SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
April 30, 1999, by and among EXCELSIOR-XXXXXXXXX MOTORCYCLE MANUFACTURING
COMPANY, a Minnesota corporation, with headquarters located at 000 Xxxxxx
Xxxxx, Xxxxx Xxxxxx, Xxxxxxxxx 00000 (the "COMPANY"), and the Buyers set
forth on the signature page hereto, together with their permitted transferees
(the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by Section 4(2) of the Securities Act of 1933, as amended (the
"1933 ACT"), and Rule 506 under Regulation D ("REGULATION D") as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
1933 Act;
B. Buyers desire, upon the terms and conditions stated in this
Agreement, to purchase (i) shares of the Company's Series D Convertible
Preferred Stock (the "PREFERRED STOCK"), convertible into shares of the
Company's common stock, par value $0.01 per share (the "COMMON STOCK" ), for
an aggregate purchase price of Ten Million U.S. Dollars ($10,000,000). In
consideration for each such purchase, the Buyers will receive Stock Purchase
Warrants (the "WARRANTS") to acquire additional shares of Common Stock. The
Warrants to be issued in connection with the Preferred Stock shall be in the
form attached hereto as EXHIBIT A. The purchase price per share of Preferred
Stock shall be $1,000. The purchase of the Preferred Stock will be funded in
a closing (the " CLOSING"), subject to the terms and conditions stated in
this Agreement. The shares of Preferred Stock purchased by the Buyers
hereunder are sometimes referred to herein as the "PREFERRED SHARES." The
shares of Common Stock issuable upon conversion of the Preferred Shares or
otherwise pursuant to the terms of the Certificate of Designation (as defined
below) or the Registration Rights Agreement (as defined below) are referred
to herein as the "COMMON SHARES". The shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrants are referred to herein as
"WARRANT SHARES". The Preferred Shares, Common Shares, Warrants, and Warrant
Shares are collectively referred to herein as the "SECURITIES".
C. The Preferred Stock has the voting powers, preferences, and
rights set forth in the Statement of Designation of Rights, Preferences and
Limitations of Series D Convertible Preferred Stock attached hereto as
EXHIBIT G (the "CERTIFICATE OF DESIGNATION").
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement in the form attached hereto as EXHIBIT B (the "REGISTRATION
RIGHTS AGREEMENT"), pursuant to which the Company has agreed to provide
certain registration rights under the 1933 Act, the rules and regulations
promulgated thereunder and applicable state securities laws.
Excelsior-Xxxxxxxxx Motorcycle Manufacturing Company Page 2
Securities Purchase Agreement
NOW THEREFORE, the Company and each Buyer hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1 CLOSING. Subject to the terms and satisfaction or waiver of
the conditions of this Agreement, the issuance, sale and purchase of the
Preferred Stock shall be consummated at the Closing. On the date of the
Closing, subject to the satisfaction or waiver of the conditions set forth in
Article VI, the Company shall issue and sell to the Buyers, and each Buyer
agrees, on a several and not a joint basis, to purchase from the Company, the
number of shares of Preferred Stock set forth under such Buyer's name on the
signature page hereto executed by each Buyer.
1.2 FORM OF PAYMENT. The Buyers shall pay their respective
purchase price for the Preferred Shares by wire transfer to the account
designated pursuant to the Escrow Agreement by and among the Company, the
Buyers, and the escrow agent ("ESCROW AGENT") designated therein in the form
attached hereto as EXHIBIT C (the "ESCROW AGREEMENT"), upon delivery by the
Company to the Escrow Agent of the applicable Preferred Shares and Warrants,
all in accordance with the terms of the Escrow Agreement, and upon
satisfaction of the other conditions to the Closing.
1.3 CLOSING DATE. Subject to the satisfaction or waiver of the
conditions thereto set forth in Article VI below, and further subject to the
terms and conditions of the Escrow Agreement, the date and time of the
Closing shall be 10:00 a.m. Pacific Standard Time on May 3, 1999, or such
other mutually agreed upon date or time (the "Closing Date").
1.4 WARRANTS. In consideration of the purchase by Buyers of the
Preferred Shares, the Company shall, upon the Closing, issue Warrants to each
Buyer to acquire, in the aggregate, Thirty-five Thousand (35,000) Common
Shares for each One Million Dollars ($1,000,000) of Preferred Shares
purchased by such Buyer at the Closing, and each such Warrant shall have an
exercise price per share equal to (i) for one-half (1/2) of such Warrants,
125% of the Closing Bid Price (as defined in the Certificate of Designation)
on the Business Day (as defined in the Certificate of Designation) prior to
the Closing Date and (ii) for the other one-half (1/2) of such Warrants, 125%
of the average Closing Bid Price (as defined in the Certificate of
Designation) of the Common Stock over the five trading days ending on
November 30, 1999.
ARTICLE II
BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants to the Company as of the date
hereof and as of the date of the Closing, severally and solely with respect
to itself and its purchase hereunder and not with respect to any other Buyer,
as set forth in this Article II. Each Buyer makes no other representations
or warranties, express or implied, to the Company in connection with the
transactions contemplated hereby and any and all prior representations and
warranties, if any, which may have been made by the Buyers to the Company in
connection with the transactions contemplated hereby shall be deemed to have
been merged in this Agreement and any such prior representations and
warranties, if any, shall not survive the execution and delivery of this
Agreement.
2.1 INVESTMENT PURPOSE. Buyer is purchasing the Securities for
its own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act; provided, however, that by making the
representation herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of
the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
2.2 ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D. Buyer has
delivered an Investor Questionnaire in the form of EXHIBIT D to the Company
and Shoreline Pacific Institutional Finance, the Institutional Division of
Financial West Group ("SHORELINE PACIFIC").
2.3 RELIANCE ON EXEMPTIONS. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Securities.
2.4 INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer
and its advisors, if any, have been afforded the opportunity to ask questions
of the Company. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Article III below. The Buyer
acknowledges and understands that its investment in the Securities involves a
significant degree of risk, including the risks reflected in the SEC
Documents (as defined below).
2.5 GOVERNMENTAL REVIEW. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
2.6 TRANSFER OR RESALE. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under
Page 4
the 1933 Act or any applicable state securities laws and consequently the
Buyer may have to bear the risk of owning the Securities for an indefinite
period of time, and the Securities may not be transferred unless (a) the
resale of the Securities is registered pursuant to an effective registration
statement under the 1933 Act; (b) the Buyer shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (c) the
Securities are sold or transferred pursuant to Rule 144 promulgated under the
1933 Act (or a successor rule) ("RULE 144") or (d) the Securities are sold or
transferred to an affiliate (as defined in Rule 144) of the Buyer; (ii) any
sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of
the SEC thereunder; and (iii) neither the Company nor any other person is
under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). The Buyer covenants it will not make any sale, transfer or
other disposition of the Securities in violation of federal or state
securities laws.
2.7 LEGENDS. The Buyer understands that until (i) the Preferred
Shares and the Warrants may be sold by the Buyer under Rule 144(k) or any
successor rule that would permit sale of such Securities without restriction
as to the number of securities that can then be immediately sold ("RULE
144(k)") and (ii) such time as the resale of the Common Shares and the
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, or otherwise may be sold by the Buyer under
Rule 144(k), the certificates representing the Securities will bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any certificate upon
which it is stamped in accordance with the terms specified in the Transfer
Agent Instructions referred to in Article V hereof, and otherwise in
accordance with the terms of Article V.
Page 5
2.8 AUTHORIZATION; ENFORCEMENT. This Agreement, the Registration
Rights Agreement and the Escrow Agreement have been duly and validly
authorized, executed and delivered on behalf of the Buyer and are valid and
binding agreements of the Buyer enforceable in accordance with their terms,
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of equity.
2.9 RESIDENCY. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyers that:
3.1 ORGANIZATION AND QUALIFICATION. The Company is duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used, operated and
conducted. The Company has no subsidiaries. The Company is duly qualified to
do business and is in good standing in every jurisdiction in which the nature
of the business conducted by it makes such qualification necessary except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on (i) the business, operations, assets or financial condition
of the Company, or (ii) on the ability of the Company to perform its
obligations pursuant to the transactions contemplated hereby or under the
agreements or instruments to be entered into or filed in connection herewith,
or (iii) the Securities.
3.2 AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to file and perform its obligations under the
Certificate of Designation, to enter into and to perform its obligations
under this Agreement, the Registration Rights Agreement, the Escrow Agreement
and to consummate the transactions contemplated hereby and thereby and to
issue the Securities, in accordance with the terms hereof and thereof, (ii)
the execution, delivery and performance of this Agreement, the Registration
Rights Agreement and the Warrants by the Company and the consummation by it
of the transactions contemplated hereby and thereby (including without
limitation the filing of the Certificate of Designation, issuance of the
Preferred Shares, and the issuance and reservation for issuance of the Common
Shares in accordance with the Certificate of Designation and the Warrant
Shares issuable in accordance with the terms of the Warrants) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board or Directors, or its shareholders is
required, (iii) this Agreement, the Registration Rights Agreement, the Escrow
Agreement and the Warrants have been duly executed and the Certificate of
Designation has been duly filed by the Company, and (iv) each of this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Certificate of Designation and the Warrants constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in
Page 6
accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, or moratorium or similar laws
affecting the rights of creditors generally and the application of general
principles of equity.
3.3 CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 25,000,000 shares of $.01 par value
Common Stock of which 13,583,076 shares are issued and outstanding, 1,200,000
shares are reserved for issuance pursuant to the Company's employee and
director stock option plans and an additional 1,000,000 shares have been
approved by the Board of Directors for issuance under such plans, pending
shareholder approval, 300,000 shares are reserved for issuance pursuant to
the Company's employee stock purchase plan, 999,910 shares are reserved for
issuance pursuant to securities (other than securities issued under the
foregoing plans) exercisable for, or convertible into or exchangeable for
shares of Common Stock; and (ii) 7,000,000 shares of preferred stock, par
value $0.01 per share, of which 10,000 shares are designated as Series B
Convertible Preferred Stock, and of which 6,750 are issued and outstanding,
and 3,000 shares are designated as Series C Convertible Preferred Stock and
of which 3,000 are issued and outstanding. All of such outstanding shares of
capital stock are, or upon issuance will be, duly authorized, validly issued,
fully paid and nonassessable. No shares of capital stock of the Company,
including the Preferred Shares, the Common Shares and the Warrant Shares
issuable pursuant to this Agreement, are subject to preemptive rights or any
other similar rights of the stockholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in SCHEDULE 3.3 and except for the transactions
contemplated hereby, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or securities
or rights convertible into, exercisable for, or exchangeable for any shares
of capital stock of the Company, or arrangements by which the Company is or
may become bound to issue additional shares of capital stock of the Company,
and (ii) there are no agreements or arrangements under which the Company is
obligated to register the sale of any of its or their securities under the
1933 Act (except the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued
by the Company (or in any agreement providing rights to security holders)
that will be triggered by the issuance of the Securities. The Company has
furnished to the Buyers true and correct copies of the Company's Articles of
Incorporation, as amended, as in effect on the date hereof ("ARTICLES OF
INCORPORATION"), the Company's By-laws as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable
for Common Stock of the Company and the material rights of the holders
thereof in respect thereto.
3.4 ISSUANCE OF SECURITIES. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims, encumbrances, and charges with respect to the issue
thereof and shall not be subject to preemptive rights or other similar rights
of stockholders of the Company and will not impose personal liability on the
holders thereof. The Common Shares and Warrant Shares are duly authorized
and reserved for issuance, and, upon conversion of the Preferred Shares and
exercise of the Warrants in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable, and free from all taxes,
liens,
Page 7
claims and encumbrances and will not be subject to preemptive rights or other
similar rights or stockholders of the Company and will not impose personal
liability upon the holder thereof.
3.5 ACKNOWLEDGEMENT OF COMPANY. The Company understands and
acknowledgesthat, the maximum number of shares that the Company is obligated
to issue upon conversion of all of the Preferred Shares is 2,716,615 (the
"MAXIMUM SHARE AMOUNT") which shall be allocated pro-rata among the Buyers as
described in Section V.D. of the Certificate of Designation. In addition, up
to 350,000 shares of Common Stock may be issued upon exercise of the Warrants
issued or issuable in connection with all of the Preferred Shares. Any Face
Amount (as defined in the Certificate of Designation) of the Preferred Shares
remaining when the Maximum Share Amount is reached will be redeemed in cash,
or, if the Company agrees to waive such limit after obtaining all necessary
shareholder approvals, such remaining Face Amount will be converted into a
number of additional shares of Common Stock determined by dividing the
then-outstanding Face Amount by the Conversion Price (as defined in the
Certificate of Designation) in effect from time to time. The Company
acknowledges that, subject to the limitations and the option to redeem for
cash described above, its obligation to issue shares of Common Stock upon
conversion of the Preferred Stock and exercise of the Warrants in accordance
with the terms of the Certificate of Designation and the Warrants is absolute
and unconditional.
3.6 SERIES OF PREFERRED STOCK. The terms, designations, powers,
preferences and relative, participating and optional or special rights, and
the qualifications, limitations and restrictions of each series of preferred
stock of the Company (other than the Preferred Shares) are as stated in the
Articles of Incorporation, filed on or prior to the date hereof, and the
Bylaws. The terms, designations, powers, preferences and relative,
participating and optional or special rights, and the qualifications,
limitations and restrictions of the Preferred Stock are as stated in the
Certificate of Designation.
3.7 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrants and the Escrow
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the issuance and reservation for issuance of the Preferred Shares, Common
Shares, Warrants, and Warrant Shares) will not (i) conflict with or result in
a violation of any provision of the Articles of Incorporation or By-laws or
(ii) except as described in SCHEDULE 3.7, violate or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give
to others any rights of termination, amendment (including without limitation,
the triggering of any anti-dilution provision), acceleration or cancellation
of, any agreement, indenture, patent, patent license, or instrument to which
the Company is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable
to the Company or by which any property or asset of the Company is bound or
affected (except for such conflicts, breaches, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Except as
described in Schedule 3.7, the Company
Page 8
is not in violation of its Articles of Incorporation, By-laws or other
organizational documents and the Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default) under, and the Company has not taken any action or failed to take
any action that (and no event has occurred which, without notice or lapse of
time or both) would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which the Company is a party or by which any property or assets of the
Company is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The
business of the Company is not being conducted, and shall not be conducted so
long as a Buyer owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, the failure to comply
with which would, individually or in the aggregate, have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws or any
listing agreement with any securities exchange or automated quotation system,
the Company is not required to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency or
any regulatory or self regulatory agency in order for it to execute, deliver
or perform any of its obligations under this Agreement, the Warrants or the
Registration Rights Agreement, in each case in accordance with the terms
hereof or thereof or to issue and sell the Preferred Shares and Warrants in
accordance with the terms hereof and to issue the Conversion Shares upon
conversion of the Preferred Shares and the Warrant Shares upon exercise of
the Warrants. Except as set forth in SCHEDULE 3.7, all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of
the listing requirements of Nasdaq (as defined below) and does not reasonably
anticipate that the Common Stock will be delisted by Nasdaq in the
foreseeable future. The Company is unaware of any facts or circumstances
which might give rise to the foregoing.
3.8 SEC DOCUMENTS, FINANCIAL STATEMENTS. Since the date of the
Company's initial public offering, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 ACT") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits) incorporated by reference therein,
being hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to each Buyer, or each Buyer has had access to, true and complete
copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act or the 1933 Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
Page 9
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set
forth in the financial statements included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than liabilities incurred
in the ordinary course of business subsequent to January 2, 1999, and
liabilities of the type not required under generally accepted accounting
principles to be reflected in such financial statements. Such liabilities
incurred subsequent to January 2, 1999 are not, in the aggregate, material to
the financial condition or operating results of the Company.
3.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Documents or as described in Schedule 3.9, since January 2, 1999, there has been
no material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, prospects or
results of operations of the Company.
3.10 ABSENCE OF LITIGATION. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its officers or directors acting as such that could, individually or in the
aggregate, have a Material Adverse Effect. The Company is not aware of any
facts or circumstances which would reasonably be expected to give rise to any
action or proceeding described in the foregoing sentence. SCHEDULE 3.10
contains a complete list and summary description of any pending or, to the
knowledge of the Company, threatened litigation against the Company (or
litigation in which the Company is named), without regard to whether it could
have a Material Adverse Effect.
3.11 PATENTS, COPYRIGHTS, ETC. The Company owns or possesses the
requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights ("INTELLECTUAL
PROPERTY") necessary to enable it to conduct its business as now operated (and,
except as set forth in SCHEDULE 3.11 hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); there is no
claim or action by any person pertaining to, or proceeding pending, or to the
Company's knowledge threatened, which challenges the right of the Company with
respect to any Intellectual Property necessary to enable it to conduct its
business as now operated (and, except as set forth in SCHEDULE 3.11 hereof, to
the best of the Company's knowledge, as presently contemplated to be operated in
the future); to the best of the Company's knowledge, the Company's current and
intended products, services and processes do not infringe on any Intellectual
Property or other rights held by any person; and the Company is unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of its Intellectual Property.
Page 10
3.12 NO MATERIALLY ADVERSE CONTRACTS, ETC. The Company is not subject
to any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the reasonable judgment of the Company's
officers has or is expected in the future, individually or in the aggregate, to
have a Material Adverse Effect. The Company is not a party to any contract or
agreement which in the reasonable judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
3.13 TAX STATUS. Except as set forth on SCHEDULE 3.13, the Company
has made or filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. Except as set forth on
SCHEDULE 3.13, none of the Company's tax returns is presently being audited by
any taxing authority.
3.14 CERTAIN TRANSACTIONS. Except as disclosed in the SEC Documents
or as set forth on SCHEDULE 3.14 and except for arm's-length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties
and other than the grant of stock options, employment agreements or the
ownership of other securities and rights disclosed on SCHEDULE 3.3 none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or employee
has a substantial interest or is an officer, director, trustee or partner.
3.15 DISCLOSURE. All information relating to or concerning the
Company set forth in this Agreement and provided to the Buyers pursuant to
Section 2.4 hereof and otherwise in connection with the transactions
contemplated hereby contained no untrue statement of a material fact and the
Company has not omitted to state any material fact necessary in order to make
the statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or its business, properties,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed (assuming for this purpose that
the
Page 11
Company's reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by the Company under the 1933 Act).
3.16 ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. The
Company acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and that any statement made by any Buyer or any of their
respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is not advice or a recommendation and is
merely incidental to the Buyer's purchase of the Securities and has not been
relied on by the Company, its officers or directors in any way. The Company
further represents to each Buyer that the Company's decision to enter into
this Agreement has been based solely on an independent evaluation by the
Company and its representatives.
3.17 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers
to buy any security under circumstances that would require registration under
the 1933 Act of the issuance of the Securities to the Buyers. The issuance
of the Securities to the Buyers will not be integrated with any other
issuance of the Company's securities (past, current or future, including, but
not limited to, the issuance of the Company's Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), the Company's Series C Preferred
Stock (the "Series C Preferred Stock"), the Warrants issued in connection
with the Series B Preferred Stock (the "Series B Warrants") and the Series C
Preferred Stock (the "Series C Warrants"), and any shares of Common Stock
issuable upon conversion of or exercise of, or otherwise, pursuant to the
Series B Preferred Stock, the Series C Preferred Stock, the Series B Warants
or the Series C Warrants) for purposes of the 1933 Act or any applicable
rules of Nasdaq (including Rule 4460(i)). Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, will take a
position, with the SEC, Nasdaq or otherwise, that the Securities should be
integrated with any other issuance of the Company's securities (past, current
or future, including, but not limited to, the issuance of the Series B
Preferred Stock, the Series C Preferred Stock, the Series B Warrants and the
Series C Warrants, and any shares of Common Stock issuable upon conversion of
or exercise of, or otherwise, pursuant to the Series B Preferred Stock, the
Series C Preferred Stock, the Series B Warants or the Series C Warrants) for
purposes of the 1933 Act or any applicable rules of Nasdaq (including Rule
4460(i)).
3.18 NO BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with Shoreline Pacific, whose commissions and
fees will be paid for by the Company.
3.19 PERMITS; COMPLIANCE. The Company is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own,
lease and operate its properties and to carry on its
Page 12
business as it is now being conducted except those the failure of which to
possess would not, individually or in the aggregate, have a Material Adverse
Effect (collectively, the "COMPANY PERMITS"), and there is no action pending
or, to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits. The Company is not in conflict
with, or in default or violation of, any of the Company Permits, except for
any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. Since January 2, 1999, the Company has not received any notification
with respect to possible conflicts, defaults or violations of applicable
laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
3.20 TITLE TO PROPERTY. The Company has good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company. Any real property and facilities held under lease by the Company
are held by it under valid, subsisting and enforceable leases with such
exceptions as would not have a Material Adverse Effect.
3.21 INSURANCE. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has no reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not have a Material Adverse Effect.
3.22 INTERNAL ACCOUNTING CONTROLS. The Company maintains a system
of internal accounting controls sufficient, in the judgment of the Company's
board of directors, to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
3.23 EMPLOYMENT MATTERS. The Company is in compliance with all
federal, state, local and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours except where failure to be in compliance would not have a Material
Adverse Effect. There are no pending investigations involving the Company by
the U.S. Department of Labor or any other governmental agency responsible for
the enforcement of such federal, state, local or foreign laws and
regulations. There is no unfair labor practice charge or complaint against
the Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company. Except as set forth in SCHEDULE 3.23, no
representation question exists respecting the employees of the Company, and
no collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance
Page 13
or arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company. No material labor dispute with the
employees of the Company exists or, to the knowledge of the Company, is
imminent.
3.24 INVESTMENT COMPANY STATUS. The Company is not and upon
consummation of the sale of the Securities will not be an "investment
company," a company controlled by an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.
3.25 NO GENERAL SOLICITATION. Assuming the accuracy of the
representations and warranties of Shoreline Pacific in its letter to the
Company dated as of April 30, 1999 (a copy of which is attached as SCHEDULE
3.25 hereto) to the extent relevant for such determination, neither the
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the
Company, or any such distributor, has conducted any "general solicitation,"
as such term is defined in Regulation D, with respect to any of the
Securities being offered hereby.
IV
COVENANTS.
4.1 COMMERCIALLY REASONABLE EFFORTS. The parties shall use their
commercially reasonable efforts to satisfy timely each of the conditions
described in Article VI of this Agreement.
4.2 FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide
a copy thereof to each Buyer promptly after such filing. The Company shall,
on or before the date of the Closing, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers on or prior to the date of the Closing. The Company agrees to file a
Form 8-K disclosing this Agreement and the transactions contemplated hereby
with the SEC within ten (10) business days following the date of the Closing.
4.3 REPORTING STATUS; ELIGIBILITY TO USE FORM S-3. The Company's
Common Stock is registered under Section 12(g) of the 1934 Act. Throughout
the Registration Period (as defined in the Registration Rights Agreement),
the Company shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as
an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would permit such termination. The
Company currently meets, and will take all
Page 14
reasonably necessary action to continue to meet, the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 for the
registration of securities for the account of shareholders of the Company.
4.4 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Securities for general corporate purposes and shall not
otherwise, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other entity.
4.5 EXPENSES. The Company and the Buyers shall each be liable
for their own expenses incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without
limitation, attorneys' and consultants' fees and expenses.
4.6 FINANCIAL INFORMATION. The Company agrees to file all
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the 1934
Act. The financial statements of the Company will be prepared in accordance
with United States generally accepted accounting principles, consistently
applied, and will fairly present in all material respects the consolidated
financial position of the Company and results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). The Company agrees to
send the following reports to each Buyer until such Buyer transfers, assigns,
or sells all of the Securities owned by it: (i) within ten (10) days after
the filing with the SEC, a copy of its Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii)
within one (1) day after release, copies of all press releases issued by the
Company; and (iii) contemporaneously with the making available or giving to
the stockholders of the Company, copies of any notices or other information
the Company makes available or gives to such stockholders.
4.7 LISTING. The Company shall promptly secure the listing of the
Common Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and, so long as any
Buyer owns any of the Securities, shall maintain such listing of all such
Common Shares and Warrant Shares. The Company will use its best efforts to
obtain and, so long as any Buyer owns any of the Securities, maintain the
listing and trading of its Common Stock on the Nasdaq National Market System
("NASDAQ"), the American Stock Exchange ("AMEX") or the New York Stock
Exchange ("NYSE"), and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Nasdaq or other exchanges, as applicable. The Company shall promptly provide
to each Buyer copies of any notices it receives regarding the continued
eligibility of the Common Stock for listing on the Nasdaq or other principal
exchange or quotation system on which the Common Stock is listed or traded.
4.8 SOLVENCY; COMPLIANCE WITH LAW. The Company (both before and
after giving effect to the transactions contemplated by this Agreement) is
solvent (i.e., its assets have a fair
Page 15
market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any
action that would impair, its ability to pay its debts from time to time
incurred in connection therewith as such debts mature. The Company will
conduct its business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business,
including, without limitation, all applicable local, state and federal
environmental laws and regulations the failure to comply with which would
have a Material Adverse Effect.
4.9 INSURANCE. The Company shall maintain liability, casualty and
other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size to the Company.
7.14 NO INTEGRATION. The Company shall not make any offers or sales
of any security (other than the Securities) under circumstances that would cause
the offering of Securities to be integrated with any other offering of
securities by the Company (i) for the purpose of any stockholder approval
provision applicable to the Company or its securities or (ii) for purposes of
any registration requirement under the 1933 Act.
4.11 RESERVATION OF SHARES. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Common Shares in connection therewith
(based on the Conversion Price of the Preferred Shares in effect from time to
time) and the full exercise of the Warrants and the issuance of the Warrant
Shares in connection therewith (based upon the Exercise Price of the Warrants in
effect from time to time). The Company shall not reduce the number of shares of
Common Stock reserved for issuance upon conversion of the Preferred Shares or
exercise of the Warrants without the consent of all the Buyers. The Company
shall use its best efforts at all times to maintain the number of shares of
Common Stock so reserved for issuance at no less than 3,066,615 shares of Common
Stock. If at any time the number of shares of Common Stock authorized and
reserved for issuance is below the number of Conversion Shares and Warrant
Shares issued and issuable upon conversion of the Preferred Shares and exercise
of the Warrants (based on the Conversion Price of the Preferred Shares and
Exercise Price of the Warrants then in effect), the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of shareholders
to authorize additional shares to meet the Company's obligations under this
Section 4.11, in the case of an insufficient number of authorized shares, and
using its best efforts to obtain shareholder approval of an increase in such
authorized number of shares.
4.12 LIMITATION ON SHORT SALES.
(a) Each Buyer agrees to conduct all sales of shares of Common Stock
(including all short sales or other hedging activities) in compliance with all
relevant securities laws and regulations.
Page 16
(b) Each Buyer agrees that during any period of
determination of any Market Price (as defined in the Certificate of
Designation), if Buyer (or others controlling, controlled by, or under common
control with Buyer) engages in short sale transactions or other hedging
activities which involve, among other things, sales of common shares, Buyer
(or others controlling, controlled by, or under common control with Buyer)
will place its sale orders for such shares of Common Stock in the course of
such activities so as not to complete or effect any such sale on any trading
day during such period at a price which is lower than the lowest trading
price effected for shares of Common Stock on such day by persons other than
Buyer (or others controlling, controlled by, or under common control with
Buyer ).
(c) Buyer will not create new trading lows through sales of
common shares in order to create a lower Market Price applicable to
conversions of Preferred Stock.
(d) In connection with the sale of any shares of Common Stock
(a "Common Stock Sale") by a Buyer (or by others controlling, controlled by
or under common control with such Buyer) at any time after the Effective Date
of the Registration Statement (as defined in Section 4.13 below) and prior to
the first anniversary of the Closing (the "Common Stock Sale Period") at a
price greater than 110% of the Fixed Conversion Price (as defined in the
Certificate of Designation), each Buyer convenants and agrees that it will
issue a Notice of Conversion (as defined in the Certificate of Designation)
and shall convert Preferred Stock into such number of Common Shares equal to
the number of such shares of Common Stock sold by such Buyer within twenty
(20) business days following such sale.
4.13 RESTRICTION ON BELOW MARKET ISSUANCE OF SECURITIES. (a) For a
period from the date of the Closing through the later to occur of (a) six
months following the effective date of the "REGISTRATION STATEMENT" required
to be filed pursuant to Section 2(a) of the Registration Rights Agreement
(the "EFFECTIVE DATE") (plus any days in which sales cannot be made
thereunder) and (b) the first anniversary of the Closing, neither the Company
nor any subsidiary of the Company ("SUBSIDIARY") shall issue or agree to
issue, (except (i) to Buyers pursuant to this Agreement, (ii) pursuant to any
employee stock option, stock purchase or restricted stock plan of the Company
in effect on the date hereof, or any such plan established after the date
hereof and approved by the Board of Directors of the Company, (iii) pursuant
to any existing security, option, warrant, scrip, call or commitment or right
in each case or disclosed on SCHEDULE 3.3 hereof or (iv) pursuant to a
strategic joint venture or partnership entered into by the Company or any
Subsidiary, undertaken at the reasonable discretion of the Board of Directors
of the Company, the primary purpose of which is not to raise equity capital),
any equity securities (including debt securities with an equity component) of
the Company or any Subsidiary (or any security convertible into or
exercisable or exchangeable, directly or indirectly, for equity securities of
the Company or any Subsidiary) if such securities (x) are issued at a price
(or in the case of securities convertible into or exercisable or
exchangeable, directly or indirectly, for Common Stock such securities
provide for a conversion, exercise or exchange price) which may be less than
the then current market price for Common Stock on the date of issuance of
such Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock (taking into account the value of any warrants
or options to acquire Common Stock issued in connection therewith, but only
if the number of such warrants or options exceeds 25% of the transaction
based upon the dollar value
Page 17
of the transaction divided by the then current market price for the Common
Stock and provided, further, that no such warrant or option is exercisable at
a price less than the current market price for the Common Stock on the date
of issuance of the securities issued in connection with such warrants or
options), (y) are convertible into an indeterminate number of shares of
Common Stock or (z) are redeemable at a premium to the purchase price of such
securities. During such period neither the Company nor any Subsidiary shall
issue or agree to issue any security convertible into or exercisable or
exchangeable for, directly or indirectly, equity securities of the Company or
any such Subsidiary based on a variable conversion exercise or exchange price
or formula.
V
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS
The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Buyer or its nominee, for the Common Shares
and the Warrant Shares in such amounts as determined in accordance with this
Agreement and the Warrants. All such certificates shall bear the restrictive
legend, except as specified in this Article V. In addition, the Company will
issue the irrevocable Transfer Agent Instructions to the transfer agent in
the form of EXHIBIT F hereto. The Company warrants that no instruction other
than as referred to in this Article V, and stop transfer instructions to give
effect to Section 2.7 hereof (prior to registration of Common Shares and
Warrant Shares under the 1933 Act), will be given by the Company to its
transfer agent. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement set forth in this Article V hereof to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Common Shares and Warrant Shares.
If, unless otherwise required by applicable state securities laws, (a)
the resale of the Securities has been registered under an effective
registration statement filed under the 1933 Act, or (b) such holder provides
the Company and the Transfer Agent with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Securities
may be made without registration under the 1933 Act and such sale either has
occurred or may occur without restriction on the manner of such sale or
transfer, or (c) such holder provides the Company and the Transfer Agent with
reasonable assurances that such Securities can be sold under Rule 144 under
the 1933 Act (or a successor rule thereto), or (d) the Securities can be sold
without restriction as to the number of securities as of a particular date
that can then be immediately sold under Rule 144(k), the Company shall permit
the transfer of the Common Shares or Warrant Shares, and the Transfer Agent
shall issue one or more certificates, free from any restrictive legend in
such name and in such denominations as specified by such Buyer.
Notwithstanding anything herein to the contrary, but subject to the following
proviso, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement; provided that this
shall not alter the provisions of this Article V with respect to the removal
of restrictive legends.
Page 18
The Buyer agrees to sell all Securities in compliance with applicable
prospectus delivery requirements, if any, or otherwise in compliance with the
requirements for an exemption from registration under the 1933 Act and the
rules and regulations promulgated thereunder.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer, by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under
this Article V will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Buyer shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
VI
CONDITIONS TO THE CLOSING.
6.1 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL THE PREFERRED
STOCK. The obligation of the Company hereunder to issue and sell the
Preferred Stock to each Buyer at the Closing is subject to the satisfaction
by such Buyer, at or before such date of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(a) On or before the Closing, each Buyer shall have
executed this Agreement, the Registration Rights Agreement and the Escrow
Agreement, and delivered the same to the Company and the Escrow Agent.
(b) Each Buyer shall have delivered the purchase price for
the Preferred Stock to the Escrow Agent in accordance with this Agreement.
(c) The representations and warranties of each Buyer shall
be true and correct in all material respects as of the Closing as though made
at that time (except for representations and warranties that speak as of a
specific date which representations and warranties shall be correct as of
such date), and each Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by each Buyer
at or prior to the Closing.
(d) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
Page 19
(e) The Certificate of Designation shall have been accepted
by the Secretary of State of the State of Minnesota, and evidence thereof
reasonably satisfactory to the Company shall have been received by the
Company.
6.2 CONDITIONS TO BUYERS' OBLIGATION TO PURCHASE THE PREFERRED
STOCK. The obligation of each Buyer hereunder to purchase the Preferred Stock
from the Company at the Closing is subject to the satisfaction, at or before
such date of each of the following conditions, provided that these conditions
are for each such Buyer's respective benefit and may be waived by each such
Buyer at any time in its sole discretion:
(a) On or before the Closing, the Company shall have
executed this Agreement, the Registration Rights Agreement and the Escrow
Agreement, and delivered the same to the Buyer.
(b) The Certificate of Designation shall have been filed
with and accepted by the Secretary of State of the State of Minnesota, and
evidence thereof reasonably satisfactory to the applicable Buyer shall have
been delivered to such Buyer.
(c) The Company shall have delivered to the Escrow Agent
duly executed certificates representing the Preferred Stock and duly executed
Warrants in the amounts specified in Section 1.4.
(d) The representations and warranties of the Company shall
be true and correct in all material respects as of the Closing as though made
at such time (except for representations and warranties that speak as of a
specific date which representations and warranties shall be true and correct
as of such date) and the Company shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the date of the Closing. The Buyers shall have
received a certificate or certificates, executed by the Chief Executive
Officer or the Chief Financial Officer of the Company, dated as of the
Closing, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, but not limited to,
certificates with respect to the Company's Articles of Incorporation,
By-laws, Board of Directors' resolutions relating to the transactions
contemplated hereby and the incumbency and signatures of each of the officers
of the Company who shall execute on behalf of the Company any document
delivered on the date of the Closing.
(e) No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
(f) Trading and listing of the Common Stock on Nasdaq shall
not have been suspended by the SEC or Nasdaq.
Page 20
(g) The Buyers shall have received an opinion of the
Company's counsel, dated as of the Closing, in form, scope and substance
reasonably satisfactory to the Buyers and in substantially the same form as
EXHIBIT E attached hereto.
(h) The Irrevocable Transfer Agent Instructions in respect
of the Preferred Stock, in form and substance satisfactory to the Buyers,
shall have been delivered to the Company's transfer agent and acknowledged in
writing by such transfer agent.
(i) LETTER AGREEMENTS REGARDING VOTING. The Company shall
have caused Xxxx, Xxx and Xxxxxxxx Xxxxxx to execute letter agreements, in
substantially the form of EXHIBIT I hereto pursuant to which they will agree
to vote in favor of the Stockholder Approval (as defined in Article V(B)(ii)
of the Certificate of Designation).
VII
GOVERNING LAW; MISCELLANEOUS.
7.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws. The parties hereto
hereby submit to the exclusive jurisdiction of the United States Federal and
state courts located in Delaware with respect to any dispute arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
7.2 COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in two or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
7.3 HEADINGS. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of,
this Agreement.
7.4 SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
7.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any
Page 21
Buyer makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be
charged with enforcement.
7.6 NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular U.S. mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a
party. The addresses for such communications shall be:
If to the Company:
Excelsior-Xxxxxxxxx Motorcycle Manufacturing Company
000 Xxxxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Chief Financial Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Faegre & Xxxxxx LLP
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Shoreline Pacific Institutional Finance
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: General Counsel
Phone: (000) 000-0000
Fax: (000) 000-0000
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide written notice to the other party of any
change in address.
Page 22
7.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Buyer may assign all or part of its rights
and obligations hereunder to any of its "affiliates," as that term is defined
under the 1933 Act, without the consent of the Company so long as such
affiliate is an accredited investor (within the meaning of Regulation D under
the 0000 Xxx) and agrees in writing to be bound by this Agreement. This
provision shall not limit the Buyer's right to transfer the Securities
pursuant to the terms of this Agreement or to assign the Buyer's rights
hereunder to any such transferee pursuant to the terms of the Agreement.
7.8 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
7.9 SURVIVAL/REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company and the agreements and covenants set forth
herein shall survive the closing hereunder. The Company makes no
representations or warranties in any oral or written information provided to
Buyers, other than the representations and warranties included herein. The
Company agrees to indemnify and hold harmless each Buyer and all such Buyer's
respective officers, directors, employees, partners, members, affiliates, and
agents for loss or damage arising as a result of or related to any breach by
the Company of any of its representations, warranties, covenants and
obligations under this Agreement or the Registration Rights Agreement.
7.10 PUBLICITY. The Company and each Buyer shall have the right to
review, a reasonable period of time before issuance thereof, any press
releases, or relevant portions of any SEC or Nasdaq filings, or any other
public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Buyers, to make any press release or SEC or Nasdaq filings
with respect to such transactions as are required by applicable law and
regulations including NASD requirements (although the Company shall make
reasonable efforts to consult with the Buyers in connection with any such
press release prior to its release and filing and the Buyers shall be
provided with a copy thereof and be given an opportunity to comment thereon).
7.11 FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, Certificate, instruments and
documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.
7.12 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against
any party.
Page 23
7.13 EQUITABLE RELIEF. The Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations
under this Agreement, any remedy at law may prove to be inadequate relief to
the Buyers. The Company therefore agrees that the Buyers shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
7.14 CONSENTS UNDER PRIOR CERTIFICATES OF DESIGNATION. Pursuant to
Section XII of that certain Statement of Designation relating to the Series B
Convertible Preferred Stock of the Company and Section XII of that certain
Statement of Designation relating to the Series C Convertible Preferred Stock
of the Company, RGC International Investors, LDC (a Buyer hereunder) hereby
gives its approval of and consents to the entering into and performance of
this Agreement and all related documents by the Company and each Buyer and
the issuance of the Securities as described herein.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
Page 24
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
EXCELSIOR-XXXXXXXXX MOTORCYCLE MANUFACTURING COMPANY
By:
-----------------------------------
Name:
Title:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
Page 25
BUYERS:
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By:
-----------------------------------
Name:
Its: Managing Director
Aggregate Subscription Amount: $2,500,000
No. of Shares of Preferred Stock: 2,500
No. of Warrants 87,500
RESIDENCE: Cayman Islands
ADDRESS:
x/x Xxxx Xxxx Xxxxxxx Xxxxxxxxxx, X.X.
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attn: Xxxxx X. Xxxxx
Page 26
BUYERS:
SOCIETE GENERALE
(not as to Section 7.14)
By:
----------------------------------
Name:
Its:
Aggregate Subscription Amount: $7,500,000
No. of Shares of Preferred Stock: 7,500
No. of Warrants 262,500
RESIDENCE: France
ADDRESS:
c/o XX Xxxxx Securities Corporation
1221 Avenue of the Xxxxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attn: Xxxxxxxxx Xxxxxx
