<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BIKERS DREAM, INC.
(Name of Registrant as Specified in Its Charter)
--------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
---------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: __________________________
2) Form, Schedule or Registration Statement No.: _______________
3) Filing Party: ___________________________________________
4) Date Filed: ____________________________________________
<PAGE> 2
BIKERS DREAM, INC.
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held July 19, 1999
-----------------------
To the Shareholders of
Bikers Dream, Inc.:
The Annual Meeting of Shareholders of Bikers Dream, Inc., a California
corporation (the "Company"), will be held at 237 Park Avenue, 9th floor, New
York, New York 10017 on July 19, 1999, at 9:00 a.m., local time, and any
adjournments thereof, to consider and act upon the following matters:
(1) The election of five directors;
(2) The ratification of the selection of Singer, Lewak, Greenbaum &
Goldstein LLP as the Company's independent certified public
accountants for fiscal year 1999;
(3) The authorization and ratification of: (i) the issuance and
sale in private placements of up to 3,090 shares (the
"Preferred Shares") of the Company's Series D 5% Cumulative
Convertible Preferred Stock, par value $0.01 per share (the
"Series D Preferred Stock") and Common Stock Purchase Warrants
to purchase up to 125,000 shares of Common Stock ("Warrants"),
(ii) the issuance of that number of shares of the Company's
Common Stock, no par value ("Common Stock"), issuable upon
conversion of the Series D Preferred Stock being approved for
issuance, based on the conversion formula set forth in the
Certificate of Determination governing the Series D Preferred
Stock, (iii) the issuance of the maximum number of shares of
Common Stock issuable upon exercise of the Warrants in
accordance with their terms; and (iv) the issuance of Series D
Preferred Stock, in accordance with the terms of the Certificate
of Determination governing the Series D Preferred Stock, as a
dividend upon all shares of Series D Preferred Stock being
approved for issuance.
(4) The transaction of such other business as may properly come
before the meeting and any adjournments thereof.
The subject matter of each of the above proposals is described within
the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on _______, 1999
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting.
In order to constitute a quorum for the conduct of business at the
Annual Meeting, holders of a majority of all outstanding voting shares of the
Company must be present in person or be represented by proxy.
Whether or not you expect to attend the Annual Meeting in person, please
date, sign and mail the enclosed Proxy in the postage-paid return envelope
provided as promptly as possible. The Proxy is revocable and will not affect
your right to vote in person if you attend the meeting.
By Order of the Board of Directors
Herm Rosenman
President and Chief Executive Officer
Mira Loma, California
_________, 1999
<PAGE> 3
BIKERS DREAM, INC.
3810 WACKER DRIVE
MIRA LOMA, CALIFORNIA 91752
-----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 19, 1999
-----------------------
To Our Shareholders:
Your Board of Directors furnishes this Proxy Statement in connection
with its solicitation of your Proxy in the form enclosed to be used at the
Company's Annual Meeting of Shareholders to be held on July 19, 1999, at the
time and place and for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders.
The Company's Annual Report on Form 10-KSB, as filed with the Securities
and Exchange Commission, including audited financial statements, is being mailed
to you on or about May 24, 1999 with this Proxy Statement.
We cordially invite you to attend the Annual Meeting. Whether or not you
plan to attend, please date, sign and return your Proxy promptly in the postage
paid return envelope provided. You may revoke your Proxy at any time prior to
its exercise at the meeting by notice to the Company's Secretary and, if you
attend the meeting, you may vote your shares in person. You may also revoke your
Proxy by returning a duly executed Proxy bearing a later date. If no instruction
is given, the proxy will be voted FOR each of the proposals described herein.
The named proxies may vote in their discretion upon such other matters as may
properly come before the meeting.
Only shareholders of record at the close of business on ________, 1999
will be entitled to vote at the meeting. As of ____, 1999, the record date for
determining shareholders entitled to notice of and to vote at the Annual
Meeting, the Company had issued and outstanding 5,157,590 shares of common
stock, no par value ("Common Stock"), one share of Series A Convertible
Preferred Stock, no par value (the "Series A Preferred Stock"), 702,194 shares
of Series B Convertible Preferred Stock, no par value (the "Series B Preferred
Stock") and 1,545 shares of Series D Convertible Preferred Stock ("Series D
Preferred Stock").
Holders of Common Stock and Series A Preferred Stock are entitled to one
vote per share. Holders of Series B Preferred Stock are entitled to that number
of votes equal to the number of shares of Common Stock issuable upon conversion
of such Series B Preferred Stock at the time the shares are voted, which is
_______________ , as of ________, 1999. Holders of Series D Preferred Stock have
no voting rights. All shares entitled to vote shall hereinafter be collectively
referred to as "Shares." Notwithstanding the foregoing, shareholders may
exercise cumulative voting rights with respect to the election of directors.
Cumulative voting allows a shareholder to cast a number of votes equal to the
number of directors to be elected (five) multiplied by the number of votes held
in his or her name on the Record Date. This total number of votes may be cast
for one nominee or may be distributed among as many candidates as the
shareholder desires.
<PAGE> 4
Pursuant to California law, no shareholder can cumulate votes unless
prior to the voting at the Annual Meeting, a shareholder has given notice of the
shareholder's intention to cumulate the shareholder's votes at the Annual
Meeting and the nominee for which the shareholder intends to cumulate votes has
properly been nominated. If any shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. The Board of
Directors does not, at this time, intend to give such notice or to cumulate the
votes it may hold pursuant to the proxies solicited herein unless the required
notice by a shareholder is given, in which event votes represented by proxies
delivered pursuant to this Proxy Statement may be cumulated in the discretion of
the proxy holders, in accordance with the recommendation of the Board of
Directors. Therefore, discretionary authority to cumulate votes in such event is
solicited in this Proxy Statement.
The presence, in person or by proxy, of a majority of the Shares is
necessary to constitute a quorum at the Annual Meeting. The five candidates for
election of directors receiving the highest number of votes will be elected,
whether or not votes are cumulated. The ratification of the appointment of
Singer, Lewak, Greenbaum & Goldstein, LLP as the Company's independent public
accountants for the 1999 fiscal year requires the approval of a majority of the
Shares present or represented by proxy and voting at the meeting. The approval
of a majority of the Shares present or represented by proxy and voting at the
meeting is also required for the authorization and ratification of (i) the
issuance and sale in private placements of up to 3,090 shares (the "Preferred
Shares") of Series D Preferred Stock and Common Stock Purchase Warrants to
purchase up to 125,000 shares of Common Stock ("Warrants"), (ii) the issuance
of that number of shares of Common Stock issuable upon conversion of the Series
D Preferred Stock being approved for issuance, based on the conversion formula
set forth in the Certificate of Determination governing the Series D Preferred
Stock, (iii) the issuance of the maximum number of shares of Common Stock
issuable upon exercise of the Warrants in accordance with their terms; and
(iv) the issuance of Series D Preferred Stock, in accordance with the terms of
the Certificate of Determination governing the Series D Preferred Stock, as a
dividend upon all shares of Series D Preferred Stock being approved for
issuance.
Abstentions and "broker non-votes" (shares which are held by brokerage
firms for their clients, but as to which the firms have not received voting
instructions from their clients and therefore do not have the authority to vote)
will be counted for purposes of determining a quorum, but will not count as
votes in favor of the election of directors, and will have the effect of votes
against Proposals 2 and 3.
The Company has been advised by its directors and officers that they
expect that the 979,310 outstanding shares of Common Stock over which they have
or share voting power, representing 19% of the total voting shares outstanding
as of the record date, will be voted in favor of the proposals presented in this
Proxy Statement. See "Beneficial Ownership of Securities."
The entire cost of soliciting proxies will be borne by the Company,
including expenses in connection with preparing and mailing proxy solicitation
materials. In addition to use of the mails, proxies may be solicited by
officers, directors and regular employees of the Company, without extra
compensation, by telephone, telegraph or personal solicitation, and no
additional compensation will be paid to such persons. If requested, the Company
will reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expenses incurred in mailing proxy material to their
principals.
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<PAGE> 5
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, management will present as nominees and recommend
to the shareholders that each of the first five persons listed below (the
current directors) be elected to serve as directors until the next annual
meeting of shareholders or until their respective successors are duly elected
and qualified. Each nominee has agreed to serve if elected.
Proxies will be voted for the election of the five nominees named below
unless instructions are given to the contrary. Proxies cannot be voted for a
greater number of persons than the number of nominees named. Should any nominee
become unable to serve as a director, the persons named in the enclosed form of
Proxy will, unless otherwise directed, vote for the election of such other
person as the present Board of Directors may recommend to fill that position.
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth certain biographical information, present
occupation and business experience for the past five years of each director and
executive officer of the Company, including those persons nominated to serve on
the Board of Directors. Officers of the Company are elected by the Board of
Directors and hold office until their successors are chosen and qualified, until
their death or until they resign or have been removed from office. All corporate
officers serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME OFFICE
- ---- ------
<S> <C>
Herm Rosenman CEO, President; Director
Donald J. Duffy Director
Humbert Powell Director
John K. Russell Director
Bruce Scott Director
Harold L. Collins Vice President and General Counsel
Anne Todd Controller
</TABLE>
HERM ROSENMAN, age 51, has been the Company's president and chief executive
officer and a director since September 1997. At the annual meeting of the
shareholders of the Company in July 1998, he was appointed chairman of the board
of directors. From 1996 through 1997, Mr. Rosenman was a principal with Pacific
Consulting Group. From 1994 to 1997, Mr. Rosenman was the chief executive
officer of RadNet, a healthcare provider. From 1991 to 1995, he was the
President and chief executive officer of Ireland Coffee, an upscale coffee chain
he founded in a joint venture. From 1988 to 1991, Mr. Rosenman was the chief
financial officer of Rexene, a plastics and petrochemicals manufacturer. Prior
to 1988, Mr. Rosenman worked for Coopers & Lybrand for 20 years, 10 of which he
was a partner, where he served clients in many industries including
manufacturing, telecommunications, pharmaceuticals and construction. Mr.
Rosenman also serves on the board of directors of Integrated Intelligence Corp.,
a privately owned company. Mr. Rosenman received a B.B.A. from Pace University
and an M.B.A. from the Wharton School of Business. Mr. Rosenman is married to
Diana Rosenman, Director of Marketing and Public Relations of the Company. See
"Certain Relationships and Related Transactions."
3
<PAGE> 6
DONALD J. DUFFY, age 31, has been a director since December 1995 and is the
former chief executive officer of the Company. Until the last Annual Meeting
held in 1998, Mr. Duffy served as the chairman of the board of directors. Mr.
Duffy is a principal of Meyer, Duffy & Associates, Inc. ("Meyer, Duffy"), an
investment management and strategic consulting group based in New York which he
founded in September 1994. Meyer, Duffy is involved in the financing of
development stage private and public companies. From June 1992 to September
1994, Mr. Duffy was a senior analyst at Oak Hall Capital Advisors, specializing
in research and investments in retail, gaming and technology companies.
HUMBERT POWELL, III, age 61, has been a director since December 1995. Mr. Powell
has been an associate with Sanders, Morris and Mundy, an investment banker and
broker/dealer, since December 1996. Prior to joining Sanders, Morris and Mundy,
Mr. Powell held a variety of positions in corporate finance and investment
banking, including Chairman of Marleau, Lemire USA from 1995 to November 1996
and Senior Managing Director of Bear Stearns & Co. from 1984 to 1994. Mr. Powell
also serves on the board of directors of Osicom Technologies.
JOHN K. RUSSELL, age 48, has been a director since May 1997. Mr. Russell is
President of the Ducati Owners Club Northeast and owns and operates a fine arts
business. Mr. Russell has over twenty years of retail experience and an
extensive background managing, supervising and consulting in motorcycle related
businesses.
BRUCE A. SCOTT, age 52, has been a director since July 1998. Since January 1998,
Mr. Scott has been the President of Cana Capital Corporation, the Secretary and
Treasurer of Big Bike Boutique, a retail apparel distributor, the President of
Bikers Dream stores in Tampa Bay, Jacksonville, Panama City and Daytona,
Florida, and the president of another motorcycle dealership in Florida. From
December 1995 through December 1997 Mr. Scott was the Senior Vice President of
Republic Security Services, a security system company which was, at the time, a
division of Republic Industries. From 1985 to 1995 Mr. Scott was the President
of Scott Alarm, a privately held security system company that was sold to
Republic Industries in 1995.
HAROLD L. COLLINS, age 48, was appointed in April 1999 by the board of directors
to serve as vice president and general counsel. Mr. Collins has been employed by
the Company since November 1998. From 1977 until the time he joined the Company,
Mr. Collins maintained a private law practice. His areas of practice included
business litigation, personal injury litigation, family law and adversary
proceedings in bankruptcy.
ANNE TODD, age 31, was named controller and appointed corporate secretary in
1997. Ms. Todd was previously assistant controller for the Company from 1995 to
1997. Prior to joining the Company, Ms. Todd was assistant controller for
American Standard from 1993 to 1995.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors convened five formal meetings during the fiscal
year ended December 31, 1998. In addition, the Board took action several times
during the year by unanimous written consent. No Director attended less than 75%
of the total number of meetings of the Board of Directors or all committees of
which he was a member, except that Mr. Rosenman abstained from participating in
the one meeting of the compensation committee which was held during the year to
determine his bonus for 1998.
The Board has a compensation committee and an audit committee. The
compensation committee is comprised of Messrs. Duffy, Rosenman and Russell. The
audit committee is comprised of Messrs. Duffy, Powell and Russell. The audit
committee meets to review the results of the annual audit and to discuss the
financial statements. The compensation committee evaluates the performance of
the Company's officers and
4
<PAGE> 7
makes recommendations to the Board concerning compensation. The Board does not
have a nominating committee.
In 1998, the audit committee did not convene a formal meeting, as the
results of the audit for the fiscal year ended 1997 were reviewed by the entire
membership of the Board of Directors. The compensation committee held one formal
meeting in 1998, the purpose of which was to discuss Mr. Rosenman's bonus for
1998. See "Executive Compensation."
COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1998, no cash compensation was
paid to directors of the Company for their services as directors.
As partial consideration for Mr. Rosenman's services as a director of
the Company, the Company granted to Mr. Rosenman options to purchase 10,000
shares of Common Stock at an exercise price of $5.00 per share, on September 1,
1997, which were repriced at $4.00 per share on October 22, 1998 and repriced
again at $3.00 per share on December 28, 1998.
In October 1998, options to purchase 10,000 shares at a price of $7.90
that were previously granted to Humbert Powell and options to purchase 10,000
shares at a price of $7.05 that were previously granted to John Russell were
canceled and new options were issued to each of them at an exercise price of
$4.00 per share, which price includes a premium of approximately 10% above the
fair market value of the Common Stock as of the date of approval by the
Compensation Committee. The Compensation Committee approved the reductions in
the exercise price from $7.90 and $7.05 to $4.00 to more closely reflect the
market price of the Common Stock and thereby maintain the value of the options
as an incentive. As a result of this stock option repricing, the Company
canceled a total of 20,000 stock options and granted the same number of new
stock options (10,000 options to each of Humbert Powell and John Russell) at the
aforementioned exercise price of $4.00 per share.
In July 1998, the Company's stockholders approved a stock option plan
(the "Plan") that authorizes incentive stock options for employees (including
officers) and non-qualified stock options for non-employee directors and
consultants. A total of 1,000,000 shares of Common Stock were reserved for
issuance under the Plan.
Under the Plan, as of the date of their first election or appointment as
directors, each director of the Company is automatically granted non-qualified
stock options to purchase 5,000 shares of the Company's Common Stock, and
thereafter on each anniversary of their first election or appointment as
director, each director of the Company will automatically be granted
non-qualified stock options to purchase 2,000 shares of the Company's Common
Stock. Except as expressly authorized by the Plan, directors of the Company who
are members of the committee that administers the Plan are not otherwise
eligible to participate in the Plan. The exercise price for each non-qualified
stock option granted under the Plan is the fair market value of the Company's
Common Stock on the date of grant. Each such non-qualified stock option has a
term of five years, subject to earlier termination. If a holder of any
non-qualified stock option granted under the Plan no longer serves on the Board,
then the outstanding non-qualified stock options of such holder will expire one
year after such termination, or their stated expiration date, whichever occurs
first.
During the year ended December 31, 1998, the Company's five directors
were each awarded options under the Plan for the purchase of 5,000 shares of
Common Stock, all with an exercise price of $3.75 per share, none of which were
exercised during that year.
5
<PAGE> 8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities
("reporting persons"), to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Reporting persons
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Except as described below, to the Company's knowledge, based solely on a
review of the copies of reports and amendments thereto on Forms 3, 4 and 5
furnished to the Company by reporting persons during, and with respect to, its
fiscal year ended December 31, 1998, and on a review of written representations
from reporting persons to the Company that no other reports were required to be
filed for such fiscal year, all Section 16(a) filing requirements applicable to
the Company's directors, executive officers and greater than ten percent
beneficial owners during such period were satisfied in a timely manner, except
(i) Anne Todd, who was appointed Principal Accounting Officer in 1998, failed to
timely file one report, and (ii) Christopher Ebert, who served as Chief
Financial Officer from June 22, 1998 to October 7, 1998, failed to timely file
one report. In addition, based on information available to the Company, it
appears that (i) Humbert Powell III, who was appointed as a director in 1995,
failed to timely file two reports, one of which related to one transaction and
(ii) Donald Duffy, who was then the Co-Chief Executive Officer and a director of
the Company, failed to timely file three reports with respect to five
transactions in 1997.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding ownership
of the Company's voting securities, which include its Common Stock, Series A
Preferred Stock and Series B Preferred Stock, as of April 14, 1999, by each
director of the Company, the chief executive officer of the Company, each person
known by the Company to be the beneficial owner of more than five percent of any
class of the Company's voting securities, and all of the directors and the chief
executive officer of the Company as a group, excluding in each case rights under
options or warrants not exercisable within 60 days. All persons named have sole
voting power and investment power over their shares except as otherwise noted.
The figures set forth below have been adjusted to reflect the Company's reverse
stock split as of February 5, 1998.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF SHARES PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNED CLASS
- -------------- ------------------- --------- ----------
<S> <C> <C> <C>
Common Stock Herm Rosenman(1) 205,001(2) 3.82%(3)
3810 Wacker Drive
Mira Loma, CA 91752
Common Stock Donald Duffy(4) 1,403,643(5) 25.04%(3)
c/o Meyer, Duffy &
Associates, Inc.
237 Park Avenue
New York, NY 10017
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF SHARES PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNED CLASS
- -------------- ------------------- --------- ----------
<S> <C> <C> <C>
Common Stock MD Strategic L.P. 933,448(6) 17.38%(3)
c/o Meyer, Duffy &
Associates, Inc.
237 Park Avenue
New York, NY 10017
Common Stock Humbert Powell, III(7) 15,000(8) *(3)
712 Fifth Avenue, 11th Floor
New York, NY 10019
Common Stock John K. Russell(9) 15,000(10) *(3)
3810 Wacker Drive
Mira Loma, CA 91752
Common Stock Bruce Scott(11) 22,000(12) *(3)
3810 Wacker Drive
Mira Loma, CA 91752
Common Stock Bulldog Capital Management 524,555(13) 10.17%(3)
Limited Partnership, Inc.
33 North Glendon Avenue
Suite 750
Clearwater, FL 33755
Common Stock Directors and Officers as a 1,660,644 28.41%(3)
Group(5)
Series A Pfd. Stock Elizabeth M. Custer TTEE FBO 1 100%(14)(15)
William M. Custer
14 S. High Street
P.O. Box 673
New Albany, OH 43504
Series A Pfd. Stock Directors and Officers as a 0 0%(15)
Group
Series B Pfd. Stock Mull Acres Investments, Inc. 600,000 85.4%(16)(17)
c/o Furman Selz
230 Park Avenue
New York, NY 10169
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF SHARES PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNED CLASS
- -------------- ------------------- --------- ----------
<S> <C> <C> <C>
Series B Pfd. Stock Len Lichter 102,194 14.6%(18)(17)
405 Park Avenue
New York, NY 10022
Series B Pfd. Stock Directors and Officers as a 0 0%(17)
Group
</TABLE>
- ----------
(1) Mr. Rosenman is a Director, President and CEO of the Company.
(2) Includes 667 shares of Common Stock received in consideration of Mr.
Rosenman's services as a consultant to the Company, and 20,000 shares
granted pursuant to Mr. Rosenman's stock grant and stock option
agreement with the Company (20,000 of said shares are issuable on the
earlier of termination of employment or September 1, 2000). Mr. Rosenman
disclaims beneficial ownership of 20,000 of the shares described in the
immediately preceding sentence as they are not issuable until the
earlier of September 1, 2000 or the termination of his employment. Also
includes 178,334 shares underlying presently exercisable options. Does
not include: 10,000 shares granted to Mr. Rosenman pursuant to his stock
grant and stock option agreement with the Company which do not vest
until January 1, 2000. Also does not include 300,000 shares of Common
Stock underlying options issued to Mr. Rosenman which will not vest
within 60 days. Includes 6,000 shares underlying presently exercisable
options that were granted to Diana Rosenman, Mr. Rosenman's wife. Does
not include 10,000 shares of Common Stock issuable to Diana Rosenman
upon the exercise of options which will not vest within 60 days.
(3) Percent of class calculation based on 5,157,590 shares of Common Stock
outstanding as of April 14, 1999, plus number of shares of Common Stock,
if any, issuable to the named securityholders upon conversion of
preferred stock and/or exercise of options and warrants exercisable
within 60 days.
(4) Mr. Duffy is a Director of the Company.
(5) Includes (i) 11,193 shares of Common Stock owned by Mr. Duffy
individually, and (ii) 55,000 shares of Common Stock which Mr. Duffy has
the right to acquire upon the exercise of currently exercisable stock
options. Also includes an additional (x) 944,450 shares of Common Stock
which are held by various investment partnerships of which Mr. Duffy is
either a general partner or a member of the limited liability company
which serves as the general partner, including MD Strategic L.P., and a
corporation of which Mr. Duffy is an executive officer (collectively,
the "Investment Entities"), and as to which he shares voting and
investment power, and (y) 393,000 shares of Common Stock which the
Investment Entities have the right to acquire upon the exercise of
currently exercisable stock options and/or warrants. Mr. Duffy disclaims
beneficial ownership of all securities described in clauses (x) and (y).
(6) Includes (i) 720,448 shares of Common Stock owned by MD Strategic L.P.,
and (ii) 213,000 shares of Common Stock which MD Strategic L.P. has the
right to acquire upon the exercise of currently
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<PAGE> 11
exercisable warrants. Mr. Donald Duffy is a general partner of MD
Strategic L.P. (see footnote 5 to this table).
(7) Mr. Powell is a director of the Company.
(8) Issuable upon exercise of presently exercisable options.
(9) Mr. Russell is a director of the Company.
(10) Issuable upon exercise of presently exercisable options.
(11) Mr. Scott is a director of the Company.
(12) Includes: (i) 17,000 shares of Common Stock and (ii) 5,000 shares of
Common Stock issuable upon the exercise of currently exercisable
options.
(13) Bulldog Capital Management Limited Partnership ("BCM"), Bulldog Capital
Partners Limited Partnership ("BCP"), Bulldog Capital Management,
Inc.("BCMI"), the general partner of BCM, and Ronald J. Pollack
("Pollack"), the controlling shareholder of BCMI, filed a Schedule 13G
on February 16, 1999 indicating that BCM, BCMI, and Pollack share voting
power and dispositive power with respect to 524,555 shares, and that
BCM, BCMI, Pollack and BCP share voting power and dispositive power with
respect to 470,168 shares. The Schedule 13G also states that, with
respect to those shares owned by BCM in its capacity as an investment
adviser, no individual client's holdings are more than 5% of the class.
The principal office of BCM are located at 33 North Glendon Avenue,
Suite 750, Clearwater, Florida 33755.
(14) Represents less than 5% of the outstanding Common Stock of the Company
as of April 14, 1999, assuming conversion of said share of Series A
Preferred Stock to Common Stock on such date.
(15) Percent of class calculation based on one share of Series A Preferred
Stock outstanding as of April 14, 1999.
(16) Represents less than 5% of the outstanding Common Stock of the Company
as of April 14, 1999, assuming conversion of said 600,000 shares of
Series B Preferred Stock to Common Stock on such date.
(17) Percent of class calculation based on 702,194 shares of Series A
Preferred Stock outstanding as of April 14, 1999.
(18) Represents less than 5% of the outstanding Common Stock of the Company
as of April 14, 1999, assuming conversion of said 102,194 shares of
Series B Preferred Stock to Common Stock on such date.
* Represents less than 1% of the outstanding shares of Common Stock of the
Company as of April 14, 1999.
9
<PAGE> 12
EMPLOYMENT AGREEMENTS
The Company entered into a three year employment agreement with Herm
Rosenman in September 1997, pursuant to which Mr. Rosenman is employed as
President and Chief Executive Officer of the Company. The term of this agreement
was extended to five years by amendment in December 1997. Under the terms of
this agreement, as amended, Mr. Rosenman is to receive base compensation of
$17,361 for each month of the first, second and third years, and at least
$20,000 for each month of the fourth and fifth years, of the term. In accordance
with the terms of the employment agreement and as agreed to by the parties, the
Company deferred payment of $7,361 each month for the months of September and
October 1997, $4,861 each month for the months of November and December 1997 and
$2,361 each month during the year of 1998. Further, pursuant to the employment
agreement, the Company is obligated to pay all amounts so deferred in equal
monthly installments throughout the remainder of the term commencing January
1999, determined by dividing the total amount of payments deferred by the total
number of monthly payments remaining during the term as of January 1, 1999. As
of January 1, 1999, the total amount deferred was $52,778. The Board may
annually review Mr. Rosenman's salary and, in its sole discretion, based upon
such factors as the Board may choose to consider, may increase such salary. Mr.
Rosenman is also eligible to participate in any bonus plans applicable to
executive officers of the Company as may be established by the Board. In
addition, the Company reimburses Mr. Rosenman for certain automobile expenses
and provides him with a motorcycle manufactured by the Company for his personal
use, and if Mr. Rosenman serves the full five year term of his employment
agreement, title to this motorcycle will be transferred to him at the end of the
term. In the event that Mr. Rosenman becomes physically or mentally disabled or
incapacitated during any period of the term, the Company will pay him his base
compensation less the aggregate amount of all income disability benefits that he
may, or may be entitled to, receive for such period. Mr. Rosenman's employment
agreement further provides that on the date of any termination without cause of
Mr. Rosenman's employment under his employment agreement arising from a change
in control, the Company is obligated to pay to Mr. Rosenman an amount equal to
18 months' salary, as determined according to the amount paid to Mr. Rosenman at
the time of termination, payable on a monthly basis.
In connection with Mr. Rosenman's employment agreement, the Company and
Mr. Rosenman entered into a stock grant and stock option agreement in December
1997. Pursuant to the stock grant and stock option agreement, the Company agreed
to grant 30,000 shares of Common Stock (after giving effect to the reverse stock
split of the Company's Common Stock that was effected as of February 5, 1998) to
Mr. Rosenman, which shares would vest in equal allotments of 10,000 shares on
each of September 1, 1998, September 1, 1999 and September 1, 2000, provided
that Mr. Rosenman was still employed by the Company under his employment
agreement at each such vesting date. Under an amendment to the stock grant and
stock option agreement entered into in December 1998, the vesting dates for the
first two allotments of 10,000 shares (a total of 20,000 shares) were changed to
January 1, 1999, and the vesting date for the last allotment of 10,000 shares
was changed to January 1, 2000 in lieu, partially, of a cash bonus to Mr.
Rosenman. Once vested, none of the 30,000 shares are issuable until September 1,
2000 or upon termination of Mr. Rosenman's employment, whichever occurs first.
Under the original stock grant and stock option agreement, the Company
agreed to grant 460,000 options to Mr. Rosenman at an exercise price of $5.00
per share (as adjusted for the reverse stock split of the Common Stock of the
Company effected as of February 5, 1998), which shares would vest in specified
allotments over a period of five years. In October 1998, these options, together
with 13,334 previously granted options, were canceled and new options were
issued at an exercise price of $4.00 per share, which price included a premium
of approximately 10% above the fair market value of the Common Stock as of the
date of approval by the Compensation Committee. The Compensation Committee
approved the reduction in
10
<PAGE> 13
the exercise price from $5.00 to $4.00 to more closely reflect the market price
of the Common Stock and thereby maintain the value of the options as an
incentive. As a result of this stock option repricing, the Company canceled a
total of 473,334 stock options and granted the same number of new stock options
at the aforementioned exercise price of $4.00 per share.
In December 1998, all 473,334 options were canceled and new options were
issued at an exercise price of $3.00 per share, which price includes a premium
of approximately 20% above the fair market value of the Common Stock as of the
date of approval by the Compensation Committee. In lieu, partially, of a cash
bonus, the Compensation Committee approved the reduction in the exercise price
from $4.00 to $3.00 per share to provide greater economic incentive to Mr.
Rosenman to remain with the Company and to avoid the expense to the Company of a
cash or stock bonus. As a result of this stock option repricing, the Company
canceled a total of 473,334 stock options and granted the same number of new
stock options at the aforementioned exercise price of $3.00 per share. Under the
original stock grant and stock option agreement, the vesting schedule for the
460,000 options granted thereunder provided (after giving effect to the reverse
stock split of the Company's Common Stock that was effected as of February 5,
1998) for vesting of 80,000 options on September 1, 1998, 80,000 options on
September 1, 1999 (of which 40,000 were performance-based options), and 100,000
options (of which 50,000 were performance-based options) on each of September 1,
2000, September 1, 2001 and September 1, 2002. Pursuant to the amendment to
stock grant and stock option agreement, this schedule was amended in December
1998 to provide, in partial substitution for a cash bonus, for vesting of the
remaining then unvested 380,000 options as follows: 80,000 options (of which
40,000 options were performance-based options) on December 31, 1998 and 100,000
options (of which 50,000 options are performance-based options) on each of
December 31, 1999, December 31, 2000 and December 31, 2001. All of the 80,000
options scheduled to vest on December 31, 1998 (including the 40,000
performance-based options) vested on such date.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information regarding
compensation paid by the Company for services rendered in all capacities during
the fiscal years ended December 31, 1998 and 1997, respectively, to the
Company's chief executive officer during the fiscal year ended December 31,
1998. Where applicable, the figures set forth below have been adjusted to
reflect the Company's reverse stock split effected as of February 5, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION SECURITIES
--------------------- RESTRICTED UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS OPTIONS/SARS
- --------------------------- ---- ---------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Herm Rosenman, CEO/President(1) 1998 $180,000(2) 0(3) $ 76,875(5) 478,334(6)
1997 $ 45,000(2) 0 $158,646(4) 473,334(7)
</TABLE>
(1) Herm Rosenman was appointed CEO and President in September 1997. No
other executive officer earned salary and bonus in excess of $100,000
during the fiscal year ended December 31, 1998.
(2) Under Mr. Rosenman's employment agreement with the Company, as amended,
commencing September 1, 1997, the Company has an obligation to pay him a
salary in monthly installments of $17,361 for the first, second and
third years of the agreement and not less than $20,000 for the fourth
and fifth years of the agreement. In accordance with the terms of the
employment agreement and as agreed to by the parties, the Company
deferred payment of $7,361 each month for the months of September and
October 1997, $4,861 each month for the months of November and December
11
<PAGE> 14
1997 and $2,361 each month during the year of 1998. Further, pursuant to
the employment agreement, the Company is obligated to pay all amounts so
deferred in equal monthly installments throughout the remainder of the
term commencing January 1999, determined by dividing the total amount of
payments deferred by the total number of monthly payments remaining
during the term as of January 1, 1999. As of January 1, 1999, the total
amount deferred was $52,778.
(3) On December 28, 1998, in lieu of a cash bonus (i) the vesting schedule
of 30,000 shares of restricted stock previously granted to Mr. Rosenman
in 1997 was changed; and (ii) the exercise price of certain options to
purchase Common Stock previously granted to Mr. Rosenman was reduced and
the vesting schedule for such options was changed. See also notes (4),
(5) and (6).
(4) Includes 667 shares of Common Stock granted in consideration of Mr.
Rosenman's services as a consultant to the Company that vested on August
1, 1997, and 30,000 shares granted as of September 1, 1997, pursuant to
Mr. Rosenman's stock grant and stock option agreement, of which 10,000
shares were originally scheduled to vest on each of September 1, 1998,
September 1, 1999 and September 1, 2000. As discussed in notes (3) and
(5), on December 28, 1998 the vesting dates for the first two allotments
of 10,000 shares (a total of 20,000 shares) were changed to January 1,
1999 and the vesting date for the last allotment of 10,000 shares was
changed to January 1, 2000. Dividends will be paid on such shares (when
issued and outstanding) only to the same extent, if any, that dividends
are paid on all other outstanding shares of Common Stock.
(5) As described in note (4), the vesting dates of the 30,000 shares
originally awarded to Mr. Rosenman in 1997 were changed on December 28,
1998, with 20,000 shares vesting on January 1, 1999 and 10,000 shares
vesting on January 1, 2000. In the table, this change in vesting dates
has been treated as the grant of a new restricted stock award of 30,000
shares in 1998; however, the 1998 award in effect simply replaces, and
is not cumulative with respect to, the prior award of 30,000 shares in
1997. The shares that vest on January 1, 2000 will vest only if Mr.
Rosenman is still employed by the Company on September 1, 1999. All of
the 30,000 shares, once vested, will not become issuable until September
1, 2000 or upon termination of Mr. Rosenman's employment, whichever
occurs first. Dividends on the 30,000 shares (when issued and
outstanding) will be paid only to the same extent, if any, that
dividends are paid on all other outstanding shares of Common Stock.
As of December 31, 1998, Mr. Rosenman held a total of 667 shares of
restricted stock awarded to him as compensation, and the total value of
such shares, based on the Nasdaq closing sales price for the Company's
Common Stock on that date, was $2,793.
(6) Includes non-qualified options to purchase 473,334 shares of Common
Stock that are reflected in this table as securities underlying options
originally granted in the fiscal year ended December 31, 1997. These
options are included in the table for 1998 because they were all
repriced on October 22, 1998 at an exercise price of $4.00 and
subsequently repriced on December 28, 1998 at an exercise price of
$3.00. The vesting schedule for 380,000 of these options was also
changed on December 28, 1998 as reflected in the table below entitled
Option Grants in the Fiscal Year Ended December 31, 1998. Also includes
options to purchase 5,000 shares of Common Stock granted in 1998 in
consideration of Mr. Rosenman's services as a director of the Company.
(7) Includes non-qualified options to purchase 3,334 shares of Common Stock
granted on August 1, 1997 in consideration of Mr. Rosenman's services as
a consultant to the Company and non-qualified options to purchase
470,000 shares of Common Stock granted on September 1, 1997, of which
460,000 options were granted pursuant to Mr. Rosenman's stock grant and
stock option agreement, as amended, and 10,000 options were granted in
consideration of Mr. Rosenman's services as a director of the Company.
STOCK OPTIONS
The following table sets forth certain information with respect to stock options
granted to the Company's Chief Executive Officer during the fiscal year ended
December 31, 1998.
12
<PAGE> 15
OPTION GRANTS IN THE FISCAL YEAR
ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE
NAME GRANTED 1998(10) ($/SHARE) EXPIRATION DATE
---- --------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Herm Rosenman 13,334(1)(2) 2.11 $3.00 9/1/2002
Herm Rosenman 80,000(1)(3) 12.69 $3.00 9/1/2003
Herm Rosenman 80,000(1)(4) 12.69 $3.00 12/31/2003
Herm Rosenman 50,000(1)(5) 7.93 $3.00 12/31/2004
Herm Rosenman 50,000(1)(5)(6) 7.93 $3.00 12/31/2004
Herm Rosenman 50,000(1)(7) 7.93 $3.00 12/31/2005
Herm Rosenman 50,000(1)(6)(7) 7.93 $3.00 12/31/2005
Herm Rosenman 50,000(1)(8) 7.93 $3.00 12/31/2006
Herm Rosenman 50,000(1)(6)(8) 7.93 $3.00 12/31/2006
Herm Rosenman 5,000(9) 0.79 $3.75 7/31/2003
</TABLE>
- ----------
(1) Includes non-qualified options to purchase the number of shares of
Common Stock stated in the table that were originally granted in August
and September 1997 but were repriced on October 22, 1998 at an exercise
price of $4.00 and, in lieu (partially) of a cash bonus, were
subsequently repriced on December 28, 1998 at an exercise price of
$3.00. The vesting schedule for 380,000 of these options was also
changed on December 28, 1998, as reflected in subsequent footnotes to
the table.
(2) These options are exercisable commencing September 1, 1997. Of these
options, 3,334 options were granted in consideration of Mr. Rosenman's
services as a consultant to the Company and 10,000 options were granted
in consideration of Mr. Rosenman's services as a director of the
Company.
(3) These options are exercisable commencing September 1, 1998.
(4) These options are exercisable commencing December 31, 1998.
13
<PAGE> 16
(5) These options are exercisable commencing December 31, 1999.
(6) None of these options vest until 75% of the budget is achieved. These
options vest ratably with the percentage of budget achieved in excess of
75%. As 75% to 100% of the budget is achieved, 75% to 100% of these
options vest. The budget described in this footnote is the budget that
is submitted annually by Mr. Rosenman and the Company's management team,
and approved by the Board of Directors, subject to revision as approved
by the Board of Directors or an authorized committee thereof.
(7) These options are exercisable commencing December 31, 2000.
(8) These options are exercisable commencing December 31, 2001.
(9) These options are exercisable commencing July 31, 1998. These options
were granted in consideration of Mr. Rosenman's services as a director
of the Company.
(10) Includes, for purposes of this table, the total number of options
granted to Herm Rosenman as a consultant and as a director.
The following table sets forth certain information as to the fiscal year-end
value of unexercised options of the Company's Chief Executive Officer. He did
not exercise any options during the fiscal year ended December 31, 1998.
AGGREGATE OPTION EXERCISES IN
FISCAL YEAR ENDED DECEMBER 31, 1998 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN THE MONEY
SHARES OPTIONS AT 12/31/98 OPTIONS AT 12/31/98(1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Herm Rosenman 0 -- 178,334 300,000 $208,022 $356,250
</TABLE>
(1) The value of the Company's Common Stock for the purposes of the
calculation was based upon the closing sales price for the Company's
Common Stock on December 31, 1998, as reported by The Nasdaq Stock
Market, minus the exercise price.
14
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996 and 1997, the Company incurred a total of $115,603 fees to
Meyer, Duffy & Associates, Inc. ("Meyer, Duffy"), for consulting services with
respect to capital raising. Mr. Don Duffy, a director of the Company, is a
principal of Meyer, Duffy. The fees were paid by the Company in May and June of
1998.
In private offerings in January and June of 1997, the Company sold
$2,210,000 principal amount of 12% promissory notes and $2,710,000 principal
amount of 9.75% promissory notes, respectively. MD Strategic L.P. ("MD
Strategic"), PV II L.P. ("PV II") and MD Ventures III ("MDV III"), partnerships
in which Mr. Duffy is a general partner, purchased an aggregate of $1,480,000 of
such notes. In August 1998, the notes held by the partnerships plus accrued
interest thereon were converted into a total of 1,559,742 shares of Series B
Preferred Stock. These shares were subsequently converted into a total of
311,950 shares of Common Stock (on a post-reverse split basis).
In connection with the January 1997 issuance of the 12% promissory
notes, the Company issued 1,105,000 warrants ("C Warrants") to purchase an
equivalent number of shares of Common Stock (221,000 shares of Common Stock on a
post-reverse split basis). Of this number, a total of 375,000 C Warrants were
issued to MD Strategic and PV II. In September 1997, MD Strategic and PV II
received 275,000 shares of Common Stock (55,000 shares on a post-reverse split
basis) upon the exercise of an equivalent number of warrants. PV II continues to
hold Series C warrants entitling it to purchase 20,000 shares of Common Stock on
a post reverse split basis.
In connection with the June 1997 issuance of the 9.75% promissory notes,
the Company issued 1,367,501 warrants ("E Warrants") to purchase an equivalent
number of shares of Common Stock of the Company (273,500 shares of Common Stock
on a post-reverse-split basis). Of this number, a total of 365,000 E Warrants
were issued to MD Strategic and MDV III. These warrants entitle MD Strategic and
MDV III to purchase a total of 73,000 shares of Common Stock on a post reverse
split basis.
In February 1998, pending the completion of the Company's Series C
Preferred Stock offering, the Company obtained unsecured bridge loans in the
amounts of $500,000 and $300,000, respectively, from MD Strategic and MDV IV,
L.P. ("MDV IV"), partnerships in which Mr. Duffy is a principal. Both loans bore
interest at 12%. MD Strategic and MDV IV also received a total of 150,000
warrants at an exercise price $5.00 per share, pending completion of the Series
C Preferred Stock offering. In April 1998, MD Strategic was issued 48 units of
Series C Preferred Stock and 60,000 additional warrants for total consideration
of $1.2 million consisting of $700,000 in cash and conversion of its $500,000
promissory note. In August 1998, these 48 units were converted into 396,040
shares of Common Stock. In April 1998, MDV IV was issued 12 units of Series C
Preferred Stock and 15,000 additional warrants in exchange for conversion of its
$300,000 promissory note. In August 1998, these 12 units were converted into
99,010 shares of Common Stock.
On April 1, 1998, Meyer, Duffy entered into a Consulting Agreement with
the Company pursuant to the terms of which Meyer, Duffy agreed to provide the
Company consulting services (said services to include advice regarding capital
raising and industry research on the motorcycle industry) in exchange for a fee
of $117,600 (payable in monthly installments of $4,900 over a period of two
years) and warrants to purchase 25,000 shares of Common Stock of the Company
with an exercise price of $4.00 per share.
In order to finance its current working capital needs, the Company is
relying on a $1.5 million inventory flooring line of credit which it obtained in
May 1998 from Cana Capital Corporation ("Cana Capital"), a company owned by
Bruce Scott, a director of the Company, and a $300,000 loan which it obtained in
October 1998 from MD Strategic. Advances under the Cana Capital line of credit
bear interest at a rate of 2% or 5% over the prime rate, depending on the type
of advance. The MD Strategic loan is evidenced by an unsecured note bearing
interest at eighteen percent (18%) per annum and is due, together with accrued
interest, on the earlier of May 31, 1999 or upon receipt by the Company of funds
from a third-party lender. The Company is in the process of negotiating a
revolving line of credit with an institutional lender and anticipates that it
will terminate the line of credit with Cana Capital Corporation and repay the MD
Strategic loan upon obtaining such financing.
15
<PAGE> 18
In February 1998, the Company entered into a license agreement with Big
Bike Boutique, Inc. ("BBB"), a company owned by Bruce Scott, a director of the
Company and owner of four independently operated Bikers Dream dealerships,
pursuant to which the Company licensed its name to BBB for the purpose of
selling apparel and accessories. The agreement was terminated in October 1998
pursuant to a termination of license agreement and mutual release. In connection
with the termination agreement, the Company issued to Mr. Scott in February 1999
16,000 shares of Common Stock.
In September 1998, the Company entered into a sublease agreement and a
repayment agreement with Big Bike of Daytona, Inc. ("Big Bike"), a Florida
corporation owned by Mr. Scott. Pursuant to the terms of the sublease agreement,
the Company agreed to sublease to Big Bike, for an original term of three years
(which term is in the process of being extended to six years), premises to be
used by Big Bike for the operation of an independent motorcycle retail business.
Under the repayment agreement, the Company has agreed to reimburse Big Bike for
a portion of the cost of certain tenant improvements advanced by Big Bike; such
reimbursement is to be made by an offset by Big Bike against the rent otherwise
due under the sublease. All profits made by Big Bike on sales of motorcycles,
parts and other inventory consigned by the Company shall be applied to rent due
under the sublease until the amount paid under the sublease in any given year
equals the rent the Company is obligated to pay on the master lease for the
premises; thereafter, Big Bike is obligated to pay the Company half of net
profits on sales of consigned inventory from the Company. Total rent due under
the sublease is capped at the lesser of actual net profits from the sale of
consigned inventory from the Company or the amount owed by the Company under the
master lease.
The Company has entered into an employment agreement and a stock grant
and stock option agreement with Herm Rosenman, president and chief executive
officer of the Company. See "Employment Agreements."
The Company entered into a three year employment agreement with Diana
Rosenman in May, 1998, pursuant to which Ms. Rosenman is employed as the
director of marketing and public relations at initial annual salary of $110,000,
subject to annual review by the Board's compensation committee. In addition, the
Company agreed to grant Ms. Rosenman an option to purchase 16,000 shares of the
Company's Common Stock at $4.00 per share, vesting over a period of three years.
Upon termination other than for cause, Ms. Rosenman is entitled to payment equal
to six months salary, based on her then current rate of compensation. Ms.
Rosenman is the wife of Herm Rosenman, the Company's president and chief
executive officer.
In November 1998, the Company entered into a three year employment
agreement with Harold Collins, pursuant to which Mr. Collins is employed as the
Company's general counsel at an initial annual salary of $150,000. Mr. Collins'
salary will be adjusted annually based on a review of his performance and the
Company's financial condition at the time of such adjustment. The employment
agreement provides that Mr. Collins shall be eligible to participate in such
bonus plans, stock grant and stock option plans applicable to executive officers
of the Company as may be established by the Board of Directors from time to
time, pursuant to the terms of such plans. The agreement provides for a phase-in
period during which Mr. Collins will devote half of his working time to the
affairs of the Company while he winds down his full-time law practice. During
the phase-in period, Mr. Collins' salary will be adjusted proportionately to
reflect the amount of time devoted by Mr. Collins to the affairs of the Company.
After Mr. Collins winds down his law practice, he will devote his full-time
efforts to the affairs of the Company and will be entitled to receive the full
amount of compensation he is entitled to receive under his employment agreement.
Notwithstanding Mr. Collins' obligation to devote his full-time efforts to the
affairs of the Company after the phase-in period, the employment agreement
provides that Mr. Collins may consult with Mr. Rosenman and Ms. Rosenman on
personal legal matters at their own cost and expense. It is not anticipated that
such consultation would be so material as to interfere with Mr. Collins'
obligation to represent the Company on a full-time basis. Upon termination upon
a change of control, Mr. Collins is entitled to payment equal to six months
salary, based on his then current rate of compensation. If he is terminated for
any other reason he is entitled to receive six months of severance pay if he has
been employed for one year or less, and one year of severance pay if he has been
employed for more than one year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1
16
<PAGE> 19
PROPOSAL 2
APPROVAL OF ISSUANCE AND SALE OF
SERIES D PREFERRED STOCK,
WARRANTS TO PURCHASE COMMON STOCK,
COMMON STOCK ISSUABLE UPON CONVERSION OF PREFERRED STOCK,
COMMON STOCK ISSUABLE UPON EXERCISE OF WARRANTS, AND
PREFERRED STOCK ISSUABLE AS DIVIDENDS UPON PREFERRED STOCK
On February 5, 1999, the Company completed the sale by private
placement of 1,500 shares of Series D Preferred Stock for a purchase price of
$1,000 per share and issued warrants to purchase a total of 35,000 shares of
Common Stock (subject to adjustment for stock dividends, combinations or splits
with respect to the underlying Common Stock). The Company issued an additional
45 shares of Series D Preferred Stock and 25,000 warrants as commissions for
this placement, along with the payment of $45,000 in cash. The 1,545 shares of
Series D Preferred Stock and 60,000 warrants so issued are referred to
collectively as the "Initial Shares" and the "Initial Warrants", respectively.
The Company used the proceeds from the offering of the Initial Shares and
Initial Warrants to fund general working capital requirements.
Each share of Series D Preferred Stock is convertible, in whole or in
part, into a number of shares of Common Stock equal to $1,000 per share (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) (the "Stated Value"), plus accrued and unpaid dividends, divided by the
Conversion Price, as defined below. The Initial Warrants are currently
exercisable at a price of $4.125 per share and expire on February 5, 2004.
On February 5, 1999, the Company also obtained commitments from the
purchasers of the Series D Preferred Stock to purchase up to an additional 1,500
shares of Series D Preferred Stock at the price of $1,000 per share in two
separate tranches of 500 shares (said 500 shares, together with 15 shares
issuable as commissions, the "First Put Shares") and 1,000 shares (said 1000
shares, together with 30 shares issuable as commissions, the "Second Put
Shares") respectively. Upon the purchase of the First Put Shares, the purchasers
will also receive warrants to purchase a total of 15,000 shares of Common Stock
(subject to adjustment for stock dividends, combinations or splits with respect
to the underlying Common Stock) at a price equal to 110% of the closing bid
price of the Common Stock on the day the Company gives notice to the purchaser
of its intention to exercise its right (the "First Put") to require the
purchasers to purchase the First Put Shares (said 15,000 warrants together with
8,333 warrants issuable as commissions, the "First Put Warrants"). Upon the
purchase of the Second Put Shares, the purchasers will also receive warrants to
purchase a total of 25,000 shares of Common Stock (subject to adjustment for
stock dividends, combinations or splits with respect to the underlying Common
Stock) at a price equal to 115% of the closing bid price of the Common Stock on
the day the Company gives notice to the purchaser of its intention to exercise
its right (the "Second Put") to require the purchasers to purchase the Second
Put Shares (said 25,000 warrants, together with 16,667 warrants issuable as
commissions, the "Second Put Warrants"). The First Put Warrants and Second Put
Warrants are exercisable on the date of receipt of the First Put exercise notice
and Second Put exercise notice, respectively, and expire five years thereafter.
Other than with respect to exercise price and expiration date, the terms of the
First Put Warrants and the Second Put Warrants are identical to the terms of the
Initial Warrants. Upon issuance of the First Put Shares the Company shall pay,
in addition to the 15 shares of Series D Preferred Stock and 8,333 First Put
Warrants referenced above, cash commissions in the amount of $15,000. Upon
issuance of the Second Put Shares the Company shall pay, in addition to the 30
shares of Series D Preferred Stock and 16,667 Second Put Warrants referenced
above, cash commissions in the amount of $30,000.
The Company intends to use the proceeds from the sale of the First Put
Shares and Second Put Shares to fund general working capital requirements.
<PAGE> 20
The Company's right to exercise the First Put is contingent upon
satisfaction of the following conditions:
- the receipt of shareholder approval (as more fully discussed
below under "Reason for Shareholder Approval");
- that the Company continue to be a fully reporting public
company;
- that the closing bid price of the Common Stock for the five
trading days prior to delivery of the exercise notice is not
less than $1.50;
- no material adverse change in the Company's business;
- no Event of Default with respect to the Series D Preferred
Stock;
- the Company's ongoing compliance with Nasdaq listing
requirements; and
- the execution and delivery by the Company and the subscribers
of appropriate documents evidencing the transaction
substantially in the form previously agreed upon.
The Company's right to exercise the Second Put is contingent upon
satisfaction of all the foregoing conditions, as well as the additional
condition that there be an effective registration statement registering the
public resale by the purchasers of the Common Stock underlying both the
securities issued by the Company on February 5, 1999 and the securities issuable
by the Company in connection with the First Put.
The Certificate of Determination for the Series D Preferred Stock and
form of Initial Warrants are annexed hereto as Exhibit A and Exhibit B,
respectively. The following is a summary of their terms and conditions.
Reference is made to the full texts thereof for a complete description of the
terms and conditions of the Series D Preferred Stock and the Initial Warrants.
Capitalized terms used herein and not defined hereby have the meanings ascribed
to them in the Certificate of Determination and/or the Initial Warrants.
REASON FOR SHAREHOLDER APPROVAL
Pursuant to the terms of the Subscription Agreement governing the sale
and issuance of the Initial Shares, the First Put Shares and the Second Put
Shares (collectively, the "Preferred Shares")and the Initial Warrants, the First
Put Warrants and the Second Put Warrants (collectively, the "Warrants"), the
Company covenanted to obtain, on or before September 30, 1999, shareholder
approval of the issuance of shares of Common Stock in excess of 19.9% of the
outstanding Common Stock upon conversion of the Preferred Shares and exercise of
the Warrants (the "Approval"). Until the Company obtains the Approval, the
issuance of shares of Common Stock upon conversion of the Preferred Shares and
exercise of the Warrants, collectively, in excess of 19.9% of the outstanding
Common Stock may violate rules promulgated by the Nasdaq ("Rule
4310(c)(25)(H)"). Until such approval is obtained, the maximum number of shares
of Common Stock which can be issued on conversion of the Series D Preferred
Stock and exercise of the Warrants is 1,027,996, which represents 19.9% of the
number of shares of the Common Stock outstanding as of February 5, 1999, the
date of the issuance of the Initial Shares and the Initial Warrants.
Rule 4310(c)(25)(H) requires shareholder approval for the issuance of
shares of Common Stock in a transaction involving (i) the sale or issuance by
the issuer of common stock (or securities convertible into or exercisable for
common stock) at a price less than the greater of book or market value, which
together with sales by officers, directors or substantial shareholders of the
corporation, equals 20% or more of the common stock or 20% or more of the voting
power outstanding before issuance; or (ii) the sale or issuance by the issuer of
common stock (or securities convertible into or exercisable for common stock)
equal to 20% or more of the common stock or 20% or more of the voting power
outstanding before the issuance for less than the greater of book or market
value of the stock.
In the event the Approval is not obtained by September 30, 1999 as
described above, the Company will be required, pursuant to the terms of the
Series D Preferred Stock, with respect to (and only to the extent of) that
number of shares of Common Stock issuable upon conversion of the Series D
Preferred Stock and dividends thereon which exceed the 19.9% limitation and
therefore may not be converted due to the Company's failure to obtain such
Approval, either to pay a dividend rate of 10% per annum (instead of the
standard dividend rate of 5% per annum otherwise payable in accordance with the
terms of the Certificate of Determination governing the terms of the Series D
Preferred Stock) or to redeem such non-convertible shares of Series D Preferred
Stock by the immediate payment of that amount equal to the number of
<PAGE> 21
shares of Common Stock that would be issuable upon conversion of an amount of
Stated Value and accrued dividends designated by the shareholder at the
Conversion Price (as defined below) in effect as of the trading day prior to the
date notice is given to the Company multiplied by the average closing ask price
of the Company's Common Stock on such date.
In addition, if the Approval is not obtained by September 30, 1999, the
Company will not be able to exercise the First Put or the Second Put, thereby
losing the opportunity to obtain an additional $1,500,000 for working capital
purposes upon the sale of the First Put Shares and the Second Put Shares.
DIVIDENDS
The holders of the Series D Preferred Stock are entitled to receive
dividends on a quarterly basis, at the rate of 5% simple interest per annum on
the Stated Value per share, when, as and if declared by the Company. The
dividends are payable, at the option of the Company, either in cash or
additional shares of Series D Preferred Stock at the rate of one share of Series
D Preferred Stock for each $1,000 of such dividend not paid in cash. Dividends
may be paid at the Company's option with Series D Preferred Stock only if the
Common Stock deliverable upon conversion of such Series D Preferred Stock has
been included for public resale in an effective registration statement filed
with the Securities and Exchange Commission; otherwise the dividend will be paid
in cash. The dividends on the Series D Preferred Stock are cumulative and shall
be paid or declared and set aside for payment prior to any payment or
declaration of dividends on, or purchase or redemption of, any Common Stock or
any other class of preferred stock of the Company.
CONVERSION
Subject to the restrictions discussed below, any holder of Series D
Preferred Stock has the right at any time to convert, in whole or in part,
shares of Series D Preferred Stock into a number of shares of Common Stock equal
to $1,000 per share plus accrued and unpaid dividends on such share divided by
the Conversion Price. The Conversion Price means the lesser of (i) 110% of the
average Closing Bid Price of the Company's Common Stock for the trading day
immediately preceding the date of the issuance of the shares of Series D
Preferred Stock; or (ii) 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 shall mean
the closing bid price of the Company's Common Stock as reported by Nasdaq or the
principal exchange or market where traded. 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 the Company's Common Stock. Decreases in the trading price of
the Company's Common Stock are likely to result in increases in the number of
shares of Common Stock issuable upon conversion. However, prior to the receipt
of the Approval, the maximum number of shares issuable upon conversion of the
Series D Preferred Stock, together with the shares issuable upon exercise of the
Warrants, will not exceed 1,027,996. This number represents 19.9% of the
Company's outstanding Common Stock as of the date the Initial Shares and the
Initial Warrants were issued.
In the event the Company declares any dividend or distribution on its
Common Stock, or splits, combines or reclassifies its Common Stock, then the
Conversion Price will be proportionately adjusted so that each holder of Series
D Preferred Stock will be entitled to receive the same number of shares of
Common Stock upon conversion of the Series D Preferred Stock as though such
conversion occurred prior to the event requiring the adjustment. Similarly, if
the Company merges with another entity or sells substantially all of its assets,
the holders of the Series D Preferred Stock shall be entitled to convert each
share of Series D Preferred Stock into the consideration (whether it consists of
stock, other securities and/or property) which that holder would have been
entitled to receive had such holder converted its holdings of Series D Preferred
Stock to Common Stock immediately prior to such merger or asset sale. The
Conversion Price will also be adjusted pursuant to formula (thereby entitling
the holders of the Series D Preferred Stock to receive additional shares of
Common Stock upon conversion) in the event the Company makes certain additional
issuances of Common Stock.
The Series D Preferred Stock shall automatically convert two years from
the date of issuance into shares of Common Stock at the Conversion Price;
however, such a conversion may occur without the consent of a
<PAGE> 22
holder of Series D Preferred Stock only if the shares of Common Stock issuable
upon such conversion may be resold publicly without restriction under applicable
securities laws.
REDEMPTION
The Series D Preferred Stock is redeemable at the option of the Company
by paying to each holder of Series D Preferred Stock that amount which is equal
to the closing bid price of the Company's Common Stock on the date notice of
redemption is given by the Company to such holder, multiplied by the number of
shares of Common Stock that would be issued upon conversion of the Series D
Preferred Stock being redeemed and the dividends accrued thereon, at the
Conversion Price that would be in effect on the Redemption Date, but in no event
may the amount paid upon redemption be less than 110% of the Stated Value of the
Series D Preferred Stock being redeemed plus accrued dividends thereon.
The Company is required to redeem Series D Preferred Stock, or in the
alternative, pay a dividend rate of 10% per annum (instead of the standard
dividend rate of 5% per annum otherwise payable in accordance with the terms of
the Certificate of Determination governing the terms of the Series D Preferred
Stock) after the occurrence of certain triggering events, including, among other
things:
- Failure of the Company to pay dividends when required;
- Material breaches of the Company'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 the Company's Common
Stock;
- Failure to deliver Common Stock certificates in a timely
fashion after the conversion of Series D Preferred Stock; and
- Failure to obtain the Approval.
With respect to the last item listed above, see also the discussion in "Reason
for Shareholder Approval."
LIQUIDATION RIGHTS
Upon a voluntary or involuntary dissolution, liquidation or winding-up
of the Company, the holders of Series D Preferred Stock shall be entitled to
receive, before any payment or distribution shall be made on any Common Stock or
any other class of preferred stock of the Company, out of the assets of the
Company available for distribution to such holders, the Stated Value per share
of Series D Preferred Stock and all accrued and unpaid dividends to and
including the date of payment to any such holder. In the event the assets of the
Company available for distribution to the holders of Series D Preferred Stock
are insufficient to permit payment in full of all amounts owing to the Series D
holders, then all of such assets shall be distributed proportionately among the
holders of the Series D Preferred Stock to the exclusion of the holders of
Common Stock or any other class of preferred stock of the Company.
The Board of Directors has unanimously approved, and recommends that
the shareholders authorize and ratify: (i) the issuance of the Preferred Shares
and the Warrants, (ii) the issuance of that number of shares of the Company's
Common Stock issuable upon conversion of the Series D Preferred Stock approved
for issuance hereby, based on the conversion formula set forth in the
Certificate of Determination governing the Series D Preferred Stock, (iii) the
issuance of the maximum number of shares of Common Stock issuable upon exercise
of the Warrants in accordance with the terms thereof, and (iv) the issuance of
Series D Preferred Stock as a dividend upon Series D Preferred Stock approved
for issuance hereby in accordance with the terms of the Certificate of
Determination governing the Series D Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2
<PAGE> 23
PROPOSAL 3
APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors is recommending the ratification of its selection
of Singer, Lewak, Greenbaum & Goldstein LLP as the Company's independent
certified public accountants to audit the financial statements of the Company
for the 1999 fiscal year. Although ratification of the choice of auditors is not
legally required, the Board believes such ratification to be in the best
interests of the Company. In the event such approval of shareholders is not
received, the Board will select another firm to audit the Company's financial
statements. Singer, Lewak, Greenbaum & Goldstein LLP has advised the Company
that neither it nor any of its partners or associates has any direct or indirect
financial interest in or any connection with the Company other than as
accountants and auditors. A representative of Singer, Lewak, Greenbaum &
Goldstein LLP is expected to be present and available to answer appropriate
questions at the Annual Meeting and will be given the opportunity to make a
statement if desired.
The following resolution will be offered at the meeting:
RESOLVED, that Singer, Lewak, Greenbaum & Goldstein LLP be and hereby is
appointed as the independent certified public accountants of the Company
for its 1999 fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matter shall properly come
before the Annual Meeting, the proxy holders named in the proxy accompanying
this statement will have discretionary authority to vote all proxies in
accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the Company's 2000
Annual Meeting of Shareholders must deliver the proposal to the Company no later
than ________, 2000 and must otherwise comply with Rule 14a-8 under the
Securities Exchange Act of 1934 in order to have the proposal included in the
proxy materials for that meeting. Any shareholder proposal submitted other than
for inclusion in the Company's proxy materials for that meeting must be
delivered to the Company no later than ________, 2000 or such proposal will be
considered untimely. If a shareholder proposal is received after ________, 2000,
the Company may vote in its discretion as to that proposal all of the shares for
which it has received proxies for the 2000 Annual Meeting of Shareholders.
ADDITIONAL INFORMATION
This Proxy Statement is accompanied by the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1998. The Securities and
Exchange Commission (the "Commission") maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Exhibits to the Company's Annual Report on Form 10-KSB will
be made available to shareholders at no charge upon their written request to the
Company, 3810 Wacker Drive, California 91752, Attention: Mr. Louis Rabman.
Mira Loma, California By Order of the Board of Directors
________, 1999
20
<PAGE> 24
[Form of Proxy]
BIKERS DREAM, INC.
3810 WACKER DRIVE
MIRA LOMA, CALIFORNIA 91752
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, as owner of ______ shares of Common Stock of Bikers
Dream, Inc., a California corporation (the "Company"), hereby acknowledges
receipt of the Proxy Statement and the notice of the shareholders meeting to be
held on _______________, 1999, at 9:00 a.m. local time, at the ________________,
and hereby further revokes all previous proxies and appoints Herm Rosenman or
Donald Duffy, or either of them, as proxy of the undersigned at said meeting and
any adjournments thereof with the same effect as if the undersigned were present
and voting the shares.
(1) For the election of the following persons as directors of the Company to
serve until the next annual meeting of shareholders or until their
respective successors shall have been elected and qualified:
Donald Duffy, Herm Rosenman,
Humbert Powell, John Russell, Bruce Scott
[ ] AUTHORITY GRANTED to [ ] AUTHORITY WITHHELD to
vote for nominees listed above, vote for all nominees listed
except as indicated to the above.
contrary below.
(INSTRUCTION: TO VOTE AGAINST ANY NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
---------------------------------------------------------------------
(2) The authorization and ratification of: (i) the issuance and sale in
private placements of up to 3,090 shares (the "Preferred Shares") of the
Company's Series D Preferred Stock and Common Stock Purchase Warrants to
purchase up to 125,000 shares of Common Stock ("Warrants"), (ii) the
issuance of that number of shares of Common Stock, issuable upon
conversion of the Series D Preferred Stock being approved for issuance,
based on the conversion formula set forth in the Certificate of
Determination governing the Series D Preferred Stock, (iii) the issuance
of the maximum number of shares of Common Stock issuable upon exercise of
the Warrants in accordance with their terms; and (iv) the issuance of
Series D Preferred Stock, in accordance with the terms of the Certificate
of Determination governing the Series D Preferred Stock, as a dividend
upon all shares of Series D Preferred Stock being approved for issuance.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) The approval and adoption of a resolution appointing Singer, Lewak,
Greenbaum & Goldstein LLP as the Company's independent certified public
accountants for fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion upon such other matters as may properly come before
the meeting and any adjournments thereof.
(continued and to be signed on reverse side)
<PAGE> 25
(continued from previous side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE INDICATED ABOVE.
IF NO INDICATION HAS BEEN MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR THE ABOVE NOMINEES AND IN FAVOR OF SUCH PROPOSALS, AND AS SAID PROXY
DEEMS ADVISABLE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated:____________________________, 1999
________________________________________
________________________________________
Sign exactly as your name appears on
your share certificate. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title. If more than one trustee, all
should sign. All joint owners should
sign. If a corporation, sign in full
corporation name by president or other
authorized officer. If a partnership,
sign in partnership name by authorized
person. Persons signing in a fiduciary
capacity should indicate their full
title in such capacity.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 26
[Form of Proxy]
BIKERS DREAM, INC.
3810 WACKER DRIVE
MIRA LOMA, CALIFORNIA 91752
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, as owner of ______ shares of Series A Preferred Stock
of Bikers Dream, Inc., a California corporation (the "Company"), hereby
acknowledges receipt of the Proxy Statement and the notice of the shareholders
meeting to be held on _______________, 1999, at 9:00 a.m. local time, at the
________________, and hereby further revokes all previous proxies and appoints
Herm Rosenman or Donald Duffy, or either of them, as proxy of the undersigned at
said meeting and any adjournments thereof with the same effect as if the
undersigned were present and voting the shares.
(1) For the election of the following persons as directors of the Company to
serve until the next annual meeting of shareholders or until their
respective successors shall have been elected and qualified:
Donald Duffy, Herm Rosenman,
Humbert Powell, John Russell, Bruce Scott
[ ] AUTHORITY GRANTED to [ ] AUTHORITY WITHHELD to
vote for nominees listed above, vote for all nominees listed
except as indicated to the above.
contrary below.
(INSTRUCTION: TO VOTE AGAINST ANY NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
---------------------------------------------------------------------
(2) The authorization and ratification of: (i) the issuance and sale in
private placements of up to 3,090 shares (the "Preferred Shares") of the
Company's Series D Preferred Stock and Common Stock Purchase Warrants to
purchase up to 125,000 shares of Common Stock ("Warrants"), (ii) the
issuance of that number of shares of Common Stock, issuable upon
conversion of the Series D Preferred Stock being approved for issuance,
based on the conversion formula set forth in the Certificate of
Determination governing the Series D Preferred Stock, (iii) the issuance
of the maximum number of shares of Common Stock issuable upon exercise of
the Warrants in accordance with their terms; and (iv) the issuance of
Series D Preferred Stock, in accordance with the terms of the Certificate
of Determination governing the Series D Preferred Stock, as a dividend
upon all shares of Series D Preferred Stock being approved for issuance.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) The approval and adoption of a resolution appointing Singer, Lewak,
Greenbaum & Goldstein LLP as the Company's independent certified public
accountants for fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion upon such other matters as may properly come before
the meeting and any adjournments thereof.
(continued and to be signed on reverse side)
<PAGE> 27
(continued from previous side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE INDICATED ABOVE.
IF NO INDICATION HAS BEEN MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR THE ABOVE NOMINEES AND IN FAVOR OF SUCH PROPOSALS, AND AS SAID PROXY
DEEMS ADVISABLE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated:____________________________, 1999
________________________________________
________________________________________
Sign exactly as your name appears on
your share certificate. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title. If more than one trustee, all
should sign. All joint owners should
sign. If a corporation, sign in full
corporation name by president or other
authorized officer. If a partnership,
sign in partnership name by authorized
person. Persons signing in a fiduciary
capacity should indicate their full
title in such capacity.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 28
[Form of Proxy]
BIKERS DREAM, INC.
3810 WACKER DRIVE
MIRA LOMA, CALIFORNIA 91752
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, as owner of ______ shares of Series B Preferred Stock
of Bikers Dream, Inc., a California corporation (the "Company"), each of which
is convertible into ______ shares of Common Stock of the Company as of
__________, 1999, hereby acknowledges receipt of the Proxy Statement and the
notice of the shareholders meeting to be held on _______________, 1999, at 9:00
a.m. local time, at the ________________, and hereby further revokes all
previous proxies and appoints Herm Rosenman or Donald Duffy, or either of them,
as proxy of the undersigned at said meeting and any adjournments thereof with
the same effect as if the undersigned were present and voting the shares.
(1) For the election of the following persons as directors of the Company to
serve until the next annual meeting of shareholders or until their
respective successors shall have been elected and qualified:
Donald Duffy, Herm Rosenman,
Humbert Powell, John Russell, Bruce Scott
[ ] AUTHORITY GRANTED to [ ] AUTHORITY WITHHELD to
vote for nominees listed above, vote for all nominees listed
except as indicated to the above.
contrary below.
(INSTRUCTION: TO VOTE AGAINST ANY NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
---------------------------------------------------------------------
(2) The authorization and ratification of: (i) the issuance and sale in
private placements of up to 3,090 shares (the "Preferred Shares") of the
Company's Series D Preferred Stock and Common Stock Purchase Warrants to
purchase up to 125,000 shares of Common Stock ("Warrants"), (ii) the
issuance of that number of shares of Common Stock, issuable upon
conversion of the Series D Preferred Stock being approved for issuance,
based on the conversion formula set forth in the Certificate of
Determination governing the Series D Preferred Stock, (iii) the issuance
of the maximum number of shares of Common Stock issuable upon exercise of
the Warrants in accordance with their terms; and (iv) the issuance of
Series D Preferred Stock, in accordance with the terms of the Certificate
of Determination governing the Series D Preferred Stock, as a dividend
upon all shares of Series D Preferred Stock being approved for issuance.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) The approval and adoption of a resolution appointing Singer, Lewak,
Greenbaum & Goldstein LLP as the Company's independent certified public
accountants for fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion upon such other matters as may properly come before
the meeting and any adjournments thereof.
(continued and to be signed on reverse side)
<PAGE> 29
(continued from previous side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE INDICATED ABOVE.
IF NO INDICATION HAS BEEN MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR THE ABOVE NOMINEES AND IN FAVOR OF SUCH PROPOSALS, AND AS SAID PROXY
DEEMS ADVISABLE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated:____________________________, 1999
________________________________________
________________________________________
Sign exactly as your name appears on
your share certificate. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title. If more than one trustee, all
should sign. All joint owners should
sign. If a corporation, sign in full
corporation name by president or other
authorized officer. If a partnership,
sign in partnership name by authorized
person. Persons signing in a fiduciary
capacity should indicate their full
title in such capacity.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 30
EXHIBIT A
CERTIFICATE OF DETERMINATION
OF
BIKERS DREAM, INC.
Herm Rosenman and Anne Todd hereby certify that:
A. They are the chief executive officer and secretary, respectively, of
Bikers Dream, Inc., a California corporation.
B. The number of shares of Series D Convertible Preferred Stock is
3,500, none of which has been issued.
C. The board of directors duly adopted the following resolutions:
WHEREAS, the articles of incorporation authorize the Preferred Stock of
the corporation to be issued in series and authorize the board of directors to
determine the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and to fix the number
of shares and designation of any such series, NOW THEREFORE IT IS:
RESOLVED, that the board of directors does hereby establish a new series
of Preferred Stock as follows:
1. Designation: Number of Shares. The designation of said series of
Preferred Stock shall be Series D 5% Cumulative Convertible Preferred Stock (the
"Series D Preferred Stock"). The number of shares of Series D Preferred Stock
shall be 3,500. Each share of Series D Preferred Stock shall have a stated value
equal to $1,000 (as adjusted for any stock dividends, combinations or splits
with respect to such shares) (the "Stated Value"), and a par value of $0.01 per
Series D Preferred Share.
2. Dividends.
(a) The Holders of outstanding shares of Series D Preferred
Stock shall be entitled to receive preferential dividends in cash out of any
funds of the Corporation legally available at the time for declaration of
dividends before any dividend or other distribution will be paid or declared and
set apart for payment on any shares of any Common Stock, Series A Preferred
Stock, Series B
1
<PAGE> 31
Convertible Preferred Stock, Series C Convertible Preferred Stock or other class
of stock presently authorized or to be authorized (the Common Stock, Series A
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock and such other stock being hereinafter collectively the "Junior
Stock") at the rate of 5% simple interest per annum on the Stated Value per
share payable quarterly commencing with the quarter ending March 31, 1999 when
as and if declared; provided however that dividend payments will be made in
additional fully paid and non assessable shares of Series D Preferred Stock at a
rate of one share of Series D Preferred Stock for each $1,000 of such dividend
not paid in cash, and the issuance of such additional shares shall constitute
full payment of such dividend. Dividends may be paid at the Company's option
with Series D Preferred Stock only if the Common Stock deliverable upon
conversion of such Series D Preferred Stock will have been included for public
resale in an effective registration statement filed with the Securities and
Exchange Commission on the dates such dividends are payable and paid to the
Holder, otherwise the dividend will be paid in cash.
(b) The dividends on the Series D Preferred Stock at the rates
provided above shall be cumulative whether or not earned so that if at any time
full cumulative dividends at the rate aforesaid on all shares of the Series D
Preferred Stock then outstanding from the date from and after which dividends
thereon are cumulative to the end of the quarterly dividend period next
preceding such time shall not have been paid or declared and set apart for
payment, or if the full dividend on all such outstanding Series D Preferred
Stock for the then current dividend period shall not have been paid or declared
and set apart for payment, the amount of the deficiency shall be paid or
declared and set apart for payment (but without interest thereon) before any sum
shall be set apart for or applied by the Corporation or a subsidiary of the
Corporation to the purchase, redemption or other acquisition of the Series D
Preferred Stock or any shares of any other class of stock ranking on a parity
with the Series D Preferred Stock ("Parity Stock") and before any dividend or
other distribution shall be paid or declared and set apart for payment on any
Junior Stock and before any sum shall be set aside for or applied to the
purchase, redemption or other acquisition of Junior Stock.
(c) Dividends on all shares of the Series D Preferred Stock
shall begin to accrue and be cumulative from and after the date of issuance
thereof. A dividend period shall be deemed to commence on the day following a
quarterly dividend payment date
2
<PAGE> 32
herein specified and to end on the next succeeding quarterly dividend payment
date herein specified.
3. Liquidation Rights.
(a) Upon the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, the Holders of the Series D
Preferred Stock shall be entitled to receive before any payment or distribution
shall be made on the Junior Stock (specifically including, without limitation,
Series A Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock), out of the assets of the Corporation available for
distribution to stockholders, the Stated Value per share of Series D Preferred
Stock and all accrued and unpaid dividends to and including the date of payment
thereof. Upon the payment in full of all amounts due to Holders of the Series D
Preferred Stock the Holders of the Common Stock of the Corporation and any other
class of Junior Stock shall receive all remaining assets of the Corporation
legally available for distribution. If the assets of the Corporation available
for distribution to the Holders of the Series D Preferred Stock shall be
insufficient to permit payment in full of the amounts payable as aforesaid to
the Holders of Series D Preferred Stock upon such liquidation, dissolution or
winding-up, whether voluntary or involuntary, then all such assets of the
Corporation shall be distributed to the exclusion of the Holders of shares of
Junior Stock ratably among the Holders of the Series D Preferred Stock.
(b) Neither the purchase nor the redemption by the Corporation
of shares of any class of stock nor the merger or consolidation of the
Corporation with or into any other corporation or corporations nor the sale or
transfer by the Corporation of all or any part of its assets shall be deemed to
be a liquidation, dissolution or winding-up of the Corporation for the purposes
of this paragraph 3.
4. Conversion into Common Stock. Shares of Series D Preferred Stock
shall have the following conversion rights and obligations:
(a) Subject to the further provisions of this paragraph 4 each
Holder of shares of Series D Preferred Stock shall have the right at any time
and from time to time from the date on which
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shares of Series D Preferred Stock were issued, to convert such shares into
fully paid and non-assessable shares of Common Stock of the Corporation (as
defined in paragraph 4(i) below) determined in accordance with the Conversion
Price provided in paragraph 4(b) below (the "Conversion Price"); provided, that
the aggregate Stated Value to be converted shall be at least $10,000 (unless if
at the time of such conversion the aggregate Stated Value of all shares of
Series D Preferred Stock registered to the Holder is less than $10,000, then the
whole amount may be converted). All issued or accrued but unpaid dividends shall
be converted simultaneously with the conversion of principal amount of Stated
Value of Series D Preferred Stock being converted.
(b) The number of shares of Common Stock issuable upon
conversion of each share of Series D Preferred Stock shall equal (i) the sum of
(A) the Stated Value per share and (B) accrued and unpaid dividends on such
share, divided by (ii) the Conversion Price. The Conversion Price shall be equal
to the lesser of: (i) 110% of the average of the Closing Bid Price of the
Corporation's Common Stock for the trading day immediately preceding the date of
issuance of the shares of Series D Preferred Stock; or (ii) 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 shall mean the closing bid price of the
Corporation's Common Stock as reported by NASDAQ or the principal exchange or
market where traded.
(c) The Holder of any certificate for shares of Series D
Preferred Stock desiring to convert any of such shares may give notice of its
decision to convert the shares into common stock by delivering or telecopying an
executed and completed notice of conversion to the Corporation or the
Corporation's Transfer Agent and delivering within three business days
thereafter, the original notice of conversion and the certificate for the
Preferred Stock properly endorsed for or accompanied by duly executed
instruments of transfer (and such other transfer papers as said Transfer Agent
may reasonably require) to the Corporation or the Corporation's Transfer Agent.
Each date on which a notice of conversion is delivered or telecopied to and
received by the Corporation or the Corporation's Transfer Agent in accordance
with the provisions hereof shall be deemed a Conversion Date. A form of Notice
of Conversion that may be employed by a Holder is annexed hereto as
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Exhibit A. The Corporation will transmit the certificates representing the
shares of common stock issuable upon conversion of any Series D Preferred Stock
(together with the Series D Preferred Stock representing the shares not
converted) to the Holder via express courier, by electronic transfer or
otherwise, within seven business days after receipt by the Corporation of the
original notice of conversion and the Series D Preferred Stock representing the
shares to be converted ("Delivery Date"). The Holder of the shares so
surrendered for conversion shall be entitled to receive (except as otherwise
provided herein) on or before the Delivery Date a certificate or certificates
which shall be expressed to be fully paid and non-assessable for the number of
shares of Common Stock to which such Holder shall be entitled upon such
conversion registered in the name of such Holder. The Corporation is obligated
to deliver to the Holder simultaneously with the aforedescribed Common Stock,
additional Common Stock representing the conversion at the Conversion Price of
dividends accrued on the Series D Preferred Stock being converted. In the case
of any Series D Preferred Stock which is converted in part only the Holder of
shares of Series D Preferred Stock shall upon delivery of the certificate or
certificates representing Common Stock also receive a new share certificate
representing the unconverted portion of the shares of Series D Preferred Stock.
Nothing herein shall be construed to give any Holder of shares of Series D
Preferred Stock surrendering the same for conversion the right to receive any
additional shares of Common Stock or other property which results from an
adjustment in conversion rights under the provisions of paragraph (d) or (e) of
this paragraph 4 until Holders of Common Stock are entitled to receive the
shares or other property giving rise to the adjustment.
In the case of the exercise of the conversion rights set forth
in paragraph 4(a) the conversion privilege shall be deemed to have been
exercised and the shares of Common Stock issuable upon such conversion shall be
deemed to have been issued upon the date of receipt by the Corporation or
Transfer Agent of the Notice of Conversion. The person or entity entitled to
receive Common Stock issuable upon such conversion shall, on the date such
conversion privilege is deemed to have been exercised and thereafter, be treated
for all purposes as the record Holder of such Common Stock and shall on the same
date cease to be treated for any purpose as the record Holder of such shares of
Series D
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Preferred Stock so converted.
Notwithstanding the foregoing, if the stock transfer books are
closed on the date a Notice of Conversion is received by the Transfer Agent or
Corporation, the conversion privilege shall be deemed to have been exercised and
the person or entity shall be treated as a record Holder of shares of Common
Stock on the next succeeding date on which the transfer books are open, but the
Conversion Price shall be that in effect on the date such conversion privilege
was exercised. The Corporation shall not be required to deliver certificates for
shares of its Common Stock or new certificates for unconverted shares of its
Series D Preferred Stock while the stock transfer books for such respective
classes of stock are duly closed for any purpose; but the right of surrendering
shares of Series D Preferred Stock for conversion shall not be suspended during
any period that the stock transfer books of either of such classes of stock are
closed.
Upon the conversion of any shares of Series D Preferred Stock no
adjustment or payment shall be made with respect to such converted shares on
account of any dividend on the Common Stock, except that the Holder of such
converted shares shall be entitled to be paid any dividends declared on shares
of Common Stock after conversion thereof.
The Corporation shall be required, in connection with any
conversion of Series D Preferred Stock, and payment of dividends on Series D
Preferred Stock to issue a fraction of a share of its Series D Preferred Stock
and to deliver a stock certificate representing such fractional share.
The Corporation and Holder may not convert that amount of the
Series D Preferred Stock on a Conversion Date 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 such Conversion Date, and (ii) the number of shares of Common Stock issuable
upon the conversion of the Series D Preferred Stock with respect to which the
determination of this proviso is being made on such Conversion Date, which would
result in beneficial ownership by the Holder and its affiliates of more than
9.99% of the outstanding shares of Common Stock of the Corporation. For the
purposes of the proviso to the immediately preceding sentence, beneficial
ownership
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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.
(d) The Conversion Price shall be subject to adjustment from
time to time as follows:
(i) In case the Corporation shall at any time (A)
declare any dividend or distribution on its Common Stock or other securities of
the Corporation other than the Series D Preferred Stock, (B) split or subdivide
the outstanding Common Stock, (C) combine the outstanding Common Stock into a
smaller number of shares, or (D) issue by reclassification of its Common Stock
any shares or other securities of the Corporation, then in each such event the
Conversion Price shall be adjusted proportionately so that the Holders of Series
D Preferred Stock shall be entitled to receive the kind and number of shares or
other securities of the Corporation which such Holders would have owned or have
been entitled to receive after the happening of any of the events described
above had such shares of Series D Preferred Stock been converted immediately
prior to the happening of such event (or any record date with respect thereto).
Such adjustment shall be made whenever any of the events listed above shall
occur. An adjustment made to the Conversion pursuant to this paragraph 4(d)(i)
shall become effective immediately after the effective date of the event
retroactive to the record date, if any, for the event.
(e) (i) In case of any merger of the Corporation with or
into any other corporation (other than a merger in which the Corporation is the
surviving or continuing corporation and which does not result in any
reclassification, conversion, or change of the outstanding shares of Common
Stock) then unless the right to convert shares of Series D Preferred Stock shall
have terminated, as part of such merger lawful provision shall be made so that
Holders of Series D Preferred Stock shall thereafter have the right to convert
each share of Series D Preferred Stock into the kind and amount of shares of
stock and/or other securities or property receivable upon such merger by a
Holder of the number of shares of Common Stock into which such shares of Series
D Preferred Stock might have been converted immediately prior to such
consolidation or merger. Such provision shall also provide for adjustments which
shall be as nearly equivalent as may be practicable to the
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adjustments provided for in paragraph (d) of this paragraph 4. The foregoing
provisions of this paragraph 4(e) shall similarly apply to successive mergers.
(ii) In case of any sale or conveyance to another person
or entity of the property of the Corporation as an entirety, or substantially as
an entirety, in connection with which shares or other securities or cash or
other property shall be issuable, distributable, payable, or deliverable for
outstanding shares of Common Stock, then, unless the right to convert such
shares shall have terminated, lawful provision shall be made so that the Holders
of Series D Preferred Stock shall thereafter have the right to convert each
share of the Series D Preferred Stock into the kind and amount of shares of
stock or other securities or property that shall be issuable, distributable,
payable, or deliverable upon such sale or conveyance with respect to each share
of Common Stock immediately prior to such conveyance.
(f) Whenever the number of shares to be issued upon conversion
of the Series D Preferred Stock is required to be adjusted as provided in this
paragraph 4, the Corporation shall forthwith compute the adjusted number of
shares to be so issued and prepare a certificate setting forth such adjusted
conversion amount and the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Transfer Agent for the Series D
Preferred Stock and the Common Stock; and the Corporation shall mail to each
Holder of record of Series D Preferred Stock notice of such adjusted conversion
price.
(g) In case at any time the Corporation shall propose:
(i) to pay any dividend or distribution payable in
shares upon its Common Stock or make any distribution (other than cash
dividends) to the Holders of its Common Stock; or
(ii) to offer for subscription to the Holders of its
Common Stock any additional shares of any class or any other rights; or
(iii) any capital reorganization or reclassification of
its shares or the merger of the Corporation with another corporation (other than
a merger in which the Corporation is the surviving or continuing corporation and
which does not result in
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any reclassification, conversion, or change of the outstanding shares of Common
Stock); or
(iv) the voluntary dissolution, liquidation or
winding-up of the Corporation;
then, and in any one or more of said cases, the Corporation shall cause at least
fifteen (15) days prior notice of the date on which (A) the books of the
Corporation shall close or a record be taken for such stock dividend,
distribution, or subscription rights, or (B) such capital reorganization,
reclassification, merger, dissolution, liquidation or winding-up shall take
place, as the case may be, to be mailed to the Transfer Agent for the Series D
Preferred Stock and for the Common Stock and to the Holders of record of the
Series D Preferred Stock.
(h) So long as any shares of Series D Preferred Stock shall
remain outstanding and the Holders thereof shall have the right to convert the
same in accordance with provisions of this paragraph 4 the Corporation shall at
all times reserve from the authorized and unissued shares of its Common Stock a
sufficient number of shares to provide for such conversions.
(i) The term Common Stock as used in this paragraph 4 shall mean
the no par value Common Stock of the Corporation as such stock is constituted at
the date of issuance thereof or as it may from time to time be changed or shares
of stock of any class of other securities and/or property into which the shares
of Series D Preferred Stock shall at any time become convertible pursuant to the
provisions of this paragraph 4.
(j) The Corporation shall pay the amount of any and all issue
taxes (but not income taxes) which may be imposed in respect of any issue or
delivery of stock upon the conversion of any shares of Series D Preferred Stock,
but all transfer taxes and income taxes that may be payable in respect of any
change of ownership of Series D Preferred Stock or any rights represented
thereby or of stock receivable upon conversion thereof shall be paid by the
person or persons surrendering such stock for conversion.
(k) Subject to the provisions of this Sections, if the
Corporation at any time shall issue any shares of Common Stock prior to the
conversion of the entire Stated Value of the Series D
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<PAGE> 39
Preferred Stock and dividends on such Series D Preferred Stock (otherwise than:
(i) as provided in paragraph (d) and (e) of this Paragraph 4; or (ii) pursuant
to options, warrants, or other obligations to issue shares outstanding on the
date hereof as described in writing to the Holder prior to the date of issuance
of Series D Preferred Stock to the Holder or in filings made by the Corporation
prior to the date hereof with the Securities and Exchange Commission including
all shares reserved for issuance pursuant to the Corporation's existing option
and stock plans or to employees or directors of the Corporation pursuant to a
stock incentive or other plan, which plan and which grant is approved by the
Board of Directors of the Corporation, [(i) and (ii) above are referred to as
the "Existing Option Obligations"]; or (iii) for a consideration less than the
Conversion Price that would be in effect at the time of such issue, then, and
thereafter successively upon each such issue, the Conversion Price shall be
reduced as follows: (y) the number of shares of Common Stock outstanding
immediately prior to such issue shall be multiplied by the Conversion Price in
effect at the time of such issue and the product shall be added to the aggregate
consideration, if any received by the Corporation upon such issue of additional
shares of Common Stock; and (z) the sum so obtained shall be divided by the
number of shares of Common Stock outstanding immediately after such issue.
Except for the existing Option Obligations and options that may be issued under
any employee incentive stock option and/or any qualified stock option plan
adopted by the Corporation, for purposes of this adjustment, the issuance of any
security of the Corporation carrying the right to convert such security into
shares of Common Stock or of any warrant, right, or option to purchase Common
Stock shall result in an adjustment to the Conversion Price upon the issuance of
shares of Common Stock upon exercise of such conversion or purchase rights.
(l) In the event a Holder shall elect to convert any shares of
Series D Preferred Stock as provided herein, the Corporation cannot refuse
conversion based on any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of said shares of Series D Preferred Stock shall have been issued
and the Corporation posts a surety bond for the benefit of such Holder in the
amount of 125% of the Stated Value of the Series D Preferred Stock and dividends
sought to be converted, which is subject to the injunction, which bond shall
remain in effect until the completion of arbitration/litigation of the dispute
and the
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proceeds of which shall be payable to such Holder in the event it obtains
judgment.
(m) In addition to any other rights available to the Holder, if
the Corporation fails to deliver to the Holder such certificate or certificates
pursuant to Section 4(c) by the Delivery Date and if after the Delivery Date the
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by such Holder of the Common Stock
which the Holder anticipated receiving upon such conversion (a "Buy-In"), then
the Corporation shall pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (A) the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (B) the aggregate Stated Value of the shares
of Series D Preferred Stock for which such conversion was not timely honored,
together with interest thereon at a rate of 15% per annum, accruing until such
amount and any accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example, if the Holder
purchases shares of Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of $10,000 of Stated
Value of Series D Preferred Stock, the Corporation shall be required to pay the
Holder $1,000, plus interest. The Holder shall provide the Corporation written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
5. Mandatory Conversion.
(a) The shares of Series D Preferred Stock and dividends not
previously converted into shares of Common Stock shall be converted into shares
of Common Stock without further action of the Holder on the date that is two
years from the date of issuance thereof ("Mandatory Conversion Date"), at the
Conversion Price and on the conversion terms specified in paragraph 4(b).
Deliveries of Common Stock upon Mandatory Conversion shall be made as if the
Mandatory Conversion Date were a Conversion Date.
(b) Notice of conversion of Series D Preferred Stock by the
Corporation pursuant to this paragraph 5 shall be given by mail or in such other
manner as may be prescribed by resolution of the Board not less than thirty (30)
days prior to the Mandatory Conversion Date. As applicable, the notice shall
specify the number of shares to be converted, the date fixed for conversion,
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and the conversion price per share.
(c) The Holder of any certificate for shares of Series D
Preferred Stock that is converted pursuant to this Section 5 shall surrender
such certificate at the principal office of any transfer agent for said stock
(the "Transfer Agent") properly endorsed for or accompanied by duly executed
instruments of transfer (and such other transfer papers as said Transfer Agent
may reasonably require). The Holder of the shares so surrendered for conversion
shall be entitled to receive (except as otherwise provided herein) a certificate
or certificates which shall be expressed to be fully paid and non-assessable for
the number of shares of Common Stock to which such Holder shall be entitled upon
such conversion registered in the name of such Holder.
(d) On and after the Mandatory Conversion Date and
notwithstanding that any certificate for shares of Series D Preferred Stock so
called for conversion shall not have been surrendered for cancellation, all
dividends on the Series D Preferred Stock called for conversion shall cease to
accrue and the shares represented thereby shall no longer be deemed outstanding
and all rights of the Holders thereof as Holders of the Corporation shall cease
and terminate, except the right to receive the shares of Common Stock upon
conversion as provided herein.
(e) In no event shall a Mandatory Conversion occur without the
consent of the Holder of Series D Preferred Stock at any time unless the Common
Stock to be delivered upon conversion will be upon delivery and thereafter
immediately resalable, without restrictive legend and upon such resale freely
transferable on the transfer books of the Corporation.
6. Voting Rights. The shares of Series D Preferred Stock shall not have
voting rights.
7. Redemption. The Corporation will have the option of redeeming the
Series D Preferred Stock ("Optional Redemption") by paying to the Holder a sum
of money equal to the Closing Bid Price
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of the Common Stock on the date notice of redemption ("Notice of Redemption) is
given to a Holder ("Redemption Date") multiplied by the number of shares of
Common Stock that would be issued upon conversion of the designated amount of
Stated Value of Series D Preferred Stock being redeemed and the dividends
accrued thereon, at the Conversion Price that would be in effect on the
Redemption Date ("Redemption Amount") but in no event may the Redemption Amount
be less than 110% of the Stated Value of the Series D Preferred Stock being
redeemed plus the dollar amount of accrued dividends on the Series D Preferred
Stock being redeemed. A Notice of Redemption may not be given in connection with
any Series D Preferred Stock for which notice of conversion has been given by
the Holder either before or after receipt by the Holder of a Notice of
Redemption except that after receipt by the Holder of a Notice of Redemption the
Holder may elect by giving written notice to the Corporation within three (3)
business days of a Redemption Date to convert no more than ten percent of the
Series D Preferred Stock noticed in the Notice of Redemption. The Redemption
Amount (less any amount that may be converted by a Holder) must be paid in good
funds to the Holder no later than the fifth business day after the Redemption
Date. In the event the Corporation fails to pay the Redemption Amount by such
date, then the Redemption Notice will be null and void and the Corporation will
thereafter have no further right to effect an Optional Redemption. Any Notice of
Redemption must be given to all Holders of Series D Preferred Stock in
proportion to their holdings of Series D Preferred Stock on a Redemption Date.
The minimum Redemption Amount must be no less than the sum that would be
realized by the Holder on the Redemption Date of a sale of the amount of Common
Stock receivable upon conversion of the amount of Series D Preferred Stock being
redeemed plus the dollar amount of accrued dividends on the Series D Preferred
Stock being redeemed but in no event may the Redemption Amount be less than 110%
of the Stated Value of the Series D Preferred Stock being redeemed plus the
dollar amount of accrued dividends on the Series D Preferred Stock being
redeemed.
8. Event of Default. The occurrence of any of the following events of
default ("Event of Default") shall, after the applicable period to cure the
Event of Default, cause the dividend rate of 5% described in paragraph 2 hereof
to become 10% from and after the occurrence of such event, and the Holder shall
have the option to require the Corporation to redeem the Series D Preferred
Stock held by such Holder by the immediate payment to the Holder by the
Corporation of a sum of money equal to the number of shares that would be
issuable upon conversion of an amount of Stated Valued and accrued dividends
designated by the Holder at the Conversion Price
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in effect as of the trading day prior to the date notice is given to the
Corporation multiplied by the average closing ask price of the Corporation's
Common Stock on such date:
(a) The Corporation fails to pay any dividend payment required
to be paid pursuant to the terms of paragraph 2 hereof or the failure to timely
pay any other sum of money due to the Holder from the Company and such failure
continues for a period of ten (10) days after written notice to the Corporation
from the Holder.
(b) The Corporation breaches any material covenant, term or
condition of the Subscription Agreement entered into between the Corporation and
Holder relating to Series D Preferred Stock (the "Subscription Agreement") or in
this Certificate of Determination, and such breach continues for a period of
seven (7) days after written notice to the Corporation from the Holder.
(c) Any material representation or warranty of the Corporation
made in the Subscription Agreement, or in any agreement, statement or
certificate given in writing pursuant thereto shall be false or misleading.
(d) The Corporation shall make an assignment of a substantial
part of its property or business for the benefit of creditors, or apply for or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee shall otherwise
be appointed.
(e) Any money judgment, confession of judgment, writ or similar
process shall be entered against the Corporation or its property or other assets
for more than $100,000, and is not vacated, satisfied, bonded or stayed within
45 days.
(f) Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation.
(g) The failure to maintain a listing of the Common Stock on the
NASDAQ SmallCap Market (or successor market, if any).
(h) An order entered by a court of competent jurisdiction, or by
the Securities and Exchange Commission, or by the National Association of
Securities Dealers, preventing purchase and sale transactions in the
Corporation's Common Stock.
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(i) The Corporation's failure to timely deliver Common Stock to
the Holder pursuant to paragraph 4 hereof or the Subscription Agreement.
(j) The occurrence of a Non-Registration Event as described in
Section 10.4 of the Subscription Agreement, except as otherwise provided in the
Subscription Agreement.
(k) The occurrence of an Approval Default as that term is
defined in the Subscription Agreement, but such Event of Default shall apply
only to Series D Preferred that can not be converted into Common Stock.
(l) The occurrence of a Non-Effectiveness Event as described in
Section 10.4 of the Subscription Agreement that has occurred and is continuing
on September 1, 1999.
9. Status of Converted or Redeemed Stock. In case any shares of Series D
Preferred Stock shall be redeemed or otherwise repurchased or reacquired, the
shares so redeemed, converted, or reacquired shall resume the status of
authorized but unissued shares of Preferred Stock and shall no longer be
designated as Series D Preferred Stock.
10. Additional Restrictions. For as long as any shares of the Series D
Preferred Stock are outstanding, the Corporation will not issue any preferred
stock that is senior to the Series D Preferred Stock, and will not amend the
terms of the Series D Preferred Stock without the written consent of 80% in
interest of the Holders of the Series D Preferred Stock.
BIKERS DREAM, INC.
By: /s/ Herm Rosenman
-------------------------------------
Herm Rosenman
By: /s/ Anne Todd
-------------------------------------
Anne Todd
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The undersigned declare under penalty of perjury under the laws of
California that they have read the foregoing certificate and know the contents
thereof and that the same is true of their own knowledge and that this
declaration was executed on January 26, 1999.
/s/ Herm Rosenman
------------------------------------
Herm Rosenman
/s/ Anne Todd
------------------------------------
Anne Todd
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EXHIBIT A
NOTICE OF CONVERSION
(To Be Executed By the Registered Holder in Order to Convert the
Series D Convertible Preferred Stock of Bikers Dream, Inc.)
The undersigned hereby irrevocably elects to convert $______________ of
the Stated Value of the above Series D Convertible Preferred Stock into shares
of Common Stock of Bikers Dream, Inc. (the "Corporation") according to the
conditions hereof, as of the date written below.
Date of Conversion:_______________________________________________
Applicable Conversion Price Per Share:____________________________
Conversion Price Calculated Pursuant to:
Section 4(b)(i):_________________ or 4(b)(ii)___________________
If pursuant to 4(b)(ii), the four dates and closing prices employed are:
(1)_____________/$______________ (2)______________/$___________
(3)_____________/$______________ (4)______________/$___________
Number of Common Shares Issuable Upon This Conversion:____________
Signature:________________________________________________________
Print Name:_______________________________________________________
Address:___________________________________________________________
- -------------------------------------------------------------------
Deliveries Pursuant to this Notice of Conversion Should Be Made to:
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
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EXHIBIT B
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN 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.
Right to Purchase _____ Shares of Common
Stock of Bikers Dream, Inc. (subject to
adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. ____ February ___, 1999
Bikers Dream, Inc., a corporation organized under the laws of the State
of California (the "Company"), hereby certifies that, for value
received,______________, or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company after February 5, 1999 at any time or from
time to time before 5:00 p.m., New York time, on February 5, 2004 (the
"Expiration Date"), up to ____________ fully paid and nonassessable shares of
Common Stock (as hereinafter defined), no par value per share, of the Company,
at a purchase price of $4.125 per share (such purchase price per share as
adjusted from time to time as herein provided is referred to herein as the
"Purchase Price"). The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term Company shall include Bikers Dream, Inc. and any
corporation which shall succeed or assume the obligations of Bikers Dream, Inc.
hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock, no
par value per share, as authorized on the date of the Agreement, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
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may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the holder hereof shall
be entitled to receive, upon exercise of this Warrant in whole in accordance
with the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a
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<PAGE> 49
Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the holders of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent appointed pursuant to Section 10 and
shall accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the Company
or such successor, as the case may be, on exercise of this Warrant pursuant to
this Section 1.
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<PAGE> 50
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct in compliance with
applicable Securities Laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such holder is entitled
upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 3 to a bank or trust
4
<PAGE> 51
company having its principal office in New York, NY, as trustee for the holder
or holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 3.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the holders of the Warrants be delivered to the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.
5. Chief Financial Officer's Certificate as to Adjustments. In each case
of any adjustment or readjustment in the shares of
5
<PAGE> 52
Common Stock (or Other Securities) issuable on the exercise of the Warrants, the
Company at its expense will promptly cause its Chief Financial Officer to
compute such adjustment or readjustment in accordance with the terms of the
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or receivable by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
and (c) the Purchase Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to the
holder of the Warrant and any Warrant agent of the Company (appointed pursuant
to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements. The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrants, all shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable Securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached hereto (the
Transferor Endorsement Form") and together with evidence reasonably satisfactory
to the Company demonstrating compliance with applicable Securities Laws, the
Company at its expense but with payment by the Transferor of any applicable
transfer taxes) will issue and deliver to or on the order of the Transferor
thereof a new Warrant or Warrants of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will
6
<PAGE> 53
execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Subscription Agreement entered into by the Company and Subscribers of
the Company's Series D Preferred Stock at or prior to the issue date of this
Warrant. The terms of the Subscription Agreement are incorporated herein by this
reference. Upon the occurrence of a Non-Registration Event as described in the
Subscription Agreement other than the case of a Non-Effectiveness Event, or upon
the occurrence of a Non-Effectiveness Event (as described in the Subscription
Agreement) that is continuing on September 1, 1999, in the event the Company is
unable to issue Common Stock upon exercise of this Warrant that has been
registered in the Registration Statement described in Section 10.1(iv) of the
Subscription Agreement, then upon receipt by the Company of notice that the
Holder of this Warrant would exercise this Warrant but for the Company's
inability to issue such Common Stock upon exercise of this Warrant, then the
Company will pay to the Holder of this Warrant, in lieu of delivering Common
Stock, a sum equal to the closing ask price of the Company's Common Stock on
NASDAQ SmallCap or such other principal trading market for the Company's Common
Stock on the trading date immediately preceding the date notice is given by the
Holder, less the exercise price of this Warrant, for each share of Common Stock
designated in such notice from the Holder.
10. Warrant Agent. The Company may, by written notice to the each holder
of the Warrant, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
11. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
12. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
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<PAGE> 54
13. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
Bikers Dream, Inc.
By:
-------------------------------------
Herm Rosenman, CEO
Witness:
- ------------------------------
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<PAGE> 55
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Bikers Dream, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, ______ shares of Common
Stock of Bikers Dream, Inc. and herewith makes payment of $______ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to __________ whose address is ____________________________________ .
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________
----------------------------------------
(Signature must conform to name of
holder as specified on the face of the
Warrant)
----------------------------------------
(Address)
9
<PAGE> 56
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Bikers Dream, Inc. to which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Bikers Dream,
Inc. with full power of substitution in the premises.
<TABLE>
<CAPTION>
===============================================================================================
Percentage Number
Transferees Transferred Transferred
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
===============================================================================================
</TABLE>
Dated: , 19
------------------ ---- ----------------------------------------
(Signature must conform to name of
holder as specified on the face of the
warrant)
Signed in the presence of:
- -------------------------------- ----------------------------------------
(Name) (address)
----------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- ---------------------------------
(Name)
10
