1
EXHIBIT 1.4
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED FOR RESALE UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT AS TO SUCH
SECURITIES FILED UNDER THE ACT, OR AN EXEMPTION FROM REGISTRATION, AND
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER MAY REQUIRE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF THAT SUCH REGISTRATION IS
NOT REQUIRED AND THAT SUCH LAWS ARE COMPLIED WITH.
VOID AFTER 3:30 P.M., EASTERN TIME, ON , 2005
Underwriters
Warrant to Purchase
Units
Each Unit Consisting of
One share of Common Stock
And
One Class A Redeemable Warrant
of
AMERICAN EAGLE MOTORCYCLE COMPANY INC.
This is to Certify That, FOR VALUE RECEIVED, Mercer Partners, Inc.(the "Holder")
is entitled to purchase, subject to the provisions of this Warrant, from
American Eagle Motorcycle Company, Inc., ("Company"), a California corporation,
at any time on or after , 2001, and not later than 3:30 p.m., Eastern Time,
on , 2005, a total of 80,000 units each unit consisting of one share of
Common Stock of the Company and one Class A redeemable warrant ("Securities")
exercisable at a purchase price of $00.00 for the Securities which is 140% of
the public offering price. The number of Securities to be received upon the
exercise of this Warrant and the price to be paid for the Securities may be
adjusted from time to time as hereinafter set forth. The purchase price of a
Security in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price." This Warrant is or may be one of
a series of Warrants identical in form issued by the Company to purchase an
aggregate of 160,000 Shares of Common Stock. The Securities, as adjusted from
time to time, underlying the Warrants are hereinafter sometimes referred to as
"Warrant Securities". The Securities issuable upon the exercise hereof are in
all respects identical to the securities being purchased by the Underwriter for
resale to the public pursuant to the terms and conditions of the Underwriting
Agreement entered into on this date between the Company and Holder.
(1.) Exercise of Warrant. Subject to the provisions of Section (7) hereof, this
Warrant may be exercised in whole or in part at anytime or from time to time on
or after , 2001, but not later than 3:30 p.m., Eastern Time on , 2005,
or if , 2005 is a day on which banking institutions are authorized by law to
close, then on the next succeeding day which shall not be such a day, by
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of shares of Common
Stock or Redeemable Warrants, as the case may be as specified in such Form,
together with all federal and state taxes applicable upon such exercise. The
Company agrees to provide notice to the Holder that any tender offer is being
made for the Securities no later than the first business day after the day the
Company becomes aware that any tender offer is being made for the Securities. If
this Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant for cancellation, execute and
1
2
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the shares purchasable hereunder along with any additional Redeemable
Warrants not exercised. Upon receipt by the Company of this Warrant at the
office of the Company or at the office of the Company's stock transfer agent, in
proper form for exercise and accompanied by the total Exercise Price, the Holder
shall be deemed to be the holder of record of the Securities issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such Securities shall not then
be actually delivered to the Holder.
(2.) Reservation of Securities. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of shares of Securities as shall be required for issuance or
delivery upon exercise of this Warrant. The Company covenants and agrees that,
upon exercise of the Warrants and payment of the Exercise Price therefor, all
Securities and other securities issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all Securities issuable upon the
exercise of the Warrants to be listed (subject to official notice of issuance)
on all securities exchanges on which the Common Stock issued to the public in
connection herewith may then be listed and/or quoted on NASDAQ.
(3.) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(a) If the Securities are listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange, the current value
shall be the last reported sale price of the Common Stock on such exchange on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average of the closing bid and asked prices
for such day on such exchange; or
(b) If the Securities are not so listed or admitted to unlisted trading
privileges, the current value shall be the mean of the last reported bid and
asked prices reported by the National Association of Securities Dealers
Automated Quotation System (or, if not so quoted on NASDAQ or quoted by the
National Quotation Bureau, Inc.) on the last business day prior to the date of
the exercise of this Warrant; or
(c) If the Securities are not so listed or admitted to unlisted trading
privileges and bid and asked prices are not so reported, the current value shall
be an amount, not less than book value, determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company, such determination
to be final and binding on the Holder.
(4.) Exchange, Assignment or Loss of Warrant. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof to the Company or at the office of its stock transfer agent, if any, for
other Warrants of different denominations entitling the Holder thereof to
purchase (under the same terms and conditions as provided by this Warrant) in
the aggregate the same number of Securities purchasable hereunder. This Warrant
may not be sold, transferred, assigned, or hypothecated until after one year
from the effective date of the registration statement except that it may be (i)
assigned in whole or in part to the officers of the "Underwriter(s)", and
(ii) transferred to any successor to the business of the "Underwriter(s)." Any
such assignment shall be made by surrender of this Warrant to the Company, or at
the office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and with funds sufficient to pay any transfer tax;
whereupon the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in-such instrument of assignment, and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other Warrants which carry the same rights upon presentation hereof at the
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants issued in substitution for or
replacement of this Warrant, or into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant,
2
3
and (in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not the Warrant so
lost, stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.
(5.) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(6.) Notices to Warrant Holders. So long as this Warrant shall be
outstanding and unexercised (i) if the Company shall pay any
dividend EXCLUSIVE OF A CASH DIVIDEND, or make any distribution upon
the Common Stock, or (ii) if the Company shall offer to the holders
of Common Stock for subscription or purchase by them any shares of
stock of any class or any other rights, or (iii) if any capital
reorganization of the Company, reclassification of the capital stock
of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or substantially
all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or
winding up of the Company shall be effected, then, in any such case,
the Company shall cause to be delivered to the Holder, at least ten
(10) days prior to the date specified in (x) or (y) below, as the
case may be, a notice containing a brief description of the proposed
action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and
the 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 equivalent securities or other property deliverable upon
such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(7.) Adjustment of Exercise Price and Number of Shares of Common Stock
Deliverable.
(A)(i) Except as hereinafter provided, in the event the Company shall, at
any time or from time to time after the date hereof, issue any shares of Common
Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein call a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Exercise Price of the Common Stock issuable upon the exercise of the Warrant
and the Redeemable Warrant in effect immediately prior to such Change of Shares
shall be changed to a price (including any applicable fraction of a cent to the
nearest cent) determined by dividing (i) the sum of (a) the total number of
shares of Common Stock outstanding immediately prior to such Change of Shares,
multiplied by the Exercise Price in effect immediately prior to such Change of
Shares, and (b) the consideration, if any, received by the Company upon such
issuance, subdivision or combination by (ii) the total number of shares of
Common Stock outstanding immediately after such Change of Shares; provided,
however, that in no event shall the Exercise Price be adjusted pursuant to this
computation to an amount in excess of the Exercise Price in effect immediately
prior to such computation, except in the case of a combination of outstanding
shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section (7) the following provisions shall be applicable:
(I) Shares of Common Stock issuable by way of dividend or other distribution
on any capital stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(II) The number of shares of Common Stock at any one time outstanding shall
not be deemed to include the number of shares issuable (subject to readjustment
upon the actual issuance thereof) upon the exercise of options, rights or
warrants and upon the conversion or exchange of convertible or exchangeable
securities.
3
4
(A)(ii) Upon each adjustment of the Exercise Price pursuant to this Section
(7), the number of shares of Common Stock and Redeemable Warrants purchasable
upon the exercise of each Warrant shall be the number derived by multiplying the
number of shares of Common Stock and Redeemable Warrants purchasable immediately
prior to such adjustment by the Exercise Price in effect prior to such
adjustment and dividing the product so obtained by the applicable adjusted
Exercise Price.
(B) In case of any reclassification or change of outstanding Securities
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of a subdivision or combination), or in case of any consolidation or merger of
the Company with or into another corporation other than a merger with a
"Subsidiary" (which shall mean any corporation or corporations, as the case may
be, of which capital stock having ordinary power to elect a majority of the
Board of Directors of such corporation (regardless of whether or not at the time
capital stock of any other class or classes of such corporation shall have or
may have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned by the Company or by one or more Subsidiaries)
or by the Company and one or more Subsidiaries in which merger the Company is
the continuing corporation and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of subdivision or combination) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Holder of each Warrant then outstanding shall have the right
thereafter to receive on exercise of such Warrant the kind and amount of
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
securities issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and shall
forthwith file at the principal office of the Company a statement signed on its
behalf by its President or a Vice President and by its Treasurer or an Assistant
Treasurer or its Secretary or an Assistant Secretary evidencing such provision.
Such provisions shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section
(7)(A). The above provisions of this Section (7)(B) shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(C) Irrespective of any adjustments or changes in the Exercise Price or the
number of Securities purchasable upon exercise of the Warrants, the Warrant
Certificates theretofore and thereafter issued shall, unless the Company shall
exercise its option to issue new Warrant Certificates pursuant hereto, continue
to express the Exercise Price per share and the number of shares purchasable
thereunder as the Exercise Price per share and the number of shares purchasable
thereunder as expressed in the Warrant Certificates when the same were
originally issued.
(D) After each adjustment of the Exercise Price pursuant to this Section
(7), the Company will promptly prepare a certificate signed on its behalf by the
President or Vice President, and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Exercise Price as so adjusted, (ii) the number of Securities purchasable upon
exercise of each Warrant, after such adjustment, and (iii) a brief statement of
the facts accounting for such adjustment. The Company will promptly file such
certificate in the Company's minute books and cause a brief summary thereof to
be sent by ordinary first class mail to each Holder at his last address as it
shall appear on the registry books of the Company. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity thereof except as to the holder to whom the Company failed to mail such
notice, or except as to the holder whose notice was defective. The affidavit of
an officer or the Secretary or an Assistant Secretary of the Company that such
notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
(E) No adjustment of the Exercise Price shall be made as a result of or in
connection with the issuance or sale of Securities if the amount of said
adjustment shall be less than $.10, provided, however, that in such case, any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment that shall amount, together with any adjustment so carried forward,
4
5
to at least $.10. In addition, Holders shall not be entitled to cash dividends
paid by the Company prior to the exercise of any Warrant or Warrants held by
them.
(F) In the event that the Company shall at any time prior to the exercise
of all Warrants declare a dividend consisting solely of shares of
Common Stock or otherwise distribute to its stockholders any assets,
property, rights, or evidences of indebtedness, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the
Securities or other securities and property receivable upon the
exercise thereof, to receive, upon the exercise of such Warrants, the
same property, assets, rights, or evidences of indebtedness, that they
would have been entitled to receive at the time of such dividend or
distribution as if the Warrants had been exercised immediately prior to
such dividend or distribution. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the
timely performance of the provisions of this Section (7).
(G.1) Right to Exercise on a Net Issuance Basis. In lieu of exercising this
Warrant for cash, the Holder shall have the right to exercise this Warrant or
any portion thereof (the "Net Issuance Right") into Common Stock as provided in
this Section G.1 at any time or from time to time during the period specified on
page one of this Warrant Agreement, hereof by the surrender of this Warrant to
the Company with a duly executed and completed Exercise Form marked to reflect
net issuance exercise. Upon exercise of the Net Issuance Right with respect to a
particular number of shares subject to this Warrant and noted on the Exercise
Form (the "Net Issuance Warrant Shares"), the Company shall deliver to the
Holder (without payment by the Holder of any Exercise Price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable shares
of Common Stock equal to the quotient obtained by dividing the value of this
Warrant (or the specified portion hereof) on the Net Issuance Exercise Date,
which value shall be determined by subtracting (A) the aggregate Exercise price
of the Net Issuance Warrant Shares immediately prior to the exercise of the Net
Issuance Right from (B) the aggregate fair market value of the Net Issuance
Warrant Shares issuable upon exercise of this Warrant (or the specified portion
hereof) on the Net Issuance Exercise Date (as herein defined) by (Y) the fair
market value one share of Common Stock on the Net Issuance Exercise Date (as
herein defined).
Expressed as a formula as shown below, such net issuance exercise shall be
computed as follows:
X = B-A
-----
Y
Where: X = the number of shares of Common Stock that may be issued to the
Holder
Y = the fair market value ("FMV") of one share of Common Stock as of
the Net Issuance Exercise Date
A = the aggregate Exercise Price (i.e. the product determined by
multiplying the Net Issuance Warrant Shares by the Exercise Price)
B = the aggregate FMV (i.e. the product determined by multiplying the
FMV by the Net Issuance Warrant Shares.
(G.1.2) Determination of Fair Market Value. For purposes of this Section G.1.2,
"fair market value" of a share of Common Stock as of the Net Issuance Exercise
Date shall mean:
(i) if the Net Issuance Right is exercised in connection
with and contingent upon a Public Offering, and if the
Company's registration Statement relating to such
Public Offering has been declared effective by the
SEC, then the initial "Price to Public" specified in
the final Prospectus with respect to such offering.
(ii) if the Net Issuance Right is not exercised in
connection with and contingent upon a Public Offering,
then as follows:
5
6
(a) If traded on a securities exchange, the fair market value of the
Common Stock shall be deemed to be the last reported sale price or
if no reported sale takes place, the average of the last reported
sale prices for the last three (3) trading days prior to the Net
Issuance Date;
(b) If traded on the Nasdaq National Market or the Nasdaq Small Cap
Market, the fair market value of the Common Stock shall be deemed
to be the average of the last reported sale price of the common
Stock on such Market over the last three (3) trading days prior to
the Net Issuance Exercise Date;
(c) If traded over-the-counter other than on the Nasdaq National
market or the Nasdaq SmallCap Market, the fair market value of the
Common Stock shall be deemed to be the average of the midpoint
between the closing bid and ask prices of the Common Stock over
the 3-day trading period prior to the Net Issuance Exercise Date;
and
(d) If there is no public market for the Common Stock, then the fair
market value shall be determined by mutual agreement of the
Warrantholder and the Company, and if the Warrantholder and the
company are unable to so agree, at the Company's sole expense, by
an investment banker of national reputation selected by the
Company and reasonably acceptable to the Warrantholder.
(8.) Piggyback Registration. If, at any time commencing one year from the
effective date of the registration statement and expiring four (4) years
thereafter, the Company proposes to register any of its securities under the
Securities Act of 1933, as amended (the "Act") (other than in connection with a
merger or pursuant to Form S-8, S-4 or other comparable registration statement)
it will give written notice by registered mail, at least thirty (30) days prior
to the filing of each such registration statement, to the Holders and to all
other Holders of the Warrants and/or the Warrant Securities of its intention to
do so. If the Holder or other Holders of the Warrants and/or Warrant Securities
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford each of the Underwriter and such Holders of
the Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement. In the event any
underwriter underwriting the sale of securities registered by such registration
statement shall limit the number of securities includable in such registration
by shareholders of the Company, the number of such securities shall be allocated
pro rata among the holders of Warrants and the holders of other securities
entitled to piggyback registration rights.
Notwithstanding the provisions of this Section, the Company shall have the
right at any time after it shall have given written notice pursuant to this
Section (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
(9.) Demand Registration.
(a) At any time commencing one year from the effective date of the
registration statement and expiring four (4) years thereafter, the Holders of
the Warrants and/or Warrant Securities representing a "Majority" (as hereinafter
defined) of such securities (assuming the exercise of all of the Warrants) shall
have the right (which right is in addition to the registration rights under
Section (i) hereof), exercisable by written notice to the Company, to have the
Company prepare and file with the Securities and Exchange Commission (the
"Commission"), on one occasion, a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Underwriter and Holders, in order to
comply with the provisions of the Act, so as to permit a public offering and
sale of their respective Warrant Securities for nine (9) consecutive months by
such Holders and any other holders of the Warrants and/or Warrant Securities who
notify the Company within ten (10) days after receiving notice from the Company
of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section (i) by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under this Section (9) at any
time commencing one year after the effective date of the registration statement
and expiring four (4) years thereafter, the Holders of Representative's
6
7
Warrants and/or Warrant Securities shall have the right, exercisable by written
request to the Company, to have the Company prepare and file, on one occasion,
with the Commission a registration statement so as to permit a public offering
and sale for nine (9) consecutive months by such Holders of its Warrant
Securities; provided, however, that the provisions of Section (9)(b) hereof
shall not apply to any such registration request and registration and all costs
incident thereto shall be at the expense of the Holder or Holders making such
request.
(10.) Covenants of the Company With Respect to Registration. In connection with
any registration under Section (8) or (9) hereof, the Company covenants and
agrees as follows:
(a) The Company shall use its best efforts to file a registration statement
within thirty (30) days of receipt of any demand therefor, shall use its best
efforts to have any registration statement declared effective at the earliest
possible time, and shall furnish each Holder desiring to sell Warrant Securities
such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections (h), (i) and (j) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. If the
Company shall fail to comply with the provisions of Section (10)(a), the Company
shall, in addition to any other equitable or other relief available to the
Holder(s), extend the Exercise Period by such number of days as shall equal the
delay caused by the Company's failure.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Warrant Securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as are reasonably requested by the Holder(s), provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant Securities to
be sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), from
and against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify the Underwriter contained in Section 7 of the
Underwriting Agreement relating to the offering.
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent with the
same effect as the provisions contained in Section 7 of the Underwriting
Agreement pursuant to which the Underwriter has agreed to indemnify the Company.
(f) The Holder(s) may exercise their Warrants prior to the initial filing of
any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other than
the Warrant Securities to be included in any registration statement filed
pursuant to Section (9) hereof, or permit any other registration statement to be
or remain effective during the effectiveness of a registration statement filed
pursuant to Section (9) hereof, other than a
7
8
secondary offering of equity securities of the Company, without the prior
written consent of the Holders of the Warrants and Warrant Securities
representing a Majority of such securities
(h) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (x) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (y) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective date of the
registration statement, and in any event within 15 months thereafter, make
"generally available to its security holders" (within the meaning of Rule 158
under the Act) an earnings statement (which need not be audited) complying with
Section 11(a) of the Act and covering a period of at least 12 consecutive months
beginning after the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and to the
managing underwriters, copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD") or an Exchange. Such investigation shall include access
to books, records and properties and opportunities to discuss the business of
the Company with its officers and independent auditors, all to such reasonable
extent and at such reasonable times and as often as any such Holder or
underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement with the managing
underwriters, which may be the Underwriter. Such agreement shall be satisfactory
in form and substance to the Company, and such managing underwriters, and shall
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type used by the
managing underwriter; provided however, that no Holder shall be required to make
any representations, warranties or covenants or grant any indemnity to which it
shall object in any such underwriting agreement. The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their Warrant
Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such Holders.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
(l) For purposes of this Agreement, the term "Majority" in reference to
the Holders of Warrants or Warrant Securities, shall mean in excess of
fifty (50%) of the then outstanding Warrants and Warrant Securities
that (i) are not held by the Company, an affiliate, officer, creditor,
employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction
therewith or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act.
8
9
(11.) Buy-Out of Registration Demand.
In lieu of carrying out its obligations to effect a Piggyback
Registration or Demand Registration of any registrable securities pursuant
to the Section, the Company may carry out such obligation by offering to
purchase and purchasing such Registrable Securities requested to be
registered in an amount in cash equal to the difference between (a) 95% of
the last sale price of the Common Stock on the day the request for
registration is made and (b) the Exercise Price in effect on such day; the
purchase transaction closing within three (3) business days; provided
however, that the Holder or Holders may decline such request rather than
accept such offer by the Company.
(12.) Conditions of Company's Obligations. The Company's obligation under
Section 10 hereof shall be conditioned as to each such public offering, upon a
timely receipt by the Company in writing of:
(a) Information as to the terms of such public offering furnished by or on
behalf of the Holders making a public distribution of their Warrant Securities;
(13.) Continuing Effect of Agreement. The Company's agreements with respect to
the Warrant Securities in this Warrant will continue in effect regardless of the
exercise or surrender of this Warrant.
(14.) Notices. Any notices or certificates by the Company to the Holder and by
the Holder to the Company shall be deemed delivered if in writing and delivered
personally or sent by certified mail, to the Holder, addressed to him or sent to
Mercer Partners, Inc. 2425 Post Road, Suite 205, Southport, CT 06490, or, if the
Holder has designated, by notice in writing to the Company, any other address,
to such other address, and, if to the Company, addressed to Gregory Spak,
President, American Eagle Motorcycle Company Inc., 2350 technology Parkway,
Hollister, CA 95023. The Company may change its address by written notice to
Mercer Partners, Inc.
(15.) Limited Transferability. This Warrant Certificate and the Warrant may not
be sold, transferred, assigned or hypothecated for a one-year period after the
effective date of the Registration Statement except to underwriters of the
Offering referred to in the Underwriting Agreement or to individuals who are
either partners or officers of such an underwriter or by will or by operation of
law and if transfer occurs after one year, the warrant must be exercised
immediately upon transfer or it shall lapse. The Warrant may be divided or
combined, upon request to the Company by the Warrant holder, into a certificate
or certificates evidencing the same aggregate number of Warrants. The Warrant
may not be offered, sold, transferred, pledged or hypothecated in the absence of
any effective registration statement as to such Warrant filed under the Act, or
an exemption from the requirement of such registration, and compliance with the
applicable federal and state securities laws. The Company may require an opinion
of counsel satisfactory to the Company that such registration is not required
and that such laws are complied with. The Company may treat the registered
holder of this Warrant as he or it appears on the Company's book at any time as
the Holder for all purposes. The Company shall permit the Holder or his duly
authorized attorney, upon written request during ordinary business hours, to
inspect and copy or make extracts from its books showing the registered holders
of Warrants.
(16.) Transfer to Comply With the Securities Act of 1933. The Company may cause
the following legend, or one similar thereto, to be set forth on the Warrants
and on each certificate representing Warrant Securities, or any other security
issued or issuable upon exercise of this Warrant not theretofore distributed to
the public or sold to underwriters for distribution to the public pursuant to
Sections (8) or (9) hereof; unless counsel satisfactory to the Company is of the
opinion as to any such certificate that such legend, or one similar thereto, is
unnecessary:
"The warrants represented by this certificate are restricted securities and
may not be offered for sale, sold or otherwise transferred unless an opinion of
counsel satisfactory to the Company is obtained stating that such offer, sale
or transfer is in compliance wrath state and federal securities law.
(17.) Applicable Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
conflict of law principles.
9
10
(18.) Assignability. This Warrant may not be amended except in a writing signed
by each Holder and the Company.
(19.) Severability. If any provisions of this Warrant shall be held to be
invalid or unenforceable, such invalidity or enforceability shall not affect any
other provision of this Warrant.
(20.) Survival of Indemnification Provisions. The indemnification provisions of
this Warrant shall survive until , 2008
American Eagle Motorcycle Company Inc.
By
----------------------------------
Gregory Spak, President
Date:
---------------------
Attest:
- ----------------------------
, Secretary
10
11
PURCHASE FORM
Dated 20
--------- -----
The undersigned hereby irrevocably elects to exercise the Warrant to the
extent of purchasing shares of
-------
Common Stock hereby makes payment of $ in
payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name
----------------------------------------------------------------------------
(please typewrite or print in block letters)
Address
-------------------------------------------------------------------------
Signature
-----------------------------------------------------------------------
11
12
ASSIGNMENT FORM
FOR VALUE RECEIVED,
-------------------------------------------------------------
hereby sells, assigns and transfers unto
Name
----------------------------------------------------------------------------
(please typewrite or print in block letters)
Address
-------------------------------------------------------------------------
the right to purchase shares of Common Stock as represented by this Warrant
to the extent of shares of Common Stock as to which such right is
exercisable and does hereby irrevocably constitute and appoint,
----------------------------
attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
Signature
----------------------------------------------------------------------
Dated: 20
------- ------
12