SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 31, 1997
FREDERICK BREWING CO.
(Exact name of registrant as specified in its charter)
MARYLAND
(State or other jurisdiction of incorporation)
0-27800 52-1769647
(Commission File Number) (IRS Employer Identification No.)
4607 Wedgewood Boulevard, Frederick, Maryland 21703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 694-7899
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Item 5. Other Events.
On March 31, 1997 the Registrant completed its offering of 8%
Cumulative Convertible Preferred Stock, Series A ("Series A Stock"). The
offering was made under Section 4(2) of the Securities Act. A total of 1,848
shares were sold at a price of $500 per share, including 630 shares issued to
the general contractor of the Company's brewery facility for construction
services and costs. The Series A Stock is convertible into common stock at an
average conversion price of $3.71955 per share. The placement agent were Ryan,
Lee & Company, Incorporated and Solomonson & Associates, Inc. A sales commission
of 10% was paid. The offering wa sold to 13 accredited and 22 non-accredited
persons under Section 4(2) to U.S. persons. Each purchasers executed an
investment letter whereon he was required to acknowledge the restricted nature
of the investment in the Series A Stock and consented to the placement of a
restrictive legend on the certificates representing the Series A Stock.
With the completion of this offering, together with the offering
described in Item 9 and having met certain other requirements, the Company has
completed its performance under the Forbearance Agreements with its lenders and
the alleged defaults described therein are deemed to have been cured. Signet
Bank has completed all funding under the loan documents.
Item 7. Financial Statements,Pro Forma Financial Information and Exhibits.
(c) Exhibits
3.3 Articles Supplementary for Series B Convertible Preferred
Stock.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
On March 31, 1997 the Registrant closed on the first subscription
for 3,750 shares of Series B Convertible Preferred Stock. As of April 8, 1997
the Registrant had closed the sale of a total of 2,525 shares (for $2,525,000 in
gross proceeds) under Regulation S and 1,225 shares (for $1,225,000 in gross
proceeds) under Section 4(2) to U.S. purchasers. Sales commissions of 12% were
paid. World Capital Funding acted as the placement agent. The Series B
Convertible Preferred Stock is convertible into common stock at the lower of
$3.50 per share or 70% of the closing bid price of the common stock averaged
over the five days prior to conversion. The U.S. offering was sold to three
accredited and six non-accredited persons, and the Regulation S offering was
sold to 8 non-U.S. Persons. Each purchaser signed an investment letter
acknowledging the restricted nature of the investment in the Series B
Convertible Preferred Stock and consented to the placement of a restrictive
legend on the certificates representing the Shares. The Regulation S purchasers
also made representations as to their status as non-U.S. persons.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: April 10, 1997 FREDERICK BREWING CO.
By: /s/ Kevin Brannon
Chairman and Chief
Executive Officer
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ARTICLES SUPPLEMENTARY
(As amended by Certificate of Correction)
Kevin E. Brannon and Maribeth Visco certify that they are the Chairman and
Secretary, respectively, of Frederick Brewing Co., a Maryland corporation
(hereinafter referred to as the "Corporation" or the "Company"); that, pursuant
to the Articles of Incorporation, as amended, and Section 2-208 of the Maryland
General Corporation Law, the Board of Directors of the Corporation adopted the
following resolutions on March 21, 1997; and that none of the Series B
Convertible Preferred Stock referred to in these Articles Supplementary has been
issued.
1. Creation of Series B Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 3,750 shares and designated as
the Series B Convertible Preferred Stock, having the voting powers, preferences,
relative, participating, limitations, qualifications optional and other special
rights and the qualifications, limitations and restrictions thereof that are set
forth below.
2. Dividend Provisions. The holders of shares of Series B Convertible
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors out of any funds at the time legally available therefor, dividends
at a par with holders of Common Stock as if the Series B Convertible Preferred
Stock had been converted into Common Stock on the record date for the payment of
the dividend. Dividends shall be waived with respect to any shares of Series B
Convertible Preferred Stock which are converted prior to any dividend payment
date. Each share of Series B Convertible Preferred Stock shall rank on a parity
with each other share of Series B Convertible Preferred Stock with respect to
dividends.
3. Redemption Provisions. The Series B Convertible Preferred Stock is
not redeemable except
with the written consent of the holders thereof.
4. Liquidation Provisions. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the Series B
Convertible Preferred Stock shall be entitled to receive an amount equal to
$1,000.00 per share. After the full preferential liquidation amount has been
paid to, or determined and set apart for the Series B Convertible Preferred
Stock and all other series of Preferred Stock hereafter authorized and issued,
if any, the remaining assets of the Corporation available for distribution to
shareholders shall be distributed ratably to the holders of the common stock. In
the event the assets of the Corporation available for distribution to its
shareholders are insufficient to pay the full preferential liquidation amount
per share required to be paid the Corporation's Series B Convertible Preferred
Stock, the entire amount of assets of the Corporation available for distribution
to shareholders shall be paid up to their respective full liquidation amounts
first to the Series B Convertible Preferred Stock, then to any other series of
Preferred Stock hereafter authorized and issued, all of which amounts shall be
distributed ratably among holders of each such series of Preferred Stock, and
the common stock shall receive nothing. A reorganization or any other
consolidation or merger of the Corporation with or into any other corporation,
or any other sale of all or substantially all of the assets of the Corporation,
shall not be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 4, and the Series B Convertible
Preferred Stock shall be entitled only to (i) the right provided in any
agreement or plan governing the reorganization or other consolidation, merger or
sale of assets transaction, (ii) the rights contained in the Maryland General
Corporation Law and (iii) the rights contained in other Sections hereof.
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5. Conversion Provisions. The holders of shares of Series B Convertible
Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. (1) Each share of Series B Convertible Preferred
Stock (the "Preferred Shares") shall be convertible, at the option of its
holder, at any time after May 15, 1997, into a number of shares of common
stock of the Company (the "Common Stock") at the initial conversion rate
(the "Conversion Rate") defined below. The initial Conversion Rate, subject
to the adjustments described below, shall be a number of shares of Common
Stock equal to $1,000 divided by the lower of (i) Seventy Percent (70%) of
the average Market Price of the Common Stock for the five trading days
immediately prior to the Conversion Date (defined below) or (ii) $3.0625,
increased proportionally for any reverse stock split and decreased
proportionally for any forward stock split or stock dividend. For purposes
of this Section 5(a)(1), Market Price for any date shall be the closing bid
price of the Common Stock on such date, as reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or
the closing bid price in the over-the-counter market if other than Nasdaq.
(2) No fractional shares of Common Stock shall be issued upon conversion of
the Preferred Shares, and in lieu thereof the number of shares of Common
Stock issuable for each Preferred Share converted shall be rounded to the
nearest whole number. Such number of whole shares of Common Stock issuable
upon the conversion of one Preferred Share shall be multiplied by the
number of Preferred Shares submitted for conversion pursuant to the Notice
of Conversion (defined below) to determine the total number of shares of
Common Stock issuable in connection with any conversion.
(3) In order to convert the Preferred Shares into shares of Common Stock,
the holder of the Preferred Shares shall: (i) complete, execute and deliver
to the Corporation the conversion certificate attached hereto as Exhibit A
or Exhibit B, as applicable (the "Notice of Conversion"); and (ii)
surrender the certificate or certificates representing the Preferred Shares
being converted (the "Converted Certificate") to the Corporation. The
Notice of Conversion shall be effective and in full force and effect if
delivered to the Corporation by facsimile transmission at (301) 694-2971.
Provided that a copy of the Notice of Conversion is delivered to the
Corporation on such date by facsimile transmission or otherwise, and
provided that the original Notice of Conversion and the Converted
Certificate are delivered to the Corporation within three (3) business days
thereafter at 4607 Wedgewood Boulevard, Frederick, Maryland 21703, the date
on which notice of conversion is given (the "Conversion Date") shall be
deemed to be the date set forth therefor in the Notice of Conversion; and
the person or persons entitled to receive the shares of Common stock
issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock as of the Conversion Date.
If the original Notice of Conversion and the Converted Certificate are not
delivered to the Corporation within three (3) business days following the
Conversion Date, the Notice of Conversion shall become null and void as if
it were never given and the Corporation shall, within two (2) business days
thereafter, return to the holder by overnight courier any Converted
Certificate that may have been submitted in connection with any such
conversion. In the event that any Converted Certificate submitted
represents a number of Preferred Shares that is greater than the number of
such shares that is being converted pursuant to the Notice of Conversion
delivered in connection therewith, the Corporation shall deliver, together
with the certificates for the shares of Common Stock
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issuable upon such conversion as provided herein, a certificate
representing the remaining number of Preferred Shares not converted.
(4) Upon receipt of a Notice of Conversion, the Corporation shall
absolutely and unconditionally be obligated to cause a certificate of
certificates representing the number of shares of Common Stock to which a
converting holder of Preferred Shares shall be entitled as provided herein,
which shares shall constitute fully paid and nonassessable shares of Common
Stock that are freely transferable on the books and records of the
Corporation and its transfer agents, to be issued to, delivered by
overnight courier to, and received by such holder by the fifth (5th)
calendar day following the Conversion Date. Such delivery shall be made at
such address as such holder may designate therefor in its Notice of
Conversion or in its written instructions submitted together therewith.
(5) No less than 25 shares of Series B Convertible Preferred Stock may be
converted at any one time.
(b) Adjustments to Conversion Rate. (1) Reclassification, Exchange and
Substitution. If the Common Stock issuable on conversion of the Series B
Convertible Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by capital
reorganization, reclassification, reverse stock split or forward stock
split or stock dividend or otherwise (other than a subdivision or
combination of shares provided for above), the holders of the Series B
Convertible Preferred Stock shall, upon its conversion, be entitled to
receive, in lieu of the Common Stock which the holders would have become
entitled to receive but for such change, a number of shares of such other
class or classes of stock that would have been subject to receipt by the
holders if they had exercised their rights of conversion of the Series B
Convertible Preferred Stock immediately before that change.
(2) Reorganizations, Mergers, Consolidations or Sale of Assets. If at any
time there shall be a capital reorganization of the Corporation's common
stock (other than a subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this Section (5) or merger of the
Corporation into another corporation, or the sale of the Corporation's
properties and assets as, or substantially as, an entirety to any other
person, then, as a part of such reorganization, merger or sale, lawful
provision shall be made so that the holders of the Series B Convertible
Preferred Stock shall thereafter be entitled to receive upon conversion of
the Series B Convertible Preferred Stock, the number of shares of stock or
other securities or property of the Corporation, or of the successor
corporation resulting from such merger, to which holders of the Common
Stock deliverable upon conversion of the Series B Convertible Preferred
Stock would have been entitled on such capital reorganization, merger or
sale if the Series B Convertible Preferred Stock had been converted
immediately before that capital reorganization, merger or sale to the end
that the provisions of this paragraph (b)(2) (including adjustment of the
Conversion Rate then in effect and number of shares purchasable upon
conversion of the Series B Convertible Preferred Stock) shall be applicable
after that event as nearly equivalently as may be practicable.
(c) No Impairment. The Corporation will not, by amendment of its Articles
of Incorporation
or through any reorganization, recapitalization, transfer of assets,
merger, dissolution, or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms
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to be observed or performed hereunder by the Corporation, but will at all
times in good faith assist in the carrying out of all the provision of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series B Convertible Preferred Stock against impairment.
(d) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Rate for any shares of Series B
Convertible Preferred Stock, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and prepare and furnish to each holder of Series B Convertible Preferred
Stock effected thereby a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at
any time of any holder of Series B Convertible Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Rate at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the
conversion of such holder's shares of Series B Convertible Preferred Stock.
(e) Notices of Record Date. In the event of the establishment by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, the
Corporation shall mail to each holder of Series B Preferred Stock at least
twenty (20) days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution and the amount and character of such dividend or
distribution.
(f) Reservation of Stock Issuable Upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion
of the shares of the Series B Convertible Preferred Stock such number of
its shares of Common Stock as shall from time to time be sufficient, based
on the Conversion Rate then in effect, to effect the conversion of all then
outstanding shares of the Series B Preferred Stock. If at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, then, in addition to all rights, claims and damages to
which the holders of the Series B Convertible Preferred Stock shall be
entitled to receive at law or in equity as a result of such failure by the
Corporation to fulfill its obligations to the holders hereunder, the
Corporation will take any and all corporate or other action as may, in the
opinion of its counsel, be helpful, appropriate or necessary to increase
its authorized but unissued shares of Common Stock to such number of shares
as shall be sufficient for such purpose.
(g) Notices. Any notices required by the provisions hereof to be given to
the holders of shares of Series B Convertible Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid and
return receipt requested, and addressed to each holder of record at its
address appearing on the books of the Corporation or to such other address
of such holder or its representative as such holder may direct.
6. Voting Provisions. Except as otherwise expressly provided or required
by law, the Series
B Convertible Preferred Stock shall have no voting rights.
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IN WITNESS WHEREOF, the Company has caused this Articles Supplementary of
Series B Convertible Preferred Stock to be duly executed by its Chairman and
attested to by its Secretary this 25th day of March, 1997 who, by signing their
names hereto, acknowledge that these Articles supplementary are the act of the
Company and state to the best of their knowledge information and belief, under
the penalties of perjury, that the above matters and facts are true in all
material respects.
FREDERICK BREWING CO.
Kevin E. Brannon, Chairman
Maribeth Visco, Secretary
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EXHIBIT A
CONVERSION CERTIFICATE
FREDERICK BREWING CO.
Series B Convertible Preferred Stock
The undersigned holder ( the "Holder") is surrendering to Frederick
Brewing Co., a Maryland corporation (the "Company"), one or more certificates
representing shares of Series B Convertible Preferred Stock of the Company (the
"Preferred Stock") in connection with the conversion of all or a portion of the
Preferred Stock into shares of Common Stock, $.00004 par value per share, of the
Company (the "Common Stock") as set forth below.
1. The Holder understands that the Preferred Stock were issued by the
Company pursuant to the exemption from registration under the United States
Securities Act of 1933, as amended (the "Securities Act"), provided by
Regulation D promulgated thereunder.
2. The Holder represents and warrants that all offers and sales of the
Common Stock issued to the Holder upon such conversion of the Preferred Stock
shall be made (a) pursuant to an effective registration statement under the
Securities Act, (b) in compliance with Rule 144, or (c) pursuant to some other
exemption from registration.
Number of Shares of Preferred Stock being converted:
Applicable Conversion Price:
Number of Shares of Common Stock Issuable:
Conversion Date:
Delivery Instructions for certificates of Common Stock and for new
certificates representing any remaining shares of Preferred Stock:
NAME OF HOLDER:
(Signature of Holder)
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EXHIBIT B
CONVERSION CERTIFICATE
FREDERICK BREWING CO.
Series B Convertible Preferred Stock
The undersigned holder ( the "Holder") is surrendering to Frederick
Brewing Co., a Maryland corporation (the "Company"), one or more certificates
representing shares of Series B Convertible Preferred Stock of the Company (the
"Preferred Stock") in connection with the conversion of all or a portion of the
Preferred Stock into shares of Common Stock, $.00004 par value per share, of the
Company (the "Common Stock") as set forth below.
1. The Holder understands that the Preferred Stock were issued by the
Company pursuant to the exemption from registration under the United States
Securities Act of 1933, as amended (the "Securities Act"), provided by
Regulation S thereunder ("Regulation S");
2. The Holder represents and warrants that either (a) the Holder is not
a "U.S. person," as defined in Regulation S or (b) the Holder is not the
original purchaser of the Preferred Stock being surrendered for conversion and
the Holder acquired the Preferred Stock in a transaction or under circumstances
exempt from registration under the Securities Act;
3. The Holder represents and warrants that all offers and sales of the
Common Stock issued to the Holder upon such conversion of the Preferred Stock
shall be made (a) pursuant to an effective registration statement under the
Securities Act, (b) in compliance with Regulation S, or (c) pursuant to an
exemption from registration; and
4. The undersigned has not engaged in any "directed selling
efforts" (as such term
is defined in Regulation S) with respect to the Preferred Stock or Common Stock.
Number of Shares of Preferred Stock being converted:
Applicable Conversion Price:
Number of Shares of Common Stock Issuable:
Conversion Date:
Delivery Instructions for certificates of Common Stock and for new
certificates representing any remaining shares of Preferred Stock:
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