0
Xxxxxxx 00.0
XXX XXXX XXXXXXX XX.
XXXXXXXXX PURCHASE AGREEMENT
THIS DEBENTURE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
OR ANY APPLICABLE STATE STATUTE
The Debenture Purchase Agreement is made this 12th day of August, 1996, by
and between RED XXXX BREWING CO., a Pennsylvania corporation, having an address
at 0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 ("Company"),
and RED XXXX PARTNERS, 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 Four Hundred Sixty Thousand
Dollars ($460,000) 5% Convertible Subordinated Debenture, due August 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 the Company in immediate funds.
Such purchase price shall be an amount equal to the principal amount of the
Debenture.
2
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 February and the 1st day of August in
each year, commencing February 1, 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) August 1, 2000. In such event, the certificate for the shares of
Common Stock representing payment of interest due August 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 ($2.00) per
share. The Conversion
3
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;
(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 see 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.
3
4
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
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
4
5
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.
(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
5
6
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 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
6
7
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 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,
7
8
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 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
8
9
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 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
9
10
(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, lease 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 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
10
11
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 of 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 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
11
12
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 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
12
13
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 of the Common Stock registered under the Securities Act of 1933
("Public Offering"), 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 the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to an SEC Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
(a) promptly give to Obligee or the registered owner(s) (collectively
the "Holders") 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 (collectively the "Registrable Securities") written notice
thereof, which shall include a list of the jurisdictions in which Company
intends to attempt to qualify such securities under the applicable blue sky
or other state securities laws; and
(b) include in such registration and any related qualification under
blue sky laws or other compliance, and in any underwriting involved
therein, the Registrable
13
14
Securities upon the written request or requests made by any Holder within
thirty (30) days after receipt of the written notice from Company described
in clause 14.(a) hereof, subject to the provisions of paragraph 15 hereof;
provided, however, that the Holders shall not be entitled to include in the
initial Public Offering (as described in paragraph 13 hereof) more than an
aggregate of 20% of the Registrable Securities held by the Holders at the
time of such Public Offering.
15. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, Company shall so advise
the Holders as a part of the written notice given pursuant to paragraph 14(a)
hereof. In such event, the right of any 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 to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall, together with
Company and the and other shareholders distributing their securities through
such underwriting, enter into an underwriting agreement in customary form with
the representative(s) of the underwriter(s) selected by the Board of Directors
of Company, which underwriter(s) are reasonably acceptable to a
majority-in-interest of the participating Holders of Registrable Securities.
Notwithstanding any other provision of paragraph 14, if the representatives of
the underwriter(s) advise Company in writing that marketing factors require a
limitation on the number of shares to be underwritten, the representative(s)
may, subject to the allocation priority set forth in this paragraph 15, limit
the number of Registrable Securities to be included in the registration and
underwriting. Company shall so advise all holders of
14
15
securities requesting registration, and the number of shares of securities
that are entitled to be included in the registration shall be limited as
follows:
(a) the last to be excluded from such registration shall be the
Company or the security holder who, in either case, initiated such
registration;
(b) the second to last to be excluded from such registration shall be
the Registrable Securities of the Holders; Seventy-five Thousand shares of
other existing shareholders (the "Other Rightsholders"); and the payee
(presently known as DWH, Inc.) under the proposed 9% convertible
subordinated note of Company, or derivative thereof ("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, it being understood that for purposes of this
paragraph 15.(b), 18.(b), DWH shall be deemed to hold not more than 435,000
shares of Registrable Securities; and
(c) the first to be excluded from such registration shall be the
Company, if it did not initiate such registration, and all other security
holders of Company. If any Holder of Registrable Securities or any officer,
director or other shareholder disapproves of the terms of any such
underwriting, such person shall withdraw therefrom by written notice to the
Company and the representative(s). Any Registrable Securities or other
Securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
16. If after the closing of Company's initial Public Offering (as defined
in paragraph 13 hereof), Company shall receive from the Holders at any time a
written request that
15
16
Company effect any registration with respect to all or a part of the
Registrable Securities (the "Initiating Holders"), 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-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities 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 Securities Act or applicable rules or
regulations thereunder;
16
17
(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 statement filed pursuant to the
request of the Initiating Holders may, subject to the provisions of paragraph
18 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.
17. 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 16 hereof
and Company shall include such information in the written notice referred to in
paragraph 16.(a) hereof. The right of any Initiating Holder to registration
pursuant to paragraph 16 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the
17
18
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.
18. If Company shall request inclusion in any registration pursuant to
paragraph 16 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 16, 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 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 16, 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
18
19
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 16(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.
19. 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
19
20
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.
20. Notices and requests delivered to Company pursuant to paragraph 18.(c),
shall contain all information regarding the shares of Common Stock to be
registered and the intended method of disposition of the Registrable Securities
that is reasonably required in connection with the action to be taken.
21. 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
20
21
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 of Executive Committee before the receipt of such request.
22. 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 ninety (90) days after the initial Public
Offering, unless sooner permitted to do 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.
23. All registration expenses incurred in connection with any
registration, qualification or compliance pursuant to this Agreement shall be
borne by Company including, 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
21
22
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 16.(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.
24. 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.
25. The rights to cause Company to register securities granted to a Holder
under paragraphs 14 and 16 hereof may be transferred or assigned by a Holder to
any other Holder, 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
22
23
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.
26. 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.
27. 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.
28. 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 prepayment 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) month after
date of the Debenture (as it is non-negotiable in any event);
23
24
(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 Securities Act of 1933 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.
29. 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.
30. Obligee acknowledges that it has received and reviewed copies of
Company's Private Placement Memorandum dated June 15, 1995, Supplement thereto
dated June 30, 1996, and Disclosure Memorandum dated August 8, 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.
24
25
31. Within thirty (30) days of the date hereof, Obligee covenants to take
the appropriate steps to amend its name to a name not containing the words "Red
Xxxx."
32. Upon receipt of evidence satisfactory to Company of the loss, theft,
mutilation or destruction of the Debenture, and in the base of loss, theft or
destruction upon delivery of a 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.
33. 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
25
26
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;
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.
34. 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.
35. 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
26
27
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.
36. 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.
37. 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.
38. 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.
27
28
39. 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.
40. Obligee shall not by 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.
41. 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 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;
28
29
(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 after payment in full of Senior Debt, shall be in pari
passu with DWH with respect to its 9% convertible subordinated note, which
for purposes of this paragraph 41 shall not exceed $600,000, but shall be
senior to all other creditors of Company.
42. 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.
43. 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 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.
44. The Debenture shall be governed by and construed and enforced in
accordance with the law of Commonwealth of Pennsylvania.
45. 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.
29
30
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/ Xxxxx X. Xxxx
---------------------------- ----------------------------
Name: Name: Xxxxx X. Xxxx
Title: Title: President
[Corporate Seal]
OBLIGEE:
WITNESS: RED XXXX PARTNERS, L.P.
/s/ /s/ Xxxxx X. Xxxx, III
---------------------------- ----------------------------
Name: Xxxxx X. Xxxx, III
Title: General Partner
30
