<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED MARCH 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
________________
Commission File Number: 1-13042
RIDE, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 91-1571027
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8160 304th Avenue Southeast
Preston, Washington 98050
- --------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(425) 222-6015
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, without par value 14,256,126 shares as of May 10, 1999.
<PAGE>
INDEX
RIDE, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- March 31, 1999 and June 30,
1998
Condensed consolidated statements of operations -- three and nine month
periods ended March 31, 1999 and period ended December 31,
1998
Condensed consolidated statements of cash flows -- Nine months ended
March 31, 1999 and 1998
Notes to condensed consolidated financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosure about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBITS
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
(Unaudited)
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $0 $165
Receivables, less allowance for doubtful accounts of
$750 at March 31, 1999 and $981 at
June 30, 1998 6,469 4,487
Inventories (Note 2) 7,316 9,752
Prepaid expenses and other current assets 802 887
Income taxes receivable 182 1,571
------------------------------------
Total current assets 14,769 16,862
Plant and equipment, net of accumulated depreciation 5,392 5,792
Notes receivable, net of discount 2,158 1,400
Goodwill, net of accumulated amortization 8,532 9,205
Other assets 1,202 1,345
------------------------------------
Total assets $32,053 $34,604
------------------------------------
------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,247 $5,918
Accrued expenses 2,383 2,911
Short-term borrowings 8,484 5,544
------------------------------------
Total current liabilities 15,114 14,373
Long-term liabilities 828 979
Shareholders' equity:
Preferred stock 500 2,832
Common stock 44,128 43,257
Accumulated other comprehensive loss (204) (163)
Accumulated deficit (28,313) (26,674)
------------------------------------
Total shareholders' equity 16,111 19,252
------------------------------------
Total liabilities and shareholders' equity $32,053 $34,604
------------------------------------
------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
2
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RIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended March 31, Nine months ended March 31,
---------------------------------------------------------------------
1999 1998 1999 1998
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 3,578 $ 4,427 $ 38,077 $ 33,343
Cost of goods sold 3,605 3,550 27,628 24,639
---------------------------------------------------------------------
Gross profit (27) 877 10,449 8,704
Selling, general and administrative expenses 3,560 4,863 11,838 23,349
---------------------------------------------------------------------
Operating loss (3,587) (3,986) (1,389) (14,645)
Sale of subsidiary 680
Interest income 28 47 177 139
Interest expense (163) (41) (798) (424)
---------------------------------------------------------------------
Loss before income taxes (3,722) (3,980) (1,330) (14,930)
Income tax expense 0 0 0 1,309
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Net loss $ (3,722) $ (3,980) $ (1,330) $ (16,239)
Preferred Stock Dividend (233) (249)
---------------------------------------------------------------------
Net loss available to common stock holders (3,955) (3,980) (1,579) (16,239)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net loss per share:
Basic $ (0.29) $ (0..35) $ (0.12) $ (1.43)
Diluted $ (0.29) $ (0.35) $ ( 0.12) $ (1.43)
Shares used in computation of net income per share:
Basic 13,675 12,121 13,073 11,591
Diluted 13,675 12,121 13,073 11,591
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
RIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended March 31,
-------------------------------------
1999 1998
-------------------------------------
<S> <C> <C>
Net cash used in operating activities (1,527) $2,384
INVESTING ACTIVITIES:
Acquisitions of Device Mfg Corp. and Smiley Hats, Inc. -- (758)
Purchase of plant and equipment (882) (475)
Payments on note receivable 1,120 100
Proceeds from SMP sale 250 --
Other (103) (265)
-------------------------------------
Net cash used in investing activities 385 (1,398)
FINANCING ACTIVITIES:
Advances on line of credit 1,211 (5,205)
Proceeds from sale of preferred stock -- 2811
Repayments of long term debt (175) (796)
Dividends paid (26) (31)
Other (33) (15)
-------------------------------------
Net cash provided by financing activities 977 (3,236)
-------------------------------------
Net decrease in cash and cash equivalents (165) (2,250)
Cash and cash equivalents at beginning of period 165 2,742
-------------------------------------
Cash and cash equivalents at end of period $0 $492
-------------------------------------
-------------------------------------
SUPPLEMENTAL DISCLOSURE:
Cash received for income taxes $1,418 --
Cash paid for interest 797 423
NONCASH FINANCING ACTIVITY:
Common stock issued in acquisitions -- $1,091
Conversion of Series B Preferred to Note Payable 1,725
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
RIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared by Ride, Inc. (the "Company"), in accordance with generally accepted
accounting principles for interim financial statements and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation have been included. The Company's revenues are highly
seasonal, occurring primarily between July and December as its products are
shipped to customers. The results of operations for the nine month period ended
March 31, 1999, therefore may not be indicative of the results for the full
fiscal year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended June 30, 1998. All amounts are stated in US dollars.
2. INVENTORIES
Inventories at March 31, 1999 and June 30, 1998 consisted of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
----------------------------------
(In thousands)
<S> <C> <C>
Finished goods $5,206 $8,283
Raw materials and work in process 2,567 2,916
Obsolescence reserve (457) (1,447)
----------------------------------
$7,316 $9,752
----------------------------------
----------------------------------
</TABLE>
3. LINE OF CREDIT AND LONG TERM DEBT
On August 31, 1998, the Company entered into a Loan and Security Agreement
("Agreement") with CIT Group/Credit Finance, Inc. ("CIT") which credit facility
replaced the Company's prior credit facility. The Company's line of credit under
the CIT facility is up to $15.0 million (to be increased to $17.0 million from
October 15 to December 15 each year) for a term of three years. The amount that
may be borrowed is also limited to the sum of (i) 85% of eligible accounts
receivable, provided the dilution does not exceed 5.0% and after implementation
of an 11.0% dilution reserve against loan availability during the season, and
(ii) 55% of eligible finished goods inventory, not to exceed $6.5 million during
April through September, $3.25 million in October, $2.5 million in November, and
$2.0 million in December (extended to March 31, 1999). There are to be no
advances against inventory during January through March of each year unless
otherwise extended. The CIT facility provides for a maximum letter of credit
subline of $8.0 million.
The facility bears interest at the Prime interest rate plus 1.5%. Additionally,
the facility requires an annual facility of 0.5% due each anniversary of the
closing and a monthly letter of credit fee of 1.5% per annum of the face amount
of any standby and documentary letters of credit.
Simultaneous with the execution of the Agreement, the Company entered into a
Consent, Reaffirmation, and Release Agreement with US Bank NA pursuant to which
the Company retained a $3.0 million credit facility with that institution. The
US Bank Facility bore interest at the Prime Rate plus 1.5% per annum
5
<PAGE>
until February 28, 1999 and now bears interest at the Prime rate plus 2.0% per
annum, is subordinated to the CIT credit line, has a term of one year and is
secured by promissory notes from Global Sports, Inc. in the original aggregate
amount of $1.8 million. Additionally, the facility is secured by the personal
guarantee of one of the Company's outside directors, including certain real
property owned by that director. The US Bank Facility is due and payable in full
on August 31, 1999.
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Mar 31, 1999 Mar 31, 1998 Mar 31, 1999 Mar 31, 1998
---------------------------------------------------------------------
(In Thousands, Except (In Thousands, Except
Per Share Amounts) Per Share Amounts)
<S> <C> <C> <C> <C>
Numerator
Net loss $(3,722) $(3,980) $(1,330) $(16,239)
Preferred stock dividend (233) (316) (249) (316)
---------------------------------------------------------------------
Numerator for basic earnings per share-
Income available to common stockholders (3,955) (4,296) (1,579) (16,555)
---------------------------------------------------------------------
Numerator for diluted earnings per share -
Income available to common stockholders
After assumed conversions (3,955) (4,296) (1,579) (16,555)
---------------------------------------------------------------------
---------------------------------------------------------------------
Denominator
Denominator for basic earnings per share -
Weighted average shares 13,675 12,121 13,073 11,591
---------------------------------------------------------------------
Denominator for diluted earnings per share -
Adjusted weighted average shares and
Assumed conversions 13,675 12,121 13,073 11,591
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic earnings per share $(0.29) $ (0.35) $(0.12) $ (1.43)
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted earnings per share $(0.29) $(0.35) $(0.12) $(1.43)
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
5. BUSINESS SEGMENTS
The Company reports operating results in two segments due to distinct
product differences. These two segments include the Company's hardgoods and
softgoods product lines. The hardgoods segment includes snowboards, snowboard
bindings, snowboard boots, wakeboards, and wakeboard boots. The softgoods
segment includes apparel and accessories.
6
<PAGE>
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1999 1998
Softgoods Hardgoods Total Softgoods Hardgoods Total
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers
USA 305 3,103 3,408 1,376 2,810 4,186
Foreign 27 143 170 104 137 241
--------- ----------- ---------- ---------- ---------- --------
Total 332 3,246 3,578 1,480 2,947 4,427
Interest Expense (55) 218 163 2 39 41
Depreciation and amortization exp. 31 298 329 106 211 317
Segment gain (loss) (498) (3,457) (3,955) (927) (3,053) (3,980)
Segment assets 3,847 28,206 32,053 3,965 30,658 34,623
Expenditures for long-lived assets 25 704 729 0 310 310
<CAPTION>
Nine months ended
March 31, March 31,
1999 1998
Softgoods Hardgoods Total Softgoods Hardgoods Total
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers
USA 4,518 25,468 29,986 6,550 17,380 23,930
Foreign 433 7,658 8,091 2,260 7,153 9,413
--------- --------- -------- ----------- --------- --------
Total 4,951 33,126 38,077 8,810 24,533 33,343
Interest Expense (10) 808 798 42 382 424
Depreciation and amortization exp. 113 859 972 233 707 940
Segment gain (loss) 468 (2,047) (1,579) (1,795) (14,466) (16,239)
Segment assets 3,847 28,206 32,053 3,965 30,658 34,623
Expenditures for long-lived assets 44 838 882 195 496 691
</TABLE>
The SMP apparel and Smiley Hats subsidiaries are stand-alone units and
make up in excess of 50% of the Softgoods segment. The remaining softgoods
revenues are comprised of the Ride softgoods lines which are sold through the
traditional hardgoods distribution units, namely Ride Snowboards and Ride
Canada. The sales for this remaining portion are specifically calculated.
Expenses and assets for the Softgoods segments of Ride Snowboards and Ride
Canada are allocated based on sales. The operating assets of the SMP subsidiary
were sold on November 2, 1998. This accounts for most of the decrease in the
Softgoods segment revenues for the Quarter ended March 31, 1999. The gain on the
sale of this SMP subsidiary also accounts for the majority of the Segment gain
in the 3rd Quarter.
Plant and equipment, goodwill and other long-lived assets of $17.5
million represent $17.2 million located in the United States, the Company's
country of domicile, and $0.3 million located in Canada.
7
<PAGE>
6. OTHER EVENTS
a. SERIES B PREFERRED SHARE CONVERSION
By the terms of the Loan and Security Agreement and related instruments,
dated February 19, 1999, by and between the Company and the holder of the
Company's Series B 5% Cumulative Preferred Stock, Advantage Fund II, Ltd.
("Holder"), the remaining 1,500 shares of the Series B 5% Cumulative Preferred
Stock of the Company issued to Holder have been converted to debt in the form of
a promissory note in the amount of $1,725,000 (the "Note"). The Note bears
interest at the rate of ten percent (10%) per annum, payable on each March 31,
June 30, September 30 and December 31, has a term due date of June 30, 1999,
which date is automatically extended to September 30, 1999 in the event the
Company has executed a letter of intent for a transaction which would raise
capital sufficient to fully redeem the Note. The Note is secured by a security
interest in the Company's assets subordinate to the outstanding security
interests of the Company's senior secured creditors. The Note has a default
interest rate of eighteen percent (18%) per annum. The Company's inability to
successfully redeem the Note when due could have a material and adverse impact
on the Company's financial condition.
b. NASDAQ LISTING REQUIREMENTS
On January 21, 1999 the Company was notified by Nasdaq that the closing bid
price of its common stock was less than $1.00 for the preceding 30-day trading
period in violation of certain Nasdaq national listing standards. On June 3,
1999, the Company will present its plans to Nasdaq for maintaining the listing
requirements. There can be no assurance that the Company will continue to meet
the minimum bid price or other listing standards. If the Nasdaq determines that
the Company cannot maintain compliance, the Company's common stock will be
delisted from the Nasdaq National Market. If the common stock is delisted,
trading could continue in the over-the-counter market, but investors might find
it more difficult to trade the stock or to obtain timely market price
information.
c. THIRD-PARTY DISCUSSIONS
The Company has engaged Ladenburg Thalmann & Co., Inc. ("Ladenburg") as its
financial advisor to provide advice regarding potential strategic alternatives
available to the Company. The Company and Ladenburg continue to hold discussions
with potential investors regarding various financial arrangements with the
Company. The negotiations are ongoing and there can be no assurance that any
such arrangement will be entered into.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
To the extent that this Quarterly Report on Form 10-Q discusses financial
projections, information or expectations about the Company's products or
markets, or otherwise makes statements about the future, such statements are
forward looking and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from the statements made. These
factors include the competitive environment, industry and product
concentrations, dependence on third-party selling efforts and other risks
outlined in more detail in the Company's Annual Report on Form 10-K as filed
with the Securities and Exchange Commission for the fiscal year ended June 30,
1998 as well as the risks described in the "Liquidity and Capital Resources"
section below.
GENERAL
The Company is a leading designer, manufacturer and marketer of snowboards
and related products through its subsidiaries: Ride Snowboard Company ("Ride
Snowboards"), Ride Manufacturing, Inc. ("Ride Manufacturing"), Ride Canada, Inc.
("Ride Canada"), Smiley Hats, Inc. ("Smiley") and Carve, Inc. ("US2"). The
Company was founded in September 1992 and acquired C.A.S. Sports International,
Inc. and C.A.S. Sports Agency, Inc. (collectively, "CAS") in August 1994, Ride
Manufacturing in September 1995 and SMP Clothing, Inc. ("SMP") in October 1995.
The Company also acquired 5150 Snowboards, Inc. ("5150") in September 1995 and
later merged 5150 with and into Ride Snowboards. In October 1996, the Company
transferred substantially all of the Canada-based operating assets and
liabilities of CAS (other than fixed assets) into Ride Canada, a newly formed
corporation, and all of the US-based operating assets and liabilities of CAS
into Ride Snowboards, and sold the CAS entities. In June 1997, the Company
acquired substantially all of the assets and liabilities of Device Mfg Corp. and
transferred those assets and liabilities to Ride Snowboards. In July 1997, the
Company's newly formed Smiley subsidiary acquired substantially all of the
assets of Galena Creek Trading Corp. In December 1997, the Company acquired US2
Sports Group Inc. through a merger of that company with and into Carve, Inc., a
newly formed corporation. Effective November 2, 1998, the Company sold the
operating assets and inventory of its Chula Vista, California-based, SMP
subsidiary to SMP's Australian licensee. As part of the transaction, Company has
retained certain of SMP's liabilities as well as SMP's accounts receivable. The
results of operations of these acquired subsidiaries are included in the
Company's financial statements from their respective dates of acquisition
through their applicable dates of disposition.
Because snowboarding traditionally is a winter sport and the Company's
sales are concentrated in the northern hemisphere, sales of the Company's
products predominantly occur in the months of July through December, the
Company's first and second fiscal quarters. Because relatively lower net sales
are realized in the months of January through June of each year, the Company
expects to incur operating losses in its third and fourth fiscal quarters for
the foreseeable future. The Company expects the addition of wakeboarding
products to its product line-up through its acquisition of US2 will help to
supplement sales in the third and fourth quarters of the year in future periods.
In addition to seasonal fluctuations, the Company's operating results fluctuate
from quarter to quarter as a result of the timing of order shipments, new
product introductions, new retailer openings, consumer buying patterns, weather
conditions, discretionary spending habits, general economic conditions in the
United States and abroad and other factors. Furthermore, the Company's gross
margins fluctuate with product mix, the timing of product price adjustments and
the mix of international and domestic sales. See "Business Risk Factors -
Seasonality; Fluctuations in Quarterly Operating Results."
The Company accumulates a backlog of orders beginning in February as a result of
preseason orders placed in connection with winter sports trade shows. The
backlog decreases beginning in late spring as product begins to be shipped and
is usually insignificant by the end of the year. Backlog in the snowboarding
industry is subject to delay or cancellation.
9
<PAGE>
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1999 COMPARED WITH QUARTER ENDED MARCH 31, 1998
Net sales in the quarter ending Mar 31, 1999 were $3.6 million compared to
$4.4 million in the comparable quarter of 1998. On a year-to-date basis, sales
for the nine months ending March 31, 1999 were $38.1 million versus $33.3
million for the nine months ending March 31, 1998.
Hard goods (defined as snowboards, bindings, boots, wake boards and
skateboards) represented 83% of third quarter net sales while soft goods
(apparel and accessories) made up 17%. For the comparable quarter of 1998, hard
goods comprised 66% of sales and soft goods 34%. On a year-to-date basis, sales
of hard goods made up 86% and soft goods the remaining 14% for the nine months
ending March 31, 1999. Comparable sales for the nine months ending March 31,
1998 were 73% for hard goods and 27% for soft goods. The main reason for the
decrease in the ratio of soft goods to hard goods in 1999 versus 1998 is the
sale of the operating portion of the SMP subsidiary on November 2, 1998. For the
quarter ending March 31 1999, sales in North America made up 95% of total sales
with international sales representing the remaining 5%. For the comparable
quarter of 1998, North America represented 95% of total sales and international
5%. For the nine months ending March 31, 1999, sales in North America were 79%
while international sales made up the remaining 21%. For the same nine month
period ending March 31, 1998, North American sales were 72% while international
sales were 28%.
Gross margin for the third quarter was (0.7%) bringing the year-to-date
margin for the nine months ending March 31, 1999 to 27.4%. The primary reason
for the negative margin in the third quarter was directly related to sales of
close-out inventory at reduced prices. The company made the decision to move
our closeout inventory at prices lower than would normally be the case in
order to gain quick sales and hence borrowing availability. Gross margins for
the third quarter ending March 31, 1998 were 19.8% and on a year-to-date
basis were 26.1% for the nine months ending March 31, 1998.
Selling, general and administrative expenses were $3.6 million for the
quarter ending March 31, 1999 compared to $4.9 million in the same period of
1998. The significant reduction in expenses in 1999 versus 1998 relates
directly to the cost reduction programs that were put in place at the start
of fiscal 1998/99. On a year-to-date basis selling, general and
administrative expenses were $11.8 million for the nine months ending March
31, 1999. This compares to $23.3 million for the comparable nine months
ending March 31, 1998. Excluding the effect of the $8.6 million goodwill
write down in December 1997, the decrease in expense from 1998 to 1999 was
primarily due to staff reductions and lower executive salaries.
Interest income was $28,000 in the quarter ending March 31, 1999 compared
with $47,000 for the same period of 1998. Interest income for the nine months
ending March 31, 1999 was $177,000 versus $139,000 for the comparable nine month
period ending March 31, 1998. Interest expense for the quarter ending March 31,
1999 was $163,000 versus $41,000 for the same period in 1998. Higher borrowings
at higher rates accounted for the difference. For the nine months ending March
31, 1999 interest expense was $797,000 versus $424,000 for the same period in
1998. These increases in 1999 versus 1998 were due to a generally higher level
of direct advances on the Company's revolving credit facility.
For the three and nine month periods ended March 31, 1999 no tax expense
was recorded as the Company was in a net operating loss carry forward position.
For the three months ending March 31, 1998 there was also no tax expense
recorded. For the nine month period ending March 31, 1998 the Company recorded
income tax expense of $1.3 million. Even though the Company was in a loss
position, the company's tax benefit is limited to the amount of income taxes
recoverable from prior years.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ending March 31, 1999, the Company financed its
operations primarily through the collection of receivables and borrowings on
it's line of credit facility. Net cash used in operating activities totaled
10
<PAGE>
$1.5 million in the nine months ended March 31, 1999 as compared to a $2.4
million provided during the comparable period of 1998. The increase in cash
used in fiscal 1999 versus fiscal 1998 was primarily related to an increase
in accounts receivable which was a direct result of higher sales during the
period. Net cash provided by investing activities of $0.4 million during the
period ended March 31, 1999 was due to the proceeds from the SMP note
receivable as well as payments received on the Gen X note receivable. This
compares to net cash used in investing activities of $1.4 million during the
comparable period ended March 31, 1998. The reduction from fiscal 1998 to
fiscal 1999 is a result of the Device Mfg. Corp. acquisition in the period
ending March 31, 1998. Net cash provided by financing activities totaled $1.2
million in the nine months ended March 31, 1999 compared with net cash used
of $3.2 million in the comparable period ended March 31, 1998 due primarily
to repayments on the company's line of credit.
The Company operates in a highly seasonal business, generating the majority
of its sales in the months of July through December. The Company's cash receipts
from its North American customers are received predominantly in the months of
December, January and February while its international customers generally pay
by cash in advance or letter of credit. In order to finance operations and
manufacture and purchase products during the remainder of the year, the Company
has historically utilized a revolving line of credit.
On August 31, 1998, the Company entered into a Loan and Security Agreement
("Agreement") with CIT Group/Credit Finance, Inc. ("CIT") which credit facility
replaced the Company's prior credit facility. The Company's line of credit under
the new facility is up to $15.0 million (to be increased to $17.0 million from
October 15 to December 15 of each year for a term of three years. The amount
that may be borrowed is also limited to the sum of (i) 85% of eligible accounts
receivable, provided the dilution does not exceed 5.0% and after implementation
of an 11.0% dilution reserve against loan availability during the season, and
(ii) 55% of eligible finished goods inventory, not to exceed $6.5 million during
April through September, $3.25 million in October, $2.5 million in November, and
$2.0 million in December (extended by agreement to March 31, 1999). There cannot
be advances against inventory during January through March of each year unless
otherwise extended. The new facility provides for a maximum letter of credit
subline of $8.0 million. The facility bears interest at the Prime interest rate
plus 1.5% and is collateralized by substantially all the assets of the Company.
Additionally, the facility requires an annual facility of 0.5% due each
anniversary of the closing and a monthly letter of credit fee of 1.5% per annum
of the face amount of any standby and documentary letters of credit.
Simultaneous with the execution of the Agreement, the Company entered into
a Consent, Reaffirmation, and Release Agreement with US Bank NA. Pursuant to
which the Company retained a $3.0 million credit facility with that institution.
The US Bank Facility bears interest at Prime Rate plus 1.5% per annum until
February 28, 1999 and Prime rate plus 2.0% per annum from March 1, 1999 through
and including the date Borrower repays the principal amount owed hereunder, is
subordinated to the CIT credit line, has a term of one year and is secured by
$1.8 million of promissory notes from Global Sports, Inc. Additionally, the
facility is secured by the personal guarantee of one of the Company's outside
directors, including certain real property owned by that director.
The Company believes the CIT Line may not be adequate to meet the future
needs of its business. To this end, the Company and CIT have agreed to review
the line in May 1999 with a view to increasing same if then current business
conditions warrant doing so. However, there can be no assurance such an increase
in the CIT Line will be available even if the Company's business prospects at
that time require and warrant doing so. In addition, availability of funds under
the CIT Line is at all times conditioned on the Company achieving certain
collateral requirements. There can be no assurance such requirements will be
achieved or, if achieved, that they can be consistently maintained. The
Company's inability to increase the CIT Line or meet or maintain specific
collateral requirements could each have a material adverse impact on the
Company's financial condition and could result in a substantial limitation or
reduction in the scope of the Company's business. With respect to the US Bank
Line, the Company is obligated to satisfy all sums due thereunder on or before
its August 30, 1999 expiration date. There can be no assurance the Company will
be successful in doing so. The Company's inability to successfully satisfy or
extend the US Bank Line, if necessary, could have a material adverse impact on
the Company's financial conditions.
11
<PAGE>
By the terms of that certain Loan and Security Agreement and related
instruments, dated February 19, 1999, by and between the Company and the holder
of the Company's Series B 5% Cumulative Preferred Stock, Advantage Fund II, Ltd.
("Holder"), the remaining 1,500 shares of the Series B 5% Cumulative Preferred
Stock of the Company issued to Holder have been converted to debt in the form of
a promissory note in the amount of $1,725,000 (the "Note"). The Note bears
interest at the rate of ten percent (10%) per annum, payable on each March 31,
June 30, September 30 and December 31, has a term due date of June 30, 1999,
which date is automatically extended to September 30, 1999 in the event the
Company has executed a letter of intent for a transaction which would raise
capital sufficient to fully redeem the Note. The Note is secured by a security
interest in the Company's assets subordinate to the outstanding security
interests of the Company's senior secured creditors. The Note has a default
interest rate of eighteen percent (18%) per annum. The Company's inability to
successfully redeem the Note when due could have a material and adverse impact
on the Company's financial condition.
Due to the seasonal nature of the Company's business, the Company does not
believe the CIT Line is adequate to meet its current cash needs. The Company
must make certain cash and letters of credit payments to materials vendors now
in order to insure production for next season. Additionally, as described above,
the Company needs cash to pay off the notes coming due to the former holder of
the Company's Series B Preferred Stock and to US Bank. The Company is currently
working with its financial advisor, Ladenburg Thalmann & Co., Inc., with regard
to strategic alternatives available to the Company. Alternatives available to
the Company may or may not involve substantial dilution to existing
shareholders. Moreover, if no alternative were to be available to the Company,
the Company might then be forced to contract its business and default on
payments due, or either.
YEAR 2000
The "year 2000 problem" is the result of computer programs being written
using two digits rather than four to define the applicable year. Software
programs and systems that have date-sensitive features may recognize a date
using "00" as the year 1900 instead of the year 2000. The Company has assessed
its year 2000 needs and has purchased and is presently installing year
2000-compliant software in all its known non-compliant hardware and software
systems, which installation the Company anticipates will be completed by the
June 30, 1999 year-end. The cost of the purchase and installations of the year
2000-compliant software is anticipated to exceed $250,000. The Company is in the
process of reviewing with each of its material suppliers, service providers and
customers the steps each is taking to insure their respective computer systems
of third parties on whose commercial efforts the Company directly or indirectly
relies, will be year 2000-compliant in a timely fashion. Because the Company has
not completed its review of its material third party suppliers, service
providers and customers, it has not created a contingency plan setting forth
what steps will be taken if such third parties are not year 2000 compliant by
December 31, 1999. Based on information received from its third party vendors,
service providers and customers, the Company intends to have a contingency plan
in place by July 1999. The failure of third parties to be year 2000 compliant
could cause material delays in the design, manufacture and shipment of products,
delay in payment for products, and delay in the availability of credit of funds
necessary to operate the business of the Company. The failure of the Company's
or one or more third-party's computer systems as a result of year 2000
non-compliance may have a material adverse effect on the Company's business and
results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
None.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1997, a shareholder filed a lawsuit against the Company and four of its
current or former officers and directors, styled MURRAY V. RIDE, INC. ET AL. The
lawsuit alleges violations of certain federal securities laws and state laws,
and purports to seek unspecified monetary damages on behalf of a class of
shareholders who purchased the Company's common stock during the period of
August 10, 1995 through December 30, 1996. In August 1998, the Company, together
with the individually named defendants, entered into a Memorandum of
Understanding with the plaintiffs in the lawsuit, wherein the parties have
agreed to settle the lawsuit upon the following principal terms: (1) a
settlement fund will be created consisting of: (a) $3,000,000 cash paid by the
Company's insurance carrier; and (b) warrants to purchase 600,000 shares of the
Company's Common Stock, exercisable for a four year period ending December 31,
2002 at a price of $3.00 per share; and (2) the dismissal of the lawsuit against
all named defendants with prejudice. The Memorandum of Understanding has been
reduced to a Stipulation of Settlement, which received final approval of the
Court on March 8, 1999.
The Company is also engaged in legal proceedings against Switch
Manufacturing, Inc. alleging patent infringement and seeking monetary
damages. While the Company intends to vigorously prosecute the lawsuit, there
can be no assurance that the Company will prevail in the action. The
expenditure of significant sums in the prosecution of the action could have a
material adverse effect on the Company's financial condition and results of
operations.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
a. `ASSET SALE
Effective November 2, 1998, the Company sold the operating assets and
inventory of its Chula Vista, California-based, subsidiary SMP Clothing, Inc.
to SMP's Australian licensee for the sum of $2,081,412. The purchase price
consists of a cash payment of $250,000 and promissory notes for the balance
due on or before March 31, 1999 (extended to September 30, 1999 by agreement
of the parties) of which balance, approximately $760,000 remain due and
payable as of March 31, 1999. The notes are secured by a first position in
the assets being sold. As part of the transaction, Ride retains SMP's current
liabilities and accounts receivable which as of March 31, 1999 totalled
approximately $87,000 and $251,000 respectively.
b. SERIES B PREFERRED SHARE CONVERSION
By the terms of that certain Loan and Security Agreement and related
instruments, dated February 19, 1999, by and between the Company and the holder
of the Company's Series B 5% Cumulative Preferred Stock, Advantage Fund II, Ltd.
("Holder"), the remaining 1,500 shares of the Series B 5% Cumulative Preferred
Stock of the Company issued to Holder have been converted to debt in the form of
a promissory note in the amount of $1,725,000 (the "Note"). The Note bears
interest at the rate of ten percent (10%) per annum, payable on each March 31,
June 30, September 30 and December 31, has a term due date of June 30, 1999,
which date is automatically
13
<PAGE>
extended to September 30, 1999 in the event the Company has executed a letter of
intent for a transaction which would raise capital sufficient to fully redeem
the Note. The Note is secured by a security interest in the Company's assets
subordinate to the outstanding security interests of the Company's senior
secured creditors. The Note has a default interest rate of eighteen percent
(18%) per annum. The Company's inability to successfully redeem the Note when
due could have a material and adverse impact on the Company's financial
condition.
c. NASDAQ LISTING REQUIREMENTS
On January 21, 1999 the Company was notified by Nasdaq that the closing bid
price of its common stock was less than $1.00 for the preceding 30-day trading
period in violation of certain Nasdaq national listing standards. On June 3,
1999, the Company will present its plans to Nasdaq for maintaining the listing
requirements. There can be no assurance that the Company will continue to meet
the minimum bid price or other listing standards. If the Nasdaq determines that
the Company cannot maintain compliance, the Company's common stock will be
delisted from the Nasdaq National Market. If the common stock is delisted,
trading could continue in the over-the-counter market, but investors might find
it more difficult to trade the stock or to obtain timely market price
information.
d. THIRD-PARTY DISCUSSIONS
The Company has engaged Ladenburg Thalmann & Co., Inc. ("Ladenburg") as its
financial advisor to provide advice regarding potential strategic alternatives
available to the Company. The Company and Ladenburg continue to hold discussions
with potential investors regarding various financial arrangements with the
Company. The negotiations are ongoing and there can be no assurance that any
such arrangement will be entered into.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
Manual
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
10.84 Loan & Security Agreement, dated February 19, 1999, by and
between Ride, Inc., Ride Snowboard Company, Ride, Manufacturing,
Inc., Carve, Inc., , Smiley Hats, Inc., Ride Canada, Inc., and
Advantage Fund II Ltd.
10.85 Secured Subordinated Promissory Note, dated February 19, 1999, made by Ride, Inc.
to the order of Advantage Fund II Ltd.
10.86 Warrant to Purchase Shares of Ride, Inc. Common Stock, dated February 19, 1999,
issued by Ride, Inc. to Advantage Fund II Ltd.
10.87 Amendment to Warrant to Purchase Shares of Ride, Inc. Common Stock, dated February
19, 1999, issued by Ride, Inc. to Advantage Fund II Ltd.
10.88 Registration Rights Agreement, dated February 19, 1999, by and between Ride, Inc.
and Advantage Fund II Ltd.
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter ended September 30,
1998.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RIDE, INC.
--------------------
(Registrant)
Dated: May 14, 1999 By /s/ Robert F. Marcovitch
-------------------------------------------
Robert F. Marcovitch
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: May 14, 1999 By /s/ Gregory S. Cook
-------------------------------------------
Gregory S. Cook
CHIEF FINANCIAL OFFICER/COO
15
<PAGE>
EXHIBIT 10.84
LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and Guarantor and the
undersigned Lender concerning a loan to be made by Lender to Borrower and
Guarantor.
SECTION 1. PARTIES
1.1 The "Borrower " is Ride, Inc., a Washington corporation.
1.2 The "Guarantor" is Ride Snowboard Company, a Washington corporation, Ride
Manufacturing, Inc., a California corporation, Carve, Inc., a Washington
corporation, Smiley Hats, Inc, a Nevada corporation and Ride Canada,
Inc., and Ontario corporation and their successors and assigns. All
references to Guarantor shall mean each of them, jointly and
severally, individually and collectively, and the successors and
assigns of each.
1.3 The "Lender" is Advantage Fund II Ltd.
SECTION 2. PROMISSORY NOTE; GUARANTIES
2.1 Borrower has issued a promissory note to Lender in the aggregate amount
of $ 1,725,000 (the "Promissory Note") in consideration of Lender
tendering to Borrower for cancellation 1,500 shares of Borrower's
Series B Cumulative Convertible Preferred Stock (the "Preferred
Stock"). Such Promissory Note is in the form attached hereto as
Exhibit A. Each of the other Guarantors has agreed to guaranty payment
of the Promissory Note pursuant to a Guaranty in the form attached
hereto as Exhibit B.
2.2 Term Loan. Intentionally omitted.
2.3 Accommodations. Intentionally omitted.
SECTION 3. INTEREST AND FEES. Intentionally omitted.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 Grant of Security Interest. Subject to the Intercreditor and
Subordination Agreement dated as of even date herewith by and among
Lender, The CIT Group/Credit Finance, Inc. and U.S. Bank, to secure
the payment and performance in full of all Obligations (as defined
below), Borrower and Guarantor hereby grant to Lender a continuing
security interest in and lien upon, and a right of setoff against, and
Borrower and Guarantor hereby assign and pledge to Lender, all of the
Collateral (as defined below), including any Collateral not deemed
eligible for lending purposes.
4.2 "Obligations" shall mean any and all amounts owing on the Promissory
Note, including principal, interest, charges, fees and expenses,
however evidenced, whether arising under this Agreement or otherwise,
whether now existing or hereafter arising, whether arising before,
during or after the term of the Promissory Note or after the
commencement of any case with respect to Borrower and Guarantor under
the United States Bankruptcy Code or any similar
<PAGE>
statute.
4.3 "Collateral" shall mean all of the following property of Borrower and
Guarantor:
(a) All now owned and hereafter acquired right, title and interest of
Borrower and Guarantor in, to and in respect of all: accounts,
interests in goods represented by accounts, returned, reclaimed
or repossessed goods with respect thereto and rights as an unpaid
vendor; contract rights; chattel paper; investment property;
general intangibles (including, but not limited to, tax and duty
refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing,
trade secrets, goodwill, processes, drawings, blueprints,
customer lists, licenses, whether as licenser or licensee, chases
in action and other claims, and existing and future leasehold
interests in equipment and fixtures); documents; instruments;
letters of credit, bankers' acceptances or guaranties; cash
moneys, deposits, securities, bank accounts, deposit accounts,
credits and other property now or hereafter held in any capacity
by any depository or other institution; agreements or property
securing or relating to any of the items referred to above;
(b) All now owned and hereafter acquired right, title and interest of
Borrower and Guarantor in, to and in respect of goods, including,
but not limited to: (i) all inventory, wherever located, whether
now owned or hereafter acquired, of whatever kind, nature or
description, including all raw materials, work-in-process,
finished goods, and materials to be used or consumed in Borrower
and Guarantor's business; and all names or marks affixed to or to
be affixed thereto for purposes of selling same by the seller,
manufacturer, lessor or licenser thereof; (ii) all equipment and
fixtures, wherever located, whether now owned or hereafter
acquired, including, without limitation, all machinery,
equipment, motor vehicles, furniture and fixtures, and any and
all additions, substitutions, replacements (including spare
parts), and accessions thereof and thereto; and (iii) all
consumer goods, farm products, crops, timber, minerals or the
like (including oil and gas), wherever located, whether now owned
or hereafter acquired, of whatever kind, nature or description;
(c) All now owned and hereafter acquired right, title and interests
of Borrower and Guarantor in, to and in respect of any personal
property in or upon which Borrower and Guarantor has or may
hereafter have a security interest, lien or right of setoff;
(d) All present and future books and records relating to any of the
above including, without limitation, all computer programs,
printed output and computer readable data in the possession or
control of the Borrower and Guarantor, any computer service
bureau or other third party; and
(e) All products and proceeds of the foregoing in whatever form and
wherever located, including, without limitation, all insurance
proceeds and all claims against third parties for loss or
destruction of or damage to any of the foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION. Intentionally omitted.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
2
<PAGE>
Borrower and Guarantor hereby represent, warrant and covenant to
Lender the following, the truth and accuracy of which, and compliance with
which, shall be a condition to Lender exchanging the Preferred Stock for the
Promissory Note:
6.1 Financial and Other Reports.
(a) Borrower and Guarantor shall keep and maintain their books and
records in accordance with generally accepted accounting
principles, consistently applied. Annually, Borrower shall
deliver audited consolidated financial statements of Borrower
accompanied by the report and opinion thereon of independent
certified public accountants acceptable to Lender, as soon as
available, but in no event later than ninety (90) days after
the end of Borrower's fiscal year. Concurrent with the
delivery to Lender of such audited consolidated financials,
Borrower shall deliver to Lender internally prepared
consolidating financial statements (which shall be
consistent with the audited statements).
(b) Borrower shall deliver to Lender promptly upon Borrower's
filing thereof, copies of all reports to or other documents
filed by Borrower and Guarantor with the Securities and
Exchange Commission under the Securities Exchange Act of
1934 and the regulations promulgated thereunder, and all
reports, notices, or statements sent or received by Borrower
to or from the holders of any equity interests of Borrower
(other than routine non-material correspondence sent to
Borrower by shareholders of Borrower) or of any debt for
borrowed money of Borrower registered under the Securities
Act of 1933 or to or from the trustee under any indenture
under which the same is issued.
6.2 Trade Names. Borrower, Guarantor and Ride Canada may from time to time
render invoices under Borrower, Guarantor and Ride Canada's trade
names set forth in Section 10.5(g) and, Borrower and Guarantor
represents that: (a) each trade name does not refer to another
corporation or other legal entity, and (b) all accounts and proceeds
thereof (including any returned merchandise) invoiced under any such
trade names are owned exclusively by Borrower, Guarantor or Ride
Canada.
6.3 Losses. Borrower and Guarantor shall promptly notify Lender in writing of
any loss, damage, investigation, action, suit, proceeding or claim
relating to a material portion of the Collateral or which may result
in any material adverse change in Borrower, Guarantor's or Ride
Canada's business, assets, liabilities or condition, financial or
otherwise.
6.4 Books and Records. Borrower, Guarantor and Ride Canada's books and
records concerning accounts and the respective chief executive offices
of Borrower, Guarantor and Ride Canada are and shall be maintained
only at the address set forth in Section 10.5(d) and (e). Borrower,
Guarantor and Ride Canada's only other places of business and the only
other locations of Collateral, if any, are and shall be the addresses
set forth in Section 10.5(f) hereof, except Borrower, Guarantor or
Ride Canada may change such locations or open a new place of business
after thirty (30) days prior written notice to Lender. Borrower and
Guarantor shall execute and deliver or cause Ride Canada to execute
and deliver to Lender such financing statements, amendments, financing
documents and security and other agreements as Lender may reasonably
require.
6.5 Title. Borrower, Guarantor or Ride Canada has and at all times will
continue to have good and
3
<PAGE>
marketable title to all of the Collateral, free and clear of all liens,
security interests, claims or encumbrances of any kind except in favor of
Lender, Permitted Liens, and those, if any set forth on Schedule A
hereto. For purposes of this Section 6.5, the term "Permitted Liens"
means:
(a) Liens for taxes not delinquent or statutory liens for taxes in an
amount not to exceed $250,000 provided that the payment of such
taxes which are due and payable is being contested in good faith
and by appropriate proceedings diligently pursued and as to which
adequate financial reserves have been established on Borrower and
Guarantor's books and records and a stay of enforcement of any
such lien is in effect;
(b) Deposits under worker's compensation, unemployment insurance,
social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance
or other similar bonds for the performance of bids, tenders or
contracts (other than for the repayment of borrowed money) or to
secure statutory obligations (other than liens arising under the
Employee Retirement Income Security Act of 1974 and the
regulations promulgated thereunder or any environmental
protection statute) or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the ordinary
course of business;
(c) Liens securing the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like individuals or
entities, provided that if any such lien arises from the
nonpayment of such claims or demand when due, such claims or
demands do not exceed $50,000 in the aggregate; and
(d) Judgment and other similar liens arising in connection with court
proceedings to the extent the attachment or enforcement of such
liens would not result in an Event of Default hereunder.
6.6 Disposition of Assets. Intentionally omitted.
6.7 Insurance. Borrower and Guarantor shall at all times maintain, with
financially sound and reputable insurers, adequate insurance (including
without limitation, at the option of Lender, earthquake and flood
insurance) with respect to the Collateral and other assets. All such
insurance policies shall be in such form, substance, amounts and coverage
as may be satisfactory to Lender and shall provide for thirty (30) days'
prior written notice to Lender of cancellation or reduction of coverage.
Lender may obtain at Borrower and Guarantor's expense, any such insurance
should Borrower and Guarantor fail to do so and adjust or settle any
claim or other matter under or arising pursuant to such insurance or
to amend or cancel such insurance. Borrower and Guarantor shall
provide evidence of such insurance and a lender's loss payable
endorsement satisfactory to Lender. Borrower and Guarantor shall
deliver to Lender, in kind, all instruments representing proceeds of
insurance received by Borrower and Guarantor. Lender may apply any
insurance proceeds received at any time to the cost of repairs to or
replacement of any portion of the Collateral and/or, at Lender's
option, to payment of or as security for any of the Obligations in any
order or manner as Lender determines.
6.8 Compliance With Laws. Borrower and Guarantor are and at all times will
continue to be, and
4
<PAGE>
Borrower and Guarantor shall cause Ride Canada at all times to be, in
compliance with the requirements of all material laws, rules, regulations
and orders of any governmental authority relating to its business
(including laws, rules, regulations and orders relating to income,
withholding (including any applicable Canadian withholding laws), excise,
property and social security taxes, minimum wages, employee retirement
and welfare benefits, employee health and safety, or environmental
matters) and all material agreements or other instruments binding on
Borrower, Guarantor or Ride Canada or any of their property. Borrower
and Guarantor shall pay and discharge, and shall cause Ride Canada to
pay and discharge, all taxes, assessments and governmental charges
against Borrower, Guarantor, Ride Canada or any Collateral when due,
unless the same are being contested in good faith. Lender may
establish reserves for the amount contested and penalties which may
accrue thereon.
6.9 Accounts. Intentionally omitted.
6.10 Equipment. With respect to Borrower and Guarantor's equipment, Borrower
and Guarantor shall keep the equipment in good order and repair, and in
running and marketable condition, ordinary wear and tear excepted.
6.11 Financial Covenants. Intentionally omitted.
6.12 Affiliated Transactions. Intentionally omitted.
6.13 Fees and Expenses. Borrower and Guarantor shall pay, on Lender's demand,
all costs, expenses, filing fees and taxes payable in connection with the
preparation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights
in the Collateral, this Agreement and all other existing and future
agreements or documents contemplated herein or related hereto,
including any amendments, waivers, supplements or consents which may
hereafter be made or entered into in respect hereof, or in any way
involving claims or defense asserted by Lender or claims or defense
against Lender asserted by Borrower, Guarantor, or any third party
directly or indirectly arising out of or related to the relationship
between Borrower and Lender or Guarantor and Lender, including, but
not limited to the following, whether incurred before, during or after
the initial term of the Promissory Note or after the commencement of
any case with respect to Borrower or Guarantor under the United States
Bankruptcy Code or any similar statute: (a) all costs and expenses of
filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) all title
insurance and other insurance premiums, appraisal fees, fees incurred
in connection with any environmental report, audit or survey and
search fees; (c) all fees as then in effect relating to the wire
transfer of loan proceeds and other funds and fees then in effect for
returned checks and credit reports; (d) intentionally omitted; and (e)
the costs, disbursements and fees of in-house and outside counsel to
Lender, including but not limited to such fees and disbursements
incurred as a result of a workout, restructuring, reorganization,
liquidation, insolvency proceeding or litigation between the parties
hereto, any third party and in any appeals arising therefrom.
6.14 Further Assurances. At the request of Lender, at any time and from time
to time, at Borrower and Guarantor's sole expense, Borrower and
Guarantor shall execute and deliver or cause Ride Canada or any other
party to execute and deliver to Lender, such agreements, documents and
instruments, including waivers, consents and subordination agreements
from mortgagees or
5
<PAGE>
other holders of security interests or liens, landlords or bailees,
and do or cause to be done such further acts as Lender, in its
discretion, deems necessary or desirable to create, preserve, perfect
or validate any security interest of Lender in the Collateral and
otherwise to effectuate the provisions and purposes of this Agreement.
Borrower and Guarantor hereby authorize Lender to file financing
statements or amendments against Borrower and Guarantor in favor of
Lender with respect to the Collateral, without Borrower and
Guarantor's signature and to file as financing statements any carbon,
photographic or other reproductions of this Agreement or any financing
statements signed by Borrower and Guarantor.
6.15 Environmental Condition. None of Borrower and Guarantor's properties or
assets has ever been designated or identified in any manner pursuant to
any environmental protection statute as a hazardous waste or hazardous
substance disposal site, or a candidate for closure pursuant to any
environmental protection statute. No lien arising under any
environmental protection statute has attached to any revenues or to any
real or personal property owned by Borrower or Guarantor. Neither
Borrower nor Guarantor has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal
or state governmental agency with respect to any action or omission by
Borrower or Guarantor resulting in the releasing, or otherwise exposing
of hazardous waste or hazardous substances into the environment.
Borrower and Guarantor are and will continue to be in compliance (in
all material respects) with all statutes, regulations, ordinances and
other legal requirements pertaining to the production, storage,
handling, treatment, release, transportation or disposal of any
hazardous waste or hazardous substance.
6.16 Year 2000 Compliance. The Borrower and Guarantor shall take all action
necessary to assure that its and Ride Canada's computer-based systems
are able to effectively process data including dates and date sensitive
functions. The Borrower and Guarantor represent and warrant that the
Year 2000 problem, as it relates to its and Ride Canada's computer
based systems will not result in a material adverse effect on the
Borrower, Guarantor or Ride Canada's business condition. Upon request,
the Borrower and Guarantor shall provide assurance acceptable to the
Lender that the Borrower, Guarantor and Ride Canada's computer systems
and software are or will be Year 2000 compliant on a timely basis. The
Borrower and Guarantor shall immediately advise Lender in writing of
any material changes in the Borrower, Guarantor or Ride Canada's Year
2000 plan, timetable or budget.
6.17 State of Incorporation. If Borrower and Guarantor is a corporation, it
is duly organized, existing and in good standing under the laws of the
state set forth in Section 10.5(h).
6.18 New Capital. Borrower and Guarantor shall use the capital obtained from
any sale of stock or other equity to pay any Obligations owing to the
Lender. Borrower covenants not to issue any stock or equity without
providing Lender with three days prior written notice.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. All Obligations shall be immediately due and payable,
without notice or demand, upon or at any time after the occurrence or
existence of any one or more of the following "EVENTS OF DEFAULT":
(a) Borrower and Guarantor fails to pay when due any of the
Obligations;
6
<PAGE>
(b) Any representation, warranty or statement of fact made by
Borrower and Guarantor to Lender in this Agreement or any other
agreement, schedule, confirmatory assignment or otherwise, or to
any affiliate of Lender, shall prove inaccurate or misleading;
(c) Guarantor revokes, terminates or fails to perform any of the
terms of the Guaranty;
(d) Borrower or Guarantor dies or ceases to exist or the usual
business of Borrower or Guarantor ceases or is suspended;
(g) Borrower or Guarantor becomes insolvent, makes an assignment for
the benefit of creditors, makes or sends notice of a bulk
transfer or calls a general meeting of its creditors or principal
creditors;
(h) Any petition or application for any relief under the bankruptcy
laws of the United States now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now
or hereafter in effect (whether at law or in equity) is filed by
or against Borrower or Guarantor;
(i) The indictment or threatened indictment of Borrower or Guarantor
under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against Borrower or
Guarantor, pursuant to which statute or proceedings the penalties
or remedies sought or available include forfeiture of any of the
property of Borrower or Guarantor which Lender believes may have
a material adverse effect on the Collateral or Borrower and
Guarantor's business;
7.2 Remedies. Upon the occurrence of an Event of Default and at any time
thereafter, and subject to the rights of other creditors pursuant to
the Subordination Agreement, Lender shall have all rights and remedies
provided in this Agreement, any other agreements between Borrower,
Guarantor and Lender, the Uniform Commercial Code and other applicable
law, all of which rights and remedies may be exercised without notice
to Borrower or Guarantor, all such notices being hereby waived, except
such notice as is expressly provided for hereunder or is not waiveable
under applicable law. All rights and remedies of Lender are cumulative
and not exclusive and are enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more
occasions and in any order Lender may determine. Without limiting the
foregoing, and subject to the rights of other creditors pursuant to
the Subordination Agreement, Lender may (a) accelerate the payment of
all obligations and demand immediate payment thereof to Lender, (b)
with or without judicial process or the aid or assistance of others,
enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (c)
require Borrower and Guarantor, at Borrower and Guarantor's expense,
to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (d) collect,
foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (e) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, by public or private
sales at any exchange, broker's board, any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for
cash, upon credit or for future delivery, with the Lender having the
right to purchase the whole or any part of the Collateral at any such
public sale, all of the foregoing being free from any right or equity
of redemption of
7
<PAGE>
Borrower and Guarantor, which right or equity of redemption is hereby
expressly waived and released by Borrower and Guarantor. If any of the
Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, ten (10) days prior
notice by Lender to Borrower and Guarantor designating the time and
place of any public sale or the time after which any private sale or
other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower and Guarantor
waive any other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower and Guarantor waive the posting of any
bond which might otherwise be required.
7.3 Application of Proceeds. Lender may apply the cash proceeds of
Collateral other than accounts actually received by Lender from any
sale, lease, foreclosure or other disposition of the Collateral to
payment of any of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrower and
Guarantor shall remain liable to Lender for the payment of any
deficiency together with interest at the highest rate provided for
herein and all costs and expenses of collection or enforcement,
including reasonable attorneys' fees and legal expenses.
7.4 Lender's Cure of Third Party Agreement Default. Lender may, at its
option, cure any default by Borrower and Guarantor under any agreement
with a third party or pay or bond on appeal any judgment entered
against Borrower and Guarantor, discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with
respect to the Collateral and pay any amount, incur any expense or
perform any act which, in Lender's sole judgment, is necessary or
appropriate to preserve, protect, insure, maintain, or realize upon the
Collateral. Lender may charge Borrower and Guarantor's loan account for
any amounts so expended, such amounts to be repayable by Borrower and
Guarantor on demand. Lender shall be under no obligation to effect such
cure, payment, bonding or discharge, and shall not, by doing so, be
deemed to have assumed any obligation or liability of Borrower and
Guarantor.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 JURY TRIAL WAIVER. BORROWER, GUARANTOR AND LENDER EACH WAIVE ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF
THEM AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTIOUS
CONDUCT BY BORROWER, GUARANTOR OR LENDER, OR, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN
BORROWER, GUARANTOR AND LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR
LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
8.2 Counterclaims. Borrower and Guarantor waive all rights to interpose any
claims, deductions, setoffs or counterclaims of any kind, nature or
description in any action or proceeding instituted by Lender with
respect to this Agreement, the Obligations, the Collateral or any
matter arising therefrom or relating thereto, except compulsory
counterclaims.
8.3 Jurisdiction. Borrower and Guarantor hereby irrevocably submit and
consent to the nonexclusive jurisdiction of the State and Federal
Courts located in the State of Washington and
8
<PAGE>
any other State where any Collateral is located with respect to any
action or proceeding arising out of this Agreement, the Obligations,
the Collateral or any matter arising therefrom or relating thereto. In
any such action or proceeding, Borrower and Guarantor waive personal
service of the summons and complaint or other process and papers
therein and agrees that the service thereof may be made by mail
directed to Borrower and Guarantor at its chief executive office set
forth herein or other address thereof of which Lender has received
notice as provided herein, service to be deemed complete five (5) days
after mailing, or as permitted under the rules of either of said
Courts. Any such action or proceeding commenced by Borrower and
Guarantor against Lender will be litigated only in a Federal Court
located in the district, or a State Court in the State and County, in
which the office of Lender designated in Section 10.5(a) is located
and Borrower and Guarantor waive any objection based on FORUM NON
CONVENIENS and any objection to veque in connection therewith.
8.4 No Waiver by Lender. Lender shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its
rights or remedies unless such waiver shall be in writing and signed by
an authorized officer of Lender. A waiver by Lender of any right or
remedy on any one occasion shall not be construed as a bar to or waiver
of any such right or remedy which Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective upon execution and
delivery by Borrower, Guarantor and Lender and shall continue in full
force and effect until all Obligations due under the Promissory Note
are paid in full.
9.2 Early Termination. Intentionally omitted.
9.3 Termination Indemnity Deposit. Intentionally omitted.
9.4 Notices. Except as otherwise provided, all notices, requests and
demands hereunder shall be (a) made to Lender at its address set forth
in Section 10.5(a) and to Borrower and Guarantor at its chief executive
office set forth in Section 10.5(d), or to such other address as either
party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if by hand,
immediately upon delivery; if by telex, telegram or telecopy (fax),
immediately upon receipt; if by overnight delivery service, one day
after dispatch; and if by first class or certified mail, three (3) days
after mailing.
9.5 Severability. If any provision of this Agreement is held to be invalid
or unenforceable, such provision shall not affect this Agreement as a
whole, but this Agreement shall be construed as though it did not
contain the particular provision held to be invalid or unenforceable.
9.6 Entire Agreement; Amendments; Assignments. This Agreement contains the
entire agreement of the parties as to the subject matter hereof, all
prior commitments, proposals and negotiations concerning the subject
matter hereof being merged herein. Neither this Agreement nor any
provision hereof shall be amended, modified or discharged orally or by
course of conduct, but only by a written agreement signed by an
authorized officer of Lender. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns, except that any obligation of Lender under this
Agreement shall not be
9
<PAGE>
assignable nor inure to the successors and assigns of Borrower and
Guarantor.
9.7 Discharge of Borrower and Guarantor. No termination of this Agreement
shall relieve or discharge Borrower and Guarantor of its Obligations,
grants of Collateral, duties and covenants hereunder or otherwise until
such time as all Obligations to Lender have been indefeasibly paid and
satisfied in full, including, without limitation, the continuation and
survival in full force and effect of all security interests and liens
of Lender in and upon all then existing and thereafter-arising or
acquired Collateral and all warranties and waivers of Borrower and
Guarantor.
9.8 Usage. All terms used herein which are defined in the Uniform
Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement and all references to the singular or plural
herein shall also mean the plural or singular, respectively.
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 Intentionally omitted.
10.2 Term Loan. Intentionally Omitted
10.3 Interest, Fees & Charges. Intentionally omitted.
10.4 Financial Covenants. Intentionally omitted.
10.5 (a) Lender's Office: c/o Genesee International, Inc.
10500 N.E. 8th Street, Suite 1920
Bellevue, WA 98004
(b) Lender's Bank: Intentionally omitted
(c) Borrower and Guarantor:Ride, Inc.
Ride Snowboard Company
Ride Manufacturing, Inc.
Smiley Hats, Inc.
Carve, Inc.
Ride Canada, Inc.
(d) Borrower and Guarantors Chief Executive Office:
8160-304th Avenue Preston, Washington 98050
(e) Locations of Eligible Inventory Collateral:
Smiley Hats, Inc.
423 Obermyer
Sparks, NV 89
Ride Manufacturing, Inc.
10
<PAGE>
150 Klug Circle
Corona, CA 91720
Ride Manufacturing, Inc.
248 Glider Circle
Corona, CA 91
Ride Canada,
185 Carlingview, Suite #1
Etobicoke, ON
M9W 5E8
(f) Borrower and Guarantor's Other Offices and Location of
Collateral:
WMI - Kamloop
B.C., Canada
Expeditors - Brussels, Belgium
(g) Borrower and Guarantor's Trade Names for Invoicing:
Ride Sports;
Ride Snowboards;
Smiley Hats;
Ride Canada
(h) Borrower and Guarantors' State of Incorporation:
Ride Snowboards, Washington
Ride Manufacturing, California
Smiley Hats, Nevada
Carve, Inc. Washington
Ride Canada, Inc., Ontario, Canada
(i) Judgment Amount Intentionally omitted
10.6 Term: Intentionally omitted.
11
<PAGE>
IN WITNESS WHEREOF, Borrower, Guarantor and Lender have duly executed
this Agreement this ___day of February, 1999.
LENDER: BORROWER:
ADVANTAGE FUND II LTD. RIDE, INC.
By: By:
Title: Title:
GUARANTORS:
RIDE MANUFACTURING, INC.
By:
Title:
RIDE SNOWBOARD COMPANY
By :
Title:
SMILEY HATS, INC.
By:
Title:
RIDE CANADA, INC.
By:
CARVE, INC.
By:
Title:
12
<PAGE>
SCHEDULE A
PERMITTED LIENS
The security and other interests reflected in each of the following
financing statements shall constitute Permitted Liens:
1. UCC-1 Financing Statement No. 95-345-0499 filed by Textron
Financial Corporation on December 11, 1995 with the Washington
State Department of Licensing;
2. UCC-1 Financing Statement No. 98-110-0505 filed by Key Corp
Leasing, a Division of Key Corporate Capital Inc. on April 20,
1998 with the Washington State Department of Licensing;
3. UCC-1 Financing Statement No. 98-110-0506 filed by Key Corp
Leasing, a Division of Key Corporate Capital Inc. on April 20,
1998 with the Washington State Department of Licensing;
4. UCC-1 Financing Statement No. 98-110-0507 filed by Key Corp
Leasing, a Division of Key Corporate Capital Inc. on April 20,
1998 with the Washington State Department of Licensing;
5. UCC-1 Financing Statement No. 98-113-0231 filed by Key Corp
Leasing, a Division of Key Corporate Capital Inc. on April 23,
1998 with the Washington State Department of Licensing;
6. UCC-1 Financing Statement No. 98-191-0124 filed by Key Corp
Leasing, a Division of Key Corporate Capital Inc. on July 10,
1998 with the Washington State Department of Licensing;
7. UCC-1 Financing Statement No. 98-182-0122 filed by U.S. Bank,
N.A., on July 1, 1998 with the Washington State Department
of Licensing;
8. UCC-1 Financing Statement No. 97-258-0047 filed by U.S. Bank, on
September 15, 1997 with the Washington State Department of
Licensing;
9. UCC-1 Financing Statement No. 97-192-0335 filed by U.S. Bank, on
July 11, 1997 with the Washington State Department of Licensing;
10. UCC-1 Financing Statement No. 94-138-0019 filed by U.S. Bank
of Washington N.A., on May 18, 1994 with the Washington State
Department of Licensing;
11. UCC-1 Financing Statement No. 96-190-0273 filed by U.S. Bank
of Washington N.A., on July 8, 1996 with the Washington State
Department of Licensing;
12. UCC-1 Financing Statement No. 9716048 filed by U.S. Bank, on
September 22, 1997 with the Nevada Secretary of State.
13. UCC-1 Financing Statement No. 98-224-0038 filed by The CIT
Group/Credit Finance,
13
<PAGE>
Inc. on August 12, 1998 with the Washington State Department of
Licensing;
14. UCC-1 Financing Statement No. 98-224-0039 filed by The CIT
Group/Credit Finance on August 12, 1998 with the Washington
State Department of Licensing;
15. UCC-1 Financing Statement No. 98-224-0036 filed by The CIT
Group/Credit Finance on August 12, 1998 with the Washington
State Department of Licensing;
16. UCC-1 Financing Statement No. 98-224-0034 filed by The CIT
Group/Credit Finance, Inc. on August 12, 1998 with the
Washington State Department of Licensing;
17. UCC-1 Financing Statement No. 98-224-0037 filed by The CIT
Group/Credit Finance, Inc. on August 12, 1998 with the
Washington State Department of Licensing;
18. UCC-1 Financing Statement No. 9812925 filed by The CIT
Group/Credit Finance, Inc., on August 12, 1998 with the Nevada
Secretary of State.
19. UCC-1 Financing Statement No. 9812926 filed by The CIT
Group/Credit Finance, Inc., on August 12, 1998 with the Nevada
Secretary of State.
20. UCC-1 Financing Statement No. 9812928 filed by The CIT
Group/Credit Finance, Inc., on August 12, 1998 with the Nevada
Secretary of State.
21. UCC-1 Financing Statement No. 9812929 filed by The CIT
Group/Credit Finance, Inc., on August 12, 1998 with the Nevada
Secretary of State.
22. UCC-1 Financing Statement No. 9822360913 filed by The CIT
Group/Credit Finance, Inc., on August 11, 1998 with the
California Secretary of State.
23. UCC-1 Financing Statement No. 9822360932 filed by The CIT
Group/Credit Finance, Inc., on August 11, 1998 with the
California Secretary of State.
24. UCC-1 Financing Statement No. 9822361063 filed by The CIT
Group/Credit Finance, Inc., on August 11, 1998 with the
California Secretary of State.
25. UCC-1 Financing Statement No. 9719860591 filed by U.S. Bank
on July 14, 1997 with the California Secretary of State.
26. UCC-1 Financing Statement No. 95-032-0014 filed by Hongkong
Bank of Canada on February 1, 1995 with the Washington Secretary
of State.
27. UCC-1 Financing Statement No. 96-19760019 filed by U.S. Bank
on July 10, 1996 with the California Secretary of State.
14
<PAGE>
EXHIBIT 10.85
PAYMENTS REQUIRED TO BE MADE HEREUNDER ARE SUBORDINATED PURSUANT TO CERTAIN
SUBORDINATION AGREEMENTS DESCRIBED HEREIN.
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR IS SUCH REGISTRATION
CONTEMPLATED. THIS NOTE MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED AT ANY TIME WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER
OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY
TO IT AND TO ITS COUNSEL TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN
VIOLATION OF THE ACT, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER.
SECURED SUBORDINATED PROMISSORY NOTE
U.S. $1,725,000 February 19, 1999
Bellevue, Washington
1. PROMISE TO PAY. FOR VALUE RECEIVED, the undersigned ("Maker"),
promises to pay to the order of Advantage Fund II Ltd., a British Virgin
Islands corporation ("Holder"), via wire transfer in accordance with written
instructions to be provided by Holder not less than three business days
prior to any payment date hereunder, the principal sum of U.S. One Million
Seven Hundred Twenty-Five Thousand Dollars and No/100 (US $1,725,000.00),
together with interest on the unpaid principal balance thereof, as provided
below.
2. INTEREST. The outstanding principal balance of this Note shall
bear interest at the rate of ten percent (10%) per annum from the date hereof
until paid in full (the "Interest Rate"). Interest shall be computed on a
daily basis and shall be due and payable in arrears on each March 31, June
30, September 30 and December 31, commencing March 31, 1999. Interest due
hereunder is payable in cash.
3. PAYMENT. Principal and any accrued but unpaid interest shall be due
and payable in full on June 30, 1999 ("Maturity Date"); provided the Maturity
Date shall be automatically extended to September 30, 1999 in the event
that on or before June 30, 1999 Maker and one or more third parties have
executed a letter of intent that would provide the capital necessary to
redeem this Note. Maker hereby covenants to apply the proceeds of any such
financing or any other issuance of stock or equity to redeem this Note in
accordance with Section 6.18 of the Loan and Security Agreement dated as of
even date hereof among Maker, certain subsidiaries of Maker and Holder (the
"Loan and Security Agreement"). Payment of principal and interest shall be
made only if and to the extent that payment of a distribution to
shareholders could be made under Section 23B.06.400 of the Washington
Business Corporation Act at the time of such payment of principal or
interest.
<PAGE>
4. DEFAULT INTEREST. If Maker shall fail to pay any interest or
principal owing under this Note within five (5) days of the respective payment
date, then such unpaid amount shall bear interest at an interest rate equal to
the Interest Rate plus eight percent (8%).
5. ATTORNEYS' FEES AND COSTS. If this Note is placed in the hands of an
attorney for collection, Maker promises to pay Holder's reasonable
attorneys' fees and all costs actually incurred in the collection process.
Such fees and costs shall become part of the indebtedness evidenced by this
Note, and shall bear interest at the Interest Rate.
6. PREPAYMENT. Maker may prepay all or any portion of the sums due under
this Note without notice or penalty at any time.
7. SECURITY AND SUBORDINATION. The indebtedness evidenced by this Note
is secured by, and this Note is the "Promissory Note" referred to in, the Loan
and Security Agreement. Pursuant to that certain Intercreditor and
Subordination Agreement dated as of the date hereof among Maker, Holder,
The CIT Group/Credit Finance, Inc. and U.S. Bank National Association (the
"Subordination Agreement"), the indebtedness evidenced by this Note is
subordinated and junior (i) in right of payment to the payment of certain
Senior Indebtedness and Senior Subordinated Indebtedness (as defined in the
Subordination Agreement) and (ii) to the enforcement of rights and remedies
of the Senior Indebtedness and Senior Subordinated Indebtedness. Pursuant
to that certain Subordination Agreement dated as of the date hereof between
Maker, Holder, Mark and Abby Salter and the Salter Family Trust (the
"Salter Subordination Agreement"), the indebtedness evidenced by this Note
is subordinated and junior (i) in right of payment to the payment of
certain Salter Indebtedness (as defined in the Salter Subordination
Agreement) and (ii) to the enforcement of rights and remedies of the Salter
Indebtedness.
8.. LIABILITY. Maker hereby waives demand, presentment for payment,
protest and notice of protest and of nonpayment and agrees that any
modification or extension of the terms of payment made by Holder, with or
without notice, at the request of Maker or otherwise, or any release of all or
any portion of the security from the lien of Holder's security interest
therein, shall not diminish or impair Maker's liability for the payment of all
amounts due hereunder.
9. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and inure to
the benefit of the Maker and the Holder and their respective successors
and assigns.
10. GOVERNING LAW. This Note shall be governed by, and construed and
interpreted in accordance with the laws of the State of Washington without
giving effect to conflict of laws principles of such state.
11. SEVERABILITY. If any provisions hereof or of any of the instruments
securing this Note is invalid or unenforceable in any jurisdiction, the
other provisions hereof and thereof shall remain in full force and effect
in such jurisdiction and the remaining provisions hereof shall be liberally
construed in favor of the Holder hereof in order to effectuate the
provisions hereof and of said instruments; and the invalidity of any
provision hereof or thereof in any jurisdiction shall not affect the
validity or enforceability of any other provisions or of such provisions in
any other jurisdiction.
12. MAXIMUM INTEREST RATE. Notwithstanding anything to the contrary
contained in this Note, in no event shall the total of all interest or
other charges payable under this Note that are or
2
<PAGE>
could be held to be in the nature of interest exceed the maximum rate
permitted to be charged by applicable law.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
MAKER:
RIDE, INC.
By: -------------------------------
Robert F. Marcovitch, President
3
<PAGE>
EXHIBIT 10.86
THIS WARRANT AND THE SHARES OF COMMON STOCK OF RIDE, INC. TO BE ISSUED UPON ANY
EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THEY MAY NOT BE OFFERED OR TRANSFERRED
BY SALE, ASSIGNMENT, PLEDGE OR OTHERWISE UNLESS (I) A REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT IS IN EFFECT OR (II) THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT.
WARRANT
TO PURCHASE SHARES
OF
COMMON STOCK
OF
RIDE, INC.
FEBRUARY 19, 1999
This certifies that, for value received, Advantage Fund II Ltd.
("Advantage") and any subsequent transferee pursuant to the terms of the
Agreement (as defined below) of even date and this Warrant (each, a "Holder") is
entitled to purchase, subject to the provisions of this Warrant, from Ride,
Inc., a Washington corporation (the "Issuer"), at any time or from time to time
on or after the date hereof and on or before 5:00 p.m., P.S.T. on February 19,
2004 (the "Expiration Date"), One Hundred Thousand (100,000) fully paid and
nonassessable shares of common stock (the "Common Stock"), of the Issuer at an
exercise price equal to $1.25 (the "Exercise Price") (such shares of Common
Stock and other securities issued and issuable upon exercise of this Warrant,
the "Warrant Shares").
Section 1. DEFINITIONS. Except as otherwise specified herein, terms
defined herein shall have the meanings assigned to them in the Subscription
Agreement of even date herewith by and between Advantage and the Issuer (the
"Agreement").
Section 2. EXERCISE OF WARRANT.
(a) Subject to the provisions hereof, this Warrant may be
exercised, in whole or in part, but not as to a fractional share, at any
time or from time to time on or after the date hereof and on or before the
Expiration Date, by presentation and
<PAGE>
surrender hereof to the Issuer or the Issuer's Transfer Agent for this
Warrant which, in accordance with the provisions of Section 9 hereof, is
then effective for notices to the Issuer or its Transfer Agent, with the
Subscription Form annexed hereto as SCHEDULE ONE, duly executed and
accompanied by payment to the Issuer as further set forth below in this
Section 2, for the account of the Issuer, of the Exercise Price for the
number of Warrant Shares specified in such form. If this Warrant should be
exercised in part only, the Issuer shall, upon surrender of this Warrant,
execute and deliver a new Warrant evidencing the rights of the Holder
hereof to purchase the balance of the Warrant Shares purchasable hereunder.
The Issuer shall maintain at its principal place of business a register for
the registration of this Warrant and registration of transfer of this
Warrant. The Exercise Price for the number of Warrant Shares specified in
the Subscription Form shall be payable in United States Dollars by
certified or official bank check payable to the order of the Issuer or by
wire transfer of immediately available funds to an account specified by the
Issuer for that purpose.
(b) Certificates representing Warrant Shares shall bear the
following restrictive legend:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"). They may not be
offered or transferred by sale, assignment, pledge or otherwise unless (i) a
registration statement for the securities under the Securities Act is in effect
or (ii) the corporation has received an opinion of counsel to the effect that
such registration is not required under the Securities Act."
(c) Notwithstanding any provisions herein to the contrary, if
the Fair Market Value (hereinafter defined) of one share of Common
Stock is greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being) by surrender of this Warrant at the
principal office of the Issuer or its Transfer Agent, together with the
properly endorsed Subscription Form in which event the Issuer shall issue
to the Holder a number of shares of Common Stock computed using the
following formula:
Y (A-B)
------
X =
A
Where X = the number of shares of
Common Stock to be issued to the Holder
Y = the number of shares
of Common Stock purchasable under the Warrant or,
if only a portion of the Warrant is being exercised,
<PAGE>
the portion of the Warrant being exercised (at the
date of such calculation)
A = the Fair Market Value of
one share of the Issuer's Common Stock (at the
date of such calculation)
B = Exercise Price (as
adjusted to the date of such calculation)
For purposes of the above calculation, Fair Market Value of one share of
Common Stock shall be the average closing bid price (as reported by The
Nasdaq Stock Market) of the Issuer's Common Stock for the five (5)
consecutive trading days ending on the trading day immediately preceding
the date of the Election to Purchase.
(d) Notwithstanding any other provision of this Warrant, in no
event shall the holder of this Warrant be entitled at any time to purchase
a number of shares of Common Stock on exercise of this Warrant in excess of
that number of shares upon purchase of which the sum of (1) the number of
shares of Common Stock beneficially owned by such holder and any person
whose beneficial ownership of shares of Common Stock would be aggregated
with such holder's beneficial ownership of shares of Common Stock for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 13d-3 thereunder (each an
"Aggregated Person" and collectively, the "Aggregated Persons") (other than
shares of Common Stock deemed beneficially owned through the ownership of
the unexercised portion of this Warrant, any warrant containing a
restriction similar to this Section 2(d) and shares of Series B Cumulative
Convertible Preferred Stock, no par value per share, of the Company (the
"Series B Convertible Preferred Stock") beneficially owned by all such
Aggregated Persons) and (2) the number of shares of Common Stock issuable
upon exercise of the portion of this Warrant with respect to which the
determination in this sentence is being made, would result in beneficial
ownership by any Aggregated Person of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d)
of the Exchange Act and Rule 13d-3 thereunder, except as otherwise provided
in clause (1) of the immediately preceding sentence.
Section 3. RESERVATION OF SHARES; PRESERVATION OF RIGHTS OF HOLDER. The
Issuer hereby agrees that there shall be reserved for issuance and/or delivery
upon exercise of this Warrant, such number of Warrant Shares as shall be
required for issuance or delivery upon exercise of this Warrant. The Warrant
surrendered upon exercise shall be canceled by the Issuer. After the Expiration
Date, no shares of Common Stock shall be subject to reservation in respect of
this Warrant. The Issuer further agrees (i) that it will not, by amendment of
its Articles of Incorporation or through reorganization, consolidation, merger,
dissolution or
<PAGE>
sale of assets, or by any other voluntary act, avoid or seek to avoid the
observation or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Issuer, (ii) promptly
to take such action as may be required of the Issuer to permit the Holder to
exercise this Warrant and the Issuer duly and effectively to issue shares of
its Common Stock or other securities as provided herein upon the exercise
hereof, and (iii) promptly to take all action required or provided herein to
protect the rights of the Holder granted hereunder against dilution. Without
limiting the generality of the foregoing, should the Warrant Shares at any
time consist in whole or in part of shares of capital stock having a par
value, the Issuer agrees that before taking any action which would cause an
adjustment of the Exercise Price so that the same would be less than the then
par value of such Warrant Shares, the Issuer shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Issuer may validly and legally issue fully paid and nonassessable shares of
such Common Stock at the Exercise Price as so adjusted. The Issuer further
agrees that it will not establish a par value for its Common Stock while this
Warrant is outstanding in an amount greater than the Exercise Price.
Section 4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. Any
attempted transfer of this Warrant, the Warrant Shares or any new Warrant not in
accordance with this Section shall be null and void, and the Issuer shall not in
any way be required to give effect to such transfer. No transfer of this Warrant
shall be effective for any purpose hereunder until (i) written notice of such
transfer and of the name and address of the transferee has been received by the
Issuer, and (ii) the transferee shall first agree in a writing deposited with
the Secretary of the Issuer to be bound by all the provisions of this Warrant
and the Agreement. Upon surrender of this Warrant to the Issuer by any
transferee authorized under the provisions of this Section 4, the Issuer shall,
without charge, execute and deliver a new Warrant registered in the name of such
transferee at the address specified by such transferee, and this Warrant shall
promptly be canceled. The Issuer may deem and treat the registered holder of any
Warrant as the absolute owner thereof for all purposes, and the Issuer shall not
be affected by any notice to the contrary. Any Warrant, if presented by an
authorized transferee, may be exercised by such transferee without prior
delivery of a new Warrant issued in the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Issuer will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute a separate contractual obligation on the
part of the Issuer, whether or not the Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
Section 5. RIGHTS OF HOLDER. Neither a Holder nor his transferee by
devise or the laws of descent and distribution or otherwise shall be, or have
any rights or privileges of, a shareholder of the Issuer with respect to any
Warrant Shares, unless and until certificates representing such Warrant Shares
shall have been issued and delivered thereto.
<PAGE>
Section 6. ADJUSTMENTS IN EXERCISE PRICE AND WARRANT SHARES. The
Exercise Price and Warrant Shares shall be subject to adjustment from time to
time as provided in this Section 6.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the
record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Common Stock, and the
Exercise Price shall be adjusted so that the aggregate amount payable for
the purchase of all Warrant Shares issuable hereunder immediately after the
record date for such recapitalization shall equal the aggregate amount so
payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or makes
a distribution to holders of Common Stock, and such dividend or
distribution is payable or made in Common Stock or securities convertible
into or exchangeable for Common Stock, or rights to purchase Common Stock
or securities convertible into or exchangeable for Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common
Stock shall be entitled to receive such dividend or distribution, in
proportion to the increase in the number of outstanding shares (and shares
of Common Stock issuable upon conversion of all such securities convertible
into Common Stock) of Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Warrant Shares
issuable hereunder immediately after the record date for such dividend or
distribution shall equal the aggregate amount so payable immediately before
such record date.
(c) If the Issuer declares a dividend on Common Stock (other
than a dividend covered by subsection (b) above) or distributes to holders
of its Common Stock, other than as part of its dissolution or liquidation
or the winding up of its affairs, any shares of its capital stock, any
evidence of indebtedness or any cash or other of its assets (other than
Common Stock or securities convertible into or exchangeable for Common
Stock), the Holder shall receive notice of such event as set forth in
Section 8 below.
(d) In case of any consolidation of the Issuer with, or merger
of the Issuer into, any other corporation (other than a consolidation or
merger in which the Issuer is the continuing corporation and in which no
change, other than the issuance of Common Stock in connection with (i) the
merger of a third corporation into the Issuer or (ii) the acquisition of
all or substantially all of the assets or equity securities of a third
corporation, occurs in its outstanding Common Stock), or in case of any
sale or transfer of all or substantially all of the assets of the Issuer,
or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of
a third corporation into the Issuer,
<PAGE>
except where the Issuer is the surviving entity and no change occurs in its
outstanding Common Stock), the corporation formed by such consolidation or
the corporation resulting from such merger or the corporation which shall
have acquired such assets or securities of the Issuer, as the case may be,
shall execute and deliver to the Holder simultaneously therewith a new
Warrant, satisfactory in form and substance to the Holder, together with
such other documents as the Holder may reasonably request, entitling the
Holder thereof to receive upon exercise of such Warrant the kind and amount
of shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer, or exchange of securities, or upon
the dissolution following such sale or other transfer, by a holder of the
number of shares of Common Stock purchasable upon exercise of this Warrant
immediately prior to such consolidation, merger, sale, transfer, or
exchange. Such new Warrant shall contain the same basic other terms and
conditions as this Warrant and shall provide for adjustments which, for
events subsequent to the effective date of such written instrument, shall
be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 6. The above provisions of this paragraph (d) shall
similarly apply to successive consolidations, mergers, exchanges, sales or
other transfers covered hereby.
(e) If the Issuer shall, at any time before the expiration of
this Warrant, sell all or substantially all of its assets and distribute
the proceeds thereof to the Issuer's shareholders, the Holder shall, upon
exercise of this Warrant have the right to receive, in lieu of the shares
of Common Stock of the Issuer that the Holder otherwise would have been
entitled to receive, the same kind and amount of assets as would have been
issued, less the Exercise Price, distributed or paid to the Holder upon any
such distribution with respect to such shares of Common Stock of the Issuer
had the Holder been the holder of record of such shares of Common Stock
receivable upon exercise of this Warrant on the date for determining those
entitled to receive any such distribution. If any such distribution results
in any cash distribution in excess of the Exercise Price provided by this
Warrant for the shares of Common Stock receivable upon exercise of this
Warrant, the Holder may, at the Holder's option, exercise this Warrant
without making payment of the Exercise Price and, in such case, the Issuer
shall, upon distribution to the Holder, consider the Exercise Price to have
been paid in full and, in making settlement to the Holder, shall obtain
receipt of the Exercise Price by deducting an amount equal to the Exercise
Price for the shares of Common Stock receivable upon exercise of this
Warrant from the amount payable to the Holder.
(f) If an event occurs which is similar in nature to the events
described in this Section 6, but is not expressly covered hereby, the Board
of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock of the
Issuer as the same exists at the Closing Date or as such stock may be
constituted from time to time, except that for the purpose of this Section
6, the term "Common
<PAGE>
Stock" shall only include any stock of any class of the Issuer which has no
preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Issuer and which is not subject to redemption by the Issuer.
(h) If required by the Holder, the Issuer shall retain a firm
of independent public accountants of recognized standing (who may be any
such firm regularly employed by the Issuer) to make any computation
required under this Section 6, and a certificate signed by such firm shall
be conclusive evidence of the correctness of any computation made under
this Section 6.
(i) Whenever the number of Warrant Shares or the Exercise Price
shall be adjusted as required by the provisions of this Section 6, the
Issuer forthwith shall file in the custody of its secretary or an assistant
secretary, at its principal office, and furnish to each Holder hereof, a
certificate prepared in accordance with paragraph (h) above, showing the
adjusted number of Warrant Shares and the Exercise Price and setting forth
in reasonable detail the circumstances requiring the adjustments.
(j) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of the
Issuer.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 6 need be made if such adjustment would amount
to a change in such Exercise Price of less than $.01; PROVIDED HOWEVER,
that the amount by which any adjustment is not made by reason of the
provisions of this paragraph (k) shall be carried forward and taken into
account at the time of any subsequent adjustment in the Exercise Price.
(l) If an adjustment is made under this Section 6 and the event
to which the adjustment relates does not occur, then any adjustments in
accordance with this Section 6 shall be readjusted to the Exercise Price
and the number of Warrant Shares which would be in effect had the earlier
adjustment not been made.
Section 7. TAXES ON ISSUE OR TRANSFER OF COMMON STOCK AND WARRANT. The
Issuer shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of shares of Common Stock or
other securities on the exercise of this Warrant. The Issuer shall not be
required to pay any tax which may be payable in respect of any transfer of this
Warrant or in respect of any transfers involved in the issue or delivery of
shares or the exercise of this Warrant in a name other than that of the Holder
and the person requesting such transfer, issue or delivery shall be responsible
for the payment of any such tax (and the Issuer shall not be required to issue
or deliver said shares until such tax has been paid or provided for).
Section 8. NOTICE OF ADJUSTMENT. So long as this Warrant shall be
outstanding, (a) if the Issuer shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Issuer shall offer generally
to the holders of Common Stock the right to subscribe to or purchase any shares
of any class of Common Stock or securities
<PAGE>
convertible into Common Stock or any other similar rights, or (c) if there shall
be any proposed capital reorganization of the Issuer in which the Issuer is not
the surviving entity, recapitalization of the capital stock of the Issuer,
consolidation or merger of the Issuer with or into another corporation, sale,
lease or other transfer of all or substantially all of the property and assets
of the Issuer, or voluntary or involuntary dissolution, liquidation or winding
up of the Issuer, or (d) if the Issuer shall give to its stockholders any
notice, report or other communication respecting any significant or special
action or event, then in such event, the Issuer shall give to the Holder, at
least thirty (30) days prior to the relevant date described below (or such
shorter period as is reasonably possible if thirty days is not reasonably
possible), a notice containing a description of the proposed action or event and
stating the date or expected date on which a record of the Issuer's stockholders
is to be taken for any of the foregoing purposes, and the date or expected date
on which any such dividend, distribution, subscription, reclassification,
reorganization, consolidation, combination, merger, conveyance, sale, lease or
transfer, dissolution, liquidation or winding up is to take place and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event.
Section 9. NOTICE. Any notice to be given or to be served upon any
party in connection with this Warrant must be in writing and will be deemed to
have been given and received upon confirmed receipt, if sent by facsimile, or
two (2) days after it has been submitted for delivery by Federal Express or an
equivalent carrier and five (5) days after it has been mailed by first class
mail, charges prepaid and addressed to the following addresses with a
confirmation of delivery:
If to the Issuer, to:
Ride, Inc.
8160 304th Avenue Southeast
Preston, Washington 98050
Attn.: President
Telephone: (425) 222-8270
Facsimile: (425) 222-4865
With a copy to:
Summit Law Group PLLC
1505 Westlake Avenue North, Suite 300
Seattle, Washington 98109
Attn.: Karen Andersen, Esq.
Telephone: (206) 281-9881
Facsimile: (206) 281-9882
If to the Holder, to:
Advantage Fund II Ltd.
<PAGE>
c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Attn.: W.R. Weber
Telephone:011-599-9732-2161
Facsimile: 011-599-9732-2008
With a copy to:
Genesee International, Inc.
10500 N.E. 8th Street, Suite 1920
Bellevue, Washington 98004
Attn.: Chris Purrier
Telephone: (425) 462-1673
Facsimile: (425) 462-4645
With a copy to:
Freeborn & Peters
950 17th Street, Suite 2600
Denver, Colorado 80202
Attn.: Kenneth S. Witt, Esq.
Telephone: (303) 628-4200
Facsimile: (303) 628-4240
If to the Transfer Agent, to:
TranSecurities International, Shareholder Services
2510 North Pines, Suite 202
Spokane, WA 99206
Attn.: Carolyn S. Tedesco
Telephone (509) 927-1255
Facsimile (509) 928-6449
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given
<PAGE>
Section 10. CHOICE OF LAW; CONFLICT OF LAW; JURISDICTION AND VENUE.
Except as otherwise expressly provided herein, the terms, conditions and
enforceability of this Warrant shall be governed by and interpreted under the
laws of the State of Washington. Any claim, dispute or disagreement relating to
the terms and conditions of this Warrant, or arising from this Warrant or the
subject matter of this Warrant, may be brought only in the courts of the State
of Washington or in any United States District Court located in the State of
Washington, which shall have exclusive jurisdiction thereof. The parties to this
Agreement consent to such jurisdiction and venue and hereby knowingly and
voluntarily waive all objections thereto on the basis of lack of personal
jurisdiction, venue or convenience.
<PAGE>
Dated: February 19, 1999
RIDE, INC.
By:
Name:
Title:
-----------------
ATTEST:
- -----------------------------
David H. Davis, Secretary
<PAGE>
SCHEDULE ONE
SUBSCRIPTION FORM
TO RIDE, INC.:
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with
respect to ______________ shares of Common Stock, as defined in the
Warrant, of Ride, Inc., a Washington corporation (the "Company").
2. The undersigned Holder (check one):
(a) elects to pay the aggregate purchase price for such shares
of Common Stock (the "Exercise Shares") (i) by lawful money of the United
States or the enclosed certified or official bank check payable in United
States dollars to the order of the Company in the amount of $___________,
or (ii) by wire transfer of United States funds to the account of the
Company in the amount of $____________, which transfer has been made before
or simultaneously with the delivery of this Subscription Form pursuant to
the instructions of the Company;
or
(b) elects to receive shares of Common Stock having a value
equal to the value of the Warrant calculated in accordance with Section
2(c) of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name:
-------------------------------------
Address:
-------------------------------------
-------------------------------------
Dated: ,
------------ --- ----- ----------------------------
(Signature must conform to name of Holder as specified on the face of the
Warrant)
----------------------------
----------------------------
(Address)
<PAGE>
EXHIBIT 10.87
AMENDMENT TO WARRANT
TO PURCHASE SHARES
OF
COMMON STOCK
OF
RIDE, INC.
FEBRUARY _, 1999
WHEREAS, on December 19, 1997, Ride, Inc., a Washington corporation (the
"Issuer"), issued a warrant (the "Warrant") to Advantage Fund II Ltd.
("Advantage") and any subsequent transferee (each a "Holder") entitling each
Holder to purchase, subject to the provisions of the Warrant, at any time or
from time to time on or before 5:00 p.m., P.S.T. on December 19, 2002 (the
"Expiration Date"), Two Hundred Thousand (200,000) fully paid and nonassessable
shares of common stock (the "Common Stock"), of the Issuer at an exercise price
equal to $2.6813 (the "Exercise Price").
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, the Warrant shall be amended to lower the Exercise Price
for all purposes from $2.6813 to $1.25. All other terms and definitions of the
Warrant shall remain as originally set forth in the Warrant.
Dated: February __, 1999
RIDE, INC.
By:
Name:
--------------------------
Title:
-------------------------
ADVANTAGE FUND II. LTD.
By:
Name:
--------------------------
Title:
<PAGE>
EXHIBIT 10.88
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of February ___,
1999 (this "Agreement"), is made by and between RIDE, INC., a Washington
corporation (the "Company"), and ADVANTAGE FUND II LTD. ("Advantage").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, to induce Advantage to execute and deliver a Loan and
Security Agreement dated as of even date herewith and pursuant to which
Advantage has tendered to the Company for cancellation shares of Ride's Series B
5% Cumulative Convertible Preferred Stock, the Company has agreed to issue to
Advantage a promissory note (the "Note") and warrant to purchase 100,000 shares
of Common Stock (the "New Warrant");
WHEREAS, to induce Advantage to execute and deliver the Loan and
Security Agreement, the Company has agreed to provide Advantage with certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws with respect to the Common
Stock issuable upon exercise of the New Warrant and with respect to any Common
Stock issued in payment of interest on the Note;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Advantage hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Advantage" means Advantage and any transferee or assignee who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 hereof.
"Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Actor any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration
<PAGE>
or ordering of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
"Registrable Securities" shall mean the shares of Common Stock
issuable upon exercise of the New Warrant.
"Registration Period" means the period from the date hereof to
the earlier of (i) the date which is two years after the date hereof, (ii) the
date on which Advantage can sell the Registrable Securities pursuant to Rule
144(k) and (iii) the date on which Advantage no longer beneficially own any
Registrable Securities.
"Registration Statement" means a registration statement of the
Company, in the Form declared effective, under the 1933 Act, including any
amendment thereto.
2. PIGGY-BACK REGISTRATION. If at any time during the
Registration Period the Company shall determine to prepare and file with the SEC
a Registration Statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, the Company shall send to Advantage written notice
of such determination and, if within ten (10) days after receipt of such notice,
Advantage shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities Advantage
requests to be registered, except that if, in connection with any underwritten
public offering for the account of the Company the managing underwriter(s)
thereof shall impose a limitation on the number of shares of Common Stock which
may be included in the Registration Statement because, in such underwriter(s)'
judgment, such limitation is necessary to effect an orderly public distribution,
then the Company shall be obligated to include in such Registration Statement
only such limited portion of the Registrable Securities; PROVIDED, HOWEVER, that
the Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities the holders of which are not entitled
by right to inclusion of securities in such Registration Statement; and PROVIDED
FURTHER, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of other
securities having the right to include such securities in the Registration
Statement, based on the number of securities for which registration is requested
except to the extent such pro rata exclusion of such other securities is
prohibited under any written agreement entered into by the Company with the
holder of such other securities prior to the date of this Agreement, in which
case such other securities shall be excluded, if at all, in accordance with the
terms of such agreement. The obligations of the Company under this Section shall
expire after the Company has afforded the opportunity for Advantage to exercise
registration rights under this Section for two registrations; PROVIDED, HOWEVER,
that if Advantage shall have had any Registrable Securities excluded from any
Registration Statement in accordance
2
<PAGE>
with this Section then it shall be entitled to include in an additional
Registration Statement filed by the Company the Registrable Securities so
excluded.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(a) furnish to Advantage and its legal counsel, (1) promptly
after the same is prepared and publicly distributed, filed with the SEC or
received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, each letter written by or on behalf of the Company to the
SEC or the staff of the SEC and each item of correspondence from the SEC or the
staff of the SEC relating to such Registration Statement (other than any portion
of any thereof which contains information for which the Company has sought
confidential treatment) and (2) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents, as Advantage may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by Advantage;
(b) in the event that the Registrable Securities are being
offered in an underwritten offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(c) as promptly as practicable after becoming aware of such
event or circumstance, notify Advantage of any event or circumstance of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to Advantage as Advantage may reasonably request;
(d) as promptly as practicable after becoming aware of such
event, notify Advantage (or, in the event of an underwritten offering, the
managing underwriters) of the issuance by the SEC of any stop order or other
suspension of effectiveness of the Registration Statement at the earliest
possible time;
(e) permit a single firm of counsel designated as selling
stockholders' counsel to review and comment on the Registration Statement and
all amendments and supplements thereto a reasonable period of time prior to
their filing with the SEC and shall pay up to $25,000 in legal fees for counsel
to Advantage in connection therewith less any legal fees paid to counsel for
Advantage in connection with execution of the Loan and Security Agreement, New
Warrant and Note;
3
<PAGE>
(f) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement;
(g) use its best efforts to cause all the Registrable
Securities covered by the Registration Statement to be listed on the Nasdaq
National Market ("Nasdaq") or such other principal securities market on which
securities of the same class or series issued by the Company are then listed or
traded; take all other reasonable actions necessary to expedite and facilitate
the disposition by Advantage of the Registrable Securities pursuant to the
Registration Statement;
(h) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(i) cooperate with Advantage and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts as the case may be, as the
managing underwriter or underwriters, if any, or Advantage may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or Advantage may request; and
(j) use best efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the persons who hold a
majority in interest of the securities covered by such Registration Statement
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof at all times until the end of the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; PROVIDED, HOWEVER, that
the Company shall not be required in connection therewith or as a condition
thereto (I) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(j), (II) to subject
itself to general taxation in any such jurisdiction, (III) to file a general
consent to service of process in any such jurisdiction, (IV) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(V) to make any change in its charter or by-laws, which in each case the Board
of Directors of the Company determines to be contrary to the best interests of
the Company and its stockholders.
4
<PAGE>
(k) take all other reasonable actions necessary to expedite
and facilitate the disposition by Advantage of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF ADVANTAGE. In connection with the
registration of the Registrable Securities, Advantage shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities that Advantage shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least four (4) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
Advantage of the information the Company requires from Advantage (the "Requested
Information") if any of its Registrable Securities are eligible for inclusion in
the Registration Statement. If at least one (1) business day prior to the filing
date the Company has not received the Requested Information from Advantage, then
the Company may file the Registration Statement without including Registrable
Securities;
(b) Advantage by its acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement
hereunder, unless Advantage has notified the Company in writing of its election
to exclude all of its Registrable Securities from the Registration Statement;
(c) In the event of an underwritten public offering, Advantage
agrees to enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities, unless
Advantage has notified the Company in writing of its election to exclude all of
its Registrable Securities from the Registration Statement;
(d) Advantage agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(c) or
3(d), Advantage will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until its receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(c) or 3(d) and, if so directed by the
Company, Advantage shall deliver to the Company (at the expense of the Company)
or destroy (and deliver to the Company a certificate of destruction) all copies
in its possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice; and
5
<PAGE>
(e) Advantage may not participate in any underwritten
registration hereunder unless Advantage (i) agrees to sell its Registrable
Securities on the basis provided in any underwriting arrangements approved by
Advantage entitled hereunder to approve such arrangements, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriters applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other
than underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company,
shall be borne by the Company, PROVIDED, HOWEVER, that except as provided in
Section 3(e), Advantage shall bear the fees and out-of-pocket expenses of any
legal counsel retained by Advantage.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless Advantage, any affiliate of Advantage, the directors, if any,
of Advantage, the officers, if any, of Advantage, each person, if any, who
controls Advantage within the meaning of the Securities Act or the Exchange Act,
any underwriter (as defined in the 1933 Act) for Advantage, the directors, if
any, of such underwriter and the officers, if any, of such underwriter, and each
person, if any, who controls any such underwriter within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the 1933
Act, the Exchange Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations in
the Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under
6
<PAGE>
which the statements therein were made, not misleading or (iii) any violation or
alleged violation by the Company of the 1933 Act, the Exchange Act, any state
securities law or any rule or regulation under the 1933 Act, the Exchange Act or
any state securities law (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse Advantage and each such underwriter or controlling person, promptly as
such expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, the prospectus or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (ii) with respect to any preliminary prospectus, shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (iii)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by Advantage
pursuant to Section 9.
(b) In connection with any Registration Statement in which
Advantage is participating, Advantage agrees to indemnify and hold harmless, to
the same extent and in the same manner set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Actor the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by Advantage expressly for use in
connection with such Registration Statement; and Advantage will reimburse any
legal or other expenses reasonably incurred by any Indemnified Party in
connection with investigating or defending any such Claim; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of
7
<PAGE>
any Claim if such settlement is effected without the prior written consent of
Advantage, which consent shall not be unreasonably withheld; PROVIDED, FURTHER,
HOWEVER, that Advantage shall be liable under this Section 6(b) for only that
amount of a Claim as does not exceed the amount by which the net proceeds to
Advantage from the sale of Registrable Securities pursuant to such Registration
Statement exceeds the cost of such Registrable Securities to Advantage. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by Advantage pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
the case may be; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for Advantage; such legal counsel shall be selected by
the persons holding a majority in interest of the securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
(d) To the extent that the Company and Advantage agree
pursuant to a subsequent agreement to provide indemnification to Advantage with
respect to any such Registration Statement, the provisions of the later
agreement shall control.
8
<PAGE>
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the amount by which the net amount of proceeds
received by such seller from the sale of such Registrable Securities exceeds the
purchase price paid by such seller for such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making
available to Advantage the benefits of Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit Advantage to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
(c) furnish to Advantage so long as Advantage owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit Advantage
to sell such securities pursuant to Rule 144; and
(d) take all reasonable actions necessary and cooperate with
Advantage to effect sales of Registrable Securities pursuant to Rule 144.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by Advantage to any transferee of all or any portion of
such securities (or all or any portion of the Warrant) only if: (a) Advantage
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (b) the Company is, within a reasonable time prior to
such transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the
9
<PAGE>
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and applicable state securities laws, and (d) at or before
the time the Company received the written notice contemplated by clause (b) of
this sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein. In connection with any such
transfer the Company shall, at its sole cost and expense, promptly after such
assignment take such actions as shall be reasonably acceptable to Advantage and
such transferee to assure that the Registration Statement and related prospectus
are available for use by such transferee for sales of the Registrable Securities
in respect of which the rights to registration have been so assigned.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Advantage who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon
Advantage and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notice to be given or to be served upon any party in
connection with this Agreement must be in writing and will be deemed to have
been given and received upon confirmed receipt, if sent by facsimile, or two (2)
days after it has been submitted for delivery by Federal Express or an
equivalent carrier and five (5) days after it has been mailed by first class
mail, charges prepaid and addressed to the following addresses with a
confirmation of delivery:
If to the Company, to:
Ride, Inc.
8160 304th Avenue Southeast
Preston, Washington 98050
Attn.: President
Telephone: (425) 222-8239
Facsimile: (425) 222-6499
With a copy to:
10
<PAGE>
Summit Law Group PLLC
1505 Westlake Avenue North, Suite 300
Seattle, Washington 98109
Attn.: Karen Andersen, Esq.
Telephone: (206) 281-9881
Facsimile: (206) 281-9882
If to the Buyer, to:
Advantage Fund II Ltd.
c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Attn.: W.R. Weber
Telephone: 011-599-9732-2161
Facsimile: 011-599-9732-2008
With a copy to:
Genesee International, Inc.
10500 N.E. 8th Street, Suite 1920
Bellevue, Washington 98004
Attn.: Chris Purrier
Telephone: (425) 462-1673
Facsimile: (425) 462-4645
With a copy to:
Freeborn & Peters
950 17th Street, Suite 2600
Denver, Colorado 80202
Attn.: Kenneth S. Witt, Esq.
Telephone: (303) 628-4200
Facsimile: (303) 628-4240
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
11
<PAGE>
(d) The terms, conditions and enforceability of this Agreement
shall be governed by and interpreted under the laws of the State of Washington.
Any claim, dispute or disagreement relating to the terms and conditions of this
Agreement, or arising from this Agreement or the subject matter of this
Agreement, may be brought only in the courts of the State of Washington or in
any United States District Court located in the State of Washington, which shall
have exclusive jurisdiction thereof. The parties to this Agreement consent to
such jurisdiction and venue and hereby knowingly and voluntarily waive all
objections thereto on the basis of lack of personal jurisdiction, venue or
convenience.
(e) In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
(f) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(g) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) This Agreement may be executed in two or more
counterparts,each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of day
and year first above written.
RIDE, INC.
By:
--------------------
Name:
-------------------
Title:
------------------
ADVANTAGE FUND II LTD.
By
-------------------------
Name:
-----------------------
Title:
----------------------
13
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<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
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<RECEIVABLES> 6,469
<ALLOWANCES> 0
<INVENTORY> 7,315
<CURRENT-ASSETS> 14,591
<PP&E> 5,392
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<TOTAL-ASSETS> 32,051
<CURRENT-LIABILITIES> 15,113
<BONDS> 0
0
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<COMMON> 44,129
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<TOTAL-LIABILITY-AND-EQUITY> 32,051
<SALES> 3,578
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