Subscription Agreement, Dated 12/19/97

EXHIBIT 10.75


SUBSCRIPTION AGREEMENT


RIDE, INC.


THIS SUBSCRIPTION AGREEMENT (the "Agreement") is dated December 19, 1997, by and between RIDE, INC., a Washington corporation, with its headquarters located at 8160 304th Avenue SE, Preston, Washington 98050 (the "Company"), and ADVANTAGE FUND II LTD., a British Virgin Islands corporation (the "Buyer").


W I T N E S S E T H:


WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the conditions of this Agreement, (i) shares of Series B 5% Cumulative Convertible Preferred Stock, no par value per share (the "Preferred Stock"), of the Company which will be convertible into shares of Common Stock, no par value per share (the "Common Stock"), of the Company and (ii) a Common Stock Purchase Warrant to purchase shares of Common Stock (the "Warrant"); and


WHEREAS, the Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D as promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933 Act");


NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.


(A) SUBSCRIPTION. The Buyer hereby agrees to purchase from the Company (i) three thousand (3,000) shares of Preferred Stock (the "Preferred Shares") of the Company having the terms and conditions as set forth in the form of Certificate of Designation of the Series B 5% Cumulative Convertible Preferred Stock attached hereto as ANNEX I (the "Certificate of Designation") and (ii) the Warrant, in the form attached hereto as ANNEX II, for the purchase of Two Hundred Thousand (200,000) shares of Common Stock, at an exercise price of $2.6813 per share for the aggregate purchase price of $3,000,000 (the "Purchase Price"). The Purchase Price for the Preferred Shares and Warrant shall be payable in United States Dollars. The shares of Common Stock issuable upon conversion of the Preferred Shares are referred to herein as the "Conversion Shares." The shares of Common Stock issuable in payment of dividends on the Preferred Shares are referred to herein as the "Dividend Shares." The shares of Common Stock issuable upon exercise of the Warrant are referred to herein as the "Warrant Shares." The Conversion Shares, the Dividend Shares and the Warrant Shares are referred to herein


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collectively as the "Common Shares." The Common Shares and the Preferred Shares are referred to herein collectively as the "Shares."


(B) CLOSING. The closing of the transaction contemplated hereby (the "Closing") shall take place on December 19, 1997 at the offices of Genesee Investments, 10500 N.E. 8th Street, Suite 1920, Bellevue, Washington 98004 at 9:30 a.m. or at such other time and place as shall be agreed to by the Company and the Buyer (the "Closing Date"). At the Closing, payment shall be made by wire transfer of immediately available funds to the escrow agent (the "Escrow Agent") identified in the Joint Escrow Instructions attached hereto as ANNEX III (the "Joint Escrow Agreement") against delivery to the Buyer of the duly executed certificates, registered in the name of the Buyer, representing the Preferred Shares to be purchased by the Buyer and the Warrant. In addition, the Company shall deliver to the Buyer (1) an opinion of Company counsel substantially in the form of ANNEX IV and (2) a certified copy of the Certificate of Designation as filed with the Secretary of State of Washington.


2. REPRESENTATIONS AND WARRANTIES OF BUYER


The Buyer hereby represents and warrants to, and covenants and agrees with the Company as follows, such representations and warranties to be true and correct as of the Closing Date.


(A) ORGANIZATION AND AUTHORITY. The Buyer is a corporation duly organized and validly existing under the laws of the British Virgin Islands. The Buyer has all requisite power and authority to execute, deliver and perform its obligations under this Agreement. This Agreement, Registration Rights Agreement (hereinafter defined)and Joint Escrow Agreement when executed and delivered by the Buyer, will be, valid and binding obligations of the Buyer enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and limits upon rights to indemnity.


(B) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Preferred Shares and the Warrant for its own account for investment only and not with a view towards the public sale or distribution thereof. The Buyer has no present intention of selling, granting any participation in or otherwise distributing the same.


(C) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as that term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3).


(D) REOFFERS AND RESALES. All subsequent offers and sales of the Shares by the Buyer shall be made pursuant to registration of the Shares being offered and sold under the 1933 Act or pursuant to an exemption from registration.


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(E) COMPANY RELIANCE. The Buyer understands that neither the Preferred Shares nor the Common Shares have been registered under the 1933 Act or qualified under any state securities laws, and that the Preferred Shares and the Warrant are being offered and sold, and the Conversion Shares and Common Shares are being offered, to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Preferred Shares and the Warrant and to receive an offer of the Common Shares.


(F) INFORMATION PROVIDED. The Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Preferred Shares and the Warrant and the offer of the Common Shares which have been requested by the Buyer; the Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries; without limiting the generality of the foregoing, the Buyer has had the opportunity to obtain and to review the Company's (1) Annual Report on Form 10-K for the fiscal year ended December 31, 1996, (2) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 and (3) the proxy statement for the Company's 1997 Annual Meeting of Stockholders, in each case as filed with the SEC (collectively, the "SEC Reports"); and the Buyer understands that its investment in the Shares involves a high degree of risk.


(G) ABSENCE OF APPROVALS. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares. The Buyer understands that there is no public market for the Preferred Shares and that there will never be a public market.


(H) SUBSCRIPTION AGREEMENT. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Buyer and is a valid and binding agreement of the Buyer enforceable in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally.


(I) NO BROKERS OR FINDERS. Except for Rochon Capital Group Ltd., the Buyer represents and warrants that no person or entity has or will have, as a result of the transactions contemplated by this Agreement, any right, interest, or valid claim upon or against the Company for any commission, fee or other compensation as a finder or broker because of any act or omission by the Buyer, and the Buyer agrees to indemnify and hold the Company harmless against any such commissions, fees, or other compensation.


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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.


The Company hereby represents and warrants to, and covenants and agrees with the Buyer as follows, such representations and warranties to be true and correct as of the Closing Date.


(A) ORGANIZATION AND AUTHORITY. The Company is a corporation duly organized and validly existing under the laws of the State of Washington, and has all requisite corporate power and authority to (i) own, lease and operate its properties and to carry on its business as now being conducted, and (ii) to execute, deliver and perform its obligations under this Agreement, the Registration Rights Agreement, the form of which is attached hereto as ANNEX V (the "Registration Rights Agreement"), the Certificate of Designation, the Transfer Agent Instructions, the form of which is attached hereto as ANNEX VI (the "Transfer Agent Instructions"), and the other agreements to be executed and delivered by the Company in connection herewith, and to consummate the transactions contemplated hereby and thereby. The Company is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions wherein such qualification is necessary and where failure so to qualify could have a material adverse effect on the business, properties, operations, condition (financial or other), results of operations or prospects of the Company.


(B) CAPITALIZATION. The authorized capital stock of the Company currently consists of (a) 20,000,000 shares of Common Stock, of which 11,700,947 shares were outstanding on December 16, 1997, all of which are fully paid and nonassessable and (b) 10,000,000 shares of Preferred Stock, of which 100,000 shares, designated as Series A 7% Cumulative Convertible Non-voting Preferred Stock, are issued and outstanding and on the Closing Date (as defined herein) there will be (x) no material increase from December 16, 1997 in the number of shares of Common Stock outstanding (except for shares issued upon the exercise of options and warrants outstanding on the date hereof or options or similar rights granted subsequent to the date of this Agreement pursuant to the Company's (i) 1994 Stock Option Plan, (ii) 1994 Directors Non-qualified Stock Option Plan and (iii) Employee Stock Purchase Plan (collectively, the "Plans"), and the 605,263 shares which may be issued in connection with a certain acquisition which the Company is currently negotiating) and (y) no additional shares of Preferred Stock outstanding except as issued pursuant to this Agreement. As of December 16, 1997, the Company had outstanding options and warrants entitling the holders to purchase 1,510,582 shares of Common Stock. Other than as set forth in the preceding sentence (and other than options that may be granted subsequent to the date of this Agreement under the Plans, the Company does not have outstanding any securities (or obligations to issue any such securities) convertible into, exchangeable for or otherwise entitling the holders thereof to acquire shares of Common Stock, except as disclosed in the SEC Reports. The outstanding shares of Common Stock and outstanding options, warrants and other securities to purchase Common Stock have been duly authorized and validly issued. None of such outstanding shares of Common


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Stock, options, warrants and other securities has been issued in violation of the preemptive rights of any security holder of the Company. The offers and sales of the outstanding shares of Common Stock and options, warrants and other rights to acquire Common Stock were at all relevant times either registered under the 1933 Act and applicable state securities laws or exempt from such requirements, except for such non-compliance with state securities laws which have not had and will not have a material adverse effect on the business, properties, operations, condition (financial or other), results of operations or prospects of the Company or the transactions contemplated by this Agreement. Except as set forth on SCHEDULE 3(B), no holder of any of the Company's securities has any rights, "demand," "piggy-back" or otherwise, to have such securities registered by reason of the intention to file, filing or effectiveness of the Registration Statement (as defined in the Registration Rights Agreement).


(C) CONCERNING THE SHARES. The Shares and the Warrant have been duly authorized by the Company and the Preferred Shares, when issued and paid for in accordance with this Agreement, and the Common Shares, when issued upon conversion of the Preferred Shares, in payment of dividends thereon or upon exercise of the Warrant, as the case may be, will be duly and validly issued, fully paid and non-assessable and will not subject the holder thereof to personal liability by reason of being such holder. There are no preemptive or similar rights of any stockholder of the Company or any other person to acquire any of the Shares. The Common Stock is listed for trading on the Nasdaq National Market ("Nasdaq") and (1) the Company and the Common Stock meet the criteria for continued listing and trading on Nasdaq; (2) the Company has not been notified by Nasdaq of any failure or potential failure to meet the criteria for continued listing and trading on Nasdaq and (3) no suspension of trading in the Common Stock is in effect. The Company knows of no reason that the Common Shares will not be eligible for listing on Nasdaq.


(D) SUBSCRIPTION AGREEMENT; WARRANT; REGISTRATION RIGHTS AGREEMENT; TRANSFER AGENT INSTRUCTIONS. This Agreement, the Warrant, the Registration Rights Agreement and the Transfer Agent Instructions have been duly and validly authorized by the Company, this Agreement has been duly executed and delivered on behalf of the Company and this Agreement is, and the Warrant, the Registration Rights Agreement and the Transfer Agent Instructions, when executed and delivered by the Company, will be, valid and binding obligations of the Company enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and limits upon rights to indemnity.


(E) NON-CONTRAVENTION. The execution and delivery of this Agreement by the Company and the consummation by the Company of the issuance of the Preferred Shares as contemplated by this Agreement and the other transactions contemplated by this Agreement, the Warrant, the Registration Rights Agreement, the terms of the Preferred Stock and the Transfer Agent Instructions do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or


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constitute a default under, the articles of incorporation or the by-laws of the Company, or any indenture, mortgage, deed of trust or other material agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound which would have a material adverse effect on the Company or any applicable law, rule or regulation or any applicable decree, judgment or order of any court, United States federal or state regulatory body, administrative agency or other governmental body having jurisdiction over the Company or any of its properties or assets which would have a material adverse effect on the Company.


(F) APPROVALS. No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders of the Company is required to be obtained by the Company for (1) the execution, delivery and performance by the Company of this Agreement, the Registration Rights Agreement (except such authorization of the SEC as is required with respect to accelerating the effectiveness of any registration statement filed pursuant thereto) and the Transfer Agent Instructions, (2) the issuance and sale of the Preferred Shares and Warrant as contemplated by this Agreement, (3) the issuance of Common Shares on conversion, or in payment of dividends upon, of the Preferred Shares and (4) the issuance of Common Shares on exercise of the Warrant.


(G) INFORMATION PROVIDED. The information provided by or on behalf of the Company to the Buyer in connection with the transactions contemplated by the Agreement, including, without limitation, the information referred to in Section 2(f) of this Agreement, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Company has not filed any reports with the SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), since December 31, 1996 other than the SEC Reports.


(H) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or other), results of operations or prospects of the Company, except as disclosed in the SEC Reports.


(I) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in the SEC Reports, there is no action, suit or proceeding, before or by any court, public board or body or governmental agency pending or, to the knowledge of the Company or any of its subsidiaries, threatened against the Company and, to the knowledge of the Company, there is no inquiry or investigation before or by any court, public board or body or governmental agency pending or threatened against the Company, in any such case wherein an unfavorable decision, ruling or finding could have a material adverse effect on the business, properties, operations, condition (financial or other), results of operations or prospects of the Company or the transactions contemplated by this Agreement or any of the documents contemplated hereby or which could adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations


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under, this Agreement or any of such other documents; the Company does not have pending before the SEC any request for confidential treatment of information and to the best of the Company's knowledge no such request will be made by the Company prior to the time the Registration Statement relating to the Common Shares which is contemplated by the Registration Rights Agreement is first ordered effective by the SEC; and to the best of the Company's knowledge there is not pending or contemplated, and there has been no, investigation by the SEC involving the Company, any director or officer of the Company or any former director or officer of the Company based upon the former director's or officer's affiliation with the Company.


(J) PROPERTIES. The Company has good title to all property real and personal (tangible and intangible) and other assets owned by it, free and clear of all security interests, charges, mortgages, liens or other encumbrances, except such as are described in the SEC Reports or such as do not materially interfere with the use of such property made, or proposed to be made, by the Company. The leases, licenses or other contracts or instruments under which the Company leases, holds or is entitled to use any property, real or personal, are valid, subsisting and enforceable with only such exceptions as do not materially interfere with the use of such property made, or proposed to be made, by the Company. The Company has not received notice of any material violation of any applicable law, ordinance, regulation, order or requirement relating to its owned or leased properties.


(K) LABOR RELATIONS. No material labor problem exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company.


(L) SEC FILINGS. The Company has timely filed all required forms, reports and other documents with the SEC. All of such forms, reports and other documents complied, when filed, in all material respects, with all applicable requirements of the 1933 Act and the 1934 Act. The Company is eligible to file a resale registration statement on Form S-3.


(M) BROKERS, FINDERS, ETC. The Company hereby indemnifies and holds the Buyer harmless from any claim made against the Buyer by any person for any brokers' or finders' fee, commission or compensation with respect to this Agreement or the transactions contemplated hereby for which the Company is responsible. It is specifically acknowledged and agreed that the Company is liable for any fees payable to Rochon Capital Group, Ltd. in connection with the transaction contemplated by this Agreement. No other broker, finder or similar person is entitled to any commission, fee or other compensation by reason of the transactions contemplated by this Agreement.


4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.


(A) TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the Preferred Shares and the Warrant have not been and are not being registered under the


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provisions of the 1933 Act and, except as provided in the Registration Rights Agreement, the Common Shares have not been and are not being registered under the 1933 Act, and may not be transferred unless (A) subsequently registered thereunder or (B) the Buyer shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Shares or the Warrant to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (2) any resale of Shares or the Warrant made in reliance on Rule 144 promulgated under the 1933 Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any such resale of Shares or the Warrant under circumstances in which the seller, or the person through whom the resale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (3) neither the Company nor any other person is under any obligation to register the Shares (other than registration of the resale of the Common Shares pursuant to the Registration Rights Agreement) or the Warrant under the 1933 Act or to comply with the terms and conditions of any exemption thereunder (other than pursuant to Section 4(d) hereof and pursuant to the Registration Rights Agreement).


(B) RESTRICTIVE LEGENDS. The Buyer acknowledges and agrees that the certificates for the Preferred Shares, Warrant, Conversion Shares and Common Shares shall bear a restrictive legend in substantially the following form:


"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or any state securities laws, and may not be offered or
sold, transferred or otherwise disposed of except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of
securities) or (iii) pursuant to another exemption from
registration under the Act."


The legend set forth above shall be removed from the certificates representing the Common Shares and the Company shall issue certificates representing such securities without such legend if, unless otherwise required by state securities laws, (a) the resale of the Common Shares is registered and effected under the 1933 Act, (b) in connection with a resale transaction, the Buyer provides the Company with an opinion of counsel, in form, substance and scope reasonably acceptable to the Company, to the effect that a public sale or transfer of the Common Shares may be made without registration under the 1933 Act or (c) the Common Shares may be resold under Rule 144(k) under the 1933 Act. Once a registration statement contemplated by the Registration Rights Agreement shall have been declared effective by the SEC, (1) the Company shall, upon request of the Buyer, immediately remove any restrictive legend and terminate any stop-transfer restriction for Common Shares issued prior to the date such registration statement is declared effective


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by the SEC and (2) the Company shall not place any restrictive legend or impose any stop-transfer restriction on the Common Shares issued thereafter.


(C) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to execute and deliver the Registration Rights Agreement at the Closing.


(D) FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with respect to the Shares and the Warrant as required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. The Buyer agrees to cooperate with the Company in connection with such filing and, upon request of the Company, to provide all information relating to the Buyer reasonably required for such filing.


(E) AUTHORIZATION FOR TRADING; REPORTING STATUS. Prior to the Closing Date, the Company shall file a notification for listing of additional shares with Nasdaq and shall provide evidence of such filing to the Buyer. So long as the Buyer beneficially owns any of the Preferred Shares, Conversion Shares, Common Shares or the Warrant, the Company shall file all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act on a timely basis and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination.


(F) USE OF PROCEEDS. Neither the Company nor any subsidiary of the Company owns or has any present intention of acquiring any "margin stock" as defined in Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve System ("margin stock"), other than the acquisition of shares of Common Stock surrendered to the Company in payment of the exercise price or tax obligations incurred in connection with the grant, vesting or exercise of a stock option or other award granted by the Company to any of its employees, directors or consultants pursuant to its stock incentive plans or in connection with a loan made to any such persons pursuant to such plans which acquisition is made pursuant to the requirements of Regulation G governing margin stock. The proceeds of sale of the Preferred Shares and Warrant will be used for general working capital purposes and in the operation of the Company's business, and may be used to finance certain acquisitions of assets or businesses. None of such proceeds will be used, directly or indirectly (1) (other than financing its subsidiaries in the ordinary course of business) to make any loan to or investment in any other person or (2) for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any margin stock or for the purpose of maintaining, reducing or retiring any indebtedness which was originally incurred to purchase or carry any stock that is currently a margin stock or for any other purpose which might constitute the transactions contemplated by this Ag ...