Exhibit 10.9
REDLINE PERFORMANCE PRODUCTS, INC.
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INTERIM BRIDGE LOAN AND INVESTMENT AGREEMENT
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THE COMPANY WILL NOT ACCEPT ANY INTERIM
BRIDGE LOAN AND INVESTMENT AGREEMENT
THAT IS NOT FULLY AND ACCURATELY COMPLETED, DATED AND SIGNED.
REDLINE PERFORMANCE PRODUCTS, INC.
INTERIM BRIDGE LOAN AND INVESTMENT AGREEMENT
INSTRUCTIONS
To purchase an Unsecured Subordinated Promissory Note and Warrants from
Redline Performance Products, Inc., please: (i) review the Interim Bridge Loan
and Investment Agreement; (ii) complete Section 12 of the Interim Bridge Loan
and Investment Agreement regarding accredited investor status; (iii) complete
Section 20 of the Interim Bridge Loan and Investment Agreement regarding
relationships to brokerage firms; (iv) complete, sign and date the appropriate
signature page (individual subscribers should complete, sign and date the
individual signature page; entity subscribers should complete, sign and date the
entity signature page); and (v) send your check payable to "Redline Performance
Products, Inc." together with the completed Interim Bridge Loan and Investment
Agreement to Xxxxxxxxx & Company LLC, 4500 Xxxxx Fargo Center, 00 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxxx, XX 00000, Attn: Xxxxxx X. Xxxxxxx. Information regarding
the Interim Loan may be obtained by contacting Xxxxxx X. Xxxxxxx, (612)
376-7050, at Xxxxxxxxx & Company LLC.
REDLINE PERFORMANCE PRODUCTS, INC.
INTERIM BRIDGE LOAN AND INVESTMENT AGREEMENT
This Interim Bridge Loan and Investment Agreement (the "AGREEMENT"),
submitted as of the date set forth on the Signature Page, is between Redline
Performance Products, Inc., a Minnesota corporation (the "COMPANY"), and the
undersigned investor (the "INVESTOR").
RECITALS
The Company is currently attempting to raise capital by selling shares
of its Series A Preferred Stock pursuant to a Confidential Private Placement
Memorandum dated August 1, 2000 (the "MEMORANDUM"). The Company needs interim
capital to fund its operations. The Investor desires to lend funds to the
Company on the terms and conditions set forth in this Agreement. Investors may
lend up to a maximum of $300,000 in principal amount to the Company on terms and
conditions equivalent to those set forth in this Agreement (the "INTERIM LOAN").
The Company has engaged Xxxxxxxxx & Company LLC (the "AGENT") as its exclusive
agent in connection with the sale of promissory notes and warrants (the "BRIDGE
PLACEMENT"), which was previously completed, and the sale of up to $5,000,000 in
shares of the Company's Series A Preferred Stock (the "SERIES A FINANCING"),
including shares of Series A Preferred Stock issuable upon conversion of the
promissory notes, which is currently in process.
AGREEMENT
In consideration of the foregoing, the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Investment. The Investor hereby purchases: (i) an Unsecured
Subordinated Promissory Note (the "INTERIM NOTE"), in substantially the
form of EXHIBIT A attached to and incorporated into this Agreement, in
the principal dollar amount set forth on the Signature Page and (ii) a
warrant (the "INTERIM WARRANT") in substantially the form of EXHIBIT B
attached to and incorporated into this Agreement, to purchase one share
of the Company's $0.01 par value per share common stock (the "COMMON
STOCK") for every $2.50 in principal amount of the Interim Note (the
"WARRANT SHARES") and hereby tenders the Investor's check payable to
"Redline Performance Products, Inc." in the aggregate dollar amount set
forth on the Signature Page.
The information contained in this Agreement is only a summary of the
terms and provisions of the Interim Notes and the Interim Warrants, and is
qualified by more detailed information included in the form of Interim Note and
the form of Interim Warrant. If the terms of this Agreement conflict with the
terms of the Interim Note or the Interim Warrant, the terms of the Interim Note
and the Interim Warrant shall control. By execution of this Agreement, the
Investor acknowledges that the Company is relying upon the accuracy and
completeness of the representations contained in this Agreement in complying
with its obligations under applicable securities laws. The Interim Note, the
Interim Warrant and the Warrant Shares are collectively referred to in this
Agreement as the "SECURITIES."
2. Loan/Promissory Note. The Investor agrees, on the terms and subject to
the conditions hereinafter set forth, to purchase an Interim Note in
the principal amount set forth on the Signature Page. The Company
agrees to issue in the name of the Investor, an Interim Note in
substantially the form attached hereto as Exhibit A.
3. Payment of Principal and Interest. All outstanding principal, and all
interest accrued on the Interim Notes during the Extension Period, as
defined below, shall be due and payable by the Company on the earlier
of: (i) December 31, 2000 and (ii) the date on which the Company
completes the sale of shares of Series A Preferred Stock which
generates gross proceeds of at least Two Million Dollars ($2,000,000),
subject to extension as provided in Section 4. Each of the foregoing
dates is referred to in this Agreement as a "MATURITY DATE" or
"MATURITY". The Interim Note shall not accrue interest unless and until
the Company extends the Maturity Date as provided in Section 4.
4. Extension of Maturity Date. If the Company is unable to repay the
Interim Note principal amount on or before the Maturity Date, the
Company may, at its sole discretion, extend the Maturity Date for a
period of up to ninety (90) days (the "EXTENSION PERIOD"). If the
Company elects to extend the Maturity Date, the Company will issue an
additional Interim Warrant (the "ADDITIONAL INTERIM WARRANT") to the
holder of the Interim Note on each of the 15th, 45th and 75th day of
the Extension Period if the principal amount of the Interim Note and
interest thereon has not been paid as of each such date. The number of
shares of Common Stock subject to each Additional Interim Warrant shall
be equal to 25% of the number of shares of Common Stock subject to the
original Interim Warrant issued to the Investor. During the Extension
Period, the Interim Note shall accrue interest at the rate of fifteen
percent (15%) per annum on any unpaid principal amount.
5. Subordination. The payment of principal and interest under the Interim
Note is not secured by any collateral and is subordinated to the
payment by the Company of "SENIOR INDEBTEDNESS" as defined in the
Interim Note. Payment of principal or interest may not be made on the
Interim Note if the Company is in default, or if the making of any
payment would result in a default, with respect to the payment of
amounts of any Senior Indebtedness.
6. Default. The Company shall be in default under this Agreement and under
the Interim Note upon the happening after the date of this Agreement of
any nonpayment, when due, of any amount payable to the holder under the
Interim Note. In the event of a default: (a) the holders of Interim
Notes shall have the right, at their option and not subject to demand
or notice, to declare all or any part of the Interim Notes immediately
due and payable, and (b) the holders of Interim Notes may exercise, in
addition to the rights and remedies granted in this Agreement, all of
the rights and remedies of a holder under the Interim Note and under
applicable law.
7. Interim Warrant. In conjunction with the purchase of a Interim Note by
the Investor, the Company will issue to the Investor a Interim Warrant
in substantially the form attached to this Agreement as Exhibit B. The
Interim Warrant will entitle the Investor to purchase one share of
Common Stock for every $2.50 in principal amount of the Interim Note.
The Interim Warrant will have an exercise price of $1.25 per share,
will be exercisable one hundred eighty (180) days after issuance and
will expire five (5) years from the date of issuance.
8. Reservation of Shares of Common Stock. The Company shall, during the
time that the Interim Warrant remains outstanding, reserve and keep
available from its authorized but unissued shares of Common Stock, a
sufficient number of shares to issue the Warrant Shares.
9. Transfer Restrictions. The Securities shall be subject to certain
restrictions on transfer as identified in this Agreement, the Interim
Note and the Interim Warrant.
2.
10. Representations and Warranties of the Company. The Company represents
and warrants to the Investor the following:
a. The Company is duly organized, validly existing and in good standing
under the laws of the State of Minnesota.
b. This Agreement has been duly authorized by all necessary corporate
action on behalf of the Company, has been duly executed and delivered
by an authorized officer of the Company, and is a valid and binding
agreement on the part of the Company. All corporate action necessary to
the authorization, issuance, and delivery of the Securities will be
taken prior to issuance of the Securities.
c. The Interim Notes and Interim Warrants, when issued and delivered to
the Investor, will constitute valid and binding obligations of the
Company in accordance with their terms, except as enforceability may be
limited by the application of bankruptcy, insolvency, moratorium or
similar laws affecting the rights of creditor generally and by judicial
limitations on the right of specific performance. The Warrant Shares
have been reserved for issuance and, when issued upon exercise of the
Warrant, will be duly authorized, validly issued and outstanding, fully
paid, nonassessable.
11. Representations and Warranties of Investor. The Investor hereby
represents and warrants to the Company and its officers, directors,
shareholders, employees and agents as follows:
a. Information About the Company. The Investor has received and reviewed
the Company's Confidential Private Placement Memorandum dated August 1,
2000, and has obtained all information about the Company as the
Investor believes relevant to the decision to purchase the Securities.
The Investor has also had the opportunity to ask questions of, and to
receive answers from, the Company or an agent or a representative of
the Company concerning the terms and conditions of the investment and
the business and affairs of the Company and to obtain any additional
information necessary to verify such information, and the Investor has
received such information concerning the Company as the Investor
considers necessary or advisable in order to form a decision concerning
an investment in the Company.
b. Forward-Looking Information. The Investor acknowledges and understands
that any information provided about the Company's future plans and
prospects is uncertain and subject to all of the uncertainties inherent
in predictions.
c. No Review by Federal or State Regulators. The Investor understands that
this transaction has not been reviewed or approved by the United States
Securities and Exchange Commission (the "COMMISSION") or by any state
securities or other authority and, because of the small number of
persons solicited to invest in the Securities and the private nature of
the placement, that all documents, records, and books pertaining to
this investment have been made available to the Investor and the
Investor's representatives, such as attorneys, accountants and/or
purchaser representatives.
d. High Degree of Risk. The Investor realizes that this investment
involves a high degree of risk, including the risk of loss of all
investment in the Company.
e. Ability to Bear the Risk. The Investor is able to bear the economic
risk of the investment, including the total loss of such investment.
3.
f. Appropriate Investment. The Investor believes, in light of the
information provided pursuant to Subsection 11(a) above, that investing
funds pursuant to the terms of this Agreement is an appropriate and
suitable investment for the Investor.
g. Financial Condition. The Investor's current financial condition is such
that (and the Investor expects the Investor's financial condition to be
such that in the near future) the Investor does not have any present or
contemplated need to dispose of any portion of the Securities to
satisfy any existing or contemplated undertaking, need or indebtedness.
h. Business Sophistication. The Investor is experienced and knowledgeable
in financial and business matters to the extent that the Investor is
capable of evaluating the merits and risks of the prospective
investment in the Securities. The Investor has obtained, to the extent
the Investor deems necessary, personal and professional advice with
respect to the risks inherent in the investment in the Securities in
light of the Investor's financial condition and investment needs. The
Investor has been given access to full and complete information
regarding the Company and has utilized such access to its satisfaction
for the purpose of obtaining information and, particularly, the
Investor has obtained, and has had the opportunity to obtain,
information from the Company as set forth in paragraph 11(a) above.
i. Residency. The Investor is a resident of the state and country set
forth on the Signature Page. The Securities are being purchased by the
Investor in the Investor's name solely for the Investor's own
beneficial interest and not as nominee for, on behalf of, for the
beneficial interest of, or with the intention to transfer to, any other
person, trust, or organization.
j. Subscription. The Investor understands that the payment made to the
Company may immediately become funds of and may be used by the Company
once accepted. The Company is free to reject any subscription in whole
or in part. The Investor understands that if the Company determines to
reject this subscription, any funds returned to the Investor will be
without deduction therefrom or interest thereon.
k. No General Solicitation. The Investor's purchase of the Securities is
not the result of any general solicitation or general advertising,
including, but not limited to (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio; and (ii) any seminar or
meeting whose attendees have been invited by any general solicitation
or general advertising.
l. Legal Age. The Investor, if an individual, is of legal age.
m. Not Subject to Backup Withholding. The Investor certifies, under
penalty of perjury, that the Investor is not subject to the backup
withholding provisions of the Internal Revenue Code of 1986, as
amended. (Note: The Investor is subject to backup withholding if: (i)
the Investor fails to furnish its Social Security Number or Taxpayer
Identification Number herein; (ii) the Internal Revenue Service
notifies the Company that the Investor furnished an incorrect Social
Security Number or Taxpayer Identification Number; (iii) the Investor
is notified that it is subject to backup withholding; or (iv) the
Investor fails to certify that it is not subject to backup withholding
or the Investor fails to certify the Investor's Social Security Number
or Taxpayer Identification Number.)
n. Legal Representation. The Investor understands that: (i) the Company
has engaged legal counsel to represent the Company in connection with
the offer and sale of securities contemplated herein: (ii) legal
counsel engaged by the Company does not represent the Investor or the
Investor's interests; and (iii) the
4.
Investor is not relying on legal counsel engaged by the Company. The
Investor has had the opportunity to engage, and obtain advice from, the
Investor's own legal counsel with respect to the investment
contemplated herein.
THE INFORMATION REQUESTED IN PARAGRAPH 12 IS REQUIRED IN CONNECTION WITH THE
EXEMPTIONS FROM THE SECURITIES ACT OF 1933 AND STATE LAWS BEING RELIED ON BY THE
COMPANY WITH RESPECT TO THE OFFER AND SALE OF THE SECURITIES. ALL OF SUCH
INFORMATION WILL BE KEPT CONFIDENTIAL, AND WILL BE REVIEWED ONLY BY, THE
COMPANY, THE AGENT AND THEIR RESPECTIVE COUNSEL. The Investor agrees to furnish
any additional information which the Company and its counsel deems necessary in
order to verify the response set forth below.
12. Accredited Status. The Investor represents and warrants as follows
(please INITIAL all applicable items):
a. INDIVIDUALS:
___ (i) The Investor is an individual with a net worth,
or a joint net worth together with his or her spouse,
in excess of $1,000,000. (In calculating net worth,
you may include equity in personal property and real
estate, including your principal residence, cash,
short-term investments, stock and securities. Equity
in personal property and real estate should be based
on the fair market value of such property less any
debt secured by such property.)
___ (ii) The Investor is an individual that had an
individual income in excess of $200,000 in each of
the prior two years and reasonably expects an income
in excess of $200,000 in the current year.
___ (iii) The Investor is an individual that had with his
or her spouse joint income in excess of $300,000 in
each of the prior two years and reasonably expects
joint income in excess of $300,000 in the current
year.
___ (iv) The Investor is a director or executive officer
of the Company.
b. ENTITIES (PLEASE PROVIDE A COPY OF THE ENTITY'S CHARTER DOCUMENTS):
___ (i) The Investor is a (initial one):
___ (A) General Partnership
___ (B) Limited Liability Partnership
___ (C) Limited Partnership
___ (D) Limited Liability Company
X (E) Corporation
___ (F) Business Trust
___ (G) Other Entity (please
specify):______________________
X (ii) The Investor is an entity, and is an
"ACCREDITED INVESTOR" as defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, as
amended (the "ACT"). This representation is based on
the following (initial one or more, as applicable):
___ (A) The Investor (or, in the case of
a trust, the Investor trustee) is a
bank or savings and loan association
as defined in Sections 3(a)(2) and
5.
3(a)(5)(A), respectively, of the Act
acting either in its individual or
fiduciary capacity.
___ (B) The Investor is a broker/dealer
registered pursuant to the
Securities Exchange Act of 1934.
___ (C) The Investor is an insurance
company as defined in Section 2(13)
of the Act.
___ (D) The Investor is an investment
company registered under the
Investment Company Act of 1940 or a
business development company as
defined in Section 2(a)(48) of that
Act.
___ (E) The Investor is a Small Business
Investment Company licensed by the
U.S. Small Business Administration
under Section 301(c) or (d) of the
Small Business Investment Act of
1958.
___ (F) The Investor is an employee
benefit plan within the meaning of
Title I of the Employee Retirement
Income Security Act of 1974 and
either (initial one or more, as
applicable):
___ (1) The investment decision
is made by a plan
fiduciary, as defined in
Section 3(21) of such Act,
which is either a bank,
savings and loan
association, insurance
company, or registered
investment adviser.
___ (2) The employee benefit
plan has total assets in
excess of $5,000,000.
___ (3) The plan is a
self-directed plan with
investment decisions made
solely by persons who are
"Accredited Investors" as
defined under the Act.
___ (G) The Investor is a private
business development company as
defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
___ (H) The Investor has total assets in
excess of $5,000,000, was not formed
for the specific purpose of
acquiring shares of the Company and
is one or more of the following
(initial one or more, as
appropriate):
___ (1) An organization
described in Section
501(c)(3) of the Internal
Revenue Code.
___ (2) A corporation.
___ (3) A Massachusetts or
similar business trust.
___ (4) A partnership.
___ (5) A limited liability
company.
___ (I) The Investor is an entity, all
of whose equity owners are
accredited investors. (PLEASE
PROVIDE WRITTEN REPRESENTATION OF
ACCREDITED INVESTOR STATUS FROM EACH
EQUITY OWNER.)
X (J) The Investor is a trust with
total assets exceeding $5,000,000,
which was not formed for the
specific purpose of investing in the
Company and whose purchase is
directed by a person described in
Rule 506(b)(2)(ii) under the Act.
(IF ONLY THIS ITEM (J) IS CHECKED,
PLEASE CONTACT THE COMPANY TO
RECEIVE AND COMPLETE AN INFORMATION
STATEMENT BEFORE THIS SUBSCRIPTION
CAN BE CONSIDERED BY THE COMPANY).
6.
IF YOU HAVE NOT INITIALED ANY OF THE FOREGOING, YOU ARE NOT AN ACCREDITED
INVESTOR AND CANNOT PURCHASE ANY SECURITIES.
IF YOU HAVE INITIALED ANY OF THE FOREGOING, PLEASE PROCEED.
RMF PR (iii) Entities. A REPRESENTATIVE OF AN ENTITY INVESTOR
MUST INITIAL HERE If the Investor is an entity, the
individual(s) signing on behalf of the Investor and the
Investor, jointly and severally, agree and certify that
this Agreement has been duly authorized by all necessary
action on the part of the Investor, has been duly
executed by an authorized representative of the Investor,
and is a legal, valid, and binding obligation of the
Investor enforceable in accordance with its terms.
13. Investment Purpose in Acquiring the Securities. The Investor and the
Company acknowledge that the Securities have not been registered under
the Act or applicable state securities laws and that the Securities
will be issued to the Investor in reliance on exemptions from the
registration requirements of the Act and applicable state securities
laws and in reliance on the Investor's and the Company's
representations and agreements contained herein. The Investor is
acquiring the Securities for the account of the Investor for investment
purposes only and not with a view to their resale or distribution. The
Investor has no present intention to divide his, her or its
participation with others or to resell or otherwise dispose of all or
any part of the Securities. In making these representations, the
Investor understands that, in the view of the Commission, exemption of
the Securities from the registration requirements of the Act would not
be available if, notwithstanding the representations of the Investor,
the Investor has in mind merely acquiring the Securities for resale
upon the occurrence or non-occurrence of some predetermined event.
14. Compliance with Securities Act. The Investor agrees that if the
Securities or any part thereof are sold or distributed in the future,
the Investor shall sell or distribute them pursuant to the requirements
of the Act and applicable state securities laws. The Investor agrees
that the Investor will not transfer any part of the Securities without:
(i) obtaining a "no action" letter from the Commission and applicable
state securities commissions; (ii) obtaining an opinion of counsel
satisfactory in form and substance to the Company to the effect that
such transfer is exempt from the registration requirements under the
Act and applicable state securities laws; or (iii) registration.
15. Restriction on Transfer After a Public Offering. The Investor
understands that the Company at a future date may file a registration
or offering statement (the "REGISTRATION STATEMENT") with the
Commission to facilitate a public offering of its securities. The
Investor agrees, for the benefit of the Company, that should such an
initial public offering be made and should the managing underwriter of
such offering require, the Investor will not, without the prior written
consent of the Company and such underwriter, during the "Lockup Period"
as defined herein: (i) sell, transfer or otherwise dispose of, or agree
to sell, transfer or otherwise dispose of any of the Securities
beneficially owned by the Investor during the Lockup Period; (ii) sell,
transfer or otherwise dispose of, or agree to sell, transfer or
otherwise dispose of any options, rights or warrants to purchase any of
the Securities beneficially owned by the Investor during the Lockup
Period; or (iii) sell or grant, or agree to sell or grant, options,
rights or warrants with respect to any of the Securities. The foregoing
does not prohibit gifts to donees or transfers by will or the laws of
descent to heirs or beneficiaries provided that such donees, heirs and
beneficiaries shall be bound by the restrictions set forth herein. The
term "LOCKUP PERIOD" shall mean the lesser of (x) 180 days and (y) the
period during which Company officers and directors are restricted by
the managing
7.
underwriter from effecting any sales or transfers of the Company's
common stock. The Lockup Period shall commence on the effective date of
the Registration Statement.
16. Restrictive Legend. The Investor agrees that the Company may place one
or more restrictive legends on any certificates evidencing the
Securities, including the Conversion Shares, containing substantially
the following language:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, have not been registered
under any state securities law, and are subject to a subscription and
investment representation agreement. They may not be sold, offered for
sale, transferred, assigned, pledged or otherwise distributed for value
unless there is an effective registration under the Securities Act of
1933, as amended, and under the applicable state securities laws, or
the Company receives an opinion of counsel acceptable to the Company
stating that such transaction is exempt from registration and
prospectus delivery requirements of the Securities Act of 1933, as
amended, and under the applicable state securities laws.
Sale or other transfer of these securities is further restricted for up
to 180 days following an initial public offering of securities of the
Company by the terms of a Subscription Agreement, a copy of which is
available for inspection at the offices of the Company.
17. Stop Transfer Order. The Investor agrees that the Company may place a
stop transfer order with its registrar and transfer agent (if any)
covering all Securities.
18. Knowledge of Restrictions upon Transfer of the Securities. The Investor
understands that the Securities are not freely transferable and may in
fact be prohibited from sale for an extended period of time and that,
as a consequence thereof, the Investor must bear the economic risk of
an investment in the Securities for an indefinite period of time and
may have extremely limited opportunities to dispose of the Securities.
The Investor realizes that there will likely be no market for the
Securities, and that there are significant restrictions on the
transferability thereof.
19. Lack of Availability of Rule 144 Under the Act. The Investor
understands and acknowledges that the Company has no obligation to
undertake or complete a public offering of its securities, that even if
a public offering is undertaken and successfully completed, the
Securities subscribed for hereby will remain subject to the
restrictions on transferability described herein, and that even if a
public offering is undertaken and completed, the Investor may never be
able to sell its Securities pursuant to Rule 144 under the Act.
The Investor further understands and acknowledges that the Company
currently does not file periodic reports with the Commission pursuant to the
requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, and
may not be obligated to file such reports at any time in the future. The
Investor also understands that the Company has not agreed to supply such other
information as would be required to enable routine sales of the Securities to be
made under the provisions of certain rules respecting "restricted securities,"
including Rule 144 promulgated under the Act by the Commission. Thus, the
Investor has been informed that the Company is not obligated to make publicly
available or to provide the Investor with the information required by Rule 144.
20. Relationship to Brokerage Firms. (Please answer the following questions
by initialing the appropriate response):
8.
a. ___ YES X NO: Are you a director, officer, partner, branch manager,
registered representative, employee, shareholder of, or similarly
related to or employed by, a brokerage firm?
b. ___ YES X NO: Is your spouse, father, mother, father-in-law,
mother-in-law, or any of your brothers, sisters, brothers-in-laws,
sisters-in-law or children, or any relative which you support, a
director, officer, partner, branch manager, registered representative,
employee, shareholder of, or similarly related to or engaged by, a
brokerage firm?
c. ___ YES X NO: Do you own 5% or more of the voting securities of any
brokerage firm?
d. ___ YES X NO: If the Investor is an entity, is any director, officer,
partner or 5% owner of the Investor also a director, officer, partner,
branch manager, registered representative, employee, shareholder of, or
similarly related to or employed by a brokerage firm?
(If you answered YES to any of the foregoing questions, please attach a
written explanation or contact the Company to provide additional
information before the Investor's subscription can be considered.)
21. Delivery of Interim Note and Interim Warrant. Upon acceptance of this
Agreement by the Company, the Interim Note and the Interim Warrant will
be registered in the name of the Investor and will be delivered via
certified mail or overnight delivery to the address of the Investor set
forth on the Signature Page.
22. Binding Effect. Neither this Agreement nor any interest herein shall be
assignable by the Investor without the prior written consent of the
Company. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective heirs,
legal representatives, successors and assigns.
23. Representations to Survive Delivery. The representations, warranties
and agreements of the Company and of the Investor contained in this
Agreement will remain operative and in full force and effect and will
survive the receipt of funds by the Company, and the issuance to the
Investor of the Interim Notes and Interim Warrants.
24. Indemnification. The Investor agrees to indemnify the Company, and each
current and future officer, director, employee, agent and shareholder
of the Company, against and to hold them harmless from any damage,
loss, liability, claim or expense including, without limitation,
reasonable attorneys' fees resulting from or arising out of the
inaccuracy or alleged inaccuracy of any of the representations,
warranties or statements of the Investor contained in this Agreement,
including without limitation any violation or alleged violation of the
registration requirements of the Act or applicable state law in
connection with any subsequent sale of the Securities or any portion
thereof by Investor.
25. Additional Information. The Investor shall supply such additional
information and documentation relating to Investor and any persons who
have any rights or interest in Investor as may be requested by the
Company in order to ensure compliance by the Company with applicable
laws. If at any time prior to the Company's execution of this
Agreement, an adverse change occurs with respect to the Investor such
that the information, representations and warranties of the Investor
set forth in this Agreement are no longer accurate, the Investor shall
immediately notify the Company of the inaccuracy in writing and shall
deliver the updated, accurate information to the Company.
26. Miscellaneous Provisions.
9.
a. Arbitration. Any dispute regarding this Agreement or the Investor's
investment in the Company (including without limitation claims pursuant
to federal or state securities laws), including any claim which is made
against any placement agent or broker-dealer involved in the offer or
sale of the Securities, shall be resolved by arbitration which shall be
the sole forum for resolution of any such disputes. Unless otherwise
agreed by the parties, any such proceedings shall be brought in
Minneapolis, Minnesota U.S.A. pursuant to the Rules and Code of
Arbitration of the American Arbitration Association, except that if a
bona fide claim is made against the Company, and a placement agent or
broker-dealer is named in connection with such claim, then such claim
shall be brought pursuant to the Rules and Code of Arbitration of the
National Association of Securities Dealers, Inc.
b. Governing Law; Venue. This Agreement shall be governed by, and
construed in accordance with, the substantive laws of the State of
Minnesota without reference to Minnesota conflict of laws provisions.
Actions or proceedings litigated in connection with this Agreement, if
any, shall be venued exclusively in the state and federal courts
located in the County of Hennepin, State of Minnesota.
c. Successors and Assigns. The representations and warranties made by the
Investor in this Agreement are binding on the Investor's successors and
assigns and are made for the benefit of the Company and any other
person who may become liable for violations of applicable securities
laws as a result of the inaccuracy or falsity of any of the Investor's
representations or warranties.
d. Notice. All notices or other communications required or permitted
hereunder shall be in writing. A written notice or other communication
shall be deemed to have been delivered hereunder: (i) if delivered by
hand, when such notice is received from the notifying party; (ii) if
transmitted by facsimile or timely delivered to an overnight courier,
on the next business day following the day so transmitted or delivered;
or (iii) if delivered by mail, on the third business day following the
date such notice or other communication is deposited in the U.S. Mail
for delivery by certified or registered mail addressed to the other
party, or when actually received, whichever occurs earlier.
e. Counterparts. This Agreement may be executed by the Company and by the
Investor in separate counterparts, each of which shall be deemed an
original.
f. Acceptance. This Agreement is not binding on the Company until accepted
in writing by an authorized officer of the Company.
(signature page follows)
10.
ENTITY SIGNATURE PAGE
All entity Investors must complete and sign this page. Total payment to
be made now is the amount on line 6.
1. Entity Name (please print): Industricorp & Co., Inc. FBO
Twin City Carpenters Pension Fd
2. Employer Identification Number: 00-0000000
(Also include Social Security Numbers if a Trust or Partnership)
3. Business (Residence) Address: Union Bank & Trust; Trust Xxxx. - Xxxxx 000
000 Xxxxxxx Xxx. XX; Mpls., MN 55414
4. Mailing Address (if different from above): ____________________________
5. Business: Tel. No. (000) 000-0000 (x 49); Facsimile No. (000) 000-0000
6. Principal Amount of Interim Note: 100,000
7. Number of Shares subject to Interim Warrant: 40,000
SIGNATURE OF INVESTOR: /s/ Xxxxxx Xxxxxxxxxx Officer
-----------------------------------
/s/ Xxxx X. Xxx Officer
-----------------------------------
By (print name): _____________________________
Its: _________________________________________
Date: 10/31/00
ACCEPTANCE:
REDLINE PERFORMANCE PRODUCTS, INC. hereby executes this Agreement as of the date
set forth below.
By: /s/ Xxxx X. Xxxxx SIGNATURE GUARANTEED
------------------------------- MEDALLION GUARANTEED
Xxxx Xxxxx, President UNION BANK & TRUST CO.
Dated: 11/1/2000 /s/ Xxxxxx Xxxxxxx
--------------------------
AUTHORIZED SIGNATURE
C9001778
SECURITIES TRANSFER AGENTS
MEDALLION PROGRAM(SM)
PLEASE RETURN THIS INTERIM BRIDGE LOAN AND INVESTMENT AGREEMENT AND PAYMENT TO:
Xxxxxxxxx & Company LLC
4500 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ANY SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF MAY BE
MADE ONLY (i) IN A REGISTRATION OR QUALIFICATION OR (ii) IF AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION IS AVAILABLE AND THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL TO THAT EFFECT REASONABLY SATISFACTORY TO THE COMPANY.
SALE OR OTHER TRANSFER OF THIS PROMISSORY NOTE IS FURTHER RESTRICTED FOR UP TO
180 DAYS FOLLOWING AN INITIAL PUBLIC OFFERING OF SECURITIES OF THE COMPANY BY
THE TERMS OF A LOAN AND INVESTMENT AGREEMENT, A COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE OFFICES OF THE COMPANY.
REDLINE PERFORMANCE PRODUCTS, INC.
UNSECURED SUBORDINATED PROMISSORY NOTE
$100,000.00 November 1, 2000
Note No.: I-1 Vista, California
FOR VALUE RECEIVED, the undersigned, Redline Performance Products,
Inc., organized and existing under the laws of the State of Minnesota, whose
mailing address is 0000 Xxxxxxx Xxx, Xxxxx, Xxxxxxxxxx 00000, and its successors
and assigns (the "BORROWER"), for value received, hereby unconditionally
promises to pay to the order of Industricorp & Co., Inc. FBO Twin City
Carpenters Pension Fund - Acct #156000091, having a mailing address of x/x Xxxxx
Xxxx & Xxxxx, Xxxxx Xxxx - Xxxxx 000, 000 Xxxxxxx Xxxxxx XX, Xxxxxxxxxxx,
Xxxxxxxxx 00000, and its successors and assigns (the "LENDER"), at such place as
may be designated from time to time by the Lender, the principal sum of One
Hundred Thousand and 00/100 Dollars ($100,000.00), at or before 5:00 p.m. Vista,
California time on December 31, 2000, or earlier as provided herein ("MATURITY
DATE"). This promissory note (the "INTERIM NOTE") is being issued in connection
with a placement of Interim Notes and warrants to purchase shares of the
Borrower's common stock (the "INTERIM WARRANT") being conducted by the Company
to raise up to $300,000 pursuant to the terms of an Interim Bridge Loan and
Investment Agreement. This Interim Note and the Holder hereof are entitled to
all the benefits provided for in the Interim Bridge Loan and Investment
Agreement, or which are referred to therein, pursuant to which this indebtedness
was incurred and is to be repaid. The provisions of the Interim Bridge Loan and
Investment Agreement are incorporated herein by reference with the same force
and effect as if fully set forth herein.
1. Payment. Subject to extension as provided in this Section 1, all
outstanding principal, and any interest accrued on the Interim Note
during the Extension Period, as defined herein, shall be due and
payable on the earlier of: (i) December 31, 2000 and (ii) the date on
which the Borrower generates gross proceeds of at least $2,000,000 (the
"MINIMUM AMOUNT") from the sale of shares of the Borrower's Series A
Preferred Stock in the a proposed placement of Series A Preferred Stock
intended to raise the Minimum Amount and up to $5,000,000 (the "SERIES
A FINANCING"), unless all principal hereunder shall have been paid.
Each of the foregoing dates is referred to in this Interim Note as the
"MATURITY DATE" or "MATURITY". All payments under this Section shall be
made by check mailed by the Borrower to the address of the Lender set
forth above. If the Borrower is unable to repay the Interim Note
principal on or
before the Maturity Date, the Company may, in its sole discretion,
extend the Maturity Date for a period of up to ninety (90) days (the
"EXTENSION PERIOD"). If the Borrower elects to extend the Maturity
Date, the Company shall issue an additional Interim Warrant (the
"ADDITIONAL INTERIM WARRANT") to the holder of the Interim Note on each
of the 15th, 45th and 75th day of the Extension Period if the Interim
Loan principal and interest has not been paid as of such dates. The
number of shares of Common Stock subject to each Additional Interim
Warrant shall be equal to 25% of the number of shares of Common Stock
subject to the original Interim Warrant issued to the Investor. During
the Extension Period, the Interim Note shall accrue interest at the
rate of fifteen percent (15%) per annum. During the Extension Period
interest on the unpaid principal balance of this Interim Note shall be
calculated on the basis of a 360-day year comprised of twelve 30-day
months.
2. Subordination. The term "SENIOR INDEBTEDNESS" shall mean all principal
of (and premium of, if any) and unpaid interest on all indebtedness of
the Borrower, and with respect to which the Borrower is a guarantor
(but excluding indebtedness guaranteed solely for the benefit of
officers, directors, employees or consultants of the Borrower), and
except as provided to the contrary herein, regardless of whether
incurred on, before or after the date of this Interim Note: (i) for
money borrowed from any bank, insurance company, or other lending
institution regularly engaged in the business of lending money, whether
or not secured; (ii) for amounts owed to TMAG Industries, Inc. as of
the date of this Interim Note and (iii) in connection with any
deferral, renewal or extension of any indebtedness described in (i) or
(ii) above or any debentures, notes, or other evidence of the
Borrower's indebtedness issued in exchange for indebtedness described
in (i) or (ii) above. The Borrower covenants and agrees and the Lender,
by acceptance hereof, covenants, expressly for the benefit of the
present and future holders of Senior Indebtedness, that the payment of
the principal and the interest on this Interim Note is expressly
subordinated in right of payment to the payment in full of all
principal and interest of Senior Indebtedness of the Borrower.
Notwithstanding the foregoing, payment of principal or interest may be
made hereunder unless the Company is in default, or if the making of
any payment hereunder would result in a default, with respect to the
payment of amounts of any Senior Indebtedness.
3. Compliance with Securities Laws and Other Transfer Restrictions.
a. The holder of this Interim Note, by acceptance hereof, agrees,
represents and warrants that this Interim Note are being
acquired for investment, that the holder has no present
intention to resell or otherwise dispose of all or any part of
this Interim Note, and that the holder will not offer, sell or
otherwise dispose of all or any part of this Interim Note
except under circumstances which will not result in a violation
of the Act or applicable state securities laws. The Borrower
may condition any transfer, sale, pledge, assignment or other
disposition on the receipt, from the party to whom this Interim
Note is to be so transferred, of any representations and
agreements requested by the Borrower in order to permit such
issuance or transfer to be made pursuant to exemptions from
registration under federal and applicable state securities
laws.
b. If the Borrower conducts an Initial Public Offering of its
Common Stock, the holder of the Interim Note shall not, without
the prior written consent of the Borrower and the managing
underwriter in such offering: (i) sell, transfer or otherwise
dispose of, or agree to sell, transfer or otherwise dispose of
the Interim Note; (ii) sell, transfer or otherwise dispose of,
or agree to sell, transfer or otherwise dispose of any right to
purchase the Interim Note; or (iii) sell or grant, or agree to
sell or grant, options, rights or warrants with respect to the
Interim Note. Such restrictions shall be effective for a period
of time equal to the period during which the managing
2.
underwriter imposes such transfer restrictions on the
Borrower's officers and directors; provided, that in no event
shall the restricted period applicable to a holder of this
Interim Note exceed one hundred twenty (180) days after
effectiveness of the Borrower's registration statement filed
under the Act with the Securities and Exchange Commission with
respect to such offering.
c. In the event the holder of this Interim Note desires to
transfer this Interim Note, the holder shall provide the
Borrower with a Form of Assignment, in the form attached hereto
describing the manner of such transfer, and an opinion of
counsel (reasonably acceptable to the Borrower) that the
proposed transfer may be effected without registration or
qualification under applicable securities laws, whereupon such
holder shall be entitled to transfer this Interim Note in
accordance with the notice delivered by such holder to the
Borrower. If, in the opinion of the counsel referred to in this
Subsection, the proposed transfer or disposition described in
the written notice given may not be effected without
registration or qualification of this Interim Note, the
Borrower shall give written notice thereof to the holder
hereof, and such holder will limit its activities in respect to
such proposed transfer or disposition as, in the opinion of
such counsel, are permitted by law.
d. The Borrower may place one or more restrictive legends on the
Interim Note which set forth the restrictions contained herein,
and may further place a "stop transfer" restriction in the
Borrower's books and records with respect to the Interim Note.
The restrictions set forth in this Interim Note shall be
binding upon any holder, donee, assignee or transferee of the
Interim Note.
4. Rights as Shareholder. The Holder of this Interim Note shall have no
rights as a shareholder of the Borrower.
5. Negative Covenant.
(a) The Company shall not transfer, sell, convey or otherwise
encumber in any manner (other than to grant a license for
marketing purposes to use one or more of the tradenames for which the
Company has filed applications for trademark protection) the
Technology Assets without the prior written consent of the holders of
two-thirds of the principal dollar amount of the outstanding Interim
Notes, which dollar amount shall exclude any accrued interest on such
outstanding Interim Notes. Such consent shall not be unreasonably
withheld. The negative covenant described in this Subsection 5(a) is
referred to herein as the "NEGATIVE COVENANT." The intended effect of
the Negative Covenant is to limit the Company's ability to transfer
or encumber the Technology Assets. The Negative Covenant does not,
and is not intended to, grant holders of Interim Notes a security or
any other interest in the Technology Assets.
(b) "TECHNOLOGY ASSETS" shall mean: (i) Patent Application entitled
"Snowmobile Suspension," Patent Serial No. 09/502,280; (ii) Patent
Application entitled "Snowmobile," Patent Serial No. 09/268,264; (iii)
"Redline Snowmobiles" Trademark Application, U.S. Serial No. 75-438,530
- Filed February 23, 1998; (iv) "Rebellion" Trademark Application, U.S.
Serial No. 75-807,788 - Filed September 24, 1999; (v) "954 Revolution"
Trademark Application, U.S. Serial No. 75-808,530 - Filed September 24,
1999; (vi) "Revolt" Trademark Application, U.S. Serial No. 75-807,847 -
Filed September 24, 1999; and (vii) any resultant patent or registered
trademark from (i) through (vi) above.
(c) At such time as the Company determines that a transfer, sale,
conveyance or other encumbrance of the Technology Assets is necessary
or appropriate, the Company shall give each holder of record of
3.
outstanding Interim Notes written notice ("NOTICE") of the Company's
intention to undertake such a transfer, sale, conveyance or other
encumbrance. The Notice shall include a general description of the
terms of the proposed transaction and a consent form which the holder
of the Interim Note may use to indicate such holder's consent to the
proposed transaction. If the holders of two-thirds of the principal
dollar amount of outstanding Interim Notes (excluding accrued interest
thereon) do not consent to the proposed transaction within 30 days of
delivery of the Notice, the Company shall not undertake the proposed
transaction described in the Notice. Delivery of the Notice shall be to
the most recent address included in the Company's records of holders of
Interim Notes.
(d) The Negative Covenant shall terminate with respect to each
outstanding Interim Note upon the earlier of: (i) the payment of the
principal amount and accrued interest on such outstanding Interim Note;
(ii) the conversion of such outstanding Interim Note into shares of the
Company's capital stock; and (iii) the written agreement of the holders
of all of the outstanding Interim Notes.
6. Miscellaneous Provisions.
a. No amendment hereunder shall be effective unless in writing
signed by the Borrower and the Lender and no waiver hereunder
shall be effective unless in writing, signed by the party to be
charged. Neither the failure on the part of the Lender in
exercising any right or remedy, nor any single or partial
exercise of any other right or remedy, shall operate as a
waiver. The acceptance by the Lender of any payment hereunder
which is less than payment in full of all amounts due and
payable at the time of such payment shall not constitute a
waiver of the right to exercise any of the options hereunder at
that time or at any subsequent time.
b. The Borrower hereby: (i) waives diligence, presentment, demand
for payment, notice of dishonor, notice of non-payment,
protest, notice of protest, and any and all other demands in
connection with the delivery, acceptance, performance, default
or enforcement of this Interim Note, and (ii) except as
provided in Section 1 of this Interim Note, agrees that the
Lender has, subject to the prior written request or approval of
the Borrower, the right (but not the obligation) to grant any
extension of time for payment of any indebtedness evidenced by
this Interim Note.
c. The terms and provisions hereof shall inure to the benefit of,
and be binding upon, the respective successors and assigns of
the Borrower and Lender. This Interim Note shall be governed by
and construed and enforced in accordance with the laws of the
State of Minnesota without giving effect to such state's choice
of law principles.
d. No recourse for the payment of the principal of or any interest
on this Interim Note, or for any claim based hereon or
otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Borrower in any
Interim Note, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator,
shareholder, officer or director as such, past, present or
future, of the Borrower or of any successor corporation either
directly or through the Borrower or any successor corporation,
whether by virtue of any constitution, statute or rule of law
or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof
and as part of the consideration for the issue hereof,
expressly waived and released.
4.
e. The Borrower covenants that during the period this Interim Note
is convertible, the Borrower will reserve from its authorized
and unissued shares of common stock a sufficient number of
shares to provide for the issuance of Conversion Shares upon
the conversion of this Interim Note, and shares of common stock
upon conversion of the Conversion Shares. The Borrower further
covenants that all Conversion Shares that may be issued upon
the conversion of this Interim Note will, upon payment and
issuance, be duly authorized and issued, fully paid and
nonassessable shares of the Borrower's common stock.
f. Upon receipt by the Borrower of evidence reasonably
satisfactory to it of the loss, theft, destruction or
mutilation of this Interim Note, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory
to it, and upon reimbursement to the Borrower of all reasonable
expenses incidental thereto, and upon surrender and
cancellation of this Interim Note, if mutilated, the Borrower
will make and deliver a new Interim Note of like tenor and
dates as of such cancellation, in lieu of this Interim Note.
g. This Interim Note has been issued pursuant to and is subject to
the terms and provisions of that certain Interim Bridge Loan
and Investment Agreement of even date herewith between the
Borrower and the Lender, the terms and provisions of which are
incorporated herein by reference with the same force and effect
as if fully set forth herein. To the extent the terms of the
Interim Note and the Interim Bridge Loan and Investment
Agreement are inconsistent, the terms of this Interim Note
shall control.
h. All notices and other communications shall be by certified
mail, return receipt requested, or by overnight delivery
service to the address furnished to the Borrower in writing by
the last holder of this Interim Note who shall have furnished
an address to the Borrower in writing. Delivery shall be deemed
to have occurred on the date three (3) days after depositing
the notice in the U.S. mail or one (1) day after delivery of
such notice to a reputable overnight delivery service.
IN WITNESS WHEREOF, the Borrower has caused this Interim Note to be
executed by its authorized representative, who certifies that he has all
necessary authority on behalf of the Borrower to execute this Interim Note and
bind the Borrower to the terms hereof.
REDLINE PERFORMANCE PRODUCTS, INC.
By: /s/ Xxxx Xxxxx
----------------------
Its: President
5.
FORM OF ASSIGNMENT
REDLINE PERFORMANCE PRODUCTS, INC.
FOR VALUE RECEIVED, the undersigned registered owner of this Unsecured
Subordinated Promissory Note (the "INTERIM NOTE") hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
under the within Interim Note as set forth below:
NAME OF ASSIGNEE ADDRESS PRINCIPAL AMOUNT OF NOTE
---------------- ------- ------------------------
and does hereby irrevocably constitute and appoint ____________________________
Attorney to make such transfer on the books of REDLINE PERFORMANCE PRODUCTS,
INC. maintained for the purpose, with full power of substitution in the
premises. The undersigned understands that compliance with the provisions of the
Interim Note is necessary to effect any assignment or transfer.
Dated: _____________ ___, _____ Dated: ________________ _____, _______
___________________________________ ______________________________________
Signature Second Signature (if necessary)
___________________________________ ______________________________________
Print Name Print Name
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ANY SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF MAY BE
MADE ONLY (i) IN A REGISTRATION OR QUALIFICATION OR (ii) IF AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION IS AVAILABLE AND THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL TO THAT EFFECT REASONABLY SATISFACTORY TO THE COMPANY.
SALE OR OTHER TRANSFER OF THIS SECURITY OR THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS SECURITY IS FURTHER RESTRICTED FOR UP TO 180 DAYS
FOLLOWING AN INITIAL PUBLIC OFFERING OF SECURITIES OF THE COMPANY BY THE TERMS
OF A INTERIM BRIDGE LOAN AND INVESTMENT AGREEMENT, A COPY OF WHICH IS AVAILABLE
FOR INSPECTION AT THE OFFICES OF THE COMPANY.
Void After 5:00 p.m. Vista, California time on November 1, 2005
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
REDLINE PERFORMANCE PRODUCTS, INC.
Warrant No. I-1 Shares: 40,000
THIS CERTIFIES that, subject to the terms and conditions herein set
forth, Industricorp & Co., Inc. FBO Twin City Carpenters Pension Fund - Acct
#156000091 or registered assigns, is entitled to purchase from REDLINE
PERFORMANCE PRODUCTS, INC., a Minnesota corporation (the "COMPANY"), at any time
after one hundred eighty (180) days from the date of original issuance of this
warrant (the "INTERIM WARRANT") and prior to the time and date set forth above,
forty thousand (40,000) fully paid and nonassessable shares of $0.01 par value
per share common stock of the Company (such class of shares being referred to as
the "COMMON STOCK," and such shares of Common Stock which may be acquired upon
exercise of this Interim Warrant being referred to as the "WARRANT SHARES").
This Interim Warrant is being issued in connection with a placement (the
"Interim PLACEMENT") of promissory notes ("INTERIM NOTES") and Interim Warrants
being conducted by the Company to raise up $300,000 and pursuant to the terms of
a Interim Bridge Loan and Investment Agreement. This Interim Warrant and the
Holder hereof are entitled to all the benefits provided for in the Interim
Bridge Loan and Investment Agreement, or which are referred to therein to which
this indebtedness was incurred and is to be repaid. The provisions of the
Interim Bridge Loan and Investment Agreement are incorporated herein by
reference with the same force and effect as if fully set forth herein.
This Interim Warrant is subject to the following terms and conditions:
1. Purchase Price. Subject to adjustment as hereinafter provided, the
purchase price of each Warrant Share shall be One and 25/100 Dollars
($1.25). The purchase price of one Warrant Share is referred to herein
as the "INTERIM WARRANT PRICE."
2. Adjustment of Interim Warrant Price and Number of Warrant Shares. The
provisions in this Interim Warrant relating to the Interim Warrant
Price and the number of Warrant Shares to be issued upon exercise of
this Interim Warrant shall be subject to adjustment from time to time
as hereinafter provided.
a. Upon each adjustment of the Interim Warrant Price, the Holder
of this Interim Warrant shall thereafter be entitled to
purchase, at the Interim Warrant Price resulting from such
adjustment, the number of shares of Common Stock obtained by
multiplying the Interim Warrant Price in effect immediately
prior to such adjustment by the number of shares of Common
Stock purchasable hereto immediately prior to such adjustment
and dividing the product thereof by the Interim Warrant Price
resulting from such adjustment.
b. In case the Company shall at any time subdivide its outstanding
Common Stock into a greater number of shares or declare a
dividend payable in Common Stock, the Interim Warrant Price in
effect immediately prior to such subdivision shall be
proportionately reduced and the number of shares of Common
Stock purchasable pursuant to this Interim Warrant shall be
proportionately increased, and conversely, in case the
Company's outstanding Common Stock shall be combined into a
smaller number of shares, the Interim Warrant Price in effect
immediately prior to such combination shall be proportionately
increased and the number of shares of Common Stock purchasable
upon the exercise of this Interim Warrant shall be
proportionately reduced.
c. If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the
Company with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be
effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities or assets ("SUBSTITUTED
PROPERTY") with respect to or in exchange for such Common
Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Holder
shall have the right to purchase and receive upon the basis and
upon the terms and conditions specified in this Interim
Warrant, and in lieu of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such Substituted
Property as would have been issued or delivered to the Holder
if it had exercised this Interim Warrant and had received upon
exercise of this Interim Warrant the Common Stock prior to such
reorganization, reclassification, consolidation, merger, or
sale. The Company shall not effect any such consolidation,
merger, or sale, unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting
from such consolidation or merger or the corporation purchasing
such assets shall assume the obligation to deliver to the
Holder such Substituted Property as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase.
d. If the Company takes any other action, or if any other event
occurs which does not come within the scope of the provisions
of Sections 2(b) or 2(c), but which should, in the Company's
reasonable judgment, result in an adjustment in the Interim
Warrant Price and/or the number of shares subject to the
Interim Warrant in order to fairly protect the purchase rights
of the Holder, an appropriate adjustment in such purchase
rights shall be made by the Company.
e. Upon any adjustment of the Interim Warrant Price or the number
of shares issuable upon of this Interim Warrant, the Company
shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder at the address of the
Holder as shown on the books of the Company, which notice
shall state the Interim Warrant Price resulting from such
adjustment and the increase or decrease, if any, in the number
of shares purchasable at such price upon the exercise of this
Interim Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is
based.
2.
3. No Fractional Shares. No fractional shares will be issued in connection
with any exercise of this Interim Warrant. In lieu of any fractional
share which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market
value, as determined by the Company's officers, of one share of Common
Stock on the date of exercise.
4. No Shareholder Rights. This Interim Warrant shall not entitle its
holder to vote, receive dividends or exercise any of the rights of a
shareholder of the Company prior to exercise of this Interim Warrant.
5. Covenants of the Company. The Company covenants that during the period
this Interim Warrant is exercisable, the Company will reserve from its
authorized and unissued shares of Common Stock a sufficient number of
shares of Common Stock to provide for the issuance of Warrant Shares
upon the exercise of this Interim Warrant. The Company further
covenants that all Warrant Shares that may be issued upon the exercise
of this Interim Warrant will, upon payment and issuance, be duly
authorized and issued, fully paid and nonassessable shares of Common
Stock.
6. Exercise of Interim Warrant. This Interim Warrant may be exercised by
the registered holder, in whole or in part, by the surrender of this
Interim Warrant at the principal office of the Company, together with
the Exercise Form attached hereto duly executed, accompanied by payment
in full of the amount of the aggregate Interim Warrant Price in cash,
cashier's check or bank draft. Upon partial exercise hereof, a new
warrant or warrants containing the same date and provisions as this
Interim Warrant shall be issued by the Company to the registered holder
for the number of Warrant Shares with respect to which this Interim
Warrant shall not have been exercised. For each partial exercise the
holder shall purchase a minimum of five thousand (5,000) Warrant
Shares, or, if the number of Warrant Shares available for exercise
under the Interim Warrant is less than such minimum number, the balance
of the Warrant Shares available for exercise under the Interim Warrant.
A Interim Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date the Company is in receipt of
this Interim Warrant, a completed Exercise Form, all documents the
Company may reasonably request from the holder for the purpose of
complying with applicable securities and other laws, and payment for
the number of Warrant Shares being acquired upon exercise of this
Interim Warrant. The holder entitled to receive the Warrant Shares
issuable upon such exercise shall be treated for all purposes as the
holder of record of such Warrant Shares as of the close of business on
such date. After such date, the Company shall issue and deliver to the
holder or holders entitled to receive the same, a certificate or
certificates for the number of full Warrant Shares issuable upon such
exercise, together with cash in lieu of any fraction of a share, as
provided above.
7. Registration of Warrant Shares. The rights of the holder of this
Interim Warrant to include Warrant Shares in a registered offering of
securities conducted by the Company are set forth in this Section 7.
Upon any closing of the Series A Placement, as such placement is
described in the Interim Bridge Loan and Investment Agreement, the
registration rights set forth in this Section 7 shall be superseded and
replaced by the registration rights provided to purchasers of shares of
Series A Preferred Stock in the Series A Placement; provided, however,
that the registration rights provided to holders of Interim Warrants
shall be on terms which are pari pasu to the registration rights
provided to purchasers of shares of Series A Preferred Stock.
a. Holders of Registrable Securities, as defined below, shall have
the demand registration rights described in this Subsection
7(a).
3.
(1) On one occasion only, after the closing of an initial
public offering of the Company's Common Stock
securities ("INITIAL PUBLIC OFFERING"), in which
offering the Company files a registration statement
under the Securities Act of 1933 (the "ACT"), upon
request by the holders of Registrable Securities who
collectively hold or have the right to purchase at
least 50% of the Registrable Securities, the Company
will promptly take all necessary steps, to register
or qualify the sale of Registrable Securities under
the Act and such state laws as such holders may
reasonably request; provided that (i) such request
must be made on or within six (6) years from the date
of this Warrant; (ii) the Company is only obligated
to register Registrable Securities if the Company is
eligible to use registration Form S-3, or a successor
form; and (iii) the Registrable Securities included
in any such registration has a dollar value of not
less than $2,000,000 as of the close of business on
the date on which such request was made.
(2) Notwithstanding anything herein to the contrary, the
Company may delay filing a registration statement
pursuant to Subsection 7(a), and may withhold efforts
to cause the registration statement to become
effective, for a period of time not exceeding ninety
(90) days, if the Company determines in good faith
that such registration might adversely affect the
Company.
(3) The Company shall keep effective and maintain any
registration, qualification, notification or approval
specified in this Subsection 7(a) for such period as
may be necessary for the holders of the Registrable
Securities to dispose thereof, not to exceed ninety
(90) days.
b. Holders of Registrable Securities shall have the incidental
registration rights described in this Subsection 7(b).
(1) If, at any time beginning on the date six (6) months
after the closing of an Initial Public Offering the
Company proposes to register the sale of any of its
shares of Common Stock under the Act on any
registration form which permits resales of securities
by security holders of the Company, the Company will
give written notice to all registered holders of
Registrable Securities, of its intention to do so. On
the written request of the registered holders of a
majority of the Registrable Securities received by
the Company within twenty (20) days after delivery by
the Company of any notice, the Company will act to
cause all such Registrable Securities, the holders of
which shall have requested the registration or
qualification thereof, to be included in such
registration statement proposed to be filed by the
Company.
(2) If any such registration under Subsection 7(b) shall
be underwritten in whole or in part, the Company may
require that the Registrable Securities requested for
inclusion pursuant to Subsection 7(b) be included in
the underwriting on the same terms and conditions as
the securities otherwise being sold through the
underwriters. In the event that, in the good faith
judgment of the managing underwriter of such public
offering, the inclusion of all or any of the
Registrable Securities originally covered by a
request for registration would reduce the number of
shares to be offered by the Company or interfere with
the successful marketing of the shares of Common
Stock offered in the underwritten offering, the
number of Registrable Securities requested to be
included pursuant to this Section
4.
7(b) in the underwritten public offering may be
reduced at the discretion of such underwriter.
Registrable Securities which are not included in the
underwritten public offering shall be withheld from
the market for a period, not to exceed ninety (90)
days, which the managing underwriter reasonably
determines is necessary in order to effect the
underwritten public offering.
(3) The Company shall keep effective and maintain any
registration, qualification, notification or approval
specified in this Subsection 7(b) only for such
period as the Company shall be obligated to maintain
effectiveness of the underlying registration
statement.
c. For purposes of Section 7, "REGISTRABLE SECURITIES" shall
collectively mean all Warrant Shares issued or issuable upon
exercise of Interim Warrants sold in the Interim Placement and
all shares of the Company's Common Stock issued or issuable
upon conversion of the Company's shares of Series A Preferred
Stock; provided, however, that Registrable Securities shall not
include any of the foregoing shares if such shares (i) have
been resold in any private or public sale or (ii) may be resold
pursuant to Rule 144(k) as provided in Subsection 7(h).
d. Any costs and expenses related to any registration pursuant to
this Section 7 shall be borne by the Company; provided, that
the persons for whose account the Registrable Securities
covered by such registration are sold shall bear underwriting
commissions applicable to their Registrable, fees of their
legal counsel and other fees and expenses customarily paid by
selling shareholders in connection with registration rights. If
the holders of Registrable Securities are the only persons
whose shares are included in the registration pursuant to
Subsection 7(a), such holders shall bear the expense of
inclusion of audited financial statements in the registration
statement which are not dated as of the Company's normal fiscal
year or are not otherwise prepared by the Company for its own
business purposes.
e. From time to time the Company shall amend or supplement, at the
Company's expense, the prospectus used in connection therewith
to the extent necessary in order to comply with applicable law.
If, after the registration statement becomes effective, the
Company advises the holders of registered Registrable
Securities that the Company considers it appropriate for the
registration statement or any prospectus related thereto to be
amended, the holders of such Registrable Securities shall
immediately suspend any further sales of their registered
Registrable Securities until the Company advises them that the
registration statement or prospectus has been amended.
f. The holder shall furnish in writing to the Company all
information as may be reasonably requested by the Company or
required under applicable securities law in connection with any
registration of Registrable Securities including, but not
limited to, the proposed method of sale or other disposition of
the registered Registrable Securities and any compensation
payable in connection therewith. The holder and the Company
shall comply with the provisions of applicable securities law
in connection with the registration of Registrable Securities
and the disposition thereof.
g. In connection with any registration statement in which the
holder's Registrable Securities are included, (i) the holder
will indemnify the Company, its directors and officers and each
person
5.
who controls the Company, against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement
or omission is contained in or should be contained in any
information furnished in writing by the holder, and (ii) the
Company will indemnify the holder, its directors and officers
and each person who controls the holder, against losses, which
shall be limited to the actual amount of the loss incurred on
the date of the event which invokes the right of
indemnification, resulting from any untrue or alleged untrue
statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, except insofar as such losses are caused by any
untrue statement or omission contained in information furnished
in writing to the Company by such holder.
h. The Company's obligation to include Registrable Securities in a
registration under this Section 7 shall terminate on the
earlier of: (i) the close of business on the date six (6) years
from the date of original issuance of the Interim Warrant, and
(ii) the date on which, in the opinion of legal counsel to the
Company, the particular Registrable Securities which the holder
may request be included in such registration statement may be
transferred or reissued without restriction, in compliance with
the provisions of Rule 144(k) under the Act, or any successor
provision.
8. Compliance with Securities Laws and Other Transfer Restrictions.
a. The holder of this Interim Warrant, by acceptance hereof,
agrees, represents and warrants that this Interim Warrant and
the Warrant Shares which may be issued upon exercise hereof are
being acquired for investment, that the holder has no present
intention to resell or otherwise dispose of all or any part of
this Interim Warrant or any Warrant Shares, and that the holder
will not offer, sell or otherwise dispose of all or any part of
this Interim Warrant or any Warrant Shares except under
circumstances which will not result in a violation of the Act
or applicable state securities laws. The Company may condition
any transfer, sale, pledge, assignment or other disposition on
the receipt from the party to whom this Interim Warrant is to
be so transferred or to whom Warrant Shares are to be issued or
so transferred, of any representations and agreements requested
by the Company in order to permit such issuance or transfer to
be made pursuant to exemptions from registration under federal
and applicable state securities laws. Upon exercise of this
Interim Warrant, the holder hereof shall, if requested by the
Company, confirm in writing holder's investment purpose and
acceptance of the restrictions on transfer of the Warrant
Shares, as well as any representations and agreements requested
by the Company in order to permit the issuance of Warrant
Shares to be made pursuant to exemptions from registration
under federal and applicable state securities laws.
b. If the Company conducts an Initial Public Offering of its
Common Stock or undertakes to file a registration statement
pursuant to Subsection 7(a), the holder of the Interim Warrant
or any Warrant Shares shall not, without the prior written
consent of the Company and the managing underwriter in such
offering: (i) sell, transfer or otherwise dispose of, or agree
to sell, transfer or otherwise dispose of the Interim Warrant
or any of the Warrant Shares; (ii) sell, transfer or
6.
otherwise dispose of, or agree to sell, transfer or otherwise
dispose of the Interim Warrant or any right to purchase any of
the Warrant Shares; or (iii) sell or grant, or agree to sell or
grant, options, rights or warrants with respect to the Interim
Warrant or any of the Warrant Shares. Such restrictions shall
be effective for a period of time equal to the period during
which the managing underwriter imposes such transfer
restrictions on the Company's officers and directors; provided,
that in no event shall the restricted period applicable to a
holder of this Interim Warrant exceed one hundred eighty (180)
days after effectiveness of the Company's registration
statement filed under the Act with the Securities and Exchange
Commission with respect to such offering.
c. In the event the holder of this Interim Warrant desires to
transfer this Interim Warrant, the holder shall provide the
Company with a Form of Assignment, in the form attached hereto
describing the manner of such transfer, and an opinion of
counsel (reasonably acceptable to the Company) that the
proposed transfer may be effected without registration or
qualification under applicable securities laws, whereupon such
holder shall be entitled to transfer this Interim Warrant in
accordance with the notice delivered by such holder to the
Company. If, in the opinion of the counsel referred to in this
Section, the proposed transfer or disposition described in the
written notice given may not be effected without registration
or qualification of this Interim Warrant, the Company shall
give written notice thereof to the holder hereof, and such
holder will limit its activities in respect to such proposed
transfer or disposition as, in the opinion of such counsel, are
permitted by law. The Company may place one or more restrictive
legends on the Interim Warrant or any certificates representing
the Warrant Shares which set forth the restrictions contained
herein, and may further place a "stop transfer" restriction in
the Company's books and records with respect to the Interim
Warrant and any Warrant Shares. The restrictions set forth in
this Interim Warrant shall be binding upon any holder, donee,
assignee or transferee of the Interim Warrant or the Warrant
Shares.
9. Subdivision of Interim Warrant. At the request of the holder of this
Interim Warrant in connection with a transfer or exercise of a portion
of the Interim Warrant, upon surrender of such Interim Warrant for such
purpose to the Company, the Company will issue and exchange therefor
warrants of like tenor and date representing in the aggregate the right
to purchase such number of shares of Common Stock as shall be
designated by such holder at the time of such surrender; provided,
however, that the Company's obligations to subdivide securities under
this Section shall be subject to and conditioned upon the compliance of
any such subdivision with applicable securities laws.
10. Loss, Theft, Destruction or Mutilation of Interim Warrant. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Interim Warrant, and in case
of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and
cancellation of this Interim Warrant, if mutilated, the Company will
make and deliver a new Interim Warrant of like tenor and dates as of
such cancellation, in lieu of this Interim Warrant.
11. No Limitation on Corporate Action. No provisions of the Interim Warrant
and no right or option granted or conferred hereunder shall in any way
limit, affect, or abridge the exercise by the Company of any of its
corporate rights or powers to recapitalize, amend its Articles of
Incorporation, reorganize or merge with or into another corporation, or
to transfer all or any part of its property or assets, or the exercise
of any other of its corporate rights and powers.
7.
12. Miscellaneous. This Interim Warrant shall be governed by the laws of
the state of Minnesota without reference to such state's choice of laws
provisions. The headings in this Interim Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a
part hereof. Neither this Interim Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the Company and the registered holder
hereof. All notices and other communications from the Company to the
holder of this Interim Warrant shall be by certified mail, return
receipt requested, or by overnight delivery service to the address
furnished to the Company in writing by the last holder of this Interim
Warrant who shall have furnished an address to the Company in writing.
Delivery shall be deemed to have occurred on the date three (3) days
after depositing the notice in the U.S. mail or one (1) day after
delivery of such notice to a reputable overnight delivery service.
ISSUED this 1st day of November, 2000.
REDLINE PERFORMANCE PRODUCTS, INC.
By: /s/ Xxxx Xxxxx
------------------------
Its: President
8.
FORM OF ASSIGNMENT
REDLINE PERFORMANCE PRODUCTS, INC.
FOR VALUE RECEIVED, the undersigned registered owner of this Interim
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under the within Interim Warrant, with respect to
the number of shares of Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NUMBER OF SHARES
---------------- ------- ----------------
and does hereby irrevocably constitute and appoint _____________________________
Attorney to make such transfer on the books of REDLINE PERFORMANCE PRODUCTS,
INC. maintained for the purpose, with full power of substitution in the
premises. The undersigned understands that compliance with the provisions of the
Interim Warrant is necessary to effect any assignment or transfer.
Dated: _____________ ___, _____
___________________________________
Signature
___________________________________
Print Name
EXERCISE FORM
REDLINE PERFORMANCE PRODUCTS, INC.
(To be executed only upon exercise of Interim Warrant)
The undersigned registered owner of this Interim Warrant irrevocably
exercises this Interim Warrant for and purchases _____________________________
of the number of shares of Common Stock of REDLINE PERFORMANCE PRODUCTS, INC.
purchasable with this Interim Warrant, and herewith makes payment therefor, all
at the price and on the terms and conditions specified in this Interim Warrant.
The undersigned agrees to deliver a completed and executed
subscription, investment or similar document requested by the Company in
connection with the purchase of shares of Common Stock upon exercise of this
Interim Warrant.
Dated: __________________ ___, _____
_______________________________________
Signature of Registered Owner
_______________________________________
Street Address
_______________________________________
City, State, Zip Code
_______________________________________
IRS Identification Number
