Exhibit 10.22
REDLINE PERFORMANCE PRODUCTS, INC.
SUBSCRIPTION AND NON-DISTRIBUTION AGREEMENT
THIS SUBSCRIPTION AND NON-DISTRIBUTION AGREEMENT (the "Agreement") is
made and entered into by the undersigned person (hereinafter referred to as
"Investor") in connection with Investor's desire to acquire securities of
REDLINE PERFORMANCE PRODUCTS, INC., a Minnesota corporation (the "Company"), and
as a condition of the issuance by the Company of such securities as contemplated
herein.
1.) Securities to be Acquired. Investor hereby subscribes for a 12% unsecured
promissory note in the amount of Forty-nine Thousand Fourteen and 83/100 Dollars
($49,014.83) (the "Note"), which includes the amount of Investor's loans to the
Company and the amount of the accrued, but unpaid interest on such loan amounts
as of the date of the Note, and a warrant to purchase twelve thousand (12,000)
shares of the common stock of the Company (the "Warrant") (the Note, the Warrant
and such shares of common stock which may be issued to Investor upon exercise of
the Warrant are hereinafter collectively referred to as the "Securities") in
consideration for prior payments to the Company of an aggregate of Forty-five
Thousand Dollars ($45,000) and for extending to a date certain the maturity date
of such loan.
2.) Delivery of Note and Warrant. Upon acceptance of this Agreement by the
Company, the Company will deliver the Note in the name of Jobsite Supply Co.,
Inc. and the Warrant in the name of Xxxxxx X. Xxxxx, Xx., a shareholder of
Jobsite Supply Co., Inc., to Investor via certified mail or overnight delivery
to the address of Investor set forth on the Signature Page.
3.) Investment Intent. Investor represents and warrants to the Company as
follows:
(a) Investor has been advised that (i) the issuance of the Securities to
Investor has not been registered under the Securities Act of 1933 (the "Act") on
the grounds, among others, that it will be exempt from registration under
Section 4(2) of the Act as a transaction not involving a public offering; (ii)
reliance upon such exemption or exemptions is predicated in part on Investor's
representation that Investor is acquiring such Securities for investment for
Investor's own account with no present intention of dividing Investor's
participation with others or reselling or otherwise distributing the same, and
Investor alone shall have the full legal and equitable right, title and interest
in the Securities; and (iii) Investor's representations, including the
foregoing, are essential to the reliance of the Company upon exemptions from
registration or qualification of this transaction or the Securities under
applicable state securities laws.
(b) Investor understands that the effect and intent of Investor's
representations in subparagraph (a) above to be that Investor does not presently
contemplate the disposal of all or any part of the Securities, and that at such
time as Investor determines to dispose of all or any part of the Securities,
Investor understands that Investor must first notify the Company, and that the
Company may require an opinion of its attorney, of Investor's attorney, or both,
that such disposition will not negate Investor's intent as expressed herein, and
that, in view of the exemption claimed, such disposition will be permissible.
(c) Investor understands that the subsequent transfer of the Securities will be
restricted, and that the effect of the restrictions on the transfer of the
Securities include the facts, among others, that (i) Investor will not have
liquidity with respect to the Securities for an indefinite period of time, and
(ii) Investor will be unable to sell, encumber or otherwise transfer the
Securities unless there is an effective registration statement covering such
disposition under the Act, and effective registrations and qualifications under
applicable state law, or exemptions from such registrations or qualifications
under the Act and state law are available.
(d) Investor recognizes that an investment in the Securities involves a high
degree of risk and that the purchase of the Securities is a long-term
investment. Investor is able to bear the economic risk of the investment in the
Securities, including the total loss of such investment. Investor believes, in
light of the information provided to Investor by the Company, that Investor's
investment in the Securities in accordance with the terms and conditions of this
Agreement is an appropriate and suitable investment for Investor. Investor's
current financial condition is (and Investor expects its financial condition in
the near future to be) such that Investor does not have any present or
contemplated need to dispose of any portion of the Securities to satisfy any
existing or contemplated undertaking, need or indebtedness.
(e) Investor understands that exemptions from the registration and qualification
requirements, as referred to in subparagraph (c) above, may not be available to
Investor, and the Company will have no obligation to assist Investor in
registering or qualifying a disposition of the Securities or in obtaining or
establishing an exemption from such registration or qualification requirements.
(f) Investor understands that any certificate representing the Securities will
bear legends stating in effect that the issuance or sale of the Securities has
not been registered under the Act or any applicable state securities laws and
Investor may not sell the Securities or other securities within twelve (12)
months following an initial public offering by the Company, and such legends may
refer to the restrictions on transfers and sales contained in this Agreement. In
addition, any certificates representing the Securities issued to an Investor who
is a resident of, or which has its chief executive offices located in, a
particular state may bear a legend containing language required by the laws of
such state. Investor further understands that a stop-transfer restriction may be
placed in the books and records of the Company with respect to the Securities.
(g) Investor's purchase of the Securities is not the result of any general
solicitation or general advertising, including, but not limited to: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over
2.
television or radio; and (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
4.) Location of Investor's Chief Executive Offices. Investor represents and
warrants to the Company that Investor's chief executive offices are located in
the State of California.
5.) Accredited Investor Status.
(a) Investor understands that the Company will only convert amounts owed to
Investor into the Securities if Investor is an "accredited investor," as such
term is defined by Rule 501(a) of Regulation D promulgated under the Securities
Act of 1933, as amended, and that Investor is an "accredited investor" only if:
(1) Investor is a (initial one):
___ General Partnership
___ Limited Liability Partnership
___ Limited Partnership
___ Limited Liability Company
X Corporation
___ Business Trust
___ Other Entity (please specify):___________________
(2) Investor is an entity, and is an "accredited
investor" based on the following (initial one or
more, as applicable):
i. Investor has total assets in excess of
$5,000,000, was not formed for the specific
purpose of acquiring the Securities and is
one or more of the following (initial one or
more, as appropriate):
___ An organization described in Section
501(c)(3) of the Internal Revenue
Code.
X A corporation.
___ A Massachusetts or similar business
trust.
___ A partnership.
___ A limited liability company.
ii. Investor is an entity, all of whose equity
owners are accredited investors.
(3) RW REPRESENTATIVE OF AN ENTITY SUBSCRIBER MUST
INITIAL HERE If Investor is an entity, the
individual(s) signing on behalf of Investor and
Investor, jointly and severally, agree and certify
that this Agreement has been duly authorized by all
necessary action on the part of Investor, has been
duly executed by an authorized representative of
Investor, and is a legal, valid, and binding
obligation of Investor enforceable in accordance with
its terms.
3.
(4) Based on the foregoing information, Investor
represents and warrants to the Company that Investor
is an accredited investor.
6.) Knowledge and Experience. Investor represents and warrants to the Company as
follows:
(a) Investor (i) believes Investor has such knowledge and experience in
financial and business matters that Investor is capable of evaluating the merits
and risks of the prospective investment in the Securities or (ii) if Investor
does not so believe, or if Investor has been instructed by the Company to
designate a purchaser representative to supplement Investor's knowledge and
experience for the purpose of evaluating the merits and risks of the prospective
investment in the Securities, Investor has provided the Company with the
identity of such purchaser representative and such information concerning the
knowledge and experience in financial and business matters of such purchaser
representative, either directly or by making such purchaser representative
available for interview, necessary to enable a determination by the Company that
such purchaser representative, together with the undersigned, have such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the prospective investment in the
Securities.
(b) In addition to designating a purchaser representative to the extent required
by the Company, if any, Investor has obtained, to the extent Investor deems
necessary, personal and professional advice with respect to the risks inherent
in the investment in the Securities in light of Investor's financial condition
and investment needs.
(c) Investor and/or Investor's purchaser representative, if any, have been given
access to full and complete information regarding the Company and have utilized
such access to their satisfaction for the purpose of obtaining information; and
particularly, Investor or Investor's purchaser representative, if any, have
either attended or been given reasonable opportunity to attend a meeting with
representatives of the Company for the purpose of asking questions of, and
receiving answers from, such representatives concerning the Company and the
Securities and to obtain any additional information, to the extent reasonably
available.
7.) Lack of Availability of Rule 144 Under the Act. Investor understands and
acknowledges that the Company has no obligation to undertake or complete a
public offering of its Securities, that even if a public offering is undertaken
and successfully completed, the Securities subscribed for hereby will remain
subject to the restrictions on transferability described in this Agreement, and
that if a public offering is not undertaken and completed, Investor may never be
able to sell Investor's Securities pursuant to Rule 144 promulgated under the
Act.
Investor further understands and acknowledges that the Company
currently does not file periodic reports with the Securities and Exchange
Commission pursuant to the requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and may not be obligated to file
such reports at any time in the future. Investor also understands that the
Company has not agreed to supply such other information as would be required to
enable routine sales of the Common Stock to be made under the provisions of
certain rules respecting "restricted securities", including Rule 144 promulgated
under the Act by the Securities and
4.
Exchange Commission. Thus, Investor has been informed that the Company is not
obligated to make publicly available or to provide Investor with the information
required by Rule 144.
8.) Lock-Up Provision. Investor agrees that if the Company conducts an initial
public offering and the managing underwriter of such offering requires, Investor
will not, during the twelve (12) months following effectiveness of the initial
public offering: (a) sell or transfer any of the Securities or (b) sell,
transfer or grant options, rights or warrants to purchase any of the Securities.
The foregoing restriction does not prohibit gifts or transfers by will or the
laws of descent to heirs or beneficiaries provided that such donees, heirs and
beneficiaries shall be bound by the restrictions set forth herein.
9.) Correctness of Information-Changes. All of the foregoing information which
Investor has provided concerning Investor, Investor's financial position and
Investor's knowledge of financial and business matters, is correct and complete
as of the date set forth at the end hereof, and if there should be any change in
such information prior to Investor's subscription being accepted, Investor will
immediately provide the Company or its agent with such information.
10.) Indemnification. Investor agrees to indemnify the Company against and to
hold the Company harmless from any damage, loss, liability, claim or expense
including, without limitation, reasonable attorneys' fees resulting from, or
arising out of, the inaccuracy or alleged inaccuracy of any of the
representations, warranties or statements of Investor contained in this
Agreement, including, without limitation, any violation or alleged violation of
the registration requirements of the Act or applicable state law in connection
with any subsequent sale of the Securities by Investor.
11.) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of Minnesota.
12.) Additional Information. Investor shall supply such additional information
and documentation relating to Investor and any persons who have any rights or
interest in Investor as may be requested by the Company in order to ensure
compliance by the Company with applicable laws.
13.) Successors and Assigns. The representations and warranties made by Investor
in this Agreement are binding on Investor's successors and assigns and are made
for the benefit of the Company and any other person who may become liable for
violations of applicable securities laws as a result of the inaccuracy or
falsity of any of Investor's representations or warranties.
14.) Counterparts. This Agreement may be executed by the Company and by Investor
in separate and several counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument.
15.) Acceptance. This Agreement is not binding on the Company until accepted in
writing by an authorized officer of the Company.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY ]
5.
SIGNATURE PAGE
Dated: December 10, 2002
Jobsite Supply Co., Inc.
----------------------------------------
Investor Name
/s/ Xxxxxx X. Xxxxx, Xx.
Signature of Authorized Representative (if entity)
Xxxxxx X. Xxxxx, Xx. - Pres.
Name (Typed or Printed) and Title (if entity)
0000 Xxxxx Xxxxxx, Xxx. X
Xxxxxx Xxxxxxx
Xxx Xxxxx, XX 00000
Xxxx, Xxxxx and Zip Code
000-000-0000
Telephone Number
000-000-0000
Facsimile Number
----------------------------------------
Tax Identification Number (if entity)
or Social Security Number (if individual)
This Subscription is accepted as of this 10th day of December, 2002.
REDLINE PERFORMANCE PRODUCTS, INC.
By: /s/ Xxxxx Xxxxxxxx
Its: Vice President
6.
$49,014.83 Dated: December 10, 2002
PROMISSORY NOTE
FOR VALUE RECEIVED, REDLINE PERFORMANCE PRODUCTS, INC., (the "Maker"),
hereby promises to pay to the order of JOBSITE SUPPLY CO., INC., a California
corporation, and its successors and assigns (the "Payee"), at 0000 Xxxxx Xxxxxx,
Xxxxx X, Xxx Xxxxx, Xxxxxxxxxx 00000, or at such other place as may be hereafter
designated from time to time by the holder hereof, the principal sum of
Forty-nine Thousand Fourteen and 83/100 Dollars ($49,014.83) (the "Principal
Balance"), which amount includes the Payee's loans to the Maker in the aggregate
amount of Forty-five Thousand Dollars ($45,000) and the interest accrued on such
loaned amounts as of the date hereof in the aggregate amount of Four Thousand
Fourteen and 83/100 Dollars ($4,014.83), together with interest accruing thereon
at the rate of twelve percent (12%) per annum, commencing on the date hereof
until this Note is paid in full. Interest shall be calculated on the basis of
the actual number of days elapsed in a 365-day year, and compounded monthly.
Except as provided below, the entire Principal Balance of this Note,
together with any and all accrued, but unpaid interest thereon, shall become
immediately due and payable at the close of business on the earlier of: (a) the
date on which the Maker closes on an initial public offering of its equity
securities, and (b) June 30, 2003 (each a "Maturity Date").
The Maker shall have the right at any time, or from time to time, to
prepay the Note, in whole or in part, without penalty or premium; provided,
however, that such prepayments shall be made in multiples of One Hundred and
NO/100 Dollars ($100.00). Any such prepayments which do not completely retire
the then outstanding Principal Balance shall be applied first to the interest
accrued on the Principal Balance and then to retirement of the Principal
Balance. Partial prepayments of amounts due under this Note shall not affect in
any way the Maker's obligation to pay the entire Principal Balance, together
with any and all accrued interest thereon, on the applicable Maturity Date set
forth herein.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
1.) The failure of the Maker to make any payment of principal and
interest due hereunder within five (5) days of the date on which such payment is
due;
2.) The insolvency of, appointment of receiver of all or any part of
the property of, assignment for the benefit of creditors by, or commencement of
any proceeding under any bankruptcy or insolvency laws by or against, the Maker,
provided that any such proceeding involuntarily commenced by a third party shall
not have been dismissed within sixty (60) days after it is commenced;
3.) The cessation or failure of the business of the Maker; or
4.) The sale of all or substantially all of the assets or business of
the Maker.
Immediately upon the occurrence of any Event of Default under this
Note, provided such Event of Default has not been waived in writing by the
Payee, the Payee may, at the Payee's sole option, upon written notice to the
Maker, declare this Note to be immediately due and payable, without presentment,
demand, protest or other notices of any kind.
The Maker does hereby waive presentment, demand, protest, or further
notice of any kind and agrees to pay all costs of collection, including
reasonable attorneys' fees, whether or not incurred in connection with any legal
proceedings.
No amendment hereunder shall be effective unless made in writing and
signed by the Maker and the Payee. No waiver hereunder shall be effective unless
made in writing and signed by the party to be charged thereby. Neither the delay
or failure on the part of the Payee in exercising any right or remedy, nor any
single or partial exercise of any right or remedy, shall operate as a waiver
thereof. The acceptance by the Payee of any payment hereunder which is less than
payment in full of all amounts due and payable at the time of such payment shall
not constitute a waiver of the right to exercise any of the options hereunder at
that time or at any subsequent time.
The terms and provisions of this Note shall inure to the benefit of,
and be binding upon, the respective successors and assigns of the Maker and the
Payee.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Minnesota without giving effect to
such state's rules and principles regarding conflicts of law. The Maker and the
Payee agree that the federal and state courts located in Hennepin County,
Minnesota shall have exclusive jurisdiction over, and be the exclusive venue for
any proceedings regarding, any matter or dispute arising from or related to this
Note.
In the event of the loss, theft, or total destruction of this Note, the
Maker will make and deliver to the Payee a new promissory note of like tenor and
date as this Note, provided the Payee provides the Maker indemnity or security
reasonably satisfactory to it and reimburses the Maker for all reasonable
expenses incidental or related to the issuance and delivery of a new promissory
note. In the event of the mutilation of this Note, the Maker will make and
deliver to the Payee a new promissory note of like tenor and date as this Note,
provided the Payee provides the Maker evidence reasonably satisfactory to it of
the mutilation of this Note, surrenders the mutilated Note to the Maker for
cancellation and reimburses the Maker for all reasonable expenses incidental or
related to the issuance and delivery of a new promissory note. Any newly issued
and delivered promissory note shall supercede and nullify the original lost,
stolen, destroyed or mutilated Note.
This Note has been issued pursuant to, and is subject to the terms and
provisions of, that certain Subscription and Non-Distribution Agreement of even
date herewith between the Maker and the Payee, the terms and provisions of which
are incorporated herein by reference with the same force and effect as if fully
set forth herein and a copy of which is attached hereto as Exhibit A. To the
extent the terms of the Note and the Subscription and Non-Distribution Agreement
are inconsistent, the terms of this Note shall control.
All notices and other communications shall be delivered by certified
mail, return receipt requested, or by overnight delivery service. Delivery shall
be deemed to have occurred on the date three (3) days after depositing the
notice in the U.S. mail or one (1) day after delivery of such notice to a
reputable overnight delivery service.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed by
its authorized representative, who certifies that he has all necessary authority
on behalf of the Maker to execute this Note and bind the Maker to the terms
hereof.
MAKER:
REDLINE PERFORMANCE PRODUCTS, INC.
By: /s/ Xxxxx Xxxxxxxx
Its: Vice President
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ANY SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF MAY BE
MADE ONLY (I) IN A REGISTRATION OR QUALIFICATION OR (II) IF AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION IS AVAILABLE AND THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL TO THAT EFFECT REASONABLY SATISFACTORY TO THE COMPANY.
SALE OR OTHER TRANSFER OF THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS SECURITY IS FURTHER RESTRICTED FOR UP TO TWELVE (12) MONTHS FOLLOWING AN
INITIAL PUBLIC OFFERING OF SECURITIES OF THE COMPANY.
Void After 5:00 p.m. VISTA, CALIFORNIA time on December 10, 2007.
REDLINE PERFORMANCE PRODUCTS, INC.
COMMON STOCK PURCHASE WARRANT
Warrant No. CL-2 Shares: 12,000
THIS CERTIFIES that, subject to the terms and conditions herein set
forth, XXXXXX X. XXXXX, XX., or his registered assigns (the "Holder") is
entitled to purchase from REDLINE PERFORMANCE PRODUCTS, INC., a Minnesota
corporation (the "Company"), at any time or from time to time prior to the time
and date set forth above, twelve thousand (12,000) fully paid and non-assessable
shares of common stock of the Company (such class of stock being referred to as
the "Common Stock" and such shares of Common Stock which may be acquired upon
exercise of this Warrant being referred to as the "Shares").
This Warrant is subject to the following terms and conditions:
1.) Purchase Price. Subject to adjustment as hereinafter provided, the
purchase price of one (1) Share shall be Three and 75/100 Dollars
($3.75). The purchase price of one (1) Share is referred to herein as
the "Warrant Price."
2.) Adjustment of Warrant Price and Number of Shares. The number and kind
of securities issuable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the happening of certain
events as follows:
(a) Adjustment for Stock Dividends, Splits and Consolidations. In
case the Company shall at any time subdivide the outstanding
Common Stock into a greater number of shares or declare a
dividend payable in Common Stock, the Warrant Price in effect
immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding Common Stock
shall be combined into a
smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately
increased.
(b) Adjustment for Reorganizations or Consolidations. If any
capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the
Company with another corporation, or the sale of all or
substantially all of its assets to another corporation shall
be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets
("Substituted Property") with respect to, or in exchange for,
such Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or
sale, the Holder shall have the right to purchase and receive
upon the basis and upon the terms and conditions specified in
this Warrant and in lieu of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such Substituted
Property as would have been issued or delivered to the Holder
if the Holder had exercised this Warrant and had received upon
exercise of this Warrant the Shares prior to such
reorganization, reclassification, consolidation, merger or
sale, less the amount of the aggregate Warrant Price.
3.) No Fractional Shares. No fractional Shares of Common Stock will be
issued in connection with any exercise of this Warrant. In lieu of any
fractional Shares which would otherwise be issuable, the Company shall
pay cash equal to the product of such fraction multiplied by the fair
market value of one (1) share of Common Stock on the date of exercise
as determined in good faith by the Company.
4.) No Stockholder Rights. This Warrant shall not entitle its Holder to any
of the rights of a stockholder of the Company prior to exercise of this
Warrant.
5.) Covenants of the Company. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares of
Common Stock to provide for the issuance of Shares upon the exercise of
this Warrant. The Company further covenants that all Shares that may be
issued upon the exercise of this Warrant will, upon payment and
issuance, be duly authorized and issued, fully paid and nonassessable
shares of Common Stock.
6.) Exercise of Warrant. This Warrant may be exercised by the registered
Holder, in whole or in part, by the surrender of this Warrant at the
principal office of the Company, together with the form of exercise
hereof duly executed, accompanied by payment in full of the amount of
the aggregate Warrant Price in cash, cashier's check or bank draft.
Upon partial exercise hereof, a new warrant or warrants containing the
same date and provisions as this Warrant shall be issued by the Company
to the registered Holder for the number of Shares of Common Stock with
respect to which this Warrant shall not have been exercised. Upon each
exercise of this Warrant the Holder shall exercise this Warrant and
purchase the lesser of five hundred (500) Shares and the balance of
Shares available for issuance under the Warrant. A Warrant shall be
deemed to have been exercised immediately prior to the close of
business on the date the Company is in receipt
2.
of this Warrant, written notice of exercise, and payment for the number
of Shares being acquired upon exercise of this Warrant. The person
entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the Holder of such Shares of record as of
the close of business on such date. As promptly as practicable on or
after such date, the Company shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for
the number of full Shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a Share, as provided
above.
7.) Compliance with Securities Laws and Other Transfer Restrictions. The
Holder of this Warrant, by acceptance hereof, agrees, represents and
warrants that this Warrant and the Shares which may be issued upon
exercise hereof are being acquired for investment, that the Holder has
no present intention to resell or otherwise dispose of all or any part
of this Warrant or any Shares, and that the Holder will not offer, sell
or otherwise dispose of all or any part of this Warrant or any Shares
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"), or applicable state
securities laws. The Company may condition any transfer, sale, pledge,
assignment or other disposition on the receipt from the party to whom
this Warrant is to be so transferred or to whom Shares are to be issued
or so transferred, on any representations and agreements requested by
the Company in order to permit such issuance or transfer to be made
pursuant to exemptions from registration under federal and applicable
state securities laws. Upon exercise of this Warrant, the Holder hereof
shall, if requested by the Company, confirm in writing the Holder's
investment purpose and acceptance of the restrictions on transfer of
the Shares.
8.) Restriction on Transfer After a Public Offering. The Holder understands
that the Company at a future date may file a registration or offering
statement (the "Registration Statement") with the Securities and
Exchange Commission to facilitate a public offering of its securities.
The Holder agrees, for the benefit of the Company, that should such an
initial public offering be made and should the managing underwriter of
such offering require, the undersigned will not, without the prior
written consent of the Company and such underwriter, during the Lockup
Period (as defined herein): (a) sell, transfer or otherwise dispose of,
or agree to sell, transfer or otherwise dispose of any of the Shares
beneficially owned by the undersigned during the Lockup Period; (b)
sell, transfer or otherwise dispose of, or agree to sell, transfer or
otherwise dispose of any options, rights or warrants to purchase any
Shares beneficially owned by the undersigned during the Lockup Period;
or (c) sell or grant, or agree to sell or grant, options, rights or
warrants with respect to any of the Shares. The foregoing does not
prohibit gifts to donees or transfers by will or the laws of descent to
heirs or beneficiaries provided that such donees, heirs and
beneficiaries shall be bound by the restrictions set forth herein. The
term "Lockup Period" shall mean the lesser of (x) twelve (12) months
and (y) the period during which Company officers and directors are
restricted by the managing underwriter from effecting any sales or
transfers of the Company's Common Stock. The Lockup Period shall
commence on the effective date of the Registration Statement.
3.
9.) Stop Transfer Order and Restrictive Legend. The Holder agrees that the
Company may place a stop transfer order with its registrar and transfer
agent (if any) covering all Shares. The Holder agrees that the Company
may place one or more restrictive legends on any certificates
evidencing the Shares containing substantially the following language:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, have
not been registered under any state securities law, and are
subject to a subscription and investment representation
agreement. They may not be sold, offered for sale, or
transferred in the absence of either an effective registration
under the Securities Act of 1933, as amended, and under the
applicable state securities laws, or an opinion of counsel for
the Company that such transaction is exempt from registration
under the Securities Act of 1933, as amended, and under the
applicable state securities laws.
Sale or other transfer of these securities is further
restricted for up to twelve (12) months following an initial
public offering of securities of the Company .
10.) Subdivision of Warrant. At the request of the Holder of this Warrant in
connection with a transfer or exercise of a portion of the Warrant,
upon surrender of such Warrant for such purpose to the Company, the
Company at its expense (except for any transfer tax payable) will issue
and exchange therefor warrants of like tenor and date representing in
the aggregate the right to purchase such number of Shares of such
Common Stock as shall be designated by such Holder at the time of such
surrender; provided, however, that the Company's obligations to
subdivide securities under this Paragraph shall be subject to, and
conditioned upon, the compliance of any such subdivision with
applicable state securities laws and with the Act.
11.) Postponement of Exercise. Notwithstanding anything herein to the
contrary, the Company shall have the right to delay any exercise for a
period of up to one hundred eighty (180) days for the purpose of: (a)
ensuring the availability of an exemption under applicable securities
laws for the issuance of the Shares to the Holder in light of the
transactions by the Company in its securities; and/or (b) facilitating
a distribution of the Company's securities. In either case, if the
Company elects to delay any such exercise, the Company shall inform the
Holder, in writing, of such delay and the terms of such delay. Any such
delay shall not lead to any change in the Warrant Price or the terms of
this Warrant and shall not extend the term of any Warrant unless such
delay would extend past the expiration date of such Warrant. In such
case, the expiration date shall be extended to thirty (30) days after
the end of such delay.
12.) Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it,
and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will make and deliver a new Warrant
of like tenor and dates as of the date of such cancellation, in lieu of
this Warrant.
4.
13.) No Limitation on Corporate Action. No provisions of the Warrant and no
right or option granted or conferred hereunder shall in any way limit,
affect, or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Articles of Incorporation,
reorganize or merge with or into another corporation, or to transfer
all or any part of its property or assets, or the exercise of any of
the Company's other rights and powers.
14.) Miscellaneous. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Minnesota without
reference to such state's conflict of laws provisions. The headings in
this Warrant are for purposes of convenience and reference only, and
shall not be deemed to constitute a part hereof. Neither this Warrant
nor any term hereof may be changed, waived, discharged or terminated,
except pursuant to a written instrument signed by the Company and the
registered Holder hereof. All notices and other communications from the
Company to the Holder of this Warrant shall be by certified mail,
return receipt requested, or by overnight delivery service to the
address furnished to the Company in writing by the last Holder of this
Warrant who shall have furnished an address to the Company in writing.
ISSUED this 10th day of December, 2002.
REDLINE PERFORMANCE PRODUCTS, INC.
By: /s/ Xxxxx Xxxxxxxx
Its: Vice President
5.
FORM OF ASSIGNMENT
REDLINE PERFORMANCE PRODUCTS, INC.
FOR VALUE RECEIVED, the undersigned registered Holder of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of Shares of Common Stock set forth below.
NAME OF ASSIGNEE ADDRESS NUMBER OF SHARES
---------------- ------- ----------------
and does hereby irrevocably constitute and appoint _____________________________
Attorney to make such transfer on the books of REDLINE PERFORMANCE PRODUCTS,
INC. maintained for the purpose, with full power of substitution in the
premises.
Dated: _____________ ___, 20__
___________________________________
Signature
___________________________________
Print Name
EXERCISE FORM
REDLINE PERFORMANCE PRODUCTS, INC.
(To be executed only upon exercise of Warrant)
The undersigned registered Holder of this Warrant ("Investor")
irrevocably exercises this Warrant for and purchases_________________________
(_____________) of the number of Shares of Common Stock (the "Shares") of
REDLINE PERFORMANCE PRODUCTS, INC. purchasable with this Warrant, and herewith
makes payment therefor, all at the price and on the terms and conditions
specified in this Warrant.
As a condition to the exercise of this Warrant, Investor represents and warrants
to Company as follows:
1.) Investment Intent.
(a) Investor has been advised that (i) the sale and issuance of the Shares to
Investor has not been registered under the Securities Act of 1933, as amended
(the "Act"), on the grounds, among others, that it will be exempt from
registration under Section 4(2) of the Act as a transaction not involving a
public offering; (ii) reliance upon such exemption or exemptions is predicated
in part on Investor's representation that Investor is acquiring such Shares for
investment for Investor's own account with no present intention of dividing
Investor's participation with others or reselling or otherwise distributing the
same, and Investor alone shall have the full legal and equitable right, title
and interest in the Shares; and (iii) Investor's representations, including the
foregoing, are essential to the reliance of the Company upon exemptions from
registration or qualification of this transaction or the Shares under applicable
state securities laws.
(b) Investor understands that the effect and intent of Investor's
representations in subparagraph (a) above to be that Investor does not presently
contemplate the disposal of all or any part of the Shares, and that at such time
as Investor determines to dispose of all or any part of the Shares, Investor
understands that Investor must first notify the Company, and that the Company
may require an opinion of its attorney, of Investor's attorney, or both, that
such disposition will not negate Investor's intent as expressed herein, and
that, in view of the exemption claimed, such disposition will be permissible.
(c) Investor understands that the subsequent transfer of the Shares will be
restricted, and that the effect of the restrictions on the transfer of the
Shares include the facts, among others, that (i) Investor will not have
liquidity with respect to the Shares for an indefinite period of time, and (ii)
Investor will be unable to sell, encumber or otherwise transfer the Shares
unless there is an effective registration statement covering such disposition
under the Act, and effective registrations and qualifications under applicable
state law, or exemptions from such registrations or qualifications under the Act
and applicable state law are available.
(d) Investor recognizes that an investment in the Shares involves a high degree
of risk and that the purchase of the Shares is a long-term investment. Investor
has a financial net worth or
anticipated income such that a sale of such Shares need not be made in the
foreseeable future to satisfy any financial obligation of which Investor is or
contemplates Investor will become subject.
(e) Investor understands that exemptions from the registration and qualification
requirements, as referred to in subparagraph (c) above, may not be available to
Investor, and the Company will have no obligation to assist Investor in
registering or qualifying a disposition of the Shares or in obtaining or
establishing an exemption from such registration or qualification requirements.
(f) Investor understands that any certificate representing the Shares will bear
legends stating in effect that the issuance or sale of the Shares has not been
registered under the Act or any applicable state securities laws and Investor
may not sell the Shares or other securities within twelve (12) months following
an initial public offering by the Company, and such legends may refer to the
restrictions on transfers and sales contained in this Agreement. In addition,
any certificates representing the Shares issued to an Investor who is a resident
of a particular state may bear a legend containing language required by the laws
of such State. Investor further understands that a stop-transfer restriction may
be placed in the books and records of the Company with respect to the Shares.
(g) Investor's purchase of the Shares is not the result of any general
solicitation or general advertising, including, but not limited to: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio; and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
2.) State of Residence. Investor represents and warrants to the Company that
Investor is a bona fide resident of, and is domiciled in, the State of
_____________________.
3.) Accredited Investor Status.
(a) Investor understands that Investor is an "accredited investor" only if:
(1) Investor's individual income from all sources for each of the
two most recent calendar years was in excess of $200,000 and
Investor reasonably expects Investor's individual income from
all sources anticipated for the current calendar year to be in
excess of $200,000; or
(2) Investor's joint income with Investor's spouse from all
sources for each of the two most recent calendar years was in
excess of $300,000 and Investor reasonably expects Investor's
joint income with Investor's spouse from all sources
anticipated for the current calendar year to be in excess of
$300,000; or
(3) Investor's individual net worth, or Investor's joint net worth
with Investor's spouse, at fair market value (including home,
furnishings and personal automobiles) is greater than
$1,000,000; or
(4) Investor otherwise meets the definition of an "accredited
investor."
(b) Based on the foregoing information, Investor represents and warrants to the
Company that Investor:
(1) IS an accredited investor (check here): [ ]
(2) IS NOT an accredited investor (check here): [ ]
4.) Knowledge and Experience. Investor represents and warrants to the Company as
follows:
(a) Investor (i) believes Investor has such knowledge and experience in
financial and business matters that Investor is capable of evaluating the merits
and risks of the prospective investment in the Shares or (ii) if Investor does
not so believe, or if Investor has been instructed by the Company to designate a
purchaser representative to supplement Investor's knowledge and experience for
the purpose of evaluating the merits and risks of the prospective investment in
the Shares, Investor has provided the Company with the identity of such
purchaser representative and such information concerning the knowledge and
experience in financial and business matters of such purchaser representative,
either directly or by making such purchaser representative available for
interview, necessary to enable a determination by the Company that such
purchaser representative, together with the undersigned, have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the prospective investment in the Shares.
(b) In addition to designating a purchaser representative to the extent required
by the Company, if any, Investor has obtained, to the extent Investor deems
necessary, personal and professional advice with respect to the risks inherent
in the investment in the Shares in light of Investor's financial condition and
investment needs.
(c) Investor and/or Investor's purchaser representative, if any, have been given
access to full and complete information regarding the Company and have utilized
such access to their satisfaction for the purpose of obtaining information; and
particularly, Investor or Investor's purchaser representative, if any, have
either attended or been given reasonable opportunity to attend a meeting with
representatives of the Company for the purpose of asking questions of, and
receiving answers from, such representatives concerning the Company and the
Shares and to obtain any additional information, to the extent reasonably
available.
SIGNATURE PAGE TO EXERCISE FORM
Dated: __________________ ___, 20__
___________________________________
Signature of Registered Holder
___________________________________
Street Address
___________________________________
City, State, Zip Code
___________________________________
IRS Identification Number
