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XXX XXXX XXXXXXX XX.
XXXXXXXXX PURCHASE AGREEMENT
VILLARS II
THIS DEBENTURE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
OR ANY APPLICABLE STATE STATUTE
The Debenture Purchase Agreement is made this 27th day of September, 1996,
by and between RED XXXX BREWING CO., a Pennsylvania corporation, having an
address at 0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
("Company"), and VILLARS II, L.P., a Pennsylvania limited partnership
("Obligee"), having an address at 000 Xxxxxxx Xxxxxx, Xxxxx, XX 00000.
1. Company has authorized the issue of a One Hundred Fifteen Thousand
Dollars ($115,000) 5% Convertible Subordinated Debenture, due September 1, 2006
("Date of Maturity") (the "Debenture"). The Debenture shall be substantially
in the form attached hereto.
2. Company agrees to sell to Obligee and, subject to the terms and
conditions herein set forth, Obligee agrees to purchase from Company, the
Debenture, such purchase and delivery to be made at the time of execution
hereof, at which time Company will deliver the Debenture to Obligee against
payment of the purchase price thereof wired to Company in immediate funds. Such
purchase price shall be an amount equal to the principal amount of the
Debenture.
3. Interest on the unpaid principal balance of the Debenture at the rate
of five percent (5%) per annum, from the date of the Debenture, shall be
payable semi-annually, on the 1st day of March and the 1st day of September in
each year, commencing March 1,
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1997, at the address of Obligee set forth above or such other place as Obligee
may designate in writing.
4. Each semi-annual payment of interest shall be payable on the date due
by a certificate representing that number of shares of common stock of Company,
no par value ("Common Stock") equal to such semi-annual interest payment
divided by the Conversion Price (as hereinafter defined) in effect at the time
of such interest payment, until the occurrence of the earlier of:
(a) The conversion of the Debenture, or
(b) September 1, 2000. In such event, the certificate for the shares
of Common Stock representing payment of interest due September 1, 2000,
shall be delivered to Obligee as soon as practicable thereafter. All
payments of interest thereafter shall be made in cash.
5. Subject to the provisions of paragraph 8 providing for earlier
conversion rights, during the period commencing on the first anniversary of the
Debenture and ending on the Date of Maturity, Obligee shall have the right, at
its option, subject to the terms and conditions of this Agreement, to convert
the entire principal balance of the Debenture or, any portion thereof, but not
less than (a) twenty-five percent (25%) of the original principal balance of
the Debenture or (b) the then outstanding principal balance of the Debenture,
whichever is the lesser, into fully paid and non-assessable shares ("Shares")
of the Common Stock at the initial Conversion Price of Two Dollars and Fifty
Cents ($2.50) per share. The Conversion Price is subject to adjustment as
hereinafter provided. To effect the conversion, Obligee shall deliver the
following to Company at its office:
(a) The Debenture;
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(b) A notice signed by Obligee stating that it is exercising its right
to convert the Debenture into Shares, specifying the percentage being
converted and the Conversion Price;
(c) A certification signed by Obligee that Obligee:
(1) Represents and warrants that Obligee is acquiring the Shares for
its own account for the purpose of investment and not with a view toward
or for sale in connection with any distribution or resale of the
Debenture (except that Obligee may distribute the Shares to its partners
in the event of dissolution of Obligee);
(2) Agrees not to sell the Shares within twelve (12) months after
date of conversion; and
(3) Acknowledges having received written notice of its right to
withdraw its acceptance without incurring any liability to Company,
within two (2) business days after Obligee made the initial payment for
the Debenture; and
(d) Such other instruments reasonably required by Company, in form
reasonably satisfactory to Company, duly executed by Obligee or by its duly
authorized representative.
6. As promptly as practicable after the Debenture shall have been
surrendered as aforesaid, Company shall issue and deliver to Obligee or its duly
authorized representative (a) a certificate or certificates representing the
number of Shares into which the Debenture is converted, and (b) if any principal
amount of such Debenture remains unpaid after such conversion, a new Debenture,
substantially in the form of exhibit A, dated the date to which interest has
been paid on the Debenture surrendered for conversion, in the aggregate
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principal amount equal to such unpaid principal amount. Except as set forth in
paragraph 8, such conversion shall be deemed to have been effected at the later
of the close of business on the date of surrender of the Debenture as aforesaid,
or the satisfaction of the conditions set forth in paragraph 12, and, at such
time, the rights of Obligee as the holder of the Debenture shall cease and
Obligee shall be deemed to have become the shareholder of record of the Shares.
Obligee shall have no rights as a shareholder prior to conversion.
7. The Conversion Price shall be subject to adjustment from time to time
as follows:
(a) In case Company shall at any time after the date of the Debenture
issue or sell, or is, in accordance with subparagraph 7.(b) through
7.(h) hereof, deemed to have issued or sold, any shares of Common Stock
(other than any shares issued in payment of any dividend or distribution
payable in Common Stock) without consideration or for a consideration
per share less than the Conversion Price in effect immediately prior to
the time of such issuance or sale, then, upon such issuance or sale, the
Conversion Price shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (a) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale multiplied
by the then existing Conversion Price and (b) the consideration, if any,
received by Company upon such issuance or sale, by (ii) the total number
of shares of Common Stock outstanding immediately after such issuance or
sale. The number of shares of Common Stock outstanding as of August 21,
1996, is 2,814,089 shares, excluding (a) 91,167 shares subject to
purchase on exercise of outstanding warrants, (b) 999,750 shares subject
to outstanding options under the company's stock option plan, and (c)
shares obtainable upon conversion and exercise of warrants under
Subordinated Convertible Debenture dated August 14, 1996 ("Villars I").
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(b) In case Company shall at any time after the date of the Debenture in
any manner grant (whether directly or by assumption in a merger or otherwise)
any warrants or other rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or any stock or security convertible into or
exchangeable for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities being called
"Convertible Securities") whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
Company as consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to Company upon the
exercise of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange of the Debenture, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Conversion Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of the date of
granting of such Options or the
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issuance of such Convertible Securities and thereafter shall be deemed to be
outstanding. Except as otherwise provided in subparagraph 7.(d) hereof, no
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(c) In case Company shall after the date of the Debenture in any manner
issue (whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the total amount received or receivable by Company
as consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to
Company upon the conversion or exchange of the Debenture, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issuance or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding,
provided that (a) except as otherwise provided in subparagraph 7.(d) hereof, no
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible Securities
and (b) if any such issuance or
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sale of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant to other provisions of
this paragraph 7, no further adjustment of the Conversion Price shall be made
by reason of such issuance or sale.
(d) If the purchase price provided for in any Option referred to in
subparagraph 7.(b) hereof, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in
subparagraph 7.(b) or 7.(c) hereof, or the rate at which Convertible Securities
referred to in subparagraph 7.(b) or 7.(c) hereof are convertible into or
exchangeable for Common Stock shall change at any time (including, but not
limited to, changes under or by reason of provisions designed to protect
against dilution), the Conversion Price in effect at the time of such event
shall forthwith be readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued
or sold, but only if as a result of such adjustment the Conversion Price then
in effect hereunder is thereby reduced; and on the expiration of any such
Option or the termination of any such right to convert or exchange such
Convertible Securities, the Conversion Price then in effect hereunder shall
forthwith be increased to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(e) In case Company shall at any time after the date of the Debenture
declare a dividend or make any other distribution upon any stock of Company
payable in
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Common Stock (except for dividends or distributions upon the Common Stock),
Options or Convertible Securities, any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
(f) In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by Company therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by Company in connection therewith. In case any
shares of Common Stock, Options or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by Company shall be deemed to be the fair value of such
consideration as determined in good faith by the Board, without deduction of
any expenses incurred or any underwriting commissions or concessions paid or
allowed by Company in connection therewith. In case any Options shall be issued
in connection with the issue and sale of other securities of Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued for such consideration as determined in good faith by the
Board.
(g) In case Company shall take a record of the holders of its Common
Stock for the purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities or (ii)
to subscribe for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the
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making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(h) The disposition of any shares of Common Stock owned or held by
or for the account of Company shall be considered an issue or sale of
Common Stock for the purpose of this paragraph 7.
8. In case at any time Company shall propose:
(a) to pay any dividend payable in shares upon its Common Stock or
make any distribution (other than cash dividends) to the shareholders of
its Common Stock; or
(b) to offer for subscription to the shareholders of Common Stock any
additional shares of any class or any other rights; or
(c) any capital reorganization or reclassification of its shares, or
the consolidation or merger of Company with another corporation; or
(d) the voluntary dissolution, liquidation or winding up of Company;
or
(e) any sale, lese or other conveyance to another person or persons of
the assets of Company as an entirety or substantially as an entirety,
then and in any one or more of said cases, Company shall cause at least thirty
(30) days' prior notice of the date on which (x) the books of Company shall
close, or a record be taken for such stock dividend, distribution or
subscription rights, or (y) such capital reorganization, reclassification,
consolidation, merger, dissolution, liquidation or winding up, sale, lease or
other conveyance shall take place, as the case may be, to be mailed by first
class mail, postage prepaid, to Obligee at the address as specified herein. Such
notice shall describe the particular event in reasonable detail. Upon receipt of
such notice, Obligee shall have the right to exercise the conversion rights set
forth in paragraph 5 hereof, and such conversion
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shall be deemed to be effective at such time as Obligee exercises such
conversion rights notwithstanding the provisions of paragraph 6 hereof.
9. In case of any reclassification or change of the outstanding shares
of capital stock of Company then issuable upon conversion of the Debenture
(other than a change in par value, or from par value to no par value, or from
no par value to par value, or a change of such shares into a greater or lesser
number of shares of the same or a different par value or without par value) or
in case of any consolidation or merger of Company with or into another person
(other than a merger with a subsidiary in which merger Company is the
continuing corporation and which does not result in any reclassification,
change or conversion of the outstanding shares of capital stock of Company of
the class then issuable upon conversion of the Debenture) or in case of any
sale, lease or other conveyance to another person or persons of the assets of
Company as an entirety or substantially as an entirety, Company shall, as a
condition precedent to any such transaction, cause effective provision to be
made so that Obligee shall have the right thereafter, by converting the
Debenture, to receive the kind and amount of shares of stock of any class,
other securities and/or property receivable upon such reclassification, change,
consolidation, merger, sale, lease or other conveyance by a shareholder of the
number of shares of Common Stock which such shareholder would have been
entitled to receive if such shareholder had been entitled to convert and had
converted the entire principal amount of the Debenture into Common Stock
immediately prior to such reclassification, change, consolidation, merger,
sale, lease or other conveyance. Company shall give notice to the Obligee of
the consummation of such reclassification, change, consolidation, merger, sale,
lease or other conveyance not later than ten (10) days after the consummation
of the Debenture. Such notice shall describe the particular event in reasonable
detail. Any such provision shall include provision for the
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adjustments provided for in this paragraph. These provisions shall similarly
apply to successive reclassifications, changes, consolidations, mergers, sales,
leases and other conveyances.
10. Before taking any action which would cause the number of shares of
Common Stock of Company of the class issuable upon conversion of the Debenture
to exceed the number of authorized and unissued shares of Common Stock of
Company of such class available for that purpose, Company shall take such
corporate action as may be necessary to cause its authorized and unissued
Common Stock of such class available for that purpose to equal not less than
the number of shares of Common Stock of such class which after such action
shall be issuable upon conversion of the aggregate principal amount of the
Debenture. Company covenants that it shall at all times reserve and keep
available out of its authorized Common Stock of the class issuable upon
conversion of the Debenture, solely for the purpose of issue upon conversion of
the Debenture as herein provided, such number of shares of such Common Stock as
shall then be issuable upon the conversion of the Debenture. Company agrees
that it will take any corporate action which may, in the opinion of its
counsel, be necessary in order that Company may validly issue fully paid and
non-assessable shares of Common Stock at the Conversion Price.
11. Upon any adjustment of the Conversion Price, then and in each such
case Company shall give written notice thereof, by first class mail, postage
prepaid, to Obligee at its address specified herein stating the Conversion
Price resulting from such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such adjustment is based.
12. The conversion is subject to the condition that, if Company will
determine that the satisfaction of withholding obligations, or that listing,
registration or qualification of the
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Shares deliverable on such conversion on any securities exchange or under any
federal or state law, or that the consent of any regulatory of self-regulatory
body is necessary or desirable as a condition of, or in connection with, such
exercise or the purchase or delivery of the Shares, then such conversion shall
not be effective unless and until such withholding, listing, registration,
qualification, consent or approval will have been effected or obtained free of
any condition not acceptable to Company. Company will use its best efforts to
effect such withholding, listing, registration, qualification, consent or
approval so that the conversion shall become effective as exercised.
13. If, at such time as Company first makes an underwritten public
offering ("Public Offering") of the Common Stock registered under the Securities
Act of 1933 (the "Act"), the Public Offering price per share is less than the
Conversion Price in effect immediately prior thereto, the Conversion Price shall
immediately be decreased to the per share Public Offering price. If the Public
Offering price is greater than the Conversion Price, no adjustment shall be
made.
14. If after the closing of Company's initial Public Offering (as defined
in paragraph 13 hereof), Company shall receive from the Holders (the "Initiating
Holders") at any time a written request that Company effect any registration
with respect to all or a part of any Warrants or any shares of Common Stock
issued upon the conversion of or payment of interest on the Debenture or
exercise of the Warrants (the "Registrable Securities"), Company will:
(a) promptly give written notice of the proposed registration to all
other Holders; and
(b) as soon as practicable, use its reasonable best efforts to effect
such registration, including, without limitation, the execution of an
undertaking to file post-
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effective amendments, appropriate qualification under applicable blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Act, as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Initiating Holder or Holders joining such
request as are specified in a written request given within thirty (30) days
after receipt of such written notice from Company; provided that Company shall
not be obligated to effect, or to take any action to effect, any such
registration pursuant to this paragraph:
(1) in any particular jurisdiction in which Company would be required
to effectuate a general consent to service of process in effecting such
registration, qualification or compliance, unless Company is already
subject to service in such jurisdiction, and except as may be required by
the Act or applicable rules or regulations thereunder;
(2) after Company has effected three (3) such registrations pursuant
to this paragraph and such registrations have been declared or ordered
effective and the sales of such Registrable Securities shall have closed;
or
(3) if the aggregate number of the Registrable Securities which are
requested to be registered by such Initiating Holder(s) is less than that
number equal to twenty percent (20%) of the number of shares of Common
Stock issued or issuable upon conversion of this Debenture.
Subject to the foregoing clauses (1), (2) and (3), Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders. The registration
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statement filed pursuant to the request of the Initiating Holders may, subject
to the provisions of paragraph 16 hereof, include other securities of Company
which are held by officers or directors of Company or which are held by persons
who, by virtue of agreement with Company heretofore entered into, are entitled
to include their securities in any such registration (the "Other
Shareholders"), and may include securities of Company being sold for the
account of Company.
15. If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise Company as a part of their request made pursuant to paragraph 14 hereof
and Company shall include such information in the written notice referred to in
paragraph 14.(a) hereof. The right of any Initiating Holder to registration
pursuant to paragraph 14 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting, unless otherwise mutually agreed by a majority-in-interest
of the Initiating Holders and such Holder with respect to such participation
and inclusion, to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities of such Holder.
16. If Company shall request inclusion in any registration pursuant to
paragraph 14 of securities being sold for its own account, or if officers or
directors of Company holding other securities of Company or Other Shareholders
shall request inclusion in any registration pursuant to paragraph 14, the
Initiating Holders shall, on behalf of all Holders, offer to include the
securities of Company and such officers, directors and Other Shareholders in
the underwriting. Company shall, together with all Holders, officers, directors
and Other Shareholders proposing to distribute their securities through such
underwriting, enter into an underwriting agreement in customary form with the
representative(s) of the underwriter or
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underwriters selected for such underwriting by a majority-in-interest of the
Initiating Holders, which underwriter(s) are reasonably acceptable to Company.
Notwithstanding any other provision of paragraph 14, if the representative(s) of
the underwriter(s) advise the Initiating Holders in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
limitation shall be applied as follows:
(a) the last to be excluded from such registration shall be the
securities of the Initiating Holders;
(b) the second to last to be excluded from such registration shall be
the Registrable Securities of the Other Rightsholders and DWH, among all
such persons in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities which they held at the time of filing the
registration statement; and
(c) the first to excluded from such registration shall be all other
security holders of Company and Company.
In the event that the number of shares of Registrable Securities of any
Initiating Holder included in any registration is reduced below ninety percent
(90%) of the shares requested to be included in such registration as a result of
the allocations pursuant to this paragraph, then such registration shall not be
deemed a registration for purposes of paragraph 14.(b)(2) hereof. If Company or
any Holder of Registrable Securities, officer, director or other shareholder who
has requested inclusion in such registration as provided herein disapproves of
the terms of any such underwriting, such person shall withdraw therefrom by
written notice to Company, the underwriter(s) and the Initiating Holders. Any
Registrable Securities or other securities excluded or withdrawn from such
Underwriting shall also be withdrawn from such registration.
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17. If Company is required to use its reasonable best efforts to effect
the registration of any Common Stock under the Act, it will use its reasonable
best efforts to:
(a) Prepare and file with the Securities and Exchange Commission
("Commission"), within ninety (90) days after the receipt of the written
request for registration a registration statement with respect to such
shares of Common Stock and cause such registration statement to become
effective as hereinafter provided;
(b) Prepare and file with the Commission all amendments and
supplements to such registration statement and the prospectus used in
connection therewith necessary to keep such registration statement
effective for a period of 120 days and to comply with the provisions of the
Act with respect to the disposition of all such shares of Common Stock
covered by such registration statement whenever the Holders of the
Registrable Securities desire to dispose of the same;
(c) Furnish to the Holders of such Registrable Securities whatever
numbers of copies of prospectuses, including one or more preliminary
prospectuses, they need to comply with the Act, and all other documents
they reasonably request in order to facilitate the disposition of such
shares; and
(d) Register or qualify the shares of Common Stock covered by such
registration statement under the other securities or blue sky laws of any
jurisdictions the Holders of the Registrable Securities reasonably request,
and do all other necessary or advisable acts and things to enable such
holders to consummate the disposition of such shares in the applicable
jurisdictions, except that Company shall not be required to file a general
consent to service in any such jurisdiction.
18. Notices and requests delivered to Company pursuant to paragraph
16.(c), shall contain all information regarding the shares of Common Stock to
be registered and the
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intended method of disposition of the Registrable Securities that is reasonably
required in connection with the action to be taken.
19. Except with respect to any registration initiated by Company, Company
may delay the filing of a registration statement for not more than ninety (90)
days from the date on which it would otherwise be required to do so if it
notifies in writing the shareholder or shareholders requesting such
registration that the filing of a registration statement would jeopardize or
impair active negotiations in which Company is then engaged in good faith or
which are impending or financial programs adopted by its Board of Directors or
Executive Committee before the receipt of such request.
20. If requested by the underwriters as a condition of the registration
of any shares of Common Stock, the Holders of the Registrable Securities shall
agree, if the officers, directors and any other selling shareholders of the
Company also so agree:
(a) Not to sell any such shares of Common Stock pursuant to the
registration statement until (90) days after the initial Public Offering,
unless sooner permitted to so by the managing underwriter or underwriters;
(b) To comply with all requirements of the Act and of the Commission
in connection with the offering and sale of such shares of Common Stock; and
(c) If so required by Company, to effect sales of all such shares of
Common Stock in an organized manner through a single broker or dealer, or a
single syndicate or selling group of brokers and/or dealers, provided that any
such required arrangement shall not prejudice any plan of distribution proposed
by any of such holders.
21. All registration expenses incurred in connection with any
registration, qualification or compliance pursuant to this Agreement shall be
borne by Company including,
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without limitation, all registration and filing fees, printing expenses,
accounting fees, fees and disbursements of counsel for Company, blue sky fees
and expenses, reasonable fees and expenses of one counsel for all selling
Holders and other security holders for a "due diligence" examination, and
expenses of any special audits incident to or required by any such registration.
All selling expenses (i.e. underwriting discounts and selling commissions) shall
be borne by the Holders, including Company, of the securities so registered pro
rata on the basis of the number of their shares so registered provided, however,
that the Holders and other shareholders requesting registration shall be
required to pay any registration expenses pro rata on the basis of the number of
their shares so included in the registration if, as a result of the withdrawal
of a request for registration by Initiating Holders, unless such withdrawal is
due to the misconduct of Company or due to an unforeseen material adverse
change in the assets, business, condition or prospects of Company occurring
prior to the effectiveness of the registration statement, in which case Company
will continue to bear such expenses, the registration statement does not become
effective, unless a majority-in-interest of the Holders elect to treat such
registration as a registration pursuant to paragraph 14.(b)(2) hereof. Company
will pay any stamp or stock transfer taxes which may be payable by reason of
conversion of the principal sum of the Debenture by Obligee or the exercise of
any Warrants.
22. Each Holder of Registrable Securities shall furnish to Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance.
23. The rights to cause Company to register securities granted to a Holder
under paragraph 14 hereof may be transferred or assigned by a Holder to any
other Holder,
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including any general or limited partner of Obligee, provided that Company is
given written notice at the time of or within a reasonable time after said
transfer or assignment stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided further that the
transferee or assignee of such rights assumes the obligations of such Holder
under this Agreement.
24. No fractional share shall be issued upon any conversion or exercise
of Warrants. In lieu of the Debenture, Company shall pay by check to Obligee or
the Warrant owner an amount equal to the value of such fractional share at the
Conversion Price.
25. The term "Common Stock" as used herein and in the Debenture shall
mean the common stock of Company as such stock is constituted at the date of
the Debenture or as it may from time to time be reclassified or changed, or
shares of stock of any class, other securities and/or property into which the
Debenture shall at any time become convertible, in whole or in part, pursuant
to the provisions of the Debenture.
26. By making the loan evidenced by the Debenture and by acquiring the
Debenture, Obligee:
(a) Represents and warrants that it is acquiring the Debenture, any
Warrants issuable upon conversion of the Debenture, and the shares of
Common Stock issuable upon conversion of the Debenture for its own account
for the purpose of investment and not with a view toward or for sale in
connection with any distribution or resale of the Debenture;
(b) Agrees not to sell the Debenture within twelve (12) months after
date of the Debenture (as it is non-negotiable in any event);
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(c) Acknowledges having received written notice of its right to
withdraw its acceptance without incurring any liability to Company, within
two (2) business days after Obligee pays the initial consideration for the
Debenture; and
(d) Agrees that if the Debenture is converted, any certificates
representing the Shares may bear legends and their transfer may be
restricted in accordance with the Bylaws of Company and the applicable
provisions of the Act and applicable state securities laws and regulations,
and such other legend(s) as, in the opinion of counsel for Company, may be
required from time to time.
27. In the event and at such time as Obligee exercises its right to
convert as set forth in the Debenture, Obligee shall be issued a warrant to
purchase the same number of shares received upon conversion of the principal sum
at the Conversion Price in effect immediately prior to such conversion. Such
warrant shall expire on the Date of Maturity and shall be substantially in the
form attached hereto.
28. Obligee acknowledges that it has received and reviewed copies of
Company's Private Placement Memorandum dated June 15, 1995, Supplements thereto
dated June 30, 1996, and August 27, 1996, and Disclosure Memorandum dated
September 26, 1996 (collectively the "Disclosure Documents"), and has had full
opportunity to discuss Company's business with its officers and to obtain any
information it deemed appropriate in connection with the acceptance of the
Debenture and the conversion of the Debenture. Company represents and warrants
that the Disclosure Documents do not contain any untrue statement of a material
fact or omit any material fact necessary in order to make the statements
contained therein not misleading.
29. Upon receipt of evidence satisfactory to Company of the loss, theft,
mutilation or destruction of the Debenture, and in the case of loss, theft or
destruction upon delivery of a
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bond of indemnity in form and amount reasonably satisfactory to Company, or in
the case of mutilation upon surrender and cancellation of the Debenture,
Company shall make and deliver to Obligee of the Debenture a debenture for a
like aggregate principal amount, dated the date of the Debenture, in lieu of
such lost, stolen, destroyed or mutilated Debenture.
30. If any one or more of the following events (each hereinafter called
an "Event of Default") shall occur and be continuing, namely:
(a) default shall be made in the payment of principal or interest on
the Debenture when and as the same shall become due and payable as herein
or therein provided, and such default shall continue for a period of five
(5) business days after written notice of such default has been given to
Company; or
(b) adjudication of Company as a bankrupt or insolvent; or entry of an
order, not having been stayed by appeal or otherwise for sixty (60) days,
appointing a receiver or trustee for Company or for all or any of its
property, or approving a petition seeking reorganization or other similar
relief under the bankruptcy or other similar laws of the United States or
of any state or of any other competent jurisdiction; or the filing by
Company of a petition seeking any of the foregoing or consenting thereto;
or the filing by Company of a petition to take advantage of any debtors'
act; or the making by Company of a general assignment for the benefit of
creditors; or admission by Company in writing of its inability to pay its
debts as they mature; or
(c) breach of any other obligation under this Agreement or the
Debenture and such default shall continue for a period of twenty (20)
business days after written notice of such default has been given to
Company;
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then and in every case, so long as such Event of Default has not been remedied,
Obligee, by notice in writing mailed by mail or delivered to Company may declare
the principal of the Debenture and the interest accrued thereon to be
immediately due and payable, and such principal and interest shall thereupon
become and be immediately due and payable, without presentment, demand, protest
notice of protest, notice of dishonor or other notice of any kind, all of which
are hereby expressly waived by Company, and Obligee may then institute any
action, suit or other proceeding at law, in equity or otherwise which it shall
deem necessary or proper for the protection of its interests.
31. Neither any failure nor any delay on the part of Obligee in exercising
any right, power or privilege under this paragraph shall operate as a waiver of
the Debenture, nor shall a single or partial exercise of the Debenture preclude
any other or further exercise of the same or the exercise of any other right,
power or privilege. No waiver by Obligee of any result hereunder shall extend to
or affect any right not expressly waived.
32. No recourse shall be had for the payment of principal of or the
interest on the Debenture, or for any claim based hereon, or otherwise in
respect of the Debenture, against any incorporator, shareholder, officer or
director, as such, past, present or future, of Company or of any successor
whether by virtue of any constitution, statute or penalty, or otherwise, all
such liability being, by the acceptance of the Debenture and as part of the
consideration for the issue of the Debenture, expressly waived and released.
33. Company may not prepay the principal of the Debenture, in whole or in
part, at any time prior to fourth anniversary of the date of the Debenture.
Commencing on the fourth anniversary, Company may at any time and from time to
time prepay the unpaid principal of the Debenture, in whole or in part, without
penalty or premium.
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34. The remedies of Obligee as provided herein shall be cumulative and
concurrent, and may be pursued singly, successively, or together, at the sole
discretion of Obligee, and shall not be exhausted by any exercise of the
Debenture but may be exercised as often occasion therefor shall occur; and the
failure to exercise any such right or remedy shall in no event be construed as a
waiver or release of the same.
35. Company waives presentment for payment, demand, notice of nonpayment,
notice of protest, and protest of the Debenture, and all other notices in
connection with the delivery, acceptance, performance, default, or enforcement
of the payment of the Debenture except such notices as are specifically provided
for herein and agrees that the liability shall be unconditional and shall not be
in manner affected by any indulgence, extension of time, renewal, waiver, or
modification granted or consented to by Obligee; and Company consents to any and
all extensions of time, renewals, waivers, or modifications that may be granted
by Obligee with respect to the payment or other provisions of the Debenture, or
any part of the Debenture, or any property now or hereafter securing the
Debenture with or without substitution.
36. The Debenture may not be negotiated, pledged, assigned or transferred
in whole or in part. Any attempt to negotiate, pledge, assign or transfer the
Debenture or any rights hereunder, in any manner whatsoever, shall be void.
37. Obligee shall not be any act of omission or commission be deemed to
waive any of its rights or remedies hereunder unless such waiver be in writing
and signed by Obligee, and then only to the extent specifically set forth
therein, a waiver on one event shall not be construed as continuing or as a bar
to or waiver of such right or remedy on a subsequent event.
38. Any cash payment of the principal of and interest on the Debenture is
hereby expressly subordinated in the right of payment to the prior payment in
full of all present and
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future indebtedness of Company to any bank or other institutional lender that
lends funds to Company ("Senior Debt"), except that Obligee shall be entitled
to receive cash payments hereunder so long as Company is not in default with
respect to such Senior Debt. Upon any distribution of Company's assets upon its
dissolution, liquidation, or reorganization, whether in bankruptcy, insolvency,
reorganization or receivership proceedings, or upon an assignment for the
benefit of creditors or any other marshalling of Company's assets and
liabilities or otherwise,
(a) All principal and interest due upon all Senior Debt shall first
be paid in full, or payment of the Debenture provided for in money or
money's worth, before Obligee is entitled to receive any payment upon the
principal of or interest on the Debenture;
(b) Any payment or distribution of Company's assets of any kind or
character, whether in cash, property or securities, to Obligee in payment
of the Debenture shall be paid after payment in full of (a) Senior Debt,
(b) Villars I, L.P., the payee under the 5% convertible subordinated
debenture of Company dated August 12, 1996, and (c) the payee (presently
referred to as DWH, Inc.) under a proposed 9% convertible subordinated note
of Company, or derivative thereof with respect to its 9% convertible
subordinated note, which for purposes of this paragraph 38 shall not exceed
$600,000, but shall be senior to all other creditors of Company.
39. All notices, requests, demands, or other communications provided for
herein or under the Warrant attached hereto shall be in writing and shall be
deemed to have been given three (3) business days after being sent by
registered or certified mail, return receipt requested, addressed to the party
intended, at its address first set forth above, or to any other address
designated by notice.
40. If any provision of the Debenture is found by a court of competent
jurisdiction to be prohibited or unenforceable, it shall be ineffective only to
the extent of such prohibition or
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unenforceability, and such prohibition or unenforceability shall not invalidate
the balance of such provision to the extent it is not prohibited or
unenforceable, nor invalidate the other provisions of the Debenture, all of
which shall be liberally construed in favor of Obligee in order to effect the
provisions of the Debenture.
41. The Debenture shall be governed by and construed and enforced in
accordance with the law of Commonwealth of Pennsylvania.
42. The word "Company" whenever occurring herein shall be deemed and
construed to include its successors and assigns, and the word "Obligee" whenever
occurring herein shall be deemed and construed to include the heirs,
administrators, executors, personal representatives, successors and assigns of
those persons constituting the Obligee.
IN WITNESS WHEREOF, Company and Obligee have duly executed and delivered
the Debenture the date and year first above written.
COMPANY:
ATTEST: RED XXXX BREWING CO.
By: /s/ Red Xxxx Brewing Company
_____________________________ _____________________________
Name: Name: Xxxxx X. Xxxx
Title: Title: President
[Corporate Seal]
OBLIGEE:
WITNESS: VILLARS II, L.P.
By: /s/ Xxxxx X. Xxxx, III
_____________________________ _____________________________
Name: Xxxxx X. Xxxx, III
Title: General Partner
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