EXHIBIT 10.86
THIS WARRANT AND THE SHARES OF COMMON STOCK OF RIDE, INC. TO BE ISSUED UPON ANY
EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THEY MAY NOT BE OFFERED OR TRANSFERRED
BY SALE, ASSIGNMENT, PLEDGE OR OTHERWISE UNLESS (I) A REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT IS IN EFFECT OR (II) THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT.
WARRANT
TO PURCHASE SHARES
OF
COMMON STOCK
OF
RIDE, INC.
FEBRUARY 19, 1999
This certifies that, for value received, Advantage Fund II Ltd.
("Advantage") and any subsequent transferee pursuant to the terms of the
Agreement (as defined below) of even date and this Warrant (each, a "Holder") is
entitled to purchase, subject to the provisions of this Warrant, from Ride,
Inc., a Washington corporation (the "Issuer"), at any time or from time to time
on or after the date hereof and on or before 5:00 p.m., P.S.T. on February 19,
2004 (the "Expiration Date"), One Hundred Thousand (100,000) fully paid and
nonassessable shares of common stock (the "Common Stock"), of the Issuer at an
exercise price equal to $1.25 (the "Exercise Price") (such shares of Common
Stock and other securities issued and issuable upon exercise of this Warrant,
the "Warrant Shares").
Section 1. DEFINITIONS. Except as otherwise specified herein, terms
defined herein shall have the meanings assigned to them in the Subscription
Agreement of even date herewith by and between Advantage and the Issuer (the
"Agreement").
Section 2. EXERCISE OF WARRANT.
(a) Subject to the provisions hereof, this Warrant may be
exercised, in whole or in part, but not as to a fractional share, at any
time or from time to time on or after the date hereof and on or before the
Expiration Date, by presentation and
surrender hereof to the Issuer or the Issuer's Transfer Agent for this
Warrant which, in accordance with the provisions of Section 9 hereof, is
then effective for notices to the Issuer or its Transfer Agent, with the
Subscription Form annexed hereto as SCHEDULE ONE, duly executed and
accompanied by payment to the Issuer as further set forth below in this
Section 2, for the account of the Issuer, of the Exercise Price for the
number of Warrant Shares specified in such form. If this Warrant should be
exercised in part only, the Issuer shall, upon surrender of this Warrant,
execute and deliver a new Warrant evidencing the rights of the Holder
hereof to purchase the balance of the Warrant Shares purchasable hereunder.
The Issuer shall maintain at its principal place of business a register for
the registration of this Warrant and registration of transfer of this
Warrant. The Exercise Price for the number of Warrant Shares specified in
the Subscription Form shall be payable in United States Dollars by
certified or official bank check payable to the order of the Issuer or by
wire transfer of immediately available funds to an account specified by the
Issuer for that purpose.
(b) Certificates representing Warrant Shares shall bear the
following restrictive legend:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"). They may not be
offered or transferred by sale, assignment, pledge or otherwise unless (i) a
registration statement for the securities under the Securities Act is in effect
or (ii) the corporation has received an opinion of counsel to the effect that
such registration is not required under the Securities Act."
(c) Notwithstanding any provisions herein to the contrary, if
the Fair Market Value (hereinafter defined) of one share of Common
Stock is greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being) by surrender of this Warrant at the
principal office of the Issuer or its Transfer Agent, together with the
properly endorsed Subscription Form in which event the Issuer shall issue
to the Holder a number of shares of Common Stock computed using the
following formula:
Y (A-B)
------
X =
A
Where X = the number of shares of
Common Stock to be issued to the Holder
Y = the number of shares
of Common Stock purchasable under the Warrant or,
if only a portion of the Warrant is being exercised,
the portion of the Warrant being exercised (at the
date of such calculation)
A = the Fair Market Value of
one share of the Issuer's Common Stock (at the
date of such calculation)
B = Exercise Price (as
adjusted to the date of such calculation)
For purposes of the above calculation, Fair Market Value of one share of
Common Stock shall be the average closing bid price (as reported by The
Nasdaq Stock Market) of the Issuer's Common Stock for the five (5)
consecutive trading days ending on the trading day immediately preceding
the date of the Election to Purchase.
(d) Notwithstanding any other provision of this Warrant, in no
event shall the holder of this Warrant be entitled at any time to purchase
a number of shares of Common Stock on exercise of this Warrant in excess of
that number of shares upon purchase of which the sum of (1) the number of
shares of Common Stock beneficially owned by such holder and any person
whose beneficial ownership of shares of Common Stock would be aggregated
with such holder's beneficial ownership of shares of Common Stock for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 13d-3 thereunder (each an
"Aggregated Person" and collectively, the "Aggregated Persons") (other than
shares of Common Stock deemed beneficially owned through the ownership of
the unexercised portion of this Warrant, any warrant containing a
restriction similar to this Section 2(d) and shares of Series B Cumulative
Convertible Preferred Stock, no par value per share, of the Company (the
"Series B Convertible Preferred Stock") beneficially owned by all such
Aggregated Persons) and (2) the number of shares of Common Stock issuable
upon exercise of the portion of this Warrant with respect to which the
determination in this sentence is being made, would result in beneficial
ownership by any Aggregated Person of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d)
of the Exchange Act and Rule 13d-3 thereunder, except as otherwise provided
in clause (1) of the immediately preceding sentence.
Section 3. RESERVATION OF SHARES; PRESERVATION OF RIGHTS OF HOLDER. The
Issuer hereby agrees that there shall be reserved for issuance and/or delivery
upon exercise of this Warrant, such number of Warrant Shares as shall be
required for issuance or delivery upon exercise of this Warrant. The Warrant
surrendered upon exercise shall be canceled by the Issuer. After the Expiration
Date, no shares of Common Stock shall be subject to reservation in respect of
this Warrant. The Issuer further agrees (i) that it will not, by amendment of
its Articles of Incorporation or through reorganization, consolidation, merger,
dissolution or
sale of assets, or by any other voluntary act, avoid or seek to avoid the
observation or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Issuer, (ii) promptly
to take such action as may be required of the Issuer to permit the Holder to
exercise this Warrant and the Issuer duly and effectively to issue shares of
its Common Stock or other securities as provided herein upon the exercise
hereof, and (iii) promptly to take all action required or provided herein to
protect the rights of the Holder granted hereunder against dilution. Without
limiting the generality of the foregoing, should the Warrant Shares at any
time consist in whole or in part of shares of capital stock having a par
value, the Issuer agrees that before taking any action which would cause an
adjustment of the Exercise Price so that the same would be less than the then
par value of such Warrant Shares, the Issuer shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Issuer may validly and legally issue fully paid and nonassessable shares of
such Common Stock at the Exercise Price as so adjusted. The Issuer further
agrees that it will not establish a par value for its Common Stock while this
Warrant is outstanding in an amount greater than the Exercise Price.
Section 4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. Any
attempted transfer of this Warrant, the Warrant Shares or any new Warrant not in
accordance with this Section shall be null and void, and the Issuer shall not in
any way be required to give effect to such transfer. No transfer of this Warrant
shall be effective for any purpose hereunder until (i) written notice of such
transfer and of the name and address of the transferee has been received by the
Issuer, and (ii) the transferee shall first agree in a writing deposited with
the Secretary of the Issuer to be bound by all the provisions of this Warrant
and the Agreement. Upon surrender of this Warrant to the Issuer by any
transferee authorized under the provisions of this Section 4, the Issuer shall,
without charge, execute and deliver a new Warrant registered in the name of such
transferee at the address specified by such transferee, and this Warrant shall
promptly be canceled. The Issuer may deem and treat the registered holder of any
Warrant as the absolute owner thereof for all purposes, and the Issuer shall not
be affected by any notice to the contrary. Any Warrant, if presented by an
authorized transferee, may be exercised by such transferee without prior
delivery of a new Warrant issued in the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Issuer will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute a separate contractual obligation on the
part of the Issuer, whether or not the Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
Section 5. RIGHTS OF HOLDER. Neither a Holder nor his transferee by
devise or the laws of descent and distribution or otherwise shall be, or have
any rights or privileges of, a shareholder of the Issuer with respect to any
Warrant Shares, unless and until certificates representing such Warrant Shares
shall have been issued and delivered thereto.
Section 6. ADJUSTMENTS IN EXERCISE PRICE AND WARRANT SHARES. The
Exercise Price and Warrant Shares shall be subject to adjustment from time to
time as provided in this Section 6.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the
record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Common Stock, and the
Exercise Price shall be adjusted so that the aggregate amount payable for
the purchase of all Warrant Shares issuable hereunder immediately after the
record date for such recapitalization shall equal the aggregate amount so
payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or makes
a distribution to holders of Common Stock, and such dividend or
distribution is payable or made in Common Stock or securities convertible
into or exchangeable for Common Stock, or rights to purchase Common Stock
or securities convertible into or exchangeable for Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common
Stock shall be entitled to receive such dividend or distribution, in
proportion to the increase in the number of outstanding shares (and shares
of Common Stock issuable upon conversion of all such securities convertible
into Common Stock) of Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Warrant Shares
issuable hereunder immediately after the record date for such dividend or
distribution shall equal the aggregate amount so payable immediately before
such record date.
(c) If the Issuer declares a dividend on Common Stock (other
than a dividend covered by subsection (b) above) or distributes to holders
of its Common Stock, other than as part of its dissolution or liquidation
or the winding up of its affairs, any shares of its capital stock, any
evidence of indebtedness or any cash or other of its assets (other than
Common Stock or securities convertible into or exchangeable for Common
Stock), the Holder shall receive notice of such event as set forth in
Section 8 below.
(d) In case of any consolidation of the Issuer with, or merger
of the Issuer into, any other corporation (other than a consolidation or
merger in which the Issuer is the continuing corporation and in which no
change, other than the issuance of Common Stock in connection with (i) the
merger of a third corporation into the Issuer or (ii) the acquisition of
all or substantially all of the assets or equity securities of a third
corporation, occurs in its outstanding Common Stock), or in case of any
sale or transfer of all or substantially all of the assets of the Issuer,
or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of
a third corporation into the Issuer,
except where the Issuer is the surviving entity and no change occurs in its
outstanding Common Stock), the corporation formed by such consolidation or
the corporation resulting from such merger or the corporation which shall
have acquired such assets or securities of the Issuer, as the case may be,
shall execute and deliver to the Holder simultaneously therewith a new
Warrant, satisfactory in form and substance to the Holder, together with
such other documents as the Holder may reasonably request, entitling the
Holder thereof to receive upon exercise of such Warrant the kind and amount
of shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer, or exchange of securities, or upon
the dissolution following such sale or other transfer, by a holder of the
number of shares of Common Stock purchasable upon exercise of this Warrant
immediately prior to such consolidation, merger, sale, transfer, or
exchange. Such new Warrant shall contain the same basic other terms and
conditions as this Warrant and shall provide for adjustments which, for
events subsequent to the effective date of such written instrument, shall
be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 6. The above provisions of this paragraph (d) shall
similarly apply to successive consolidations, mergers, exchanges, sales or
other transfers covered hereby.
(e) If the Issuer shall, at any time before the expiration of
this Warrant, sell all or substantially all of its assets and distribute
the proceeds thereof to the Issuer's shareholders, the Holder shall, upon
exercise of this Warrant have the right to receive, in lieu of the shares
of Common Stock of the Issuer that the Holder otherwise would have been
entitled to receive, the same kind and amount of assets as would have been
issued, less the Exercise Price, distributed or paid to the Holder upon any
such distribution with respect to such shares of Common Stock of the Issuer
had the Holder been the holder of record of such shares of Common Stock
receivable upon exercise of this Warrant on the date for determining those
entitled to receive any such distribution. If any such distribution results
in any cash distribution in excess of the Exercise Price provided by this
Warrant for the shares of Common Stock receivable upon exercise of this
Warrant, the Holder may, at the Holder's option, exercise this Warrant
without making payment of the Exercise Price and, in such case, the Issuer
shall, upon distribution to the Holder, consider the Exercise Price to have
been paid in full and, in making settlement to the Holder, shall obtain
receipt of the Exercise Price by deducting an amount equal to the Exercise
Price for the shares of Common Stock receivable upon exercise of this
Warrant from the amount payable to the Holder.
(f) If an event occurs which is similar in nature to the events
described in this Section 6, but is not expressly covered hereby, the Board
of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock of the
Issuer as the same exists at the Closing Date or as such stock may be
constituted from time to time, except that for the purpose of this Section
6, the term "Common
Stock" shall only include any stock of any class of the Issuer which has no
preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Issuer and which is not subject to redemption by the Issuer.
(h) If required by the Holder, the Issuer shall retain a firm
of independent public accountants of recognized standing (who may be any
such firm regularly employed by the Issuer) to make any computation
required under this Section 6, and a certificate signed by such firm shall
be conclusive evidence of the correctness of any computation made under
this Section 6.
(i) Whenever the number of Warrant Shares or the Exercise Price
shall be adjusted as required by the provisions of this Section 6, the
Issuer forthwith shall file in the custody of its secretary or an assistant
secretary, at its principal office, and furnish to each Holder hereof, a
certificate prepared in accordance with paragraph (h) above, showing the
adjusted number of Warrant Shares and the Exercise Price and setting forth
in reasonable detail the circumstances requiring the adjustments.
(j) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of the
Issuer.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 6 need be made if such adjustment would amount
to a change in such Exercise Price of less than $.01; PROVIDED HOWEVER,
that the amount by which any adjustment is not made by reason of the
provisions of this paragraph (k) shall be carried forward and taken into
account at the time of any subsequent adjustment in the Exercise Price.
(l) If an adjustment is made under this Section 6 and the event
to which the adjustment relates does not occur, then any adjustments in
accordance with this Section 6 shall be readjusted to the Exercise Price
and the number of Warrant Shares which would be in effect had the earlier
adjustment not been made.
Section 7. TAXES ON ISSUE OR TRANSFER OF COMMON STOCK AND WARRANT. The
Issuer shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of shares of Common Stock or
other securities on the exercise of this Warrant. The Issuer shall not be
required to pay any tax which may be payable in respect of any transfer of this
Warrant or in respect of any transfers involved in the issue or delivery of
shares or the exercise of this Warrant in a name other than that of the Holder
and the person requesting such transfer, issue or delivery shall be responsible
for the payment of any such tax (and the Issuer shall not be required to issue
or deliver said shares until such tax has been paid or provided for).
Section 8. NOTICE OF ADJUSTMENT. So long as this Warrant shall be
outstanding, (a) if the Issuer shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Issuer shall offer generally
to the holders of Common Stock the right to subscribe to or purchase any shares
of any class of Common Stock or securities
convertible into Common Stock or any other similar rights, or (c) if there shall
be any proposed capital reorganization of the Issuer in which the Issuer is not
the surviving entity, recapitalization of the capital stock of the Issuer,
consolidation or merger of the Issuer with or into another corporation, sale,
lease or other transfer of all or substantially all of the property and assets
of the Issuer, or voluntary or involuntary dissolution, liquidation or winding
up of the Issuer, or (d) if the Issuer shall give to its stockholders any
notice, report or other communication respecting any significant or special
action or event, then in such event, the Issuer shall give to the Holder, at
least thirty (30) days prior to the relevant date described below (or such
shorter period as is reasonably possible if thirty days is not reasonably
possible), a notice containing a description of the proposed action or event and
stating the date or expected date on which a record of the Issuer's stockholders
is to be taken for any of the foregoing purposes, and the date or expected date
on which any such dividend, distribution, subscription, reclassification,
reorganization, consolidation, combination, merger, conveyance, sale, lease or
transfer, dissolution, liquidation or winding up is to take place and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event.
Section 9. NOTICE. Any notice to be given or to be served upon any
party in connection with this Warrant must be in writing and will be deemed to
have been given and received upon confirmed receipt, if sent by facsimile, or
two (2) days after it has been submitted for delivery by Federal Express or an
equivalent carrier and five (5) days after it has been mailed by first class
mail, charges prepaid and addressed to the following addresses with a
confirmation of delivery:
If to the Issuer, to:
Ride, Inc.
0000 000xx Xxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn.: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Summit Law Group PLLC
0000 Xxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Holder, to:
Advantage Fund II Ltd.
x/x XXXXX
Xxxx Xxxxxxxxx 0
Xxxxxxx, Xxxxxxxxxxx Antilles
Attn.: X.X. Xxxxx
Telephone:000-000-0000-0000
Facsimile: 011-599-9732-2008
With a copy to:
Genesee International, Inc.
00000 X.X. 0xx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxxx & Xxxxxx
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent, to:
TranSecurities International, Shareholder Services
0000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn.: Xxxxxxx X. Xxxxxxx
Telephone (000) 000-0000
Facsimile (000) 000-0000
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given
Section 10. CHOICE OF LAW; CONFLICT OF LAW; JURISDICTION AND VENUE.
Except as otherwise expressly provided herein, the terms, conditions and
enforceability of this Warrant shall be governed by and interpreted under the
laws of the State of Washington. Any claim, dispute or disagreement relating to
the terms and conditions of this Warrant, or arising from this Warrant or the
subject matter of this Warrant, may be brought only in the courts of the State
of Washington or in any United States District Court located in the State of
Washington, which shall have exclusive jurisdiction thereof. The parties to this
Agreement consent to such jurisdiction and venue and hereby knowingly and
voluntarily waive all objections thereto on the basis of lack of personal
jurisdiction, venue or convenience.
Dated: February 19, 1999
RIDE, INC.
By:
Name:
Title:
-----------------
ATTEST:
-----------------------------
Xxxxx X. Xxxxx, Secretary
SCHEDULE ONE
SUBSCRIPTION FORM
TO RIDE, INC.:
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with
respect to ______________ shares of Common Stock, as defined in the
Warrant, of Ride, Inc., a Washington corporation (the "Company").
2. The undersigned Holder (check one):
(a) elects to pay the aggregate purchase price for such shares
of Common Stock (the "Exercise Shares") (i) by lawful money of the United
States or the enclosed certified or official bank check payable in United
States dollars to the order of the Company in the amount of $___________,
or (ii) by wire transfer of United States funds to the account of the
Company in the amount of $____________, which transfer has been made before
or simultaneously with the delivery of this Subscription Form pursuant to
the instructions of the Company;
or
(b) elects to receive shares of Common Stock having a value
equal to the value of the Warrant calculated in accordance with Section
2(c) of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name:
-------------------------------------
Address:
-------------------------------------
-------------------------------------
Dated: ,
------------ --- ----- ----------------------------
(Signature must conform to name of Holder as specified on the face of the
Warrant)
----------------------------
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(Address)
