34) 722 *
Meyer Duffy Ventures 20,000 20,000(35) 0 *
III
Boyce Wells Meyer 112,700 7,500(36) 105,200 2%
Trust
Ralph Rabman 1,000 1,000(37) 0 *
Hortense K. Seybolt as 2,500 2,500(38) 0 *
Trustee for the Gigi
1971 Trust
Stanton Weissenborn 25,685 5,000(39) 20,685 *
Leigh Welles 500 500(40) 0 *
Keith Zobrist 2,500 2,500(41) 0 *
Alexander Garrin 833 833(42) 0 *
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
SECURITIES SECURITIES PERCENTAGE
NAME OF BENEFICIALLY SECURITIES BENEFICIALLY OWNERSHIP
SELLING OWNED PRIOR TO OFFERED OWNED AFTER AFTER
SHAREHOLDER OFFERING(1) FOR SALE OFFERING(2) OFFERING(3)
----------- -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Kristoffer Garrin 833 833(43) 0 *
Nicholas Garrin 833 833(44) 0 *
Tandem Capital, Inc. 657,500 657,500(45) 0 *
Austost Anstalt Schaan 559,300 559,300(46) 0 *
Tusk Investments, Inc. 593,050 593,050(46) 0 *
Nesher, Inc. 79,900 79,900(46) 0 *
Amro International, 319,600 319,600(46) 0 *
S.A
Guarantee & Finance, 46,150 46,150(46) 0 *
Corp.
Settondown Capital 79,773 79,773(46) 0 *
International, Ltd.
Collinsville Holdings 25,667 25,667 0 *
Ltd.
M.J. Segal & 25,000 25,000(47) 0 *
Company, Inc.
P.V. II, L.P. 144,992 86,054(48) 58,938 1.1%
Mark L. Kesselman 351,000 100,000(49) 251,000 4.8%
</TABLE>
- ----------------------------------------
* Less than 1%.
(1) Except as otherwise noted herein, the number and percentage of shares
beneficially owned is determined in accordance with Rule 13d-3 of the
Exchange Act, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rule, beneficial
ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days of the date of this
prospectus through the exercise of any stock option or other right.
Unless otherwise indicated in the footnotes, each person has sole voting
and investment power, or shares such powers with his or her spouse, with
respect to the shares shown as beneficially owned.
(2) Assumes the sale of all shares of common stock offered hereby.
(3) Based upon 5,213,606 shares of common stock outstanding as of November
9, 1999.
10
<PAGE> 14
(4) Includes 343,834 shares of common stock issued upon conversion of Series
C Preferred Stock and 55,000 shares of common stock issued upon the
exercise of Series F Warrants.
(5) Includes 46,887 shares of common stock issued upon conversion of Series
C Preferred Stock and 7,500 shares of common stock issued upon the
exercise of Series F Warrants.
(6) MD Strategic L.P. is an investment partnership in which Meyer Duffy
Asset Management, LLC is the general partner. Mr. Donald J. Duffy, a
director of Bikers Dream, is a member of Meyer Duffy Asset Management,
LLC. Shares beneficially owned by MD Strategic L.P. include 396,040
shares of common stock issued upon conversion of Series C Preferred
Stock, 160,000 shares of common stock issuable upon the exercise of
Series F Warrants, 184,758 shares of common stock issued upon conversion
of Series B Preferred Stock and 53,000 shares of common stock issuable
upon the exercise of Series E Warrants.
(7) MDV IV L.P. is an investment partnership in which Meyer Duffy Asset
Management, LLC is the general partner. Mr. Donald J. Duffy, a director
of Bikers Dream, is a member of Meyer Duffy Asset Management, LLC.
Shares beneficially owned by MDV IV L.P. include 99,010 shares of common
stock issued upon conversion of Series C Preferred Stock and 65,000
shares of common stock issuable upon the exercise of Series F Warrants.
(8) Includes 8,251 shares of common stock issued upon conversion of Series C
Preferred Stock and 1,250 shares of common stock issuable upon the
exercise of Series F Warrants.
(9) Includes 49,505 shares of common stock issued upon conversion of Series
C Preferred Stock and 7,500 shares of common stock issuable upon the
exercise of Series F Warrants. and 5,000 shares of common stock issuable
upon exercise of Series E Warrants.
(10) Includes 8,251 shares of common stock issued upon conversion of Series C
Preferred Stock and 1,250 shares of common stock issuable upon the
exercise of Series F Warrants.
(11) Includes 8,251 shares of common stock issued upon conversion of Series C
Preferred Stock, 1,250 shares of common stock issuable upon the exercise
of Series F Warrants and 2,500 shares of common stock issuable upon the
exercise of Series E Warrants.
(12) Includes 8,251 shares of common stock issued upon conversion of Series C
Preferred Stock, 1,250 shares of common stock issuable upon the exercise
of Series F Warrants and 2,500 shares of common stock issuable upon the
exercise of Series E Warrants.
(13) Includes 16,502 shares of common stock issued upon conversion of Series
C Preferred Stock and 2,500 shares of common stock issuable upon the
exercise of Series F Warrants.
(14) Includes 33,004 shares of common stock issued upon conversion of Series
C Preferred Stock and 5,000 shares of common stock issuable upon the
exercise of Series F Warrants.
(15) Includes 7,599 shares of common stock issued upon conversion of Series C
Preferred Stock and 1,250 shares of common stock issuable upon the
exercise of Series F Warrants.
(16) Includes 41,255 shares of common stock issued upon conversion of Series
C Preferred Stock and 6,250 shares of common stock issuable upon the
exercise of Series F Warrants.
(17) Includes 33,004 shares of common stock issued upon conversion of Series
C Preferred Stock and 5,000 shares of common stock issuable upon the
exercise of Series F Warrants.
(18) Includes 24,753 shares of common stock issued upon conversion of Series
C Preferred Stock and 3,750 shares of common stock issuable upon the
exercise of Series F Warrants.
(19) Includes 32,787 shares of common stock issued upon conversion of Series
C Preferred Stock and 5,000 shares of common stock issuable upon the
exercise of Series F Warrants.
11
<PAGE> 15
(20) Includes 15,000 shares of common stock issuable upon the exercise of
Series F Warrants.
(21) Includes 10,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(22) Includes 5,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(23) Includes 5,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(24) Includes 2,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(25) Includes 1,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(26) Includes 20,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(27) Includes 2,500 shares of common stock issuable upon the exercise of the
Series E Warrants.
(28) Includes 1,500 shares of common stock issuable upon the exercise of the
Series E Warrants.
(29) Includes 1,500 shares of common stock issuable upon the exercise of the
Series E Warrants.
(30) Includes 1,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(31) Includes 1,500 shares of common stock issuable upon the exercise of the
Series E Warrants.
(32) Includes 5,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(33) Includes 10,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(34) Includes 103,000 shares of common stock issuable upon the exercise of
the Series E Warrants.
(35) Meyer Duffy Ventures III is an investment partnership in which Meyer
Duffy Asset Management, LLC is the general partner. Mr. Donald J. Duffy,
a director of Bikers Dream, is a member of Meyer Duffy Asset Management
LLC. Shares beneficially owned by Meyer Duffy Ventures III include
20,000 shares of common stock issuable upon the exercise of the Series E
Warrants.
(36) Includes 7,500 shares of common stock issuable upon the exercise of the
Series E Warrants.
(37) Includes 1,000 shares of common stock issuable upon the exercise of
Series E Warrants.
(38) Includes 2,500 shares of common stock issuable upon the exercise of the
Series E Warrants.
(39) Includes 5,000 shares of common stock issuable upon the exercise of the
Series E Warrants.
(40) Includes 500 shares of common stock issuable upon the exercise of the
Series E Warrants.
(41) Includes 2,500 shares of common stock issuable upon the exercise of the
Series E Warrants.
(42) Includes 833 shares of common stock issuable upon the exercise of the
Series E Warrants.
(43) Includes 833 shares of common stock issuable upon the exercise of the
Series E Warrants.
(44) Includes 833 shares of common stock issuable upon the exercise of the
Series E Warrants.
(45) Includes 657,500 shares of common stock issuable in connection with the
exercise of warrants.
12
<PAGE> 16
(46) Includes the following shares of common stock issuable upon the
conversion of Series D Preferred Stock: Austost Anstalt Schaan
(541,800); Tusk Investments, Inc. (574,800); Nesher, Inc. (77,400); Amro
International, S.A. (309,600); Guarantee & Finance Corp. (44,400); and
Settondown Capital International, Ltd. (46,440). Also includes the
following shares of common stock issuable upon the exercise of warrants
to purchase common stock issued in conjunction with Series D Preferred
Stock: Austost Anstalt Schaan (17,500); Tusk Investments, Inc. (18,250);
Nesher, Inc. (2,500); Amro International, S.A. (10,000); Guarantee &
Finance Corp. (1,750); and Settondown Capital International, Ltd.
(33,333). The number of shares of common stock shown as beneficially
owned both prior to and after the offering by the selling shareholders
holding Series D Preferred Stock represents an estimate of the number of
shares of common stock to be offered by such selling shareholders. The
actual number of shares of common stock issuable upon conversion of the
Series D Preferred Stock is indeterminate, is subject to adjustment and
could be materially less or more than such estimated number depending on
factors which cannot be predicted by Bikers Dream at this time,
including, among other factors, the future market price of the common
stock. The common stock being registered under this registration
statement includes, with respect to 974,640 shares of common stock
registered hereunder, 14,800 shares of common stock for each $25,000 of
stated value of Series D Preferred Stock subscribed for by the Series D
holders, and with respect to 679,800 shares of common stock registered
hereunder, 33,000 shares of common stock for each $25,000 of stated
value of Series D Preferred Stock subscribed for by the Series D
holders. The common stock being registered under this registration
statement also includes one share of common stock for each warrant to
purchase common stock held by the holders of Series D Preferred Stock.
The actual number of shares of common stock issuable upon conversion of
the Series D Preferred Stock shall equal the sum of the stated value of
$1,000 per share, as adjusted for any stock dividends, combinations or
splits with respect to such share, and accrued and unpaid dividends on
such share, divided by the conversion price. The conversion price shall
be equal to the lesser of: (1) 110% of the average closing bid price of
Bikers Dream common stock for the trading day immediately preceding the
date of the issuance of the shares of Series D Preferred Stock; or (2)
at 90% of the average of the four lowest closing bid prices for the 22
trading days immediately preceding the conversion of the respective
shares of Series D Preferred Stock. The closing bid price means the
closing bid price of Bikers Dream common stock as reported by Nasdaq or
the principal exchange or market where traded. Therefore, the number of
shares issuable upon conversion of the Series D Preferred Stock may be
less than or greater than the number of shares shown as beneficially
owned by the selling shareholders or otherwise covered by this
prospectus.
(47) Includes 25,000 shares of common stock issuable upon exercise of
options.
(48) P.V. II, L.P. is an investment partnership in which Meyer Duffy Asset
Management, LLC is the general partner. Mr. Donald J. Duffy, a director
of Bikers Dream, is a member of Meyer Duffy Asset Management, LLC.
Shares beneficially owned by P.V. II, L.P. include 86,054 shares of
common stock issued upon conversion of Series B Preferred Stock.
(49) Includes 100,000 shares of common stock issuable upon conversion of
options.
PLAN OF DISTRIBUTION
The shares being offered hereby will be offered and sold by the selling
shareholders named in this prospectus, by their donees or transferees, or by
their other successors in interest. Bikers Dream will not receive any of the
proceeds from the sale of the shares pursuant to this prospectus. Bikers Dream
has agreed to bear the expenses of the registration of the shares, including
legal and accounting fees, other than fees of counsel, if any, retained
individually by the selling shareholders, and any discounts or commissions
payable with respect to sales of the shares.
The selling shareholders may offer and sell the shares from time to time
in transactions in the over-the-counter market or in negotiated transactions, at
market prices prevailing at the time of sale or at negotiated prices. The
selling shareholders have advised Bikers Dream that they have not
13
<PAGE> 17
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their shares, nor is there
an underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling shareholders. Sales may be made directly or to or
through broker-dealers who may receive compensation in the form of discounts,
concessions or commissions from the selling shareholders or the purchasers of
shares for whom such broker-dealers may act as agent or to whom they may sell as
principal, or both. Such compensation may be in excess of customary commissions.
From time to time, one or more of the selling shareholders may pledge or
grant a security interest in some or all of the shares owned by them. If the
selling shareholders default in performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares from time to time by
this prospectus (except, in some cases, if the pledgees or secured parties are
broker-dealers or are affiliated with broker-dealers). The selling shareholders
also may transfer and donate shares in other circumstances. Transferees and
donees may also offer and sell the shares from time to time by this prospectus
(except, in some cases, if the transferees or donees are broker-dealers or are
affiliated with broker-dealers). The number of shares beneficially owned by
selling shareholders will decrease as and when the selling shareholders transfer
or donate their shares or default in performing obligations secured by their
shares. The plan of distribution for the shares offered and sold under this
prospectus will otherwise remain unchanged, except that the transferees, donees,
pledgees, other secured parties or other successors in interest will be selling
shareholders for purposes of this prospectus. If we are notified that a donee,
pledgee or other successor in interest of a selling shareholder intends to sell
more than 500 shares of our common stock, we will file a supplement to this
prospectus which includes all of the information required to be disclosed by
Item 507 of Regulation S-K. Further, Bikers Dream will file a post-effective
amendment to this registration statement upon any change in the plan of
distribution.
The selling shareholders and any broker-dealers acting in connection
with the sale of the shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, and any commissions
received by them and any profit realized by them on the resale of the shares as
principals may be deemed underwriting compensation under the Securities Act of
1933.
Bikers Dream has agreed to indemnify certain of the selling shareholders
against liabilities they may incur as a result of any untrue statement of a
material fact in the Registration Statement of which this prospectus forms a
part, or any omission herein or therein to state a material fact necessary in
order to make the statements made not misleading. Such indemnification includes
liabilities that such selling shareholders may incur under the Securities Act of
1933. Bikers Dream does not have to give such indemnification if the untrue
statement or omission was made in reliance upon and in conformity with
information furnished in writing to Bikers Dream by the selling shareholder for
use in the Registration Statement.
Bikers Dream has advised the selling shareholders of (1) the requirement
for delivery of this prospectus in connection with any sale of the shares, and
(2) the relevant cooling off period specified by Regulation M and restrictions
upon the selling shareholders' bidding for or purchasing securities of Bikers
Dream during the distribution of shares.
14
<PAGE> 18
TRANSFER AGENT
The transfer agent for Bikers Dream's common stock is American
Securities Transfer, Incorporated, 12039 West Alameda Parkway, Suite Z2,
Lakewood, Colorado 80228.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the securities
offered hereby will be passed upon for Bikers Dream by Miller & Holguin,
attorneys at law, Los Angeles, California.
EXPERTS
The consolidated financial statements of Bikers Dream contained in the
Annual Report on Form 10-KSB/A of Bikers Dream for the year ended December 31,
1998 and incorporated in this prospectus by reference, have been so included in
reliance on the report of Singer Lewak Greenbaum & Goldstein, LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
15
<PAGE> 19
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy and information
statements and other information with the Securities and Exchange Commission.
Our SEC filings are available to the public over the Internet at the SEC's web
site at http://www.sec.gov. You may also read and copy any document we file at
the SEC's public reference rooms located at Room 1024, Judiciary Plaza, 450 5th
Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may obtain information on the operation of the
SEC's public reference rooms by calling the SEC at 1-800-SEC-0330.
The SEC allows us to "incorporate by reference" the information we file
with them. This prospectus incorporates important business and financial
information about Bikers Dream which is not included in or delivered with this
prospectus. The information incorporated by reference is an important part of
this prospectus, and information that we file later with the SEC will
automatically update and supersede this information.
We incorporate by reference the following documents:
- our current report on Form 8-K filed on February 10, 1999;
- our Annual Report on Form 10-KSB/A for the year ended December 31,
1998 as filed on August 17, 1999;
- our report on Form 10-QSB/A for the quarter ended March 31, 1999 as
filed on August 17, 1999;
- our report on Form 10-QSB for the quarter ended June 30, 1999 as
filed on August 23, 1999;
- our Proxy Statement filed on August 19, 1999 in connection with
Bikers Dream's Annual Meeting of Stockholders held on September 23,
1999;
- our Addendum to Proxy Statement filed on August 23, 1999 in
connection with Bikers Dream's Annual Meeting of Stockholders held
on September 23, 1999;
- our current report on Form 8-K filed on October 21, 1999;
- the description of our class of common stock as set forth under Item
1 of our Form 8-A registration statement filed on March 17, 1987 and
under "Description of Securities" in our Form S-18 registration
statement No. 33-9879-LA filed on October 30, 1986, together with
the following updating information: (1) footnote 8 to the
Consolidated Financial Statements in our Quarterly Report on Form
10-QSB for the period ended September 30, 1996; (2) paragraph one of
Item 2, Part II ("Changes in Securities"), of our Quarterly Report
on Form 10-QSB for the period ended September 30, 1997; and (3)
footnote 11 to the Consolidated Financial Statements our Quarterly
Report on Form 10-QSB for the period ended March 31, 1998; and
16
<PAGE> 20
- future filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until all of the
shares offered by the selling shareholders have been sold.
You may obtain a copy of these filings, without charge, by writing or
calling us at:
Bikers Dream, Inc.
3810 Wacker Drive
Mira Loma, California 91752
Attention: Mr. Herm Rosenman
(909) 360-2500
If you would like to request these filings from us, please do so at
least five business days before you have to make an investment decision.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information in this prospectus or the documents incorporated by reference is
accurate as of any date other than on the front of those documents.
----------------------
17
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses in connection with the
distribution described in this Registration Statement will be as shown below.
All expenses incurred with respect to the distribution, except for fees of
counsel, if any, retained individually by the selling shareholders and any
discounts or commissions payable with respect to sales of the shares, will be
paid by Bikers Dream. See "Plan of Distribution."
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee................................. $ 459.31
Printing expenses.................................... 5,000.00
Accounting fees and expenses......................... 3,000.00
Legal fees and expenses.............................. 10,000.00
Miscellaneous........................................ --
------------
Total........................................ $ 18,459.31
============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The liability of the Registrant's officers and directors is or may be
affected in such capacity by the following:
Section 317 of the California General Corporation Law makes provision
for the indemnification of officers and directors in terms sufficiently broad to
include indemnification under certain circumstances for liabilities, including
reimbursement for expenses incurred, arising under the Securities Act of 1933.
The Amended and Restated Articles of Incorporation of the Registrant authorize
the Registrant to provide indemnification of its officers, directors and agents
for breach of duty to the Registrant and its shareholders through bylaw
provisions or indemnification agreements, or both, in excess of the
indemnification otherwise permitted by California law, subject to certain
limitations.
The Registrant's Bylaws provide for the indemnification of its officers
and directors to the fullest extent permitted by law. In addition, the
Registrant currently maintains directors' and officers' liability insurance and
has entered into indemnification agreements with its directors and certain of
its officers.
In addition, as permitted by Section 204(a)(10) of the California
General Corporation Law, the Amended and Restated Articles of Incorporation of
the Registrant provide that the liability of a director of the Registrant for
monetary damages shall be eliminated to the fullest extent permissible under
California law. However, as provided by California law, such limitation of
liability will not act to limit the liability of a director for (i) acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) acts or omissions that a director believes to be contrary
to the best interest of the Registrant or its shareholders or that involve the
absence of good faith on the part of the director, (iii) any transaction from
which a director derived an
II-1
<PAGE> 22
improper personal benefit, (iv) acts or omissions that show a reckless disregard
for the director's duty to the Registrant or its shareholders in circumstances
in which the director was aware or should have been aware, in the ordinary
course of performing a director's duties, of a risk of serious injury to the
Registrant or its shareholders, (v) acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the Registrant or its shareholders, (vi) any improper transactions
between a director and the Registrant in which the director has a material
financial interest or (vii) any unlawful distributions to the shareholders of
the Registrant or any unlawful loan of money or property to, or a guarantee of
the obligation of, any director of officer of the Registrant.
ITEM 16. EXHIBITS.
The following exhibits are filed or incorporated by reference as part of this
Registration Statement.
3.1 Articles of Incorporation, as amended, of Bikers Dream, Inc.
(formerly known as HDL Communications).(1)
3.1.1 Certificate of Amendment of Articles of Incorporation dated June
21, 1996.(2)
3.1.2 Certificate of Correction of Certificate of Amendment of Articles
of Incorporation dated July 25, 1997.(3)
3.1.3 Certificate of Ownership of HDL Communications (now known as
Bikers Dream, Inc.).(1)
3.1.4 Certificate of Determination of Series B Convertible Preferred
Stock.(3)
3.1.5 Certificate of Determination of Series C Convertible Preferred
Stock.(4)
3.1.6 Certificate of Determination of Series D Convertible Preferred
Stock.(5)
3.2 Bylaws, as amended, of Bikers Dream, Inc.(1)
4.1 Form of Certificate of Common Stock of Bikers Dream, Inc.(6)
4.2 Articles of Incorporation of the Company, as amended (included as
Exhibits 3.1, 3.1.1, 3.1.2, 3.1.4, 3.1.5 and 3.1.6).
4.3 By-laws, as amended, of the Company (included as Exhibit 3.2).
4.4 Form of Series D Preferred Stock Subscription Agreement.(5)
4.5 Form of Series D First Put Preferred Stock Subscription
Agreement.
5.1 Form of Opinion of Miller & Holguin as to the legality of the
securities being registered.
23.1 Consent of Singer Lewak Greenbaum & Goldstein LLP.
II-2
<PAGE> 23
23.2 Consent of Miller & Holguin (included in its opinion filed as
Exhibit 5.1).
- --------------------
(1) Previously filed as an exhibit to Bikers Dream's registration statement
on Form SB-2 (No. 33-92294) filed with the Commission on May 31, 1995.
(2) Previously filed as an exhibit to Bikers Dream's Form 10-KSB report for
the fiscal year ended December 31, 1996 filed with the Commission on
April 15, 1997.
(3) Previously filed as an exhibit to Bikers Dream's Form 10-QSB report for
the fiscal quarter ended September 30, 1997 filed with the Commission on
November 14, 1997.
(4) Previously filed as an exhibit to Bikers Dream's Form 10-QSB report for
fiscal quarter ended March 30, 1998 filed with the Commission on May 15,
1998.
(5) Previously filed as an exhibit to Bikers Dream's Form S-3 registration
statement No. 333-72167 as filed with the Commission on February 11,
1999.
(6) Previously filed as an exhibit to Bikers Dream's Form 10-KSB report for
the fiscal year ended December 31, 1998 filed with the Commission on
April 15, 1999.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in
the effective registration statement;
II-3
<PAGE> 24
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering; and
(b) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities, other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding, is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Mira Loma, State of California, on November 11, 1999.
BIKERS DREAM, INC.
Registrant
By: /s/ Herm Rosenman
-----------------------------------
Herm Rosenman
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Herm Rosenman Chief Executive Officer November 11, 1999
- -------------------------------- and Director
Herm Rosenman (Principal Executive Officer)
/s/ Donald J. Duffy Director November 11, 1999
- --------------------------------
Donald J. Duffy
/s/ Humbert Powell III Director November 11, 1999
- --------------------------------
Humbert Powell III
/s/ John Russell Director November 11, 1999
- --------------------------------
John Russell
/s/ Michael J. Fisher Chief Financial Officer November 11, 1999
- -------------------------------- (Principal Financial and
Michael J. Fisher Accounting Officer)
</TABLE>
II-5
<PAGE> 26
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE OF DOCUMENT
- ----------- -----------------
<S> <C>
3.1 Articles of Incorporation, as amended, of Bikers Dream, Inc.
(formerly known as HDL Communications).(1)
3.1.1 Certificate of Amendment of Articles of Incorporation dated June 21,
1996.(2)
3.1.2 Certificate of Correction of Certificate of Amendment of Articles of
Incorporation dated July 25, 1997.(3)
3.1.3 Certificate of Ownership of HDL Communications (now known as Bikers
Dream, Inc.).(1)
3.1.4 Certificate of Determination of Series B Convertible Preferred
Stock.(3)
3.1.5 Certificate of Determination of Series C Convertible Preferred
Stock.(4)
3.1.6 Certificate of Determination of Series D Convertible Preferred
Stock.(5)
3.2 Bylaws, as amended, of Bikers Dream, Inc.(1)
4.1 Form of Certificate of Common Stock of Bikers Dream, Inc.(6)
4.2 Articles of Incorporation of the Company, as amended (included as
Exhibits 3.1, 3.1.1, 3.1.2, 3.1.4, 3.1.5 and 3.1.6).
4.3 By-laws, as amended, of the Company (included as Exhibit 3.2).
4.4 Form of Series D Preferred Stock Subscription Agreement.(5)
4.5 Form of Series D First Put Preferred Stock Subscription Agreement.
5.1 Form of Opinion of Miller & Holguin as to the legality of the
securities being registered.
23.1 Consent of Singer Lewak Greenbaum & Goldstein LLP.
23.2 Consent of Miller & Holguin (included in its opinion filed as
Exhibit 5.1).
</TABLE>
- ---------------------
(1) Previously filed as an exhibit to Bikers Dream's registration statement
on Form SB-2 (No. 33-92294) filed with the Commission on May 31, 1995.
II-6
<PAGE> 27
(2) Previously filed as an exhibit to Bikers Dream's Form 10-KSB report for
the fiscal year ended December 31, 1996 filed with the Commission on
April 15, 1997.
(3) Previously filed as an exhibit to Bikers Dream's Form 10-QSB report for
the fiscal quarter ended September 30, 1997 filed with the Commission on
November 14, 1997.
(4) Previously filed as an exhibit to Bikers Dream's Form 10-QSB report for
fiscal quarter ended March 30, 1998 filed with the Commission on May 15,
1998.
(5) Previously filed as an exhibit to Bikers Dream's Form S-3 registration
statement No. 333-72167 as filed with the Commission on February 11,
1999.
(6) Previously filed as an exhibit to Bikers Dream's Form 10-KSB report for
the fiscal year ended December 31, 1998 filed with the Commission on
April 15, 1999.
II-7
<PAGE> 1
EXHIBIT 4.5
FIRST PUT SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Bikers Dream, Inc.,
a California corporation (the "Company") hereby agrees to issue and to sell to
the Subscriber, the number of shares of Series D 5% Cumulative Convertible
Preferred Stock, $0.01 par value (the "First Put Preferred Stock") convertible
in accordance with the terms thereof into shares of the Company's no par value
common stock (the "Company Shares") and Common Stock Purchase Warrants ("First
Put Warrants") as set forth on the signature page hereof for the aggregate
consideration as set forth on the signature page hereof ("Purchase Price"). The
Certificate of Determination of the Rights of the Preferred Stock was filed in
the office of the Secretary of State of California on January 26, 1999
("Certificate of Determination"). (The Company Shares are sometimes referred to
herein as the "Shares" or "Common Stock"). (The First Put Preferred Stock, the
Company Shares, First Put Warrants, First Put Commission Shares and First Put
Common Stock Purchase Warrants issuable to the Placement Agents ("First Put
Placement Warrants"), identified on Schedule B hereto, and the Common Stock
issuable upon exercise of the First Put Warrants and First Put Placement
Warrants are collectively referred to herein as, the "Securities"). Upon
acceptance of this Agreement by the Subscriber, the Company shall issue and
deliver to the Subscriber the First Put Preferred Stock and First Put Warrants
against payment, by federal funds (U.S.) wire transfer of the Purchase Price.
This Subscription Agreement and other similar Subscription Agreements relate to
the offering of a maximum of 500 shares of First Put Preferred Stock. The
Securities are the "Put Securities" referred to in a Subscription Agreement
dated as of February 5, 1999 between the Company and Subscriber ("Initial
Subscription Agreement").
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber
hereby represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished
with and has read the Company's Notice of Annual Meeting of Shareholders to be
held September 23, 1999 and Proxy Statement, Forms 10-QSB/A for the fiscal
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998, Form
10-KSB/A for the fiscal year ended December 31, 1998, Form 10- QSB/A for the
fiscal quarter ended March 31, 1999 and Form 10-QSB for the fiscal quarter ended
June 30, 1999, and Amendment No. 2 to Form S-3 Registration Statement, all as
filed with the U.S. Securities and Exchange Commission (the "Commission")
(collectively, with exhibits thereto, hereinafter referred to as the "Reports").
In addition, the Subscriber has received from the Company such other information
concerning its operations, financial condition and other matters as the
Subscriber has requested, and considered all factors the Subscriber deems
material in deciding on the advisability of investing in the Securities (such
information in writing is collectively, the "Other Written Information").
<PAGE> 2
(b) Information on Subscriber. The Subscriber is an "accredited
investor", as such term is defined in Regulation D promulgated by the Commission
under the Securities Act of 1933, as amended, is experienced in investments and
business matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof.
(c) Purchase of Company Shares. On the First Put Closing Date,
the Subscriber will purchase the First Put Preferred Stock and First Put
Warrants for its own account and not with a view to any distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands
and agrees that the Securities have not been registered under the Securities Act
of 1933, as amended (the "1933 Act") by reason of their issuance in a
transaction that does not require registration under the 1933 Act, and that such
Securities must be held unless a subsequent disposition is registered under the
1933 Act or is exempt from such registration. The Subscriber agrees that if, in
the future, the Subscriber should decide to dispose of any of the Securities
acquired by it pursuant to this Agreement, the Subscriber will do so only
pursuant to a registration statement or by disposition exempt from registration
requirements under the 1933 Act.
(e) First Put Preferred Stock and Company Shares Legend. The
First Put Preferred Stock, Company Shares, the First Put Commission Shares and
the shares of Common Stock issuable upon the exercise of the First Put Warrants
and First Put Placement Warrants shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO BIKERS DREAM, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(f) First Put Warrants Legend. The First Put Warrants and First
Put Placement Warrants shall bear the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN
2
<PAGE> 3
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON
SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO BIKERS DREAM, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(g) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber. At no time was the Subscriber presented
with or solicited by any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or solicited
or invited to attend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.
(h) Subscriber's Reliance. The Subscriber acknowledges that the
Subscriber has not relied upon the Company or the Company's attorneys or
advisers for legal or tax advice, and has, if desired, in all cases sought the
advice of the Subscriber's own personal legal counsel and tax advisers.
(i) Regulatory Compliance. Subscriber agrees that Subscriber and
its affiliates will comply with all relevant rules and regulations of the
Securities Exchange Act of 1934, as amended, as they relate to short sales of
the Securities. As of the date hereof and as of the First Put Closing Date, the
Subscriber and its affiliates will not have a short position in the Common
Stock.
(j) Correctness of Representations. The Subscriber represents
that the foregoing representations and warranties are true and correct as of the
date hereof and, unless the Subscriber otherwise notifies the Company prior to
the First Put Closing Date (as hereinafter defined), shall be true and correct
as of the First Put Closing Date. The foregoing representations and warranties
shall survive the First Put Closing Date.
2. Company Representations and Warranties. The Company represents
and warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company and each of its subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the business, operations or
prospects or condition (financial or otherwise) of the Company.
3
<PAGE> 4
(b) Outstanding Stock. All issued and outstanding shares of
capital stock of the Company and each of its subsidiaries has been duly
authorized and validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder and all other agreements entered into by the Company relating hereto.
(d) Additional Issuances. There are no outstanding agreements or
preemptive or similar rights affecting the Company's common stock and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of the Company or other
equity interest in any of the subsidiaries of the Company, except as set forth
on Schedule 2(d) hereto and as described in the Reports or Other Written
Information.
(e) Consents. No consent, approval, authorization or order of
any court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates or NASDAQ or the Company's Shareholders is
required for execution of this Agreement, and all other agreements entered into
by the Company relating thereto, including, without limitation issuance and sale
of the Securities, and the performance of the Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance of its obligations under
this Agreement and all other agreements entered into by the Company relating
thereto by the Company will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles of incorporation, charter or bylaws of the Company, or any of its
affiliates, (B) to the Company's knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company, or any of
its affiliates of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company, or any of its affiliates or over the properties
or assets of the Company, or any of its affiliates, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company, or any of its affiliates is a party, by which
the Company, or any of its affiliates is bound, or to which any of the
properties of the Company, or any of its affiliates is subject, or (D) the terms
of any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company, or any of its affiliates is a party; or
4
<PAGE> 5
(ii) result in the creation or imposition of any lien,
charge or encumbrance upon the Securities or any of the assets of the Company,
or any of its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and
on the date of issuance and on the First Put Closing Date, as hereinafter
defined, and the date the First Put Preferred Stock is converted, and the date
the First Put Warrants and First Put Placement Warrants are exercised, the
Securities will be duly and validly issued, fully paid and nonassessable (and if
registered pursuant to the 1933 Act, and resold pursuant to an effective
registration statement will be free trading and unrestricted);
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company;
(iv) will not subject the holders thereof to personal
liability by reason of being such holders; and
(h) Litigation. There is no pending or, to the best knowledge of
the Company, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company, or any of its affiliates that would affect the execution by the Company
or the performance by the Company of its obligations under this Agreement, and
all other agreements entered into by the Company relating hereto.
(i) Reporting Company. The Company is a publicly-held company
whose common stock is (and has been for the past 90 days) registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). The Company's Common Stock is listed for trading on the NASDAQ SmallCap
Market. Pursuant to the provisions of the 1934 Act, the Company has timely filed
all reports and other materials required to be filed thereunder with the
Securities and Exchange Commission during the preceding twelve months.
(j) No Market Manipulation. The Company has not taken, and will
not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the common stock of the Company to facilitate the sale or resale of
the Securities or affect the price at which the Securities may be issued.
(k) Information Concerning Company. The Reports and Other
Written Information contain all material information relating to the Company and
its operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date of the financial
statements included in the Reports, and except as modified in the Other Written
Information, there has been no material adverse change in the Company's
business, financial
5
<PAGE> 6
condition or affairs not disclosed in the Reports. The Reports and Other Written
Information do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(l) Dilution. The number of Shares issuable upon conversion (as
hereinafter defined) may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to conversion of the First Put
Preferred Stock. The Company's executive officers and directors have studied and
fully understand the nature of the Securities being sold hereby and recognize
that they have a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Shares upon conversion of the First Put
Preferred Stock and exercise of the First Put Warrants and First Put Placement
Warrants is binding upon the Company and enforceable, except as otherwise
described in this Subscription Agreement, regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
(m) Stop Transfer. The Securities are restricted securities as
of the date of this Agreement. The Company will not issue any stop transfer
order or other order impeding the sale and delivery of the Securities at such
time as the Securities are registered for public sale or an exemption from
registration is available.
(n) Defaults. Neither the Company nor any of its subsidiaries is
in violation of its Articles of Incorporation or Bylaws. Neither the Company nor
any of its subsidiaries is (i) in default under or in violation of any other
material agreement or instrument to which it is a party or by which it or any of
its properties are bound or affected, which default or violation would have a
material adverse effect on the Company, (ii) in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) to its
knowledge in violation of any statute, rule or regulation of any governmental
authority material to its business.
(o) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
The NASDAQ SmallCap Market ("NASDAQ SmallCap"), as applicable, nor will the
Company or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
(p) Use of Proceeds. The proceeds of the Subscriber funds to be
released to the Company will be used for working capital and for expenses of
this offering.
6
<PAGE> 7
(q) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, 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 Act) in connection with the offer or sale of
the Securities.
(r) Listing. The Company's common stock is quoted on, and listed
for trading on NASDAQ SmallCap Market. The Company has not received any notice
from NASDAQ that its Common Stock will be delisted from NASDAQ or that the
Common Stock does not meet all requirements for the continuation of such
listing.
(s) S-3 Eligibility. The Company currently meets, and will take
all necessary action to continue to meet, the "registrant eligibility"
requirements set forth in the general instructions to Form S-3.
(t) The Company has obtained the Approval described in Section
7.1(e) of the Initial Subscription Agreement.
(u) Correctness of Representations. The Company represents that
the foregoing representations and warranties and all other representations and
warranties made by the Company in this Agreement and any other agreement
delivered in connection herewith are true and correct as of the date hereof in
all material respects and, unless the Company otherwise notifies the Subscriber
prior to the First Put Closing Date, shall be true and correct in all material
respects as of the First Put Closing Date. The foregoing representations and
warranties shall survive the First Put Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to
the exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
First Put Closing Date, the Company will provide an opinion acceptable to
Subscriber from the Company's legal counsel opining on the availability of the
Regulation D exemption as it relates to the offer and issuance of the
Securities. A form of the legal opinion is annexed hereto as Exhibit B. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the conversion of the First Put Preferred
Stock, First Put Commission Shares, First Put Warrants and First Put Placement
Warrants.
4. Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted
to dispose of such Securities pursuant to Rule 144(k) under the Act, or (b) upon
resale subject to an effective registration statement after the Securities are
registered under the Act. The Company agrees to cooperate with the Subscriber in
connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide
legal opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested certifications from the Subscriber and
selling broker, if any.
7
<PAGE> 8
5. Redemption. The Company may not redeem the Securities without the
consent of the holder of the Securities, except as described in the Certificate
of Determination.
6. Legal Fees/Commissions. The Company shall pay to counsel to the
Subscriber its fee of $5,000 for services rendered to the Subscriber in
reviewing this Agreement and other subscription agreements for the aggregate
subscription amounts of up to $500,000 and acting as escrow agent. The Company
will pay a cash commission of three percent (3%) of the First Put Purchase Price
designated on the signature page hereto to certain Placement Agents identified
on Schedule A hereto. The cash commissions and legal fees will be payable out of
funds held pursuant to a Funds Escrow Agreement to be entered into by the
Company, Subscriber and an Escrow Agent. The Company will also issue and deliver
to the Placement Agents as additional compensation First Put Preferred Stock of
the Company ("First Put Commission Shares") and First Put Placement Warrants
designated on Schedule A hereto. The Commissions will be issued to the Placement
Agents only when, as, and if the corresponding subscription amount is released
from escrow to the Company. All the representations, covenants, warranties and
undertakings, including but not limited to registration rights made or granted
to or for the benefit of the Subscriber and the terms described in Sections 9.1,
9.2, and 9.3 hereof are hereby also made and granted to the Placement Agents in
respect of the First Put Commission Shares, First Put Placement Warrants and
Company Shares issuable upon exercise of the First Put Placement Warrants.
7.1. Covenants of the Company. The Company covenants and agrees with
the Subscriber as follows:
(a) The Company will advise the Subscriber, promptly after it
receives notice of issuance by the Securities and Exchange Commission, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the common stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) The Company shall promptly secure the listing of the Company
Shares, First Put Commission Shares and Common Stock issuable upon the exercise
of the First Put Warrants and First Put Placement Warrants upon each national
securities exchange, or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and shall
maintain such listing so long as any other shares of Common Stock shall be so
listed. The Company will use its best efforts to maintain the listing and
trading of its Common Stock on NASDAQ SmallCap, and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the National Association of Securities Dealers ("NASD") and such
exchanges, as applicable. The Company will provide the Subscriber copies of all
notices it receives notifying the Company of the actual delisting of the Common
Stock on any exchange or quotation system on which the Common Stock is listed.
(c) The Company shall notify the SEC, NASD and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this
8
<PAGE> 9
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 Securities to the Subscriber and Placement Agents and
promptly provide copies thereof to Subscriber.
(d) Until at least three (3) years after the effectiveness of
the Registration Statement on Form S-3 or such other Registration Statement
described in Section 10.1(iv) hereof, the Company will (i) cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, (ii) comply in all respects with its reporting and filing obligations under
the Exchange Act, and (iii) comply with all requirements related to any
registration statement filed pursuant to this Agreement. The Company will not
take any action or file any document (whether or not permitted by the Act or the
Exchange Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under said Acts
until the later of (i) three (3) years after the effective date of the
Registration Statement on Form S-3 or such other Registration Statement
described in Section 10.1(iv) hereof, or (ii) the sale by the Subscribers and
Placement Agents of all the Company Shares issuable by the Company pursuant to
this Agreement. Until at least two (2) years after the First Put Warrants and
First Put Placement Warrants have been exercised, the Company will use its
commercial best efforts to continue the listing or trading of its Common Stock
on NASDAQ SmallCap 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.
(e) The Company undertakes to use the proceeds of the
Subscriber's funds for general working capital purposes, and expenses of this
offering.
8. Covenants of the Company and Subscriber Regarding Indemnifications.
(a) The Company agrees to indemnify, hold harmless, reimburse
and defend Subscriber against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon Subscriber which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or Reports or other
Written Information; or (ii) any breach or default in performance by Company of
any covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is based
upon (a) any misrepresentation by Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto; or (b) any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.
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9.1. Conversion.
(a) The First Put Preferred Stock and accrued dividends will be
convertible according to the procedure set forth in the Certificate of
Determination. In the event Subscriber elects to convert the First Put Preferred
Stock and accrued dividends in accordance with the Certificate of Determination,
Subscriber agrees to provide to the Company and its counsel by telecopier and
first class mail to the telecopier numbers and addresses, respectively, set
forth in Section 12 hereof, simultaneously with the transmission or delivery
thereof to the Company's transfer agent, a copy of any notice of conversion.
(b) The Company understands that a delay in the delivery of the
Company Shares after Conversion, and delivery of First Put Preferred Stock
certificates representing the unconverted balance of a First Put Preferred Stock
certificate tendered for conversion beyond the date described for such delivery
set forth in the Certificate of Determination or Mandatory Conversion Date (as
that term is employed in the Certificate of Determination), or late delivery of
a Mandatory Redemption Payment (as defined herein), as the case may be, (each of
the foregoing a "Delivery Date") could result in economic loss to the
Subscriber. As compensation to the Subscriber for such loss, the Company agrees
to pay late payments to the Subscriber for late delivery of Company Shares upon
Conversion and late delivery of a First Put Preferred Stock certificates for the
unconverted portion of a First Put Preferred Stock or late delivery of a
Mandatory Redemption Payment in the amount of $100 per business day after the
Delivery Date for each $10,000 of Stated Value of First Put Preferred Stock
being converted and First Put Preferred Stock certificate remaining undelivered
or Mandatory Redemption Payment not paid. The Company shall pay any payments
incurred under this Section in immediately available funds upon demand.
Furthermore, in addition to any other remedies which may be available to the
Subscriber, in the event that the Company fails for any reason to effect
delivery of the Company Shares within three business days after the Delivery
Date, the Subscriber will be entitled to revoke the relevant Notice of
Conversion by delivery of a notice of revocation to the Company whereupon the
Company and the Subscriber shall each be restored to their respective positions
immediately prior to the delivery of such notice of revocation, except that late
payment charges described above shall be payable through the date notice of
revocation is given to the Company.
(c) Nothing contained herein or in any document referred to
herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Subscriber and thus refunded to the
Company.
9.2. Mandatory Redemption. In the event the Company may not issue
Company Shares on a Delivery Date because such issuance and delivery would be
contrary to NASDAQ's Corporate Governance Rules, or for any other reason except
in relation to the Shares not deliverable pursuant to Section 9.3 of this
Subscription Agreement, then at the Subscriber's election, the Company must pay
to the Subscriber on the Delivery Date a sum of money determined by multiplying
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the Stated Value of First Put Preferred Stock not convertible by 110% together
with accrued but unpaid dividend thereon ("Mandatory Redemption Payment"). The
Mandatory Redemption Payment must be received by the Subscriber on the same date
as the Company Shares otherwise deliverable. Upon receipt of the Mandatory
Redemption Payment, the corresponding First Put Preferred Stock will be
cancelled and no longer outstanding, and if the Holder is in possession of the
corresponding First Put Preferred Stock, same will be returned to the Company.
9.3. Maximum Conversion. The Company and Subscriber shall not be
entitled to convert on a Conversion Date or effect a Mandatory Conversion of
that amount of the First Put Preferred Stock in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Subscriber and its affiliates
on a Conversion Date, and (ii) the number of shares of Common Stock issuable
upon the conversion of the First Put Preferred Stock with respect to which the
determination of this proviso is being made on a Conversion Date, which would
result in beneficial ownership by the Subscriber and its affiliates of more than
9.99% of the outstanding shares of Common Stock of the Company. For the purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder, except as otherwise provided
in clause (i) of such proviso.
10.1. Registration Rights; Procedure; Indemnification.
Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing December 1, 1999,
but not later than three years from the date hereof, the Company, upon a written
request therefor from any record holder or holders of more than 50% of the
aggregate of the Company's Shares issued and issuable upon Conversion of the
First Put Preferred Stock (the Securities and securities issued or issuable by
virtue of ownership of the Securities, being, the "Registrable Securities"),
shall prepare and file with the SEC a registration statement under the Act
covering the Registrable Securities which are the subject of such request,
unless such Registrable Securities are the subject of an effective registration
statement. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall include in
such registration statement Registrable Securities for which it has received
written requests within 10 days after the Company gives such written notice.
Such other requesting record holders shall be deemed to have exercised their
demand registration right under this Section 10.1(i). As a condition precedent
to the inclusion of Registrable Securities, the holder thereof shall provide the
Company with such information as the Company reasonably requests. The obligation
of the Company under this Section 10.1(i) shall be limited to one registration
statement.
(ii) If the Company at any time proposes to register any of its
securities under the Act for sale to the public, whether for its own account or
for the account of other security
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<PAGE> 12
holders or both, except with respect to registration statements on Forms S-4,
S-8 or another form not available for registering the Registrable Securities for
sale to the public, provided the Registrable Securities are not otherwise
registered for resale by the Subscriber or Holder pursuant to an effective
registration statement, each such time it will give at least 30 days' prior
written notice to the record holder of the Registrable Securities of its
intention so to do. Upon the written request of the holder, received by the
Company within 30 days after the giving of any such notice by the Company, to
register any of the Registrable Securities, the Company will cause such
Registrable Securities as to which registration shall have been so requested to
be included with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required to permit the
sale or other disposition of the Registrable Securities so registered by the
holder of such Registrable Securities (the "Seller"). In the event that any
registration pursuant to this Section 10.1(ii) shall be, in whole or in part, an
underwritten public offering of common stock of the Company, the number of
shares of Registrable Securities to be included in such an underwriting may be
reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the forgoing provisions, the Company may
withdraw any registration statement referred to in this Section 10.1(ii) without
thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is
received by the Company pursuant to Section 10.1(i), the Company has determined
to proceed with the actual preparation and filing of a registration statement
under the 1933 Act in connection with the proposed offer and sale for cash of
any of its securities for the Company's own account, such written request shall
be deemed to have been given pursuant to Section 10.1(ii) rather than Section
10.1(i), and the rights of the holders of Registrable Securities covered by such
written request shall be governed by Section 10.1(ii) except that the Company or
underwriter, if any, may not withdraw such registration or limit the amount of
Registrable Securities included in such registration.
(iv) The Company shall file with the Commission within thirty
(30) days of the First Put Closing Date (as hereinafter defined) (the "Filing
Date"), and use its reasonable commercial efforts to cause to be declared
effective a Form S-3 registration statement (or such other form that it is
eligible to use) within ninety (90) days of the First Put Closing Date in order
to register the Registrable Securities for resale and distribution under the
Act. The registration statement described in this paragraph must be declared
effective by the Commission within 90 days of the First Put Closing Date
("Effective Date"). The Company will register not less than 33,000 shares of
Common Stock in the S-3 registration statement for each $25,000 of Stated Value
of First Put Preferred Stock subscribed for and one share of Common Stock for
each Commission Share and common share issuable upon exercise of the First Put
Warrants and First Put Placement Warrants. The Registrable Securities shall be
reserved and set aside exclusively for the benefit of the Subscriber and
Placement Agents, as the case may be, and not issued, employed or reserved for
anyone other than the Subscriber and Placement Agents, as the case may be. Such
registration statement will be promptly amended or additional registration
statements will be promptly filed by the Company as
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<PAGE> 13
necessary to register additional Company Shares to allow the public resale of
all Common Stock included in or issuable by virtue of the actually issued
Registrable Securities.
10.2. Registration Procedures. If and whenever the Company is
required by the provisions hereof to effect the registration of any shares of
Registrable Securities under the Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly
provide to the holders of Registrable Securities copies of all filings;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until the later of eighteen (18) months after the actual effective date of the
registration statement or six (6) months after the latest exercise period of any
common stock purchase warrants included in the Securities and comply with the
provisions of the Act with respect to the disposition of all of the Registrable
Securities covered by such registration statement in accordance with the
Seller's intended method of disposition set forth in such registration statement
for such period;
(c) furnish to the Seller, and to each underwriter if any, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller and in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) immediately notify the Seller and each underwriter under
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
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<PAGE> 14
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
10.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for
registration has been made pursuant to Section 10.1(i) or a request for
registration has been made pursuant to Section 10.1(ii), the Registrable
Securities will be included in a registration statement filed pursuant to this
Section 10. In the event of a firm commitment underwritten public offering in
which the Registrable Securities are so included, the lockup, if any, requested
by the managing underwriter may not exceed ninety (90) days after the effective
date thereof.
(b) In connection with each registration hereunder, the Seller
will furnish to the Company in writing such information with respect to itself
and the proposed distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws. In
connection with each registration pursuant to Section 10.1(i) or 10.1(ii)
covering an underwritten public offering, the Company and the Seller agree to
enter into a written agreement with the managing underwriter in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such underwriter and companies of the Company's size and
investment stature.
10.4. Non-Registration Events. The Company and the Subscriber agree
that the Seller will suffer damages if any registration statement required under
Section 10.1(i) or 10.1(ii) above is not filed within 60 days after request by
the Holder and not declared effective by the Commission within 120 days after
such request [or the Filing Date and Effective Date, respectively, in reference
to the Registration Statement on Form S-3 or such other form described in
Section 10.1(iv)], and maintained in the manner and within the time periods
contemplated by Section 10 hereof, and it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if (i) the Registration
Statement described in Sections 10.1(i) or 10.1(ii) is not filed within 60 days
of such request, or is not declared effective by the Commission on or prior to
the date that is 120 days after such request, or (ii) the registration statement
on Form S-3 or such other form described in Section 10.1(iv) is not filed on or
before the Filing Date or not declared effective on or before the Effective
Date, or (iii) any registration statement described in Sections 10.1(i),
10.1(ii) or 10.1(iv) is filed and declared effective but shall thereafter cease
to be effective (without being succeeded immediately by an additional
registration statement filed and declared effective) for a period of time which
shall exceed 30 days in the aggregate per year but not more than 20 consecutive
calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) (each such event referred to in
clauses (i), (ii) and (iii) of this Section 10.4 is referred to herein as a
"Non-Registration Event"), then, for so long as such Non-Registration Event
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<PAGE> 15
shall continue, the Company shall pay in cash as Liquidated Damages to each
holder of any Securities an amount equal to one (1%) percent for the first
thirty (30) days and two (2%) percent for each succeeding thirty (30) days or
part thereof, of the Purchase Price of the First Put Preferred Stock and Company
Shares, the Stated Value of the First Put Commission Shares or Company Shares
issued upon the conversion thereof, and the aggregate amount of the exercise
prices of the First Put Warrants and First Put Placement Warrants, whether or
not exercised, then owned of record by such holder as of the occurrence of such
Non-Registration Event. Payments to be made pursuant to this Section 10.4 shall
be due and payable immediately upon demand in immediately available funds. In
the event a mandatory payment for First Put Preferred Stock is demanded from the
Company by the Holder of First Put Preferred Stock, pursuant to Section 8 of the
Certificate of Determination, then the Liquidated Damages described in this
Section 10.4 shall no longer accrue from and after the date the Holder receives
the payment described in Section 8 of the Certificate of Determination. The
occurrence of a Non-Effectiveness Event shall be deemed an Event of Default
under Section 8 of the Certificate of Determination.
10.5. Expenses. All expenses incurred by the Company in complying
with Section 10, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, fee of one counsel, if any, to represent
all the Sellers, and costs of insurance are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any special
counsel to the Seller, are called "Selling Expenses". The Seller shall pay the
fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection
with the registration statement under Section 10. All Selling Expenses in
connection with each registration statement under Section 10 shall be borne by
the Seller and may be apportioned among the Sellers in proportion to the number
of shares sold by the Seller relative to the number of shares sold under such
registration statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities
under the Act pursuant to Section 10, the Company will indemnify and hold
harmless the Seller, each officer of the Seller, each director of the Seller,
each underwriter of such Registrable Securities thereunder and each other
person, if any, who controls such Seller or underwriter within the meaning of
the 1933 Act, against any losses, claims, damages or liabilities, joint or
several, to which the Seller, or such underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
was registered under the Act pursuant to Section 10, any preliminary prospectus
or final prospectus contained therein, or any amendment or
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<PAGE> 16
supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Seller, each such underwriter and each such controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by any such Seller, the
underwriter or any such controlling person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of the Registrable
Securities sold by the Seller under such registration statement bears to the
total public offering price of all securities sold thereunder, but not in any
event to exceed the gross proceeds received by the Seller from the sale of
Registrable Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(c) if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against
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<PAGE> 17
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 10.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in
the event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 10.6 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
provided under this Section 10.6; then, and in each such case, the Company and
the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (A) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
11. Initial Subscription Agreement.
11.1. Exercise of Second Put. The Company and Subscriber agree that
notwithstanding the provisions of Section 11.2 of the Initial Subscription
Agreement, the Company's right to exercise the Second Put, as defined therein,
shall commence on the Effective Date, as defined in this Subscription Agreement
and expires seven (7) days thereafter. The exercise of the Second Put is
nevertheless subject to all other contingencies and conditions set forth in the
Initial Subscription Agreement.
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11.2. First Put Commissions and Legal Fees. The Company and
Subscriber agree that notwithstanding the provisions of Section 11.4 of the
Initial Subscription Agreement, payment and delivery of the First Put
Commissions and attorney's fees described therein shall be made simultaneously
with the delivery to the Company of the Company's portion of the First Put
Purchase Price.
11.3. Notice of Conversion. The Company and the Subscriber agree
that Section 9.1(a) of the Initial Subscription Agreement is hereby amended to
add the following additional language:
"In the event Subscriber elects to convert the Preferred Stock
and accrued dividends in accordance with the Certificate of
Determination, Subscriber agrees to provide to the Company and
its counsel by telecopier and first class mail to the telecopier
numbers and addresses, respectively, set forth in Section 12
hereof, simultaneously with the transmission or delivery thereof
to the Company's transfer agent, a copy of any notice of
conversion."
11.4. Notices. The Company and the Subscriber agree that the
address for notices to the Company pursuant to Section 12 of the Initial
Subscription Agreement is amended as follows: 3810 Wacker Drive, Mira Loma,
California 91752, Attention: Herm Rosenman, President and CEO, telecopier number
(909) 360-2525, with a copy by telecopier only to Miller & Holguin, Attention:
Howard J. Unterberger, Esq., 1801 Century Park East, Seventh Floor, Los Angeles,
California 90067, telecopier number (310) 557-2205.
12. Miscellaneous.
(a) Notices. All notices or other communications given or made
hereunder or in connection with the Initial Subscription Agreement shall be in
writing and shall be personally delivered or deemed delivered the first business
day after being telecopied (provided that a copy is delivered by first class
mail) to the party to receive the same at its address set forth below or to such
other address as either party shall hereafter give to the other by notice duly
made under this Section: (i) if to the Company, to Bikers Dream, Inc., 3810
Wacker Drive, Mira Loma, California 91752, Attn: Herm Rosenman, President and
CEO, telecopier number: (909) 360-2525, with a copy by telecopier only to Miller
& Holguin, Attn: Howard J. Unterberger, Esq., 1801 Century Park East, Seventh
Floor, Los Angeles, California 90067, telecopier number: (310) 557-2205, and
(ii) if to the Subscriber, to the name, address and telecopy number set forth on
the signature page hereto, with a copy by telecopier only to Grushko & Mittman,
Attn: Edward M. Grushko, Esq., 277 Broadway, Suite 801, New York, New York
10007, telecopier number: (212) 227-5865. Any notice that may be given pursuant
to this Agreement, or any document delivered in connection with the foregoing
may be given by the Subscriber on the first business day after the observance
dates in the United States of America by Orthodox Jewry of Rosh Hashanah, Yom
Kippur, the first two days of the Feast of Tabernacles, Shemini Atzeret Simchat
Torah, the first two and final two days of Passover and Pentecost, with such
notice to be deemed given and effective, at the election of the Subscriber on a
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holiday date that precedes such notice. Any notice received by the Subscriber on
any of the aforedescribed holidays may be deemed by the Subscriber to be
received and effective as if such notice had been received on the first business
day after the holiday.
(b) Closing. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & Mittman, 277 Broadway, Suite
801, New York, New York 10007, upon the satisfaction of all conditions to
Closing set forth in this Agreement. The First Put Closing Date shall be the
date that subscriber funds representing the net amount due the Company from the
First Put Purchase Price are transmitted by wire transfer to the Company (the
"First Put Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No right
or obligation of either party shall be assigned by that party without prior
notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an original.
(e) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The Company
and Subscriber 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. Subject to Section 12(e) hereof, each of the Company and Subscriber
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.
19
<PAGE> 20
Nothing in this Section shall affect or limit any right to serve process in any
other manner permitted by law.
(g) Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the tenth (10th) business day following the date this
Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
<PAGE> 21
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
BIKERS DREAM, INC.
By:________________________________
Title:_____________________________
Dated: October ____, 1999
First Put Purchase Price:
First Put Preferred Shares Purchased: (at $1,000 per share)
First Put Common Stock Purchase Warrants:
ACCEPTED: Dated as of October ____, 1999
______________ - Subscriber
_____________________________
_____________________________
Fax: ________________________
By:__________________________
21
<PAGE> 22
SCHEDULE A TO SUBSCRIPTION AGREEMENT
<TABLE>
<CAPTION>
===========================================================================================================
FIRST PUT FIRST PUT
CASH PLACEMENT COMMISSION
PLACEMENT AGENT COMMISSION WARRANTS SHARES
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
LIBRA FINANCE S.A. $ 4,500.00 -0- -0-
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
- -----------------------------------------------------------------------------------------------------------
SETTONDOWN CAPITAL $10,000.00 8,333 15
INTERNATIONAL, LTD.
600 California Street, 14th Floor
San Francisco, CA 94108
Fax: 415-835-8320
- -----------------------------------------------------------------------------------------------------------
TALBIYA B. INVESTMENTS LTD. $ 500.00 -0- -0-
c/o Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Fax: 011-972-36120639
- -----------------------------------------------------------------------------------------------------------
TOTALS $15,000.00 8,333 15
===========================================================================================================
</TABLE>
22
<PAGE> 1
EXHIBIT 5.1
November 12, 1999
Bikers Dream, Inc.
3810 Wacker Drive
Mira Loma, CA 91752
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
Our opinion has been requested in connection with the Registration
Statement to which this opinion is filed as an exhibit.
We have examined the Registration Statement and have examined, and have
relied as to matters of fact upon, the originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records, agreements,
documents and other instruments and such certificates or comparable documents of
public officials and of officers and representatives of the Company, and have
made such other and further investigations, as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth. Based on and subject
to the above, it is our opinion that of the total 4,531,185 shares of common
stock being registered, 1,453,663 shares which are currently outstanding are
duly authorized, legally issued, fully paid and non-assessable, and 3,077,522
shares when issued as contemplated under the terms of the warrants, the options
and the convertible preferred stock governing their issuance, will be duly
authorized, legally issued, fully paid and non-assessable.
We are members of the Bar of the State of California and we do not
express any opinion herein concerning any law other than the law of the State of
California and the federal law of the United States.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ MILLER & HOLGUIN
MILLER & HOLGUIN
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference to the Registration
Statement on Form S-3 of our report, dated April 2, 1999 (except for Note 19, as
to which the date is August 4, 1999), which appears in the Annual Report on
Form 10-KSB/A of Bikers Dream, Inc. and subsidiaries for the year ended
December 31, 1998 (As restated). We also consent to the reference to our Firm
under the caption "Experts" in the aforementioned Registration Statement.
/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
November 10, 1999
