UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) and AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. _______)
Frederick Brewing Co.
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(Name of Issuer)
Common Stock, par value $.0004 per share
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(Title of Class of Securities)
355673-10-4
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(CUSIP Number)
Snyder International Brewing Group, LLC
1101 Center Street
Cleveland, Ohio 44113
with a copy to:
Patrick J. Leddy, Esq.
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
(216) 586-3939
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
August 24, 1999
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(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g),
check the following box. /_/
Note. Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. See
Rule 13d-7(b) for other parties to whom copies are to be sent.
(Page 1 of 7 Pages)
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Cusip No. 355673-10-4 Page 2 of 7 Pages
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Snyder International Brewing Group, LLC
I.R.S. Identification No. 34-1899781
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2. Check the Appropriate Box if a Member of a Group*
(a) [ ]
(b) [ ] [check this box]
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3. SEC Use Only
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4. Source of Funds*
WC
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5. Check if Disclosure of Legal Proceedings Is Required Pursuant
to Items 2(d) or 2(e) [ ]
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6. Citizenship or Place of Organization
State of Ohio
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Number of 7. Sole Voting Power: 4,447,104 shares of common stock,
Shares Bene- par value of $.0004 per share
ficially Owned --------------------------------------------------------------
by Each 8. Shared Voting Power: 2,155,140 shares of common stock,
par alue of $.0004 per share**
Reporting --------------------------------------------------------------
Person With 9. Sole Dispositive Power: 4,447,104 shares of common
stock, par value of $.0004
per share
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10. Shared Dispositive Power: None
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11. Aggregate Amount Beneficially Owned by Each Reporting
Person: 4,447,104 shares of common stock, par value of
$.0004 per share
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12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares*: [ ]
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13. Percent of Class Represented by Amount in Row (11): 51%
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14. Type of Reporting Person*
OO
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
** SIBG also entered into a Restructuring Agreement (the "Restructuring
Agreement"), dated as of the Closing Date (as defined below in Item 4), with
Austost Anstalt Schaan, Balmore Funds S.A., Ron S. Williams, Sr., Ron Williams,
Jr., Dean Dowda, Fred Lenz, World Capital Funding, LLC, The Augustine Fund,
L.P., Jimmy Dean, Congregation Beth Moredechai, Bertek, Inc. and Frederick
Brewing Co. (the "Company"). Pursuant to the Restructuring Agreement, the
holders (the "Preferred Shareholders") of the Company's Series F Convertible
Preferred Stock, par value $.01 per share, and Series G Convertible Preferred
Stock, par value $.01 per share, converted their Series F and G Preferred Stock
into Company Common Stock (as defined below in Item 1) and the holders of the
10% Convertible Notes, dated June 7, 1999, issued by the Company, in the
original principal amount of $500,000, were paid in full (the "Restructuring
Transaction"). Pursuant to Section 9.5 of the Restructuring Agreement, from and
after the Closing Date and including the second anniversary of the Closing Date,
the Preferred Shareholders have granted to SIBG an irrevocable proxy to vote all
of the shares of Company Common Stock then owned or controlled by the Preferred
Shareholders, at any meeting of the shareholders of the Company, however called,
in favor of any proposal to (i) approve a merger or other business combination
between or involving SIBG and the Company which (A) shall be on commercially
reasonable terms and (B) shall result in the Company remaining a reporting
company under the Securities Exchange Act of 1934, as amended, or (ii) increase
the number of authorized shares of the Company. After giving effect to the
Transaction and the Restructuring Transaction, the Preferred Shareholders owned
in the aggregate approximately 2,155,140 shares of Company Common Stock.
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ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D (this "Schedule 13D") relates to the common
stock, $.0004 par value per share (the "Company Common Stock") of Frederick
Brewing Co., a Maryland corporation (the "Company"). The principal office of the
Company is at 4607 Wedgewood Boulevard, Frederick, Maryland 21703.
ITEM 2. IDENTITY AND BACKGROUND
Snyder International Brewing Group, LLC
The name of the person filing this statement is Snyder International
Brewing Group, LLC ("SIBG"). Its state of organization is Ohio. Its
principal business is the ownership and operation of breweries that
manufacture, package and sell malt and non-malt based beverages. The
address of its principal office is 1101 Center Street, Cleveland, Ohio
44113. The Board of Managers of SIBG is comprised of C. David Snyder,
Christopher J. Livingston and Dale W. Bainbridge. SIBG's executive
officers are Messrs. Snyder and Livingston, Stephan Danckers, James
Gehrig, James Kraynik and Beverly Pressnall.
(a) - (d) and (f) C. David Snyder, Member of SIBG
Mr. Snyder's business address is 1101 Center Street, Cleveland, OH
44113. He is principally engaged in serving as the Chief Executive
Officer and Chairman of the Board of the Company, SIBG and Crooked
River Brewing Company, LLC, an Ohio limited liability company ("CRB").
The principal business address where such services are performed is
1101 Center Street, Cleveland, OH 44113. Mr. Snyder is a citizen of the
United States.
(a) - (d) and (f) Christopher J. Livingston, Member of SIBG
Mr. Livingston's business address is 1101 Center Street, Cleveland, OH
44113. He is principally engaged in serving as the President and as a
director of the Company, SIBG and CRB. The principal business address
where such services are performed is 1101 Center Street, Cleveland, OH
44113. Mr. Livingston is a citizen of the United States.
(a) - (d) and (f) Stephan Danckers, Member of SIBG
Mr. Danckers' business address is 1101 Center Street, Cleveland, OH
44113. He is principally engaged in serving as the brewmaster of CRB
and as an officer of SIBG and CRB. The principal business address where
such services are performed is 1101 Center Street, Cleveland, OH 44113.
Mr. Danckers is a citizen of the United States.
(a) - (d) and (f) William R. Bohl, Member of SIBG
Mr. Bohl's business address is 1730 West 25th Street, Cleveland, OH
44113. He is principally engaged as a medical doctor at Lutheran
Medical Center. The principal address of Lutheran Medical Center is
Medical Office Building, 1730 West 25th Street, Cleveland, OH 44113.
Mr. Bohl is a citizen of the United States.
(d) - (e) SIBG, C. David Snyder, Christopher Livingston, Stephan Danckers and
Dr. William Bohl.
Neither SIBG nor any member of SIBG, during the past five years, to its
or his knowledge, (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which any such person was or is
subject to a judgment, decree or final order enjoining further
violations
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of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source of the funds is the members of SIBG. SIBG paid $2,000,000 in cash to
the Company in consideration for the purchase of the Shares and Warrants (as
defined below in Item 4).
ITEM 4. PURPOSE OF TRANSACTION.
SIBG entered into an Investment Agreement with the Company (the "Investment
Agreement"), dated August 24, 1999 (the "Closing Date"), whereby SIBG purchased
4,447,104 shares of Company Common Stock (the "Shares") and warrants to purchase
shares of Company Common Stock (the "Warrants") (the "Transaction"). The
Warrants, which have an exercise price of $.01 per share, become exercisable
solely in the event that any warrants, options or convertible securities of the
Company outstanding on the Closing Date are exercised or converted after the
Closing Date. In consideration of the sale of the Shares and the Warrants, SIBG
paid an aggregate cash purchase price to the Company of $2,000,000. After giving
effect to the Transaction, SIBG owns approximately 51% of the outstanding shares
of Company Common Stock.
SIBG's purpose for engaging in the Transaction was to enable SIBG to obtain a
majority ownership interest in the Company, thereby becoming entitled to all the
benefits that result from such ownership. Such benefits include management and
investment discretion with regard to future conduct of the business of the
Company, the benefits of profits generated by the operations of the Company and
any increase in the Company's value. Similarly, SIBG also will bear the risk of
any decrease in the value of the Company.
(a) SIBG may acquire additional shares or, upon compliance with applicable
securities laws, may dispose of any additional shares and/or the Shares at any
time in the open market or otherwise.
(b) SIBG also may propose a merger or other business combination between or
involving SIBG and the Company whereby SIBG would merge into the Company and the
Company would be the surviving corporation.
(c) In connection with the Transaction, (i) the size of the Board of Directors
of the Company (the "Board") was increased to ten, (ii) SIBG designated and the
Board appointed C. David Snyder, Dale W. Bainbridge, Christopher J. Livingston
and David Stith as new directors to fill the vacancies created by the increase
in the size of the Board, (iii) Nicholas P. Foris, Carl H. Hildebrand, Kevin E.
Brannon, Marjorie A. McGinnis and Maribeth Visco resigned as directors of the
Company, effective as of the Closing Date, and (iv) the size of the Board was
reduced subsequently to five. The size of the Board may be increased and
additional directors may be appointed to the Board in the future.
(d) Not applicable.
(e) After giving effect to the Transaction and the Restructuring Transaction (as
defined below in Item 5(b)), the number of outstanding Shares of Company Common
Stock increased to 8,596,211 shares. After giving effect to the Transaction and
the Restructuring Transaction, all shares of the Series F and G Preferred Stock
(as defined below in Item 5(b)) were converted to Company Common Stock and are
no longer outstanding.
(f) Effective as of the Closing Date, Kevin E. Brannon and Marjorie A. McGinnis,
co-founders of the Company, resigned from their respective positions as Chief
Executive Officer and President of the Company and as directors of the Company.
(g) Not applicable.
(h) Not applicable.
(i) Not applicable
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(j) Not applicable
Although the foregoing represents the range of activities recently taken and
presently contemplated by SIBG with respect to the Company, it should be noted
that the possible range of activities of SIBG is subject to change at any time.
Except as set forth above, SIBG does not have any plans or proposals that
related to or would result in any of the actions described in subparagraphs (a)
through (j) of Item 4 Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) SIBG is the beneficial owner of 4,447,104 shares of Company Common Stock.
Such shares constitute approximately 51% of the outstanding shares of Company
Common Stock. None of Messrs. Snyder, Livingston, Danckers or Bohl beneficially
own any shares of Company Common Stock.
(b) SIBG has the sole power to vote or direct the vote of, or dispose or direct
the disposition of, 4,447,104 shares of Company Common Stock. None of Messrs.
Snyder, Livingston, Danckers and Bohl have sole or shared power to vote or
dispose of any shares of Company Common Stock.
In connection with the Transaction, SIBG also entered into a Restructuring
Agreement (the "Restructuring Agreement"), dated as of the Closing Date, with
Austost Anstalt Schaan, Balmore Funds S.A., Ron S. Williams, Sr., Ron Williams,
Jr., Dean Dowda, Fred Lenz, World Capital Funding, LLC, The Augustine Fund,
L.P., Jimmy Dean, Congregation Beth Moredechai, Bertek, Inc. and the Company.
Pursuant to the Restructuring Agreement, the holders (the "Preferred
Shareholders") of the Company's Series F Convertible Preferred Stock, par value
$.01 per share, and Series G Convertible Preferred Stock, par value $.01 per
share (collectively, the "Series F and G Preferred Stock"), converted their
Series F and G Preferred Stock into Company Common Stock and the holders (the
"Note Holders") of the 10% Convertible Notes, dated June 7, 1999, issued by the
Company, in the original principal amount of $500,000, were paid in full (the
"Restructuring Transaction"). Pursuant to Section 9.5 of the Restructuring
Agreement, from and after the Closing Date and including the second anniversary
of the Closing Date, the Preferred Shareholders have granted to SIBG an
irrevocable proxy to vote all of the shares of Company Common Stock then owned
or controlled by the Preferred Shareholders, at any meeting of the shareholders
of the Company, however called, in favor of any proposal to (i) approve a merger
or other business combination between or involving SIBG and the Company which
(A) shall be on commercially reasonable terms and (B) shall result in the
Company remaining a reporting company under the Securities Exchange Act of 1934,
as amended, or (ii) increase the number of authorized shares of the Company.
After giving effect to the Transaction and the Restructuring Transaction, the
Preferred Shareholders owned in the aggregate approximately 2,155,140 shares of
Company Common Stock.
(c) The response in the first paragraph of Item 4 is incorporated herein by
reference.
(d) None.
(e) Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
The response in the second paragraph of Item 5(b) is incorporated herein by
reference. In connection with the Restructuring Agreement, the Company entered
into Amended and Restated Common Stock Purchase Warrants with the Note Holders
whereby the Company increased the exercise price of such warrants from $.37 per
share to $.50 per share and provided piggyback registration rights to the Note
Holders in lieu of the more extensive registration rights previously provided
under these warrants.
In connection with the Transaction, SIBG entered into a Purchase Agreement (the
"Purchase Agreement"), dated as of the Closing Date, with Edward D. Scott,
Catherine D. Scott, Robert Schuerholz, Nicholas P. Foris and Vishnampet S.
Jayanthimath (collectively, the "Blue II Members"), whereby SIBG purchased all
of the outstanding membership interests in Blue II, LLC, a Maryland limited
liability company ("Blue II"). Blue II is
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the entity that owns the Company's 5.5 acre site and building (the "Premises").
Blue II leases the Premises to the Company pursuant to the Lease Agreement and
Option to Purchase, dated July 17, 1996, as amended. Pursuant to Section 2.3(b)
of the Purchase Agreement, the Company issued warrants to the Blue II Members to
purchase 132,000 shares of Company Common Stock with an exercise price of
$1.00 per share.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
2(a) Investment Agreement, dated as of August 24, 1999, by and between Snyder
International Brewing Group, LLC and Frederick Brewing Co.
2(b) Common Stock Purchase Warrant, dated August 24, 1999, issued by Frederick
Brewing Co. to Snyder International Brewing Group, LLC
3(a) Restructuring Agreement, dated as of August 24, 1999, by and among
Frederick Brewing Co., Snyder International Brewing Group, LLC, Austost
Anstalt Schaan, Balmore Funds S.A., Ron S. Williams, Sr., Ron Williams,
Jr., Dean Dowda, Fred Lenz, World Capital Funding, LLC, The Augustine
Fund, L.P., Jimmy Dean, Congregation Beth Moredechai and Bertek, Inc.
3(b) Amended and Restated Common Stock Purchase Warrant by Frederick Brewing
Co., dated August 24, 1999, in favor of Austost Anstalt Schaan
3(c) Amended and Restated Common Stock Purchase Warrant by Frederick Brewing
Co., dated August 24, 1999, in favor of Balmore Funds S.A.
3(d) Amended and Restated Common Stock Purchase Warrant by Frederick Brewing
Co., dated August 24, 1999, in favor of Ron Williams, Sr.
3(e) Amended and Restated Common Stock Purchase Warrant by Frederick Brewing
Co., dated August 24, 1999, in favor of Ron Williams, Jr.
3(f) Amended and Restated Common Stock Purchase Warrant by Frederick Brewing
Co., dated August 24, 1999, in favor of Dean Dowda
3(g) Amended and Restated Common Stock Purchase Warrant by Frederick Brewing
Co., dated August 24, 1999, in favor of Fred Lenz
3(h) Amended and Restated Common Stock Purchase Warrant by Frederick Brewing
Co., dated August 24, 1999, in favor of World Capital Funding, LLC
3(i) Blue II Purchase Agreement, dated as of August 24, 1999, by and among
Snyder International Brewing Group, LLC, Edward D. Scott, Catherine D.
Scott, Robert Schuerholz, Nicholas P. Foris and Vishnampet S. Jayanthimath
3(j) Common Stock Purchase Warrant by Frederick Brewing Co., dated August 24,
1999, in favor of Edward D. Scott
3(k) Common Stock Purchase Warrant by Frederick Brewing Co., dated August 24,
1999, in favor of Catherine D. Scott
3(l) Common Stock Purchase Warrant by Frederick Brewing Co., dated August 24,
1999, in favor of Nicholas P. Foris
3(m) Common Stock Purchase Warrant by Frederick Brewing Co., dated August 24,
1999, in favor of Robert Schuerholz
3(n) Common Stock Purchase Warrant by Frederick Brewing Co., dated August 24,
1999, in favor of Vishnampet S. Jayanthimath
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After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: September 2, 1999
SNYDER INTERNATIONAL BREWING GROUP, LLC
By: /s/ Christopher J. Livingston
--------------------------------------
Name: Christopher J. Livingston
Title: President and Secretary
7
Exhibit 2(a)
EXECUTION COPY
================================================================================
INVESTMENT AGREEMENT
Between
SNYDER INTERNATIONAL BREWING GROUP, LLC
And
FREDERICK BREWING CO.
Dated August 24, 1999
================================================================================
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TABLE OF CONTENTS
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ARTICLE I - AUTHORIZATION, ISSUANCE, PURCHASE AND SALE OF
SECURITIES ...............................................................................................1
Section 1.1 Authorization of Issuance of the Shares and the Warrants ...................................1
Section 1.2 Agreement to Purchase and Sell .............................................................1
Section 1.3 Closing ....................................................................................1
Section 1.4 Delivery and Payment .......................................................................1
Section 1.5 Legend . ...................................................................................3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................................................3
Section 2.1 Due Organization . .........................................................................3
Section 2.2 Capital Structure ..........................................................................4
Section 2.3 Issuance, Sale and Delivery of Shares and Warrant Shares ...................................5
Section 2.4 Authority, Due Execution ...................................................................5
Section 2.5 Consents ...................................................................................6
Section 2.6 SEC Documents ..............................................................................6
Section 2.7 Compliance with Applicable Laws ............................................................7
Section 2.8 Litigation .................................................................................7
Section 2.9 Taxes ......................................................................................7
Section 2.10 [Intentionally Omitted] ....................................................................9
Section 2.11 Employee Benefit Plans; ERISA ..............................................................9
Section 2.12 Absence of Undisclosed Liabilities ........................................................12
Section 2.13 Permits ...................................................................................12
Section 2.14 Absence of Certain Changes or Events ......................................................12
Section 2.15 Environmental Matters .....................................................................13
Section 2.16 Contracts and Commitments .................................................................15
Section 2.17 Title to Properties; Encumbrances .........................................................16
Section 2.18 Intellectual Property .....................................................................17
Section 2.19 Labor Matters .............................................................................18
Section 2.20 Insurance .................................................................................18
Section 2.21 Brokers ...................................................................................18
Section 2.22 Opinion of Financial Advisor ..............................................................19
Section 2.23 Disclosure ................................................................................19
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE INVESTOR..................................................19
Section 3.1 Due Organization ..........................................................................19
Section 3.2 Authority, Due Execution ..................................................................19
Section 3.3 No Violation ..............................................................................19
Section 3.4 Consents ..................................................................................20
Section 3.5 Investment Representation .................................................................20
Section 3.6 Accredited Investor Status ................................................................20
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ARTICLE IV - INDEMNIFICATION .................................................................................20
Section 4.1 Survival of Representations and Warranties ................................................20
Section 4.2 Indemnification ...........................................................................21
Section 4.3 Defenses of Claim .........................................................................21
ARTICLE V - MISCELLANEOUS ....................................................................................22
Section 5.1 Entire Agreement; Modification.............................................................22
Section 5.2 Assignment; Binding Effect.................................................................22
Section 5.3 Severability...............................................................................22
Section 5.4 Notices....................................................................................23
Section 5.5 Public Announcement........................................................................23
Section 5.6 No Third-Party Beneficiaries...............................................................24
Section 5.7 Governing Law..............................................................................24
Section 5.8 Consent to Jurisdiction....................................................................24
Section 5.9 Counterparts...............................................................................24
Section 5.10 Certain Definitions .......................................................................24
Section 5.11 Fees and Expenses .........................................................................26
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INVESTMENT AGREEMENT
--------------------
THIS INVESTMENT AGREEMENT (this "Agreement") is dated as of this 24th
day of August, 1999, by and between Snyder International Brewing Group, LLC, an
Ohio limited liability company (the "Investor"), and Frederick Brewing Co., a
Maryland corporation (the "Company").
A. The Company has requested the Investor to make an investment in the
Company in the form of newly issued shares of Common Stock, par value $.0004 per
share, of the Company (the "Company Common Stock") and warrants to purchase
shares of Company Common Stock.
B. In connection with the Investor's investment in the Company, the
parties to this Agreement desire to establish certain rights and obligations
among themselves.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and the Investor hereby agree as follows:
ARTICLE I
AUTHORIZATION, ISSUANCE, PURCHASE AND SALE OF SECURITIES
--------------------------------------------------------
Section 1.1 Authorization of Issuance of the Shares and the Warrants.
The Company has authorized the issuance to Investor of (a) 4,278,691 shares of
newly issued Company Common Stock (the "Shares" and (b) warrants to purchase
shares of Company Common Stock (the "Warrants").
Section 1.2 Agreement to Purchase and Sell. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 1.3), the
Company shall sell to the Investor, and the Investor shall purchase from the
Company the Shares and the Warrants, free and clear of all Liens (as defined in
Section 5.10(f)). In consideration of the sale of the Shares and the Warrants by
the Company to the Investor, the Investor shall pay to the Company an aggregate
cash purchase price of $2,000,000 (the "Purchase Price") for the Shares and the
Warrants.
Section 1.3 Closing. The closing of the, issuance, sale and purchase of
the Shares and the Warrants (the "Closing") will take place at the offices of
Jones, Day, Reavis & Pogue, 901 Lakeside Avenue, Cleveland, Ohio at 9:00 a.m.,
local time, on August 24, 1999, or at such other place and/or time as the
Investor and the Company mutually agree (the "Closing Date"), simultaneously
with the execution and delivery of this Agreement.
Section 1.4 Delivery and Payment.
(a) At the Closing, the Company shall deliver or cause to be delivered
to the Investor the following documents:
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(i) One or more stock certificates evidencing the Shares,
issued in the name of the Investor;
(ii) A common stock purchase warrant evidencing the Warrants,
issued in the name of the Investor, and the related Warrant Agreement;
(iii) A cross receipt ("Cross Receipt"), executed by the
Company, evidencing payment of the Purchase Price by the Investor;
(iv) Transition Agreements, executed by Kevin E. Brannon and
Marjorie A. McGinnis;
(v) Resignations of the following directors of the Company
effective as of the Closing Date: Nicholas P. Foris, Carl H.
Hildebrand, Kevin E. Brannon, Marjorie A. McGinnis and Maribeth Visco;
(vi) A legal opinion of LeClair Ryan, a Professional
Corporation, legal counsel to the Company, addressed to the Investor,
in form and substance reasonably satisfactory to Investor;
(vii) A copy of the fairness opinion of Westfinance
Corporation, addressed to the Board of Directors of the Company, with
respect to the transactions contemplated by this Agreement;
(viii) Articles of Incorporation of the Company, FBC
Acquisition Corporation doing business as Wild Goose Brewing, Inc.
("Wild Goose") and BB Acquisition Corporation doing business as
Brimstone Brewing Company ("Brimstone"), each certified by the
Secretary of State of Maryland;
(ix) Good standing certificates issued by the Secretary of
State of Maryland with respect to the Company, Wild Goose and
Brimstone;
(x) A Certificate of the Secretary of the Company certifying
as to (a) the board resolutions authorizing this Agreement, the
Transaction Documents and the transactions contemplated hereby and
thereby, including the issuance of the Shares and the Warrants, (b) the
by-laws of the Company and (c) the incumbency and the genuineness of
the signature of each officer of the Company executing this Agreement
or any other Transaction Document;
(xi) All documents requested by Investor in order to
reconstitute the Board of Directors of the Company; and
(xii) Confirmation, in form and substance reasonably
satisfactory to Investor, that (a) the Investor or any Affiliate of
Investor has acquired all of the membership interests of Blue II, LLC;
(b) the holders of the Company's Class F and Class G Preferred Stock
shall have converted their preferred stock
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into Company Common Stock and executed an agreement, in form and
substance satisfactory to the Investor, with the Company with respect
to such conversion and related matters; (c) the holders of the
Company's Convertible Notes issued on June 2, 1999 in the aggregate
principal amount of $500,000 shall have sold the indebtedness evidenced
thereby and assigned all of their rights thereunder to Investor or an
Affiliate of Investor; and (d) the creditors listed on Schedule 1.4
shall have entered into debt modification or compromise arrangements
with the Company on terms reasonably satisfactory to Investor.
(b) At the Closing, the Investor shall deliver or cause to be delivered
to the Company the following:
(i) The Purchase Price, by wire transfer of immediately
available funds to an account of the Company designated by the Company;
and
(ii) The Cross Receipt, executed by the Investor, evidencing
receipt from the Company of the certificate or certificates
representing the Shares and the warrant certificate or certificates
representing the Warrants.
Section 1.5 Legend. Any certificate or certificates representing the
Shares must bear the following legend, together with any and all other legends
as may be required pursuant to any Transaction Document (as defined in Section
2.4 or applicable Law:
The securities represented by this certificate or instrument have not
been registered under the Securities Act of 1933, as amended (the
"Act", or under any applicable state law and may not be transferred,
sold or otherwise disposed of unless either (a) they are registered
under the Act pursuant to an effective registration statement or (b)
the Company has received evidence satisfactory to it (which may include
an opinion of counsel) that such proposed disposition is exempt from
registration.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to the Investor as follows:
Section 2.1 Due Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing to conduct business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the failure
to so qualify would not have a Material Adverse Effect (as defined below). Each
of the Subsidiaries (as defined in Section 5.10(1)) of the Company is a
corporation duly
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organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to conduct business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure to so qualify would not have a Material Adverse
Effect. The entities identified on Schedule 2.1 represent all of the
Subsidiaries of the Company, and the Company does not own any equity interest in
any other Person (as defined in Section 5.10(h)) other than such Subsidiaries.
The Company has heretofore made available to the Investor complete and correct
copies of its Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws and the Articles of Incorporation and Bylaws (or other
comparable documents) of each of its Subsidiaries, as currently in effect. As
used in this Agreement, a "Material Adverse Effect" means a material adverse
effect, or any development that is reasonably likely to result in a material
adverse effect, on the business, assets, properties, prospects, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole, or on the ability of the Company to consummate the transactions
contemplated hereby.
Section 2.2 Capital Structure. The authorized capital stock of the
Company consists of 19,000,000 shares of Common Stock and 1,000,000 shares of
preferred stock, $.01 par value per share ("Preferred Stock"), of which (a)
1,848 shares have been designated Series A Convertible Preferred Stock, par
value $.01 per share (the "Series A Preferred"), (b) 3,750 shares have been
designated Series B Convertible Preferred Stock, par value $.01 per share
("Series B Preferred"), (c) 2,100 shares have been designated Series C
Convertible Preferred Stock, par value $.01 per share ("Series C Preferred"),
(d) 1,045 shares have been designated Series D Convertible Preferred Stock, par
value $.01 per share ("Series D Preferred"), (e) 2,910 shares have been
designated Series E Convertible Preferred Stock, par value $.01 per share
("Series E Preferred"), (f) 1,000 shares have been designated Series F
Convertible Preferred Stock, par value, $.01 per share ("Series F Convertible
Preferred"), and (g) 500 shares have been designated Series G Convertible
Preferred Stock, par value $.01 per share ("Series G Preferred"). As of the date
hereof: (a) 1,929,791 shares of Common Stock are issued and outstanding and
except as set forth on Schedule 2.2, there are no agreements providing for the
issuance of shares of Common Stock, (b) 2,549.5 shares of Preferred Stock are
issued and outstanding, of which 1,455 shares of Series A Preferred are issued
and outstanding, 0 shares of Series B Preferred are issued and outstanding, 0
shares of Series C Preferred are issued and outstanding, 0 shares of Series D
Preferred are issued and outstanding, 0 shares of Series E Preferred are issued
and outstanding, 776 shares of Series F Preferred are issued and outstanding and
230.5 shares of Series G Preferred are issued and outstanding, (c) 0 shares of
Common Stock are held by the Company or its direct or indirect wholly-owned
Subsidiaries, and (d) except for $500,000 in aggregate principal amount of the
Company's 10% Convertible Notes, issued June 7, 1999, no bonds, debentures,
notes or other instruments or evidence of indebtedness having the right to vote
(or convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matters on which the Company stockholders may vote
("Company Voting Debt") are issued or outstanding. All outstanding shares of
Common Stock and Preferred Stock were duly authorized and are validly issued,
fully paid and nonassessable and are not subject to preemptive or other similar
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rights. All outstanding shares of capital stock of the Subsidiaries of the
Company are owned by the Company or a direct or indirect Subsidiary of the
Company, free and clear of all Liens. As of the date hereof, except as set forth
in this Section 2.2 or Schedule 2.2, there are outstanding: (i) no shares of
capital stock, Company Voting Debt or other voting securities of the Company;
(ii) no securities of the Company or any Subsidiary of the Company convertible
into, or exchangeable or exercisable for, shares of capital stock, Company
Voting Debt or other voting securities of the Company or any Subsidiary of the
Company; (iii) no stock appreciation rights, phantom stock awards or similar
rights or awards; and (iv) no options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which the Company or any
Subsidiary of the Company is a party or by which any of them is bound, in any
case obligating the Company or any Subsidiary of the Company to issue, deliver,
sell, purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital stock or any
Company Voting Debt or other voting securities of the Company or of any
Subsidiary of the Company, or obligating the Company or any Subsidiary of the
Company to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. Set forth on Schedule 2.2 is a list of all options,
warrants, stock appreciation rights and rights to purchase shares of the Common
Stock outstanding as of the date hereof and the exercise prices relating
thereto. There are no restrictions on the Company to vote the stock of any of
its Subsidiaries.
Section 2.3 Issuance, Sale and Delivery of Shares and Warrant Shares.
The Shares have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein at the Closing, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens and
not subject to preemptive or similar rights of any third party. The Company
Common Stock to be issued upon exercise of the Warrants will be validly
authorized and, when issued upon due exercise of the Warrants, will be fully
paid and be assessable, free and clear of all Liens and not subject to
preemptive or similar rights of any third party.
Section 2.4 Authority, Due Execution. The Company has all requisite
corporate power and authority to (a) enter into this Agreement and each other
agreement, certificate, instrument and document required to be executed by the
Company in connection herewith (collectively, the "Transaction Documents"), (b)
consummate the transactions contemplated hereby and thereby and (c) perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby (i) have been duly authorized by all necessary
corporate action on the part of the Company, and (ii) do not require any
approval of the stockholders of the Company, including, without limitation,
shareholder approval of the issuance of the Shares. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency
or other similar Laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before any proceeding
therefor may be brought. The execution and delivery of this Agreement and the
Transaction Documents by the Company do not, and the consummation
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of the transactions contemplated hereby or thereby by the Company will not, (a)
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a benefit under,
or the creation of a Lien on assets or property, or right of first refusal with
respect to any asset or property (any such conflict, violation, default, right
of termination, cancellation or acceleration, loss, creation or right of first
refusal, a "Violation"), pursuant to any provision of the Amended and Restated
Articles of Incorporation or the Amended and Restated Bylaws of the Company or
the equivalent constituent documents of any of its Subsidiaries or (b) except as
set forth on Schedule 2.4 hereto and assuming the consents, approvals,
authorizations, permits, filings and notifications referred to in Section 2.5
are duly and timely obtained or made, result in any Violation of any (i) loan or
credit agreement, note, mortgage, indenture, lease, Employee Plan (as defined in
Section 2.11), or other agreement, obligation, instrument, Permit (as defined in
Section 2.13), concession, franchise or license applicable to the Company or any
of its Subsidiaries or their respective properties or assets or (ii) Order or
Law (each as defined in Section 5.10(g) and (d), respectively) applicable to the
Company or any of its Subsidiaries or their respective properties or assets. The
Board of Directors of the Company (the "Company Board") has taken all actions
necessary (a) under the Maryland General Corporation Law ("MGCL"), including
approving the transactions contemplated by this Agreement to ensure that Title
3, Subtitles 6 and 7 of the MGCL do not, and will not, apply to the transactions
contemplated in this Agreement, and (b) under Article 10 of the Company's
Amended and Restated Articles of Incorporation, including approving the
transactions contemplated by this Agreement, to ensure that such Article 10 does
not, and will not, apply to the transactions contemplated in this Agreement. No
other "fair price," "merger moratorium," "control share acquisition" or other
anti-takeover statute or similar statute or regulation applies or purports to
apply to this Agreement or any of the transactions contemplated hereby. A
resolution of the Company Board approving the issuance of the Shares is the only
approval under the MGCL or the Company's Amended and Restated Articles of
Incorporation or Amended and Restated Bylaws required to authorize the issuance
of the Shares and the Warrants.
Section 2.5 Consents. Except as set forth in Schedule 2.5 hereto, no
consent, approval, Order or authorization of, or registration, declaration or
filing with, notice to, or permit from any federal, state or local court,
tribunal or arbitrator or any federal, state or local government or any
subdivision, department, board, bureau, administrative agency, commission,
authority or instrumentality thereof, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement and
the Transaction Documents by the Company or the consummation by the Company of
the transactions contemplated hereby or thereby, except for such reports under
and such other compliance with the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby.
Section 2.6 SEC Documents. The Company has made available to the
Investor a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by the Company with the SEC since
January 1, 1996 and
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prior to the date of this Agreement (the "Company SEC Documents"), which are all
the documents (other than preliminary material) that the Company was required to
file with the SEC since such date. As of their respective dates, (a) the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Company SEC Documents, and (b) none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Documents complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and present fairly in
accordance with applicable requirements of GAAP (subject, in the case of the
unaudited statements, to normal, recurring adjustments, none of which are
material) the consolidated financial position of the Company and its
consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the Company and its
consolidated Subsidiaries for the periods presented therein.
Section 2.7 Compliance with Applicable Laws. The business of the
Company and its Subsidiaries is not currently being conducted, and has not been
conducted, in violation of any Laws. No investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company, threatened.
Section 2.8 Litigation. Except as disclosed in the Company SEC
Documents or in Schedule 2.8, there are no Actions (as defined in Section
5.10(a)) pending against the Company or any Subsidiary of the Company or, to the
knowledge of the Company, threatened against the Company or any Subsidiary of
the Company, nor to the knowledge of the Company, is there any valid basis for
any such Action, nor is there any Order outstanding against the Company or any
Subsidiary of the Company. Except as set forth on Schedule 2.8 hereto, there are
no consent decrees (including any affirmative action plan) of any Governmental
Entity to which the Company or any Subsidiary of the Company is a party or by
which the assets of the Company or any Subsidiary of the Company are bound.
Section 2.9 Taxes.
(a) Except as disclosed on Schedule 2.9:
(i) All Tax returns, statements, reports and forms (including
estimated Tax or information returns and reports) required to be filed
with any Taxing Authority on or before the date hereof by or on behalf
of the Company and each Subsidiary (collectively, the "Returns") have
been filed when due in accordance with all applicable Laws;
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(ii) The Returns correctly reflected in all material respects,
the facts regarding the income, business, assets, operations,
activities and status of the Company or any Subsidiary, as applicable;
(iii) All Taxes owed by the Company and each Subsidiary (which
are shown as due and payable on Returns filed on or before the date
hereof) have been timely paid or withheld and remitted to the
appropriate Taxing Authority;
(iv) Any accruals established for Taxes with respect to the
Company and each Subsidiary, as applicable, for any period ending on or
before the date hereof reflected on the books of such company
(excluding any provision for deferred income Taxes) are adequate;
(v) Neither the Company nor any of its Subsidiaries is
delinquent in the payment of any Tax or has requested any extension of
time within which to file any Return which has not been previously
filed except for extensions granted as a matter of right;
(vi) Neither the Company nor any of its Subsidiaries (nor any
member of any affiliated, consolidated, combined or unitary group of
which the Company or any Subsidiary is or has been a member) has
granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired;
(vii) There is no Action or audit now pending or, to the
knowledge of the Company or any Subsidiary, any Action or audit
threatened against or with respect to the Company or any Subsidiary in
respect of any Tax;
(viii) Neither the Company nor any of its Subsidiaries owns
any real property in any jurisdiction in which a Tax is imposed on the
transfer of a controlling interest in any entity that owns any interest
in real property;
(ix) None of the Company, any Subsidiary or any other Person
on behalf of the Company or any Subsidiary has entered into any
agreement or consent pursuant to Section 341(f) of the Code;
(x) There are no Liens for Taxes upon the assets of the
Company or any Subsidiary, except Liens for current Taxes not yet due;
(xi) Neither the Company nor any Subsidiary will be required
to include any adjustment in taxable income for any Post-Closing Tax Period
under Section 481(c) of the Code (or any similar provision of the Tax Laws of
any jurisdiction) as a result of a change in the method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement entered
into
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with any Taxing Authority with regard to the Tax liability of such
company for any Pre-Closing Tax Period;
(xii) Neither the Company nor any Subsidiary has been a member
of an affiliated, consolidated, combined or unitary group or
participated in any other arrangement whereby any income, revenues,
receipts, gain or loss of such company was determined or taken into
account for Tax purposes with reference to or in conjunction with any
income, revenues, receipts, gain, loss, asset or liability of any other
Person; and
(xiii) Neither the Company nor any Subsidiary has made any Tax
deposit with the U.S. Government or any other Taxing Authority in
respect of any Pre-Closing Tax Period or Post-Closing Tax Period.
Section 2.10 [Intentionally Omitted].
Section 2.11 Employee Benefit Plans: ERISA.
(a) Schedule 2.11 sets forth a complete list of, with respect to the
Company and each of its Subsidiaries, (i) all "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), (ii) all other severance pay, salary
continuation, bonus, incentive, stock option, retirement, pension, profit
sharing or deferred compensation plans, contracts, programs, funds, or
arrangements of any kind, and (iii) all other employee benefit plans,
contracts, programs, funds, or arrangements (whether written or oral,
qualified or nonqualified, funded or unfunded, foreign or domestic,
currently effective or terminated) and any trust, escrow, or similar
agreement related thereto, whether or not funded, in respect of any present
or former employees, directors, officers, shareholders, consultants, or
independent contractors of the Company or any of its Subsidiaries, (or,
where indicated below, any trade or business (whether or not incorporated)
(i) under common control within the meaning of Section 4001(b)(1) of ERISA
with the Company or (ii) which together with the Company is treated as a
single employer under Section 414(t) of the Code (the "Controlled Group"))
or with respect to which the Company (or, where indicated below, the
Controlled Group) has made or is required to make payments, transfers, or
contributions (all of the above being hereinafter individually or
collectively referred to as "Employee Plan" or "Employee Plans,"
respectively). The Company has no liability with respect to any plan,
arrangement or practice of the type described in the preceding sentence
other than the Employee Plans.
(b) Copies of the following materials have been delivered or made
available to Investor: (i) all current and prior plan documents for each
Employee Plan or, in the case of an unwritten Employee Plan, a written
description thereof, (ii) all determination letters from the Internal
Revenue Service ("IRS") with respect to any of the Employee Plans, (iii)
all current and prior summary plan descriptions, summaries of material
modifications, annual reports, and summary annual reports,
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(iv) all current and prior trust agreements, insurance contracts, and other
documents relating to the funding or payment of benefits under any Employee
Plan, and (v) any other documents, forms or other instruments relating to
any Employee Plan reasonably requested by Investor.
(c) Each Employee Plan has been maintained, operated, and administered
in material compliance with its terms and any related documents or
agreements and in compliance with all applicable Laws. There have been no
prohibited transactions or breaches of any of the duties imposed on
"fiduciaries" (within the meaning of Section 3(21) of ERISA) by ERISA with
respect to the Employee Plans that could result in any liability or excise
tax under ERISA or the Code being imposed on the Company or any of its
Subsidiaries.
(d) Each Employee Plan intended to be qualified under Section 401(a) of
the Code is so qualified and has heretofore been determined by the IRS to
be so qualified, and each trust created thereunder has heretofore been
determined by the IRS to be exempt from tax under the provisions of Section
501(a) of the Code, and nothing has occurred since the date of any such
determination that could reasonably be expected to give the IRS grounds to
revoke such determination.
(e) The Company does not currently have and at no time in the past has
had an obligation to contribute to a "defined benefit plan" as defined in
Section 3(35) of ERISA, a pension plan subject to the funding standards of
Section 302 of ERISA or Section 412 of the Internal Revenue Code of 1986,
as amended (the "Code"), a "multiemployer plan" as defined in Section 3(37)
of ERISA or Section 414(f) of the Code or a "multiple employer plan" within
the meaning of Section 210(a) of ERISA or Section 413(c) of the Code.
(f) With respect to each group health plan benefitting any current or
former employee of the Company or any of its Subsidiaries or any member of
the Controlled Group that is subject to Section 4980B of the Code, or was
subject to Section 162(k) of the Code, the Company, each of its
Subsidiaries and each member of the Controlled Group has complied with (i)
the continuation coverage requirements of Section 4980B of the Code and
Section 162(k) of the Code, as applicable, and Part 6 of Subtitle B of
Title I of ERISA and (ii) the Health Insurance Portability and
Accountability Act of 1996, as amended.
(g) With respect to each group health plan that is subject to Section
1862(b)(1) of the Social Security Act (42 U.S.C. ss. 1395y(b)), the Company
and its Subsidiaries has complied with the secondary payer requirements of
Section 1862(b)(1) of such Act.
(h) No Employee Plan is or at any time was funded through a "welfare
benefit fund" as defined in Section 419(e) of the Code, and no benefits
under any Employee Plan are or at any time have been provided through a
voluntary employees' beneficiary association (within the meaning of
subsection 501(c)(9) of the Code) or a
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supplemental unemployment benefit plan (within the meaning of Section
501(c)(17) of the Code).
(i) All contributions, transfers and payments in respect of any
Employee Plan, other than transfers incident to an incentive stock option
plan within the meaning of Section 422 of the Code, have been or are fully
deductible under the Code.
(j) There is no pending or threatened assessment, complaint,
proceeding, or investigation of any kind in any court or government agency
with respect to any Employee Plan (other than routine claims for benefits),
nor, to the knowledge of the Company, is there any basis for one.
(k) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses and other amounts due and payable under, and (iii)
contributions, transfers or payments required to be made to, any Employee
Plan prior to the Closing will have been paid, made or accrued on or before
the Closing.
(l) With respect to any insurance policy providing funding for benefits
under any Employee Plan, (i) there is no liability of the Company or any of
its Subsidiaries, in the nature of a retroactive rate adjustment, loss
sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance policy was terminated on the
date hereof, and (ii) no insurance company issuing any such policy is in
receivership, conservatorship, liquidation or similar proceeding and, to
the knowledge of the Company, no such proceedings with respect to any
insurer are imminent.
(m) No Employee Plan provides benefits, including, without limitation,
death or medical benefits, beyond termination of service or retirement
other than (i) coverage mandated by law, (ii) death or retirement benefits
under any qualified Employee Plan, or (iii) deferred compensation benefits
reflected on the books of the Company and its Subsidiaries.
(n) The execution and performance of this Agreement will not (i)
constitute a stated triggering event under any Employee Plan that will
result in any payment (whether of severance pay or otherwise) becoming due
from the Company or any of its Subsidiaries to any officer, employee or
former employee (or dependents of such employee), or (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due to
any employee, officer or director of the Company or any of its
Subsidiaries.
(o) Neither the Company nor any of its Subsidiaries has agreed or
committed to institute any plan, program, arrangement or agreement for the
benefit of employees or former employees of the Company or any of its
Subsidiaries other than the Employee Plans, or to make any amendments to
any of the Employee Plans.
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(p) Each of the Company and its Subsidiaries has reserved all rights
necessary to amend or terminate each of the Employee Plans without the
consent of any other person.
(q) No Employee Plan provides benefits to any individual who is not a
current or former employee of the Company or any of its Subsidiaries, or
the dependents or other beneficiaries of any such current or former
employee.
(r) All contributions required to be paid with respect to workers'
compensation arrangements of the Company and its Subsidiaries have been
made or accrued as a liability on the Company's financial statements
included the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999.
(s) No amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of the
Company or any of its Subsidiaries or Affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation
Section 1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or Employee Plan currently in effect would
not be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code). The disallowance of a
deduction under Section 162(m) of the Code for employee remuneration will
not apply to any amount paid or payable by the Company or any of its
Subsidiaries under any contract, Employee Plan, program, arrangement or
understanding currently in effect.
Section 2.12 Absence of Undisclosed Liabilities. Except as disclosed in
the Company SEC Documents or Schedule 2.12, neither the Company nor any of its
Subsidiaries has any material liabilities or obligations (whether absolute,
accrued, contingent, or otherwise, or due or to become due), other than
liabilities incurred in the ordinary course of business consistent with past
practice subsequent to January 1, 1999.
Section 2.13 Permits. The Company and each Subsidiary of the Company
have all licenses, permits, approvals, variances and other governmental
authorizations required by or from any Governmental Entity ("Permits")
necessary for the conduct of their respective businesses as they are currently
conducted, including, without limitation, liquor, air emission and wastewater
discharge permits. Except as set forth on Schedule 2.13, the Company and each
Subsidiary of the Company have been and presently are operating in compliance
with all such Permits, any necessary renewal or extension requests have been
filed, and no proceeding is pending, or to the knowledge of the Company,
threatened to revoke, limit or not to renew any Permit.
Section 2.14 Absence of Certain Changes or Events. Except as set forth
on Schedule 2.14 hereto, as disclosed in the Company SEC Documents filed prior
to the date of this Agreement, or as contemplated by this Agreement, since the
date of the most recent audited financial statements included in the Company SEC
Documents, the Company and its
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Subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been any (i) Material Adverse Effect, (ii) damage,
destruction or loss, whether covered by insurance or not, which has or could
have a Material Adverse Effect, (iii) declaration, setting aside, making or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock or any redemption,
purchase or other acquisition, direct or indirect, of any capital stock of the
Company, (iv) capital investment in, any loan to or any acquisition by the
Company or its Subsidiaries (by merger, consolidation or acquisition of stock or
assets) of any corporation, partnership or other business organization or
division thereof, or the entering into by the Company or its Subsidiaries of any
contract, agreement, commitment or arrangement with respect thereto, (v) change
by the Company in accounting principles except to the extent required by a
change in GAAP, (vi) labor dispute, litigation or governmental investigation
which has or could have a Material Adverse Effect, (vii) obligations or
liabilities (whether absolute, accrued, contingent or otherwise and whether due
or to become due) created or incurred or entered into (including, without
limitation, the incurrence of debt), other than such items created or incurred
in the ordinary course of business and consistent with past practices, (viii)
any increase in or any change in the method of computing the compensation of
employees of the Company or any of its Subsidiaries or any increase in
compensation payable to any officer, employee, consultant or agent of the
Company or any of its Subsidiaries, or the entering into of an employment
contract with or loan to, any officer or employee of the Company or any of its
Subsidiaries, (ix) amendments or other changes to the Amended and Restated
Articles of Incorporation or Amended and Restated By Laws of the Company or
equivalent constituent documents of any of its Subsidiaries, (x) sale,
assignment, transfer, mortgage, pledge or other encumbrance of any tangible or
intangible asset of the Company or any of its Subsidiaries, except in the
ordinary course of business, (xi) voluntary release, compromise or cancellation
of any debts owed to the Company or any of its Subsidiaries or claims against
others exceeding $5,000 individually, issuance of any debt securities or
entering into or modifying of any material contract, agreement, commitment or
arrangement, (xii) amendment to any credit arrangements with any bank or other
institution, (xiii) issuance, sale or authorization for issuance or sale, of any
additional shares of any class of capital stock or issue, grant or enter into
any subscription, option, warrant, right, convertible security or other
agreement or commitment of any character obligating the Company or any of its
Subsidiaries to issue securities, or (xiv) except as required by Law, adoption,
amendment or termination of any Plans for the benefit or welfare of any past or
present executive officers of the Company, or (xv) agreement to do any of the
foregoing.
Section 2.15 Environmental Matters.
(a) For purposes of this Agreement:
(i) "Environmental Law" means any applicable Law regulating,
prohibiting or otherwise imposing liability with respect to Releases or
threatened Releases into any part of the environment (indoor or
outdoor), or pertaining to the protection of human health, natural
resources or the environment including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") (42 U.S.C. ss. ss. 9601,
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et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
ss.ss. 1801, et seq.), the Resource Conservation and Recovery Act (42
U.S.C.ss.ss. 6901, et seq.), the Clean Water Act (33 U.S.C. ss.ss.
1251, et seq.), the Clean Air Act (33 U.S.C. ss.ss. 7401, et seq.), the
Toxic Substances Control Act (15 U.S.C. ss.ss. 7401, et seq.), the Safe
Drinking Water Act (42 U.S.C. ss.ss. 300f, et seq.) and the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss.ss. 136, et
seq.), and the regulations promulgated pursuant thereto, and any such
similar foreign or domestic state or local statutes, and the
regulations promulgated pursuant thereto, as such laws are in effect on
the date hereof;
(ii) "Hazardous Material" means any substance, material or
waste which is regulated by any public or Governmental Entity in the
jurisdictions in which the Company or its Subsidiaries conducts
business, or the United States, including, without limitation, any
material or substance which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste" "contaminant," "toxic waste" or
"toxic substance" under any provision of any Environmental Law;
(iii) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into, within or from the indoor or outdoor
environment, including, without limitation, any property owned,
operated or leased by the Company or any of its Subsidiaries; and
(iv) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a Governmental Entity
or required under any Environmental Law, or voluntarily undertaken to
(A) clean up, remove, treat, or in any other way ameliorate or address
any Hazardous Materials or other substance in the indoor or outdoor
environment; (B) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not endanger
or threaten to endanger the public health or welfare of the indoor or
outdoor environment; (C) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (D) achieve or maintain compliance with any
Environmental Law.
(b) Except (i) as disclosed in the Company SEC Documents, or (ii) as
set forth in Schedule 2.15, the operations of the Company and its
Subsidiaries have materially complied and currently materially comply with
all Environmental Laws, and neither the Company nor any of its Subsidiaries
has received any written or oral notice, claim or demand with respect to
any of its facilities, whether owned or leased, of any alleged violation of
any Environmental Law or any possible liability or remediation obligation
arising under any Environmental Law nor, to the Company's knowledge, are
there any facts upon which such a notice, claim or demand could be based.
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(c) The Company and its Subsidiaries are not subject to any outstanding
Orders, agreements or contracts with or issued by any Governmental Entity
or other Person respecting (i) Environmental Laws, (ii) any Remedial Action
or (iii) any Release or threatened Release of a Hazardous Material, except
as described in Schedule 2.15.
(d) There have been no Releases of any Hazardous Material to, within or
from any of the Company's or its Subsidiaries' facilities, whether owned or
leased, in quantity or concentration that would require either reporting or
Remedial Action under any Environmental Law.
(e) To the Company's knowledge, there have been no Releases of
Hazardous Materials generated by the Company or any of its Subsidiaries at
any site or property not owned or occupied by the Company or any of its
Subsidiaries.
(f) The Company has made available to the Investor for review and
copying true and complete copies of all (A) audits, reports, studies, data
or analysis in the Company's possession or control relating to the
condition of any sites currently or previously owned or occupied by the
Company and its Subsidiaries, including, without limitation, any
environmental site assessments or compliance audits, and (B) all records
and documents in the Company's or any of its, Subsidiaries' possession or
control related to the Company's or any of its Subsidiaries' use, handling,
generation, treatment, recycling, storage or disposal of Hazardous
Materials.
(g) To the Company's knowledge, there are no conditions related to a
release of a Hazardous Material on property not within the control of the
Company or any of its Subsidiaries which will or could result in Remedial
Action on property owned or leased by the Company or any of its
Subsidiaries.
Section 2.16 Contracts and Commitments. Except as set forth on Schedule
2.16 hereto and except as filed as an exhibit to the Company SEC Documents or
incorporated by reference therein neither the Company nor any Subsidiary of the
Company is a party to any written or oral contract, agreement, commitment or
arrangement that would be required to be filed as a material contract (as
described in Section 601 of Regulation S-K promulgated by the SEC), in an Annual
Report on Form 10-K of the Company. Except as set forth on Schedule 2.16 hereto,
neither the Company nor any Subsidiary of the Company is a party to or bound by
any of the following written or oral contracts, agreements, commitments or
instruments: (a) employment agreements, consulting agreements or other similar
agreements, arrangements or understandings with any employee or other Person,
(b) indentures, mortgages, notes, installment obligations, capital leases,
agreements or other instruments relating to the borrowing of money or the
guarantee of any obligation or (c) agreements that commit the Company or any
Subsidiary of the Company to capital expenditures of more than $10,000. No
purchase commitment of the Company or of any Subsidiary of the Company, or by
which the Company or any Subsidiary of the Company is bound, is in excess of the
normal, ordinary and usual requirements of the businesses of the Company and its
Subsidiaries or at an excessive price. During the past two years, neither the
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Company nor any Subsidiary of the Company has lost or been notified of any
possible loss of any customer that accounted for more than 5% of the aggregate
services and products provided or sold by the Company and its Subsidiaries
during such period, or lost or been notified of any possible loss of any
supplier that accounted for more than 5% of the aggregate services and products
supplied to the Company and its Subsidiaries during such period.
Section 2.17 Title to Properties: Encumbrances.
(a) Each of the Company and its Subsidiaries has good, valid and
marketable title to, or valid and enforceable leasehold interests in, all
of its properties and assets (real, personal and mixed, tangible and
intangible), including, without limitation, all of the properties and
assets reflected in the consolidated balance sheet of the Company and its
Subsidiaries as of March 31, 1999 included in the Company's Quarterly
Report on Form 10-Q for the period ended on such date (except for
properties and assets disposed of in the ordinary course of business and
consistent with past practices since March 31, 1999). None of such
properties or assets are subject to any liability, obligation or Lien
(whether absolute, accrued, contingent or otherwise), except as set forth
in Schedule 2.17 hereto.
(b) With respect to the premises (the "Leased Premises") leased by Blue
II, LLC ("Blue II") to the Company pursuant to the Lease Agreement and
Option to Purchase, dated July 17, 1996, by and between Blue II and FBC
(the "Lease Agreement"), as more particularly described in the Lease
Agreement:
(i) The Company has not received notice that any portion of
the Leased Premises is subject to any pending condemnation proceeding
or any other Action adverse to the Leased Premises and, to the
knowledge of the Company, there is no threatened condemnation
proceeding or other Action with respect to the Leased Premises;
(ii) The structures, improvements and fixtures at or upon the
Leased Premises, including, without limitation, roofs and structural
elements thereof and the electrical, plumbing, heating, ventilation,
air conditioning and similar units and systems, have to date been
reasonably maintained, are structurally sound without material defects
and are in good operating condition for their intended use subject to
the provision of usual and customary maintenance and repair performed
in the ordinary course of business with respect to similar properties
of like age and construction;
(iii) To the knowledge of the Company, there is no water
diffusion or other intrusion into any buildings, structures or other
improvements included in the Leased Premises that would impair the
value or use of the Leased Premises in connection with the conduct of
the business currently operated thereon;
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(iv) No notice of any increase in the assessed valuation of
the Leased Premises and no notice of any contemplated special
assessment has been received by the Company and, to the knowledge of
the Company, there is no threatened special assessment pertaining to
the Leased Premises;
(v) There are no contracts or agreements to which the Company
is a party or by which the Leased Premises are bound, granting to any
person or entity the right of use or occupancy of any portion of the
Leased Premises, except for the Lease Agreement, and the Lease
Agreement is in full force and effect and there are no defaults
thereunder or matters which, upon the passage of time or giving of
notice, would rise to the level of a default under the Lease Agreement;
and
(vi) There is no person or entity (other than FBC) in
possession of the Leased Premises.
Section 2.18 Intellectual Property.
(a) The "Intellectual Property" means all of the following which is
owned by, issued or licensed to Company or its Subsidiaries which is used
in the business of the Company or its Subsidiaries, including, without
limitation, (i) all patents, trademarks, trade names, trade dress, assumed
names, service marks, logos, copyrights, Internet domain names and
corporate names together with all applications, registrations, renewals and
all goodwill associated therewith; and (ii) all trade secrets and
confidential information (including, without limitation, customer lists,
know-how, formulae, manufacturing and production processes, research,
financial business information, and marketing plans) owned or used by the
Company or its Subsidiaries; (iii) information technologies (including,
without limitation, software programs, data and related documentation); and
(iv) other intellectual property rights and all copies and tangible
embodiments of the foregoing in whatever form or medium
(b) The Company represents and warrants that, except as specifically
set forth on Schedule 2,18: (i) the Company or its Subsidiaries owns and
possess all right, title and interest in and to, or has a valid and
enforceable license to use, the Intellectual Property necessary for the
operation of the business as currently conducted; (ii) no claim by any
third party contesting the validity, enforceability, use or ownership of
any of the Intellectual Property has been made, is currently outstanding or
is threatened, and, to the Company's knowledge, there are no grounds for
the same; (iii) neither the Company nor any of its Subsidiaries have
received any notices of, or is aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict with,
any third party with respect to the Intellectual Property; (iv) neither the
Company nor its Subsidiaries have infringed, misappropriated or otherwise
conflicted with any intellectual property rights or other rights of any
third parties and neither the Company nor any of its Subsidiaries is aware
of any infringement, misappropriation or conflict which will occur as a
result of
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the continued operation of the business as currently conducted or as
currently proposed to be conducted.
(c) The Company represents and warrants that: (i) the transactions
contemplated by this Agreement will have no material adverse effect on the
right, title and interest in and to the Intellectual Property; and (ii) the
Company and each of its Subsidiaries have taken all necessary and desirable
action to maintain and protect the Intellectual Property and will continue
to maintain and protect the Intellectual Property so as to not materially
adversely affect the validity or enforceability of the Intellectual
Property.
Section 2.19 Labor Matters. Except as set forth in Schedule 2.19, (a)
the Company and each Subsidiary of the Company is in material compliance with
all applicable Laws respecting employment and employment practices, wages, hours
of work and occupational safety and health and is not engaged in any unfair
labor practice; (b) there is no unfair labor practice charge or complaint
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries; (c) the Company and each Subsidiary of the Company have
not experienced any strike, work stoppage, slowdown, lockout or other dispute
involving their respective employees in the past five years and there is no such
action currently pending, or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries; (d) the Company and
each Subsidiary of the Company are not parties to or bound by any collective
bargaining agreement or other contract or arrangement with any labor
organization; (e) the Company and each Subsidiary of the Company do not know of
any union organizational campaign presently in progress with respect to their
respective employees and no question concerning representation exists with
respect to such employees; and (f) there are no written personnel policies,
rules or procedures applicable to employees of the Company or any of its
Subsidiaries.
Section 2.20 Insurance. All current primary, excess and umbrella
policies of insurance owned or held by or on behalf of, or providing insurance
coverage to, the Company or its Subsidiaries are in full force and effect and
are valid, outstanding, collectible and enforceable policies. Schedule 2.20 sets
forth a list of all such policies and a summary of their respective terms. With
respect to such policies (a) no premiums are in arrears, (b) no notices of
cancellation or termination have been received, and (c), to the Company's
knowledge, the insurance coverage of the Company and its Subsidiaries is
adequate and sufficient to cover claims.
Section 2.21 Brokers. Except as set forth on Schedule 2.21, the
Company has not, and the Company's officers, directors and employees have not,
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby. No amendment may be made to any agreement described on Schedule 2.21
that would increase the amount of the payment thereunder in connection with the
transactions contemplated by this Agreement. The obligations described on
Schedule 2.21 are solely the responsibility of the Company, and the Company
shall indemnify the Investor from and against any and all claims, liabilities
and costs and expenses (including attorneys' fees) incurred by the Investor
directly or indirectly
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arising out of any breach of the representations, warranties and agreements of
the Company contained in this Section 2.21.
Section 2.22 Opinion of Financial Advisor. The Company Board has
received the opinion of Westfinance Corporation to the effect that, as of the
date hereof, the Purchase Price to be received by the Company in connection with
the issuance of the Shares and the Warrants is fair, from a financial point of
view, to the Company and its stockholders.
Section 2.23 Disclosure. No representation, warranty or statement of
the Company set forth in this Agreement (including the Schedules attached
hereto) or in any Transaction Document contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in the light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
----------------------------------------------
The Investor hereby represents and warrants to the Company as follows:
Section 3.1 Due Organization. The Investor is a limited liability
company duly organized, validly existing and in good standing under the laws of
Ohio, has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
Section 3.2 Authority, Due Execution. The Investor has all requisite
power and authority to (a) enter into and perform this Agreement and each
Transaction Document to which it is a party, (b) consummate the transactions
contemplated hereby and thereby and (c) perform its obligations hereunder and
thereunder. The execution and delivery by the Investor of this Agreement and
Transaction Documents, and the consummation by the Investor of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action on the part of the Investor. This Agreement has been duly and validly
executed and delivered by the Investor and constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency or
other similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before any proceeding
therefor may be brought.
Section 3.3 No Violation. The execution and delivery of this Agreement
and each other Transaction Document to which it is a party do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not result in any Violation of, any
material obligation or the loss of a material benefit under, any provision of
(a) the Operating Agreement of the Investor, or (b) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement to which
the Investor is a party or by which it or its properties or assets are bound.
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Section 3.4 Consents. No consent, approval, Order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to the Investor in connection with the execution and delivery
of this Agreement and the Transaction Documents by the Investor or the
consummation by the Investor of the transactions contemplated hereby and
thereby, except for such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby.
Section 3.5 Investment Representation. The Investor is acquiring the
Shares and the Warrants for its own account for investment purposes only, and
not with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act. The Investor understands that the
Shares have not been registered under the Securities Act or any blue sky or
other state securities Law (hereinafter collectively referred to as "blue sky
laws"). The Investor also understands that it cannot offer for sale, sell or
transfer the Shares or any of the Company Common Stock to be issued upon
exercise of the Warrants unless such offer, sale or transfer thereof has been
registered under the Securities Act and under any applicable blue sky laws or
unless an exemption from such registration is available with respect to any such
proposed offer, sale or transfer.
Section 3.6 Accredited Investor Status. Investor is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investments to be made by it hereunder.
ARTICLE IV
INDEMNIFICATION
---------------
Section 4.1 Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement
survive the Closing, but expire on the third anniversary of the Closing Date,
except that (a) the expiration date for any claim relating to a breach of the
representations and warranties set forth in Sections 2.9 and 2.11 will be the
expiration of the statutes of limitations applicable to such claims, and (b)
there will be no expiration date for any claim relating to a breach of the
representations and warranties set forth in Sections 2.1, 2.2, 2.3, 2.4, 2.15
and 2.21. The covenants and agreements of the parties contained herein will
survive the Closing and will remain in full force and effect in accordance with
their terms. No party to this Agreement has any rights to indemnification under
Section 4.2 unless notice of any claim pursuant to Section 4.3 is given to an
indemnifying party prior to the expiration of the applicable representation or
warranty.
Section 4.2 Indemnification.
(a) The Company shall indemnify, defend and hold the Investor harmless
from and against any and all demands, damages, losses, liabilities,
diminution of value of the Shares (including any Shares received or to be
received upon exercise of the Warrants), claims, obligations, charges,
penalties, costs and expenses (including
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all reasonable attorneys' fees and other expenses incurred in investigating
and preparing for any litigation or proceeding) (collectively, "Losses")
that the Investor may sustain, insofar as such Losses (i) arise out of a
breach by the Company of any covenant or agreement, or the inaccuracy of
any representation or warranty, of the Company contained herein, or (ii)
arise out of, or relate to, the operation of, or actions taken by, the
Company prior to the Closing Date. At Investor's option, Investor may
receive from the Company as payment for any Losses the number of shares of
Company Common Stock (the "Indemnification Shares") equal to the amount of
any such Losses divided by the closing bid price of the Company Common
Stock on the trading day immediately preceding the date of receipt of the
Investor's written notice exercising this option (the "Exercise Notice").
The Indemnification Shares shall be issued to the Investor within 5
Business Days of receipt by the Company of the Exercise Notice. Any
Indemnification Shares issued by the Company to Investor shall be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens
and not subject to preemptive or similar rights of any third party.
(b) The Investor shall indemnify, defend and hold the Company harmless
from and against any and all Losses that the Company may sustain, insofar
as such Losses arise out of a breach by the Investor of any covenant or
agreement, or the inaccuracy of any representation or warranty, of the
Investor contained herein.
(c) The remedies provided herein are cumulative and do not preclude the
assertion by any party hereto of any other rights or the seeking of any
remedies against the other party hereto.
Section 4.3 Defenses of Claim. If a claim for Losses is to be made by
an indemnified party, such indemnified party shall give written notice to the
indemnifying party as soon as practicable after such indemnified party becomes
aware of any fact, condition or event which may give rise to Losses for which
indemnification may be sought under Section 4.2. If any claim is brought by a
third party against an indemnified party for which indemnification may be sought
under Section 4.2, the indemnified party shall promptly notify the indemnifying
party. The party against whom indemnification is sought may (or, if requested,
shall) assume the defense of such claim, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all
expenses, unless in the reasonable judgment of the other party a conflict of
interest may exist with respect to such claim or differing or additional
defenses may be available to the other party. If defense of a claim is assumed
by an indemnifying party, the indemnified party will not be liable for any
settlement for such action or proceedings effected without its prior written
consent. Any party entitled to indemnification hereunder agrees to give prompt
written notice to the other party of any written notice of the commencement of
any Action or threat thereof made in writing for which such party may claim
indemnification under Section 4.2; provided, however, that the failure to give
such notice does not limit any party's right to indemnification hereunder.
Notwithstanding the foregoing, an indemnified party hereunder always has the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel will be at the
expense of such indemnified party, unless: (a) the indemnifying party has failed
promptly to assume the
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defense and employ counsel or (b) the named parties to any such action
(including any impleaded parties) include such indemnified party and the
indemnifying party and such indemnified party has been advised by counsel that a
conflict of interest may exist with respect to such claims or there may be one
or more legal defenses available to it that are different from one or in
addition to those available to the indemnifying party; provided, that the
indemnifying party will not in such event be responsible hereunder for the fees
and expenses of more than one firm of separate counsel in connection with any
action in the same jurisdiction, in addition to any local counsel.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1 Entire Agreement; Modification. This Agreement (together
with the documents delivered pursuant hereto) supersedes all prior documents,
understandings and agreements, oral or written, related to these transactions
contemplated by this Agreement and constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof;
provided, however, that until the Closing the Confidentiality Agreement remains
in full force and effect in accordance with the terms thereof. Any modification
or amendment to, or waiver of, any provision of this Agreement may be made only
by an instrument in writing executed by the party against whom enforcement
thereof is sought.
Section 5.2 Assignment Binding Effect. Neither this Agreement nor any
of the rights or obligations hereunder may be assigned by the Company without
the prior written consent of the Investor, or by the Investor without the prior
written consent of the Company, except that the Investor may, without such
consent, assign, in whole or in part, the right to acquire the Shares and the
Warrants hereunder to an Affiliate of such Investor. Subject to the foregoing,
this Agreement is binding upon and inures to the benefit of the parties hereto
and their respective successors and assigns, and no other Person has any right,
benefit or obligation hereunder.
Section 5.3 Severability. If any one or more provisions of this
Agreement is held to be illegal, invalid or unenforceable under present or
future Laws, then, if possible, such illegal, invalid or unenforceable provision
will be modified to such extent as is necessary to comply with such present or
future Laws and such modification will not affect any other provision of this
Agreement; provided, that if such provision may not be so modified, such
illegality, invalidity or unenforceability will not affect any other provision,
but this Agreement will be reformed, construed and enforced as if such invalid,
illegal or unenforceable provision had never been contained in this Agreement.
Section 5.4 Notices. Any notices required or permitted to be given
under this Agreement (and, unless otherwise expressly provided therein, under
any other Transaction Document delivered pursuant to this Agreement) must be
given in writing and will be deemed to have been duly given or made as of the
date delivered if (a) sent by first-class registered or certified mail, postage
prepaid, return receipt requested, (b) delivered
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personally or by a nationally recognized overnight courier service, or (c) sent
by telecopy (with prompt written confirmation of receipt thereof), to the
address given below:
The Investor: Snyder International Brewing Group, LLC
c/o Crooked River Brewing Company
1101 Center Street
Cleveland, OH 44114
Attn: C. David Snyder
Telecopy: (216) 771-7990
With a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attn: Patrick J. Leddy
Telecopy: (216) 579-0212
The Company: Frederick Brewing Co.
4607 Wedgewood Boulevard
Frederick, MD 21703
Attn: Kevin E. Brannon
Telecopy: (301) 694-7899
With a copy to: LeClair Ryan, A Professional Corporation
707 East Main Street
Suite 1100
Richmond, Virginia 23219
Attn: Bradley A. Haneberg
Telecopy: (804) 783-2294
Each party may change its address for purposes of this Section 5.4 by proper
notice to the other party in accordance with the provisions of this Section 5.4.
Section 5.5 Public Announcement. The Investor and the Company shall
notify the other party prior to any public announcement of the transactions
contemplated by this Agreement and allow the other party reasonable time to
review the contents of such public announcement. Neither the Company nor the
Investor shall issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement that is not required by Law without the consent of the other party,
which consent may not be unreasonably withheld.
Section 5.6 No Third-Party Beneficiaries. No Person not a party to this
Agreement is to be deemed to be a third-party beneficiary hereunder or entitled
to any rights hereunder.
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Section 5.7 Governing Law. This Agreement is to be governed by and
construed in accordance with the laws of the State of Ohio, without regard to
principles of conflicts or choice of law.
Section 5.8 Consent to Jurisdiction. Any legal action or proceedings
arising out of this Agreement may be brought only in the courts of the State of
Ohio, or in the courts of the United States of America sitting in the State of
Ohio. The Investor and the Company, irrevocably submit to the exclusive
jurisdiction of each such court, together with courts having appellate
jurisdiction therefrom, and waive all requirements of personal jurisdiction or
venue with respect thereto, and any writ, judgment or other notice of legal
process will be sufficiently served on the Investor or the Company if delivered
pursuant to Section 5.4 of this Agreement.
Section 5.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, will constitute but one agreement
binding upon all of the parties hereto.
Section 5.10 Certain Definitions.
(a) "Action" means any suit, action, charge, claim, inquiry,
investigation, grievance or proceeding (including any condemnation
proceeding).
(b) "Affiliate" of any Person means any Person directly or indirectly
controlling, controlled by, or under common control with, any such Person.
(c) "Business Day" means any day on which securities listed on the
National Association of Securities Dealers ("NASD") Automated Quotation
System ( "NASDAQ") SmallCap Market System ("NASDAQ/SMS") are quoted for
trading.
(d) "Knowledge" of any Person that is not an individual means the
knowledge of such Person's executive officers after reasonable inquiry.
(e) "Law" means any federal, state, local or foreign law, principle of
common law, statute, ordinance, rule, order or regulation of any
Governmental Entity.
(f) "Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in
respect of such property or asset. For the purposes of this Agreement, a
Person will be deemed to own, subject to a Lien, any property or asset
which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
(g) "Outstanding Interest" I means, with respect to any Person, the
percentage of the voting power of the outstanding shares of Common Stock
(other than voting power with respect to the election of specified
directors or a class vote on
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specified matters) represented by the shares of Common Stock beneficially
owned by such Person.
(h) "Order" means any judgment, decree, injunction, rule or order of
any Governmental Entity.
(i) "Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, Governmental Entity,
unincorporated association or any other entity or organization.
(j) "Post-Closing Tax Period" means any Tax period (or portion thereof)
ending after the Closing Date.
(k) "Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the Closing Date.
(l) "Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are, at any time, directly or indirectly, owned by such
Person.
(m) "Tax" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding on amounts paid to or by
the Company or any Subsidiary, payroll, equipment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest, penalty,
addition to tax or additional amount imposed by any Taxing Authority, (ii)
any liability of the Company or any Subsidiary for the payment of any
amounts of any of the foregoing types as a result of being a member of an
affiliated, consolidated, combined or unitary group, or being a party to
any agreement or arrangement whereby liability of the Company or any
Subsidiary for payment of such amounts was determined or taken into account
with reference to the liability of any other Person, and (iii) any
liability of the Company or any Subsidiary for the payment of any amounts
as a result of being a party to any Tax-Sharing Agreement or with respect
to the payment of any amounts of any of the foregoing types as a result of
any express or implied obligation to indemnify any other Person.
(n) "Tax-Sharing Agreement" means any existing Tax-sharing agreement or
arrangement (whether or not written) binding on the Company or any
Subsidiary.
(o) "Taxing Authority" means any Governmental Authority responsible for
the imposition of any Tax.
25
<PAGE>
Section 5.11 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
26
<PAGE>
IN WITNESS WHEREOF, the Company and the Investor have duly executed
this Agreement as of the date first above written.
SNYDER INTERNATIONAL BREWING
GROUP, LLC
By: /s/ David Snyder
------------------------------------
Name: David Snyder
Title: Chairman and CEO
FREDERICK BREWING CO.
By: /s/ Kevin E. Brannon
------------------------------------
Name: Kevin E. Brannon
Title: Chairman and CEO
27
Exhibit 2(b)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase Shares of Common Stock
of Frederick Brewing Co. (subject to
adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. C-1 August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
SNYDER INTERNATIONAL BREWING GROUP, LLC, or assigns, is entitled, subject to the
terms set forth below, to purchase from the Company after August 24, 1999 at any
time or from time to time until ten business days after the holder hereof
receives written notice from the Company that all Existing Convertible
Securities (as defined herein) shall have been converted, exercised, exchanged,
terminated or expired (the "Expiration Date"), the number of fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $.0004 par value
per share, of the Company, equal to the number of shares of Common Stock
issuable under the Existing Convertible Securities at a per share purchase price
of $0.01 per share (such purchase price per share is referred to herein as the
"Purchase Price") in such amounts and at such times as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.00004 par value per share, as authorized on the date of the Agreement, and (b)
any other capital stock of any class or classes (however designated) of the
Company, authorized on or after such date, the holders of which shall have the
right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and the
holders of which shall ordinarily, in the absence of contingencies, be entitled
to vote for the election of a majority of directors of the Company (even if the
right so to vote has been suspended by the happening of such a contingency).
<PAGE>
(c) The term "Existing Convertible Securities" refers to all securities
of the Company outstanding on the date hereof that are convertible into or
exercisable or exchangeable for Common Stock, including, without limitation, any
convertible preferred stock, warrants and options, and any convertible,
exercisable or exchangeable securities issued after the date hereof in exchange
for or in replacement of or pursuant to the terms of any Existing Convertible
Securities.
(d) The term "Unexercised Exercisable Warrants" means the Warrants that
are exercisable hereunder pursuant to a Triggering Conversion Notice or Notices
that are not exercised.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after
the date hereof through and including the Expiration Date, the holder hereof
shall be entitled, upon the Company's receipt of notice (each, a "Triggering
Conversion Notice") that any Existing Convertible Securities are being
converted, exchanged or exercised, to receive, upon exercise of this Warrant in
whole in accordance with the terms of subsection 1.2 or upon exercise of this
Warrant in part in accordance with subsection 1.3, the number of shares of
Common Stock of the Company equal to the number of shares of Common Stock of the
Company to be issued under the Triggering Conversion Notice.
1.2 Full Exercise. This Warrant may be exercised in full as to
the number of shares of Common Stock of the Company reflected in the relevant
Triggering Conversion Notice (plus the number of any Unexercised Exercisable
Warrants) by the holder hereof by surrender of this Warrant, with the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such holder, to the Company at its principal office, accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercised by the Purchase Price (as
hereinafter defined).
1.3 Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) as to the number of shares of Common Stock of
the Company reflected in the relevant Triggering Conversion Notice (plus the
number of any Unexercised Exercisable Warrants) by surrender of this Warrant in
the manner and at the place provided in subsection 1.2 except that the amount
payable by the holder on such partial exercise shall be the amount obtained by
multiplying (a) the number of shares of Common Stock designated by the holder in
the Subscription Form (which number shall not exceed the number of shares of
Common Stock issuable pursuant to the relevant Triggering Conversion Notice plus
the number of any Unexercised Exercisable Warrants) by (b) the Purchase Price.
1.4 Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ
SmallCap Market, then the closing or last sale price, respectively,
reported for the last business day immediately preceding the
Determination Date.
2
<PAGE>
(b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the
closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.
(c) If the Company's Common Stock is not publicly traded, then
as the Holder and the Company agree or in the absence of agreement by
arbitration in accordance with the rules then standing of the American
Arbitration Association, before a single arbitrator to be chosen from a
panel of persons qualified by education and training to pass on the
matter to be decided.
1.5 Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the date of issuance of the shares of Common Stock issued pursuant to the
Triggering Conversion Notice, provided that the holder of this Warrant shall
have made payment for the shares purchased upon exercise of this Warrant within
5 business days of receipt of the relevant Triggering Conversion Notice. If
payment is not received within such five business day period, the date of
issuance shall be deemed the date of receipt of payment for such shares. As soon
as practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock to which
such holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the Fair Market Value of one full share on the business
day immediately preceding the date of issuance.
3. Reservation of Stock, etc. Issuable on Exercise of Warrant:
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, 610,000 shares
of Common Stock, provided that the number of shares of Common Stock reserved
with respect to this Warrant shall be increased at the written request of the
holder hereof by an amount mutually agreed to by the holder and the Company
based on the number of Existing Convertible Securities then outstanding and the
market price of the Common Stock of the Company. This Warrant entitles the
holder hereof to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Company's Common
Stock.
4. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred (in whole but not in part) by registered holder hereof (a
"Transferor") in connection with a sale by such holder of its equity interests
in the Company. On the surrender for exchange of this Warrant, with the
Transferor's
3
<PAGE>
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, the Company at
its expense but with payment by the Transferor of any applicable transfer taxes
will issue and deliver to or on the order of the Transferor thereof a new
Warrant of like tenor, in the name of the transferee specified in such
Transferor Endorsement Form (a "Transferee"), for the aggregate for the number
of shares of Common Stock called for in the Warrant so surrendered by the
Transferor.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
6. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
7. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
8. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of Ohio. Any dispute relating to this Warrant shall be
adjudicated in Ohio. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
4
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: /s/ Kevin E. Brannon
-------------------------------
Name: Kevin E. Brannon
Title: Chairman and CEO
Witness:
/s/ [ILLIGIBLE]
- ---------------------------
5
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the holder of the within Warrant, hereby irrevocable
elects to exercise this Warrant for, and to purchase thereunder, ______ shares
of Common Stock of Frederick Brewing Co. and herewith makes payment of
$___________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to, _______________________________, whose
address is _____________________________________.
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:_________________________
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
6
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto the person(s) named below under the heading "Transferee" the right
represented by the within Warrant to purchase shares of Common Stock of
Frederick Brewing Co. and appoints such person attorney to transfer its
respective right on the books of Frederick Brewing Co. with full power of
substitution in the premises.
Dated:___________________, 1999 ____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
Signed in the presence of:
_______________________________ ____________________________________________
(Name) (Address)
ACCEPTED AND AGREED: ____________________________________________
[TRANSFEREE] (Address)
_______________________________
(Name)
7
Exhibit 3(a)
RESTRUCTURING AGREEMENT
This RESTRUCTURING AGREEMENT (this "Agreement") is made as of this 24th
day of August, 1999 by and among FREDERICK BREWING CO., a Maryland corporation
("FBC"), SNYDER INTERNATIONAL BREWING GROUP, LLC, an Ohio limited liability
company ("SIBG"), AUSTOST ANSTALT SCHAAN, a Lichtenstein corporation
("Austost"), BALMORE FUNDS S.A., a British Virgin Islands corporation
("Balmore"), RON S. WILLIAMS, SR. ("Williams Sr."), RON WILLIAMS, JR. ("Williams
Jr."), DEAN DOWDA ("Dowda"), FRED LENZ ("Lenz"), WORLD CAPITAL FUNDING, LLC, a
Pennsylvania limited liability company ("World Capital"), THE AUGUSTINE FUND
L.P., an Illinois limited partnership ("Augustine"), JIMMY DEAN ("Dean"),
CONGREGATION BETH MOREDECHAI, a religious organization with an address at 1074
46th Street, Brooklyn, New York 11219 ("CBM"), and BERTEK, INC., a New York
corporation, ("Bertek").
RECITALS
--------
A. Each of Austost, Balmore, Williams Sr., Williams Jr., Dowda, Lenz
and World Capital (each, a "Note Holder" and collectively, the "Note Holders")
is a holder of FBC's 10% Convertible Notes, dated June 7, 1999 (the "Convertible
Notes") issued by FBC pursuant to that certain Subscription Agreement dated as
of June 2, 1999 (the "Note Subscription Agreement").
B. Each of Austost, Balmore, Augustine, Dowda, CBM and Bertek (each, a
"Preferred Share Holder" and collectively, the "Preferred Share Holders") is the
beneficial and record owner of shares of FBC's Series F Convertible Preferred
Stock (the "Series F Stock") and/or Series G Convertible Preferred Stock (the
"Series G Stock" and together with the Series F Stock, the "Preferred Shares")
issued pursuant to the Subscription Agreements, dated as of September 3, 1998
(the "Series F Subscription Agreements") and the U.S. Subscription Agreements,
dated as of November 20, 1998 (the "Series G Subscription Agreements," and
together with the Series F Subscription Agreement, the "Preferred Shares
Subscription Agreements"), respectively.
C. In order to induce SIBG to make an investment of $2.0 million in
FBC, the Note Holders and the Preferred Share Holders (collectively, the
"Securities Holders") have agreed, effective as of the closing of such
investment (the "Investment Closing"), to consummate the transactions
contemplated by this Agreement (collectively, the "Restructuring Transactions").
D. Capitalized terms not otherwise defined herein shall have the
meaning given to them in Section 11.10 of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and undertakings contained in this
Agreement, and subject to and on the terms and conditions set forth in this
Agreement, the parties, intending to be legally bound, hereby agree as follows:
<PAGE>
ARTICLE I
PAYMENT OF
THE CONVERTIBLE NOTES
---------------------
1.1 Payment of the Convertible Notes. In full payment of the
Convertible Notes, SIBG shall cause FBC to pay (a) an aggregate of $500,000 to
the respective Note Holders in the amount set forth opposite their name on
Exhibit A attached hereto (the "Note Payments"), (ii) an aggregate of $50,000 to
World Capital in respect of advances made by World Capital to FBC in connection
with the issuance of the Convertible Notes (the "Advance Payment"), and (iii) an
aggregate of $20,000, payable as follows: $10,000 to World Capital, $5,000 to
Austost and $5,000 to Balmore, in respect of fees incurred by them in connection
with the issuance of the Convertible Notes (the "Fees Payment"). SIBG shall pay
the foregoing amounts by wire transfer of immediately available funds to the
recipient's account or accounts specified by such recipients in writing prior to
the Closing.
1.2 Termination of Note Subscription Agreement and Related
Agreements. Effective as of the Closing, (i) the Note Subscription Agreement and
the Security Agreement, dated as of June 7, 1999, between FBC and Barbara
Mittman, as collateral agent (the "Collateral Agent") for the benefit of the
persons and entities listed on Exhibit A attached thereto (the "Security
Agreement"), shall terminate and be of no further force and effect, (ii) neither
FBC nor SIBG nor any of their respective Affiliates shall have any obligations
or liabilities to the Note Holders under the Note Subscription Agreement or the
Security Agreement or under any other agreements (written or oral) regarding the
Convertible Notes, and (iii) the Note Holders hereby release any and all claims
under such agreements pursuant to Section 9.2 of this Agreement. The Note
Holders shall execute, deliver and file, or cause the execution, delivery and
filing of, any and all agreements, instruments or filings required or determined
by FBC to be appropriate to terminate any Liens in favor of the Note Holders.
The Note Holders hereby authorize the Collateral Agent to execute any and all
agreements, instruments and filings necessary or appropriate to effect the
foregoing.
1.3 Warrant Amendments. At the Closing, each of the Note
Holders who beneficially own common stock purchase warrants issued in connection
with the issuance of the Convertible Notes (the "Note Warrants") shall execute
an amendment to their respective Note Warrants in the form of Exhibit B attached
hereto (each, an "Amended Note Warrant").
ARTICLE II
CONVERSION OF PREFERRED SHARES
------------------------------
2.1 Conversion of Preferred Shares. At the Closing, each of
the Preferred Share Holders shall execute and deliver to FBC in accordance with
the terms of such Preferred Shares a conversion notice specifying that,
effective upon the Investment Closing, all of such Preferred Share Holder's
Preferred Shares shall be converted into the number of shares of Common Stock of
FBC (the "Conversion Shares") set forth opposite their name on Exhibit C. FBC
hereby acknowledges that pursuant to subsection (d)(3)(i) and (ii) of Rule 144
(as defined in Section 9.6(a)), holders of the Preferred Shares can tack the
holding period of the Preferred Shares to the Conversion Shares.
2
<PAGE>
2.2 Termination of Preferred Share Subscription Agreements and
Related Agreements. Effective as of the Closing, the Preferred Share
Subscription Agreements shall terminate and be of no further force and effect
and neither FBC nor SIBG nor any of their respective Affiliates shall have any
obligations or liabilities to the holders of the Preferred Shares under the
Preferred Share Subscription Agreements or the Certificate of Designation and
Articles Supplementary relating to the Preferred Shares or under any other
agreement (written or oral) regarding the Preferred Shares.
ARTICLE III
CLOSING
-------
3.1 Closing. The closing of the Restructuring Transactions
(the "Closing") will be held at the offices of Jones, Day, Reavis & Pogue, 901
Lakeside Avenue, Cleveland, Ohio 44114-1190 on August 24, 1999 (the "Closing
Date") simultaneously with the execution and delivery of this Agreement.
3.2 Closing Deliveries and Payment.
(a) At the Closing, each of the Note Holders shall deliver or
cause to be delivered to FBC and SIBG the following documents:
(i) The original Convertible Note for cancellation;
(ii) An Amended Note Warrant, to the extent
applicable, duly executed by each holder thereof;
(iii) A certified copy of the organizational
documents of World Capital; and
(iv) A certificate of the Secretary of each of
Austost, Balmore and World Capital certifying as to (A) the
good standing of Austost, Balmore and World Capital,
respectively, under the laws of their respective jurisdictions
of incorporation, (B) the board resolutions authorizing the
execution and performance of this Agreement, the execution and
performance of the documents contemplated hereby (the
"Transaction Documents") to which it is a party and the
performance of the Restructuring Transactions, (C) except with
respect to Austost and Balmore, their respective by-laws or
regulations and (D) the incumbency and genuineness of the
signature of each of their respective officers executing this
Agreement and the documents contemplated hereby.
(b) At the Closing, each of the Preferred Share Holders shall
deliver or cause to be delivered to FBC and SIBG the following documents:
(i) A Conversion Notice, duly executed by such
Preferred Share Holder;
3
<PAGE>
(ii) A certified copy of the organizational documents
of Augustine, CBM and Bertek;
(iii) A good standing certificate for Augustine, CBM
and Bertek issued by their respective jurisdictions of
organization; and
(iv) A certificate of the Secretary of each of
Augustine, CBM and Bertek certifying as to (A) the good
standing of Augustine, CBM and Bertek, respectively, under the
laws of their respective jurisdiction of organization, (B) the
board resolutions authorizing the execution and performance of
this Agreement, the execution and performance of the
Transaction Documents to which it is a party and the
performance of the Restructuring Transactions, (C) their
respective by-laws or regulations and (D) the incumbency and
genuineness of the signature of each of their respective
officers executing this Agreement and the documents
contemplated hereby.
(c) At the Closing, SIBG and/or FBC, as the case may be, shall
deliver or cause to be delivered to the Note Holders and/or the Preferred Share
Holders, as the case may be, the following documents:
(i) The Note Payments;
(ii) The Advance Payment;
(iii) The Fee Payment;
(iv) The Amended Note Warrants with respect to each
holder thereof;
(v) The shares of Common Stock of FBC issuable upon
conversion of the Preferred Shares pursuant to Section 2.1 of
this Agreement;
(vi) An Officer's Certificate certifying as to the
receipt by FBC of SIBG's $2.0 million investment for 51% of
FBC's outstanding common stock after giving effect to the
transactions contemplated hereby;
(vii) A certificate of the Secretary of SIBG
certifying as to (A) the good standing of SIBG under the laws
of its jurisdiction of organization, (B) the board resolutions
authorizing the execution and performance of this Agreement,
the execution and performance of the Transaction Documents to
which it is a party and the performance of the Restructuring
Transactions, (C) its by-laws or regulations and (D) the
incumbency and genuineness of the signature of each of its
officers executing this Agreement and the documents
contemplated hereby;
(viii) A certificate of the Secretary of FBC
certifying as to (A) the good standing of FBC under the laws
of its jurisdiction of organization, (B) the board resolutions
authorizing the execution and performance of this Agreement,
the execution and performance of the Transaction Documents to
which it is a party and the performance of the Restructuring
Transactions, (C) its by-laws or regulations and
4
<PAGE>
(D) the incumbency and genuineness of the signature of each of
its officers executing this Agreement and the documents
contemplated hereby; and
(ix) A certified copy of the organizational documents
of SIBG and FBC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE NOTE HOLDERS
-------------------
Each Note Holder represents and warrants to SIBG and FBC as of the date
of this Agreement as follows:
4.1 Authority. Such Note Holder has all requisite power and
authority to enter into and perform its or his obligations under this Agreement
and any Transaction Documents to which it or he is a party and to consummate the
Restructuring Transactions, and this Agreement and each of the Transaction
Documents to which it or he is a party have been duly executed and delivered by
such Note Holder pursuant to all necessary authorization and are the legal,
valid and binding obligations of such Note Holder, enforceable against such Note
Holder in accordance with their terms.
4.2 Title. Such Note Holder (a) is the record and beneficial
owner of the Convertible Note set forth opposite his or its name on Exhibit A
attached hereto, which constitutes all of the Convertible Notes it or he
directly or indirectly owns or controls, (b) has full power, right and
authority, and any approval required by law, to make and enter into this
Agreement and the Transaction Documents to which it or he is a party, and (c)
has valid title to his or its Convertible Note, free and clear of any Liens.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PREFERRED SHARE HOLDERS
------------------------------
Each Preferred Share Holder represents and warrants to SIBG and FBC for
itself as of the date of this Agreement as follows:
5.1 Authority. Such Preferred Share Holder has all requisite
power and authority to enter into and perform its or his obligations under this
Agreement and the Transaction Documents to which it or he is a party and to
consummate the Restructuring Transactions, and this Agreement and each of the
Transaction Documents to which it or he is a party have been duly executed and
delivered by such Preferred Share Holder pursuant to all necessary authorization
and are the legal, valid and binding obligations of such Preferred Share Holder,
enforceable against such Preferred Share Holder in accordance with their terms.
5.2 Title. Such Preferred Share Holder (a) is the record and
beneficial owner of the Preferred Shares set forth opposite his or its name on
Exhibit C attached hereto, which constitute
5
<PAGE>
all of the Preferred Shares it or he directly or indirectly owns or controls,
(b) has full power, right and authority, and any approval required by law, to
make and enter into this Agreement and the Transaction Documents to which it or
he is a party and to convert in full his or its Preferred Share, and (c) has
valid title to his or its Preferred Shares, free and clear of any Liens.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE SECURITIES HOLDERS
-------------------------
Each of the Securities Holders represents and warrants to SIBG and FBC
for itself as of the date of this Agreement as follows:
6.1 FBC Securities. Schedule 6.1 sets forth all of the debt
and/or equity securities of FBC directly or indirectly owned or controlled by
such Securities Holder except for the Amended Note Warrants and the Conversion
Shares. Except as set forth on Schedule 6.1 and except for the Amended Note
Warrants, such Securities Holder does not own or control any Options relating to
the Common Stock of FBC.
6.2 Consents and Approvals. No approval or authorization of,
or declaration, filing or registration with, any Governmental Authority is
required to be made or obtained by such Securities Holder in connection with the
execution, delivery and performance of this Agreement or any Transaction
Document to which it or he is a party and the consummation of the Restructuring
Transactions.
6.3 No Conflict or Violation. Neither the execution, delivery
or performance of this Agreement, any Transaction Document to which it or he is
a party nor the consummation of the Restructuring Transactions will result in
(a) a violation by such Securities Holder of any Laws or Orders applicable to
such Securities Holders, which violation would have a material adverse effect on
the ability of such Securities Holders to consummate the Restructuring
Transactions or (b) a violation or conflict with any provision of any contract
or agreement to which such Securities Holder is a party.
6.4 Litigation. There are no Actions instituted or pending
against such Securities Holder that seek to prevent or prohibit the consummation
of the Restructuring Transactions. Such Securities Holder is not subject to any
Order.
6.5 No Reliance. Such Securities Holder has (a) had access to
information regarding FBC, its business and financial condition, (b) had an
opportunity to ask questions of, and obtain additional information from, FBC
regarding its business, financial condition and prospects, and (c) had the
opportunity to seek legal counsel regarding the Restructuring Transactions and
this Agreement. Such Securities Holder is not taking any action pursuant to this
Agreement in reliance upon any representation made, or information provided by,
FBC or SIBG or any of their respective Representatives or Affiliates except for
the representations and warranties set forth in this Agreement.
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6.6 Broker's Fees. No person has acted directly or indirectly
as a broker, finder or financial advisor for such Securities Holder in
connection with the Restructuring Transactions or this Agreement, and no person
is entitled to any fee or commission or like payment from such Securities Holder
in connection with the Restructuring Transactions or this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SIBG
--------------------------------------
SIBG represents and warrants to the Securities Holders as follows:
7.1 Authorization. SIBG has the legal capacity, power and
authority to enter into this Agreement and perform its obligations under this
Agreement and any Transaction Document to which it is a party, and has taken all
actions necessary to consummate the Restructuring Transactions and to perform
SIBG's obligations under this Agreement and any Transaction Document to which it
is a party. This Agreement and the Transaction Documents to which it is a party
have been duly executed and delivered by SIBG and are the legal, valid and
binding obligations of SIBG, enforceable against SIBG in accordance with their
terms.
7.2 Consents and Approvals. No approval or authorization of,
or declaration, filing or registration with, any Governmental Authority is
required to be made or obtained by SIBG in connection with the execution,
delivery and performance of this Agreement or any Transaction Document to which
it is a party and the consummation of the Restructuring Transactions.
7.3 No Conflict or Violation. Neither the execution, delivery
or performance of this Agreement, any Transaction Document to which it is a
party nor the consummation of the Restructuring Transactions will result in (a)
a violation by SIBG of any Laws or Orders applicable to SIBG, which violation
would have a material adverse effect on the ability of SIBG to consummate the
Restructuring Transactions, or (b) a violation or conflict with any provision of
any contract or agreement to which SIBG is a party.
7.4 Litigation. There are no Actions instituted or pending
or, to the knowledge of SIBG, threatened against SIBG that seek to prevent or
prohibit the consummation of the Restructuring Transactions. SIBG is not subject
to any Order.
7.5 Broker's Fees. No person has acted directly or indirectly
as a broker, finder or financial advisor for SIBG in connection with the
Restructuring Transactions or this Agreement, and no person is entitled to any
fee or commission or like payment from SIBG in connection with the Restructuring
Transactions or this Agreement.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF FBC
-------------------------------------
FBC represents and warrants to the Securities Holders as follows:
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8.1 Authorization. FBC has the legal capacity, power and
authority to enter into this Agreement and perform its obligations under this
Agreement and any Transaction Document to which it is a party and has taken all
actions necessary to consummate the Restructuring Transactions and to perform
FBC's obligations under this Agreement and any Transaction Document to which it
is a party. This Agreement and the Transaction Documents to which it is a party
have been duly executed and delivered by FBC and are the legal, valid and
binding obligations of FBC, enforceable against FBC in accordance with their
terms.
8.2 Consents and Approvals. No approval or authorization of,
or declaration, filing or registration with, any Governmental Authority is
required to be made or obtained by FBC in connection with the execution,
delivery and performance of this Agreement or any Transaction Document to which
it is a party and the consummation of the Restructuring Transactions.
8.3 No Conflict or Violation. Neither the execution, delivery
or performance of this Agreement, any Transaction Document to which it is a
party nor the consummation of the Restructuring Transactions will result in (a)
a violation by FBC of any Laws or Orders applicable to FBC, which violation
would have a material adverse effect on the ability of FBC to consummate the
Restructuring Transactions, or (b) a violation or conflict with any provision of
any contract or agreement to which FBC is a party.
8.4 Litigation. There are no Actions instituted or pending or,
to the knowledge of FBC, threatened against FBC that seek to prevent or prohibit
the consummation of the Restructuring Transactions. FBC is not subject to any
Order.
8.5 Broker's Fees. No person has acted directly or indirectly
as a broker, finder or financial advisor for FBC in connection with the
Restructuring Transactions or this Agreement, and no person is entitled to any
fee or commission or like payment from FBC in connection with the Restructuring
Transactions or this Agreement.
ARTICLE IX
COVENANTS AND AGREEMENTS
------------------------
9.1 Further Assurances. Following the Closing, SIBG and FBC,
on the one hand, and the Securities Holders, on the other hand, shall perform
such further deeds, acts, things and assurances as are necessary, reasonable,
advisable or appropriate to consummate the Restructuring Transactions and
otherwise to carry out or facilitate the performance of the terms of this
Agreement. If, at any time after the Closing, any further action is necessary or
desirable to carry out this Agreement or the Restructuring Transactions, SIBG
and FBC, on the one hand, and the Securities Holders, on the other hand, shall
take all such necessary action.
9.2 Release of Claims. Each Securities Holder, on behalf of
himself or itself and his or its dependents, successors, assigns, heirs,
executors, administrators and Representatives (the "Releasors"), hereby
releases, remises, acquits and discharges forever, irrevocably and
unconditionally, SIBG and FBC and their respective Representatives, Affiliates,
successors and assigns (the "Releasees"), from, against and with respect to any
and all Claims which any of the Releasors has, ever had or may hereafter have
against the Releasees arising on or prior to the date
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of this Agreement or on account of or arising out of any matter, cause or event
occurring on or prior to the date of this Agreement; provided, however, that
nothing in this Section 9.2 will operate to release any obligation of SIBG or
FBC arising under this Agreement. Each Securities Holder, on behalf of himself
or itself and the other Releasors, hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any Claim, or commencing, instituting or
causing to be commenced or instituted, any Action of any kind against any
Releasee under this Section 9.2 based on any matter purported to be released
under this Section 9.2. The provisions of this Section 9.2 are intended for the
benefit of, and will be enforceable by each Releasee.
9.3 Volume Limitations. During the period commencing on the
date the volume limitations of Rule 144(e) are no longer applicable to the
Conversion Shares through and including the second anniversary of the date
hereof (the "Contractual Restriction Period"), the number of Conversion Shares
which each Preferred Share Holder or any Affiliate of a Preferred Share Holder
who receives or acquires Conversion Shares (the "Conversion Share Holder") shall
be entitled to sell during any three-month period shall not exceed the greater
of (i) one percent of the shares of FBC Common Stock outstanding as shown by the
most recent report or statement published by FBC or (ii) the average weekly
reported volume of trading in such securities on all national securities
exchanges and/or reported through the automated quotation system of a
registered securities association during the four calendar weeks preceding the
date of such sale; provided, however, that if, prior to the commencement of the
Contractual Restriction Period, a Conversion Share Holder does not sell the
maximum number of Conversion Shares permitted during such period by Rule 144(e),
then, notwithstanding the restrictions contained in this Section 9.3, such
Conversion Share Holder may sell pursuant to Rule 144(k) (to the extent legally
available) the number of Conversion Shares equal to the Rule 144(e) Shortfall
Amount in addition to the amounts saleable pursuant to (i) and (ii) above. For
purposes of this Agreement, the "Rule 144(e) Shortfall Amount" means the excess
of the Rule 144(e) Amount over the number of Conversion Shares sold by such
Conversion Share Holder pursuant to Rule 144 after the date hereof and prior to
the commencement of the Contractual Restriction Period; and "Rule 144(e) Amount"
means the maximum number of shares of FBC Common Stock such Conversion Share
Holder was entitled to sell between the date hereof and the commencement of the
Contractual Restriction Period pursuant to Rule 144 in compliance with the
volume limitations of Rule 144(e). For purposes of determining the amount of
shares of FBC Common Stock which may be sold on a particular date, the parties
hereto shall rely on Rule 144(e)(3) and the interpretations of Rule 144 by the
Securities and Exchange Commission. Each Preferred Share Holder acknowledges
that the foregoing volume limitations are a material inducement for FBC and SIBG
to enter into this Agreement and consummate the transactions contemplated by
this Agreement.
9.4 Prohibition Against Short Sales. For a period of three
years commencing on the date of this Agreement, no Preferred Share Holder shall,
directly or indirectly, engage in any short sales in FBC Common Stock. For
purposes of this Agreement, "short sale" means any sale of a security that the
seller does not own or any sale that is consummated by delivery of a security
borrowed by, or for the account of, the seller. Each Preferred Share Holder
acknowledges that the foregoing prohibition is a material inducement for FBC and
SIBG to enter into this Agreement and consummate the transactions contemplated
by this Agreement.
9.5 Irrevocable Proxy. From the date hereof through and
including the second anniversary of the date hereof, each Preferred Share Holder
hereby grants SIBG an irrevocable proxy and irrevocably appoints SIBG or its
designees, with full power of substitution, his or its attorney
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and proxy to vote all of the shares of FBC Common Stock then owned or controlled
by such Preferred Share Holder, at any meeting of the shareholders of FBC,
however called, in favor of any proposal to (i) approve a merger or other
business combination between or involving SIBG and FBC which (A) shall be on
commercially reasonable terms, and (B) shall result in FBC remaining a reporting
company under the Exchange Act (as defined in 9.6(a)) and (ii) increase the
number of authorized shares of FBC. The proxy granted hereby shall be deemed to
be a proxy coupled with an interest for purposes of Section 2-507 of the
Maryland General Corporation Law.
9.6 Registration Rights. FBC hereby provides the Preferred
Share Holders with registration rights as set forth in this Section 9.6.
(a) Definitions. The following terms, as used in this Section
9.6, have the following meanings (all terms defined herein in the
singular to have the correlative meanings when used in the plural and
vice versa):
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute,
and the rules and regulations promulgated thereunder.
"Holders" means the Preferred Share Holders who
receive FBC Common Stock pursuant to Section 2.1 of this
Agreement and any assignee of the Holders permitted by Section
9.6(h), so long as any such Person is a holder of record of
Registrable Shares.
"Initial Shares" means the Conversion Shares.
"Participating Holders" means, with respect to any
registration of Registrable Shares by FBC pursuant to this
Agreement the Holders that are entitled to participate in, and
are participating in or seeking to participate in, such
registration.
"Person" means a natural person, a corporation, a
partnership, a limited liability company, a trust, a joint
venture, any regulatory authority or any other entity or
organization.
"Piggyback Registration" means any registration of
Registrable Shares under the Securities Act effected in
accordance with Section 9.6(b).
"Registrable Shares" means (i) the Initial Shares,
and (ii) any other securities issued or issuable with respect
to the Initial Shares by way of stock dividend, stock split or
dividend or distribution in the form of securities or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Shares, such securities shall
cease to be Registrable Shares when (i) a registration
statement with respect to the sale of such securities shall
have become effective under the Securities Act and such
securities shall have been disposed of pursuant to such
registration statement, (ii) such securities shall have been
distributed in accordance with Rule 144, (iii) such securities
shall have ceased to be outstanding, or (iv) such securities
are transferred to any Person that is not an assignee
permitted by Section 9.6(h).
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"Registration Expenses" means all expenses incident
to FBC's performance of or compliance with this Agreement,
including, without limitation, (a) all registration and filing
fees, (b) all registration, filing, qualification and other
fees and expenses of complying with securities or blue sky
laws of all jurisdictions in which the securities are to be
registered and any legal fees and expenses incurred in
connection with the blue sky qualifications of the Registrable
Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all
word processing, duplicating, printing, messenger and delivery
expenses and (d) the fees and disbursements of counsel for FBC
and of its independent public accountants.
"Rule 144" means Rule 144 promulgated by the SEC
under the Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority
thereto.
"Securities Act" means the Securities Act of 1933,
as amended from time to time, or any successor statute, and
the rules and regulations promulgated thereunder.
"Selling Expenses" means all costs and expenses
incident to each Holder's sale of Registrable Shares as
provided for in Section 9.6(b) of this Agreement, including,
without limitation, commissions to brokers and/or dealers and
fees and expenses of any Person retained by the Holder in
connection with such sale or sales, but excluding Registration
Expenses.
"Shares" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
(i) If FBC at any time proposes to register any of
its equity securities under the Securities Act for its own
account (other than by a registration on Form S-4 or Form S-8
or any successor or similar form then in effect) in a form and
in a manner that would permit registration of the Registrable
Shares, it will give prompt (but in no event less than thirty
days prior to the proposed date of filing the registration
statement relating to such registration) notice to all Holders
of FBC's intention to do so and of such Holders' rights under
this Section 9.6(b). Upon the request of any such Holder made
within twenty days after the receipt by such Holder of any
such notice (which request shall specify the Registrable
Shares intended to be disposed of by such Holder) (the
"Piggyback Registration Notice"), FBC will use commercially
reasonable efforts to effect the registration under the
Securities Act of all Registrable Shares which FBC has been so
requested to register by the Holders thereof, to the extent
required to permit the disposition (in accordance with the
manner of distribution contemplated by FBC with respect to
such registration by FBC of the Registrable Shares so to be
registered; provided, however, that if, at any time after
giving notice of its intention to register any equity
securities and prior to the effective date of the registration
statement filed in connection with such registration, FBC
shall determine for any reason not to register or to delay
registration of such equity securities, FBC may, at its
election, give notice of such
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determination to each such Holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of
its obligation to register any Registrable Shares in
connection with such registration and (ii) in the case of a
determination to delay registering, shall be permitted to
delay registering any Registrable Shares for the same period
as the delay in registering such other equity securities.
(ii) If FBC at any time proposes to register any of
its equity securities for its own account under the Securities
Act as contemplated by this Section 9.6(b) and such securities
are to be distributed by or through one or more underwriters,
FBC will, if requested by any Participating Holder and subject
to this Section 9.6(b), include the Registrable Shares
requested by such Holder or Holders among the securities to be
distributed by such underwriters. The Holders of Registrable
Shares to be distributed by such underwriters shall be parties
to the underwriting agreement between FBC and such
underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to FBC.76
(iii) If (A) a registration pursuant to this Section
9.6(b) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a
transaction and (B) the managing underwriter of such
underwritten offering shall inform FBC and the Holders
requesting such registration by letter of its belief that the
amount of securities requested to be included in such
registration exceeds the amount which can be sold in (or
during the time of) such offering within a price range
acceptable to FBC, FBC will include in such registration such
amount of securities which FBC is so advised can be sold in
(or during the time of) such offering as follows: first, all
securities proposed by FBC to be sold for its own account;
second, such Registrable Shares requested to be included in
such registration by any Holders thereof pro rata on the basis
of the amount of such securities so proposed to be sold and so
requested to be included by such Holders; and third, all other
securities of FBC requested to be included in such
registration pro rata on the basis of the amount of such
securities so proposed to be sold and so requested to be
included.
(c) Registration Terms and Procedures. (i) Each Participating
Holder shall pay its own Selling Expenses (as the case may be) incurred
in connection with a registration to be effected (whether or not
effected or deemed effected) pursuant to this Agreement. FBC shall pay
all Registration Expenses in connection with a registration to be
effected (whether or not effected or deemed effected) pursuant to this
Agreement.
(ii) In connection with FBC's obligations to register
Registrable Shares pursuant to this Agreement, FBC will use
commercially reasonable efforts to effect such registration so
as to permit the sale of any Registrable Shares included in
such registration in accordance with the intended method or
methods of distribution thereof, and pursuant thereto FBC will
as expeditiously as possible prepare and (as soon thereafter
as practicable) file with the SEC the requisite registration
statement containing all information required thereby to
effect such registration and thereafter use commercially
reasonable efforts to cause such registration statement to
become and remain effective in accordance with the terms of
this Agreement.
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(iii) Each Holder of Registrable Shares as to which
any registration is being effected shall furnish to FBC such
information regarding such Holder, the Registrable Shares held
by such Holder and the intended plan of distribution of such
securities as FBC may from time to time reasonably request in
writing in connection with such registration. If any
registration statement refers to any Holder by name or
otherwise as the holder of any securities of FBC, then such
Holder shall have the right to require that such reference to
be in a form reasonably satisfactory to such Holder or in the
event that such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal
or state blue sky statute and the rules and regulations
thereunder then in force, the deletion of the reference to
such Holder.
(d) [intentionally omitted]
(e) Preparation: Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, FBC will give the Holders of
Registrable Shares to be registered under such registration statement,
in the case of registration of Registrable Shares pursuant to Section
9.6(b), their underwriters or agents, if any, and their respective
counsel and accountants reasonable access to its books and records and
such opportunities to discuss the business of FBC with its officers and
the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such Holders' and
such underwriters' or agents' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
(f) Indemnification. FBC and each of the Preferred Share
Holders acknowledge and agree that as a condition precedent to the
exercise of the registration rights herein contained, FBC and those
Holders electing to avail themselves of the rights specified in this
Section 9.6 shall each agree to and shall exchange such indemnities as
are customary and reasonable in connection with public offerings of
securities in circumstances similar to the circumstances of any
offering effected pursuant to the rights herein contained, which
indemnities shall be acceptable to FBC and its counsel in their sole
discretion. The Holders shall provide such information and undertake
such other actions as reasonably requested by FBC in connection with
such registration.
(g) [intentionally omitted]
(h) Assignment. The rights of the Holders hereunder shall only
be assignable in connection with the transfer of Registrable Shares by
a Holder that is required by operation of law, or in connection with a
transfer by a Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of each Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 9.6(f) and the
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rights of any party hereto with respect to the breach of any provision
hereof shall survive termination of this Agreement.
ARTICLE X
INDEMNIFICATION
---------------
10.1 Survival Periods. The representations and warranties of
the parties contained in this Agreement will survive the Closing Date but expire
on the first anniversary of the Closing Date, except that there will be no
expiration date for any claim relating to breach of the representations and
warranties set forth in Sections 4.1, 4.2, 5.1, 5.2, 6.1, 6.6, 7.1, 7.5, 8.1 and
8.5. The covenants and agreements of the parties hereto will survive the Closing
in accordance with their terms. From and after the Closing, each of the
Securities Holders hereby agrees to indemnify, defend and hold harmless SIBG and
FBC, and SIBG and FBC hereby agree to indemnify, defend and hold harmless each
of the Securities Holders, against certain liabilities, in accordance with the
terms of this Article X.
10.2 Indemnification. Subject to the other provisions of this
Article X, from and after the Closing, a party providing indemnification
pursuant to this Article X (an "Indemnifying Party") shall indemnify, defend and
hold harmless the other party (the "Indemnified Party") from and against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims and damages (collectively, "Damages") to the extent they are the
result of any inaccuracy of any representation or warranty or failure to perform
or breach of any covenant or agreement made by the Indemnifying Party under this
Agreement. In addition, each of the Securities Holders, jointly and severally,
agree to indemnify, defend and hold harmless SIBG and FBC for any and all
Damages incurred or suffered by SIBG and/or FBC arising or resulting from any
activities of the Securities Holders or their Affiliates involving any
fraudulent or unlawful conduct with respect to any of FBC's debt in equity
securities, whether relating to a claim by FBC, SIBG, the SEC, any other
Governmental Authority or any other Person; provided, however, that unless a
claim relating to such fraudulent or unlawful conduct or alleged fraudulent or
unlawful conduct results in a determination by the appropriate Governmental
Authority that the Securities Holders or any of them engaged in such fraudulent
or unlawful conduct, the Securities Holders shall have no obligation to pay the
attorneys' fees and other costs and expenses of FBC and/or SIBG with respect to
such claim.
10.3 Claims. (a) If an Indemnified Party intends to seek
indemnification pursuant to this Article X, such Indemnified Party shall
promptly notify the Indemnifying Party in writing of such claim describing such
claim in reasonable detail; provided, that the failure to provide such notice
will not affect the obligations of the Indemnifying Party unless such Party is
actually prejudiced thereby. If such claim involves a claim by a third party
against the Indemnified Party, the Indemnifying Party will have 30 days after
receipt of such notice to decide whether it will undertake, conduct and control,
through counsel of its own choosing and at its own expense, the settlement or
defense of such claim, and if it so decides, the Indemnified Party shall
cooperate with the Indemnifying Party in connection with the settlement or
defense; provided, that the Indemnified Party may participate in such settlement
or defense through counsel chosen by it; and provided further, that the fees and
expenses of such counsel must be paid by the Indemnified Party. The Indemnifying
Party shall not, without the written consent of the Indemnified Party, settle or
compromise any action in any manner that would materially and adversely affect
the Indemnified
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Party. If the Indemnifying Party does not notify the Indemnified Party within 30
days after the receipt of the Indemnified Party's notice of a claim of indemnity
under this Agreement that it elects to undertake the defense of such claim, the
Indemnified Party will have the right to contest, settle or compromise the claim
but does not thereby waive any right to indemnity for such claim pursuant to
this Agreement. As long as the Indemnifying Party is contesting any such claim
in good faith, the Indemnified Party shall not pay or settle any such claim.
Notwithstanding the foregoing, the Indemnified Party will have the right to pay
or settle any such claim; provided, that as long as the Indemnifying Party is
contesting such claim in good faith, any such settlement must include as an
unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnifying Party of a duly executed written release of the Indemnifying Party
from all liability and obligation in respect of such action; and provided
further, that in such event Indemnified Party shall waive any right to indemnity
for such claim by the Indemnifying Party; and provided further, that the
Indemnified Party shall provide the Indemnifying Party reasonable advance notice
of any proposed settlement or payment and may not pay or settle any claim if the
Indemnifying Party reasonably objects.
(b) The Indemnified Party shall cooperate fully in all aspects
of any investigation, defense, pretrial activities, trial, compromise,
settlement or discharge of any claim in respect of which indemnity is
sought pursuant to Article X, including, without limitation, by
providing the other party with reasonable access to any employees
(including as witnesses) and other information.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Successors and Assigns. This Agreement is binding upon
and inures to the benefit of the parties and their respective successors and
assigns, but, except with respect to Section 9.6, is not assignable by any party
without the prior written consent of the other parties.
11.2 Notices. Unless otherwise provided in this Agreement, any
notice, request, instruction or other document to be given under this Agreement
by SIBG, FBC or any of the Securities Holders must be in writing and will be
deemed duly given (a) when received if personally delivered or sent by confirmed
facsimile, with a copy mailed by certified mail, postage prepaid, return receipt
requested, (b) within one business day after being sent by recognized overnight
delivery service or (c) within five business days after being mailed by
certified mail, postage prepaid, return receipt requested, and in each case
addressed as follows:
If to the Securities Holder:
To the address and facsimile number set forth opposite of the
Securities Holder's name on Exhibit A or Exhibit C hereto.
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If to SIBG:
C. David Snyder
c/o Crooked River Brewing Company
1101 Center Street
Cleveland, Ohio 44113
Facsimile: (216) 771-7990
With a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attn: Patrick J. Leddy, Esq.
Facsimile: (216) 579-0212
or to such other place and with such other copies as any of the foregoing may
designate by written notice to the other party.
11.3 Choice of Law. This Agreement is governed by and will be
construed and enforced in accordance with the laws of the State of Ohio without
regard to principles of conflicts of laws.
11.4 Entire Agreement, Amendments and Waivers. This Agreement,
together with all Exhibits, constitutes the entire agreement of the parties
pertaining to this subject matter and supersedes all prior agreements,
understandings, negotiations or discussions, whether oral or written, of the
parties. No supplement, modification or waiver of this Agreement will be binding
unless executed in writing by the party or the parties to be bound thereby. No
waiver of any of the provisions of this Agreement will be deemed or will
constitute a waiver of any other provision of this Agreement (whether or not
similar), nor will such waiver constitute a continuing waiver unless otherwise
expressly provided.
11.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
11.6 Invalidity. If any one or more of the provisions
contained in this Agreement or in any other instrument referred to in this
Agreement, is, for any reason, held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability will not affect any
other provision of this Agreement.
11.7 Headings. The headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
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11.8 Expenses. SIBG and FBC, on the one hand, and the
Securities Holders, on the other hand, are liable for their own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Agreement.
11.9 No Third Party Beneficiaries. Except under Section 9.2,
nothing expressed or implied in this Agreement is intended, or will be
construed, to confer upon or give any person or entity other than the parties
hereto any rights or remedies under or by reason of this Agreement.
11.10 Defined Terms. For purposes of this Agreement the
following terms have the meanings (such meanings to be equally applicable to
both singular and plural forms of the defined terms) set forth below:
"Actions" means any action, suit, or legal, administrative or
arbitral proceeding before any Governmental Authority.
"Affiliate" means with respect to any person, any other
Person, directly or indirectly controlling, controlled by or under common
control with the first Person. For purposes of this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
"Claims" means any and all claims, Actions, suits,
liabilities, costs, demands, accounts, causes of action, rights of levy,
execution or recission, remedies, judgments, obligations, damages, expenses,
interest, penalties and charges of every kind and nature whatsoever, whether in
law or in equity, whether known or unknown, foreseen or unforeseen, matured or
unmatured, absolute or contingent, determined or determinable.
"Governmental Authority" means any government or political
subdivision, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any federal,
state, local or foreign court or arbitrator.
"Laws" means any law, statute, code, ordinance, regulation or
legally enforceable rule of any Governmental Authority.
"Liens" means any mortgage, lien, Option, pledge, adverse
claim, interest, charge or other encumbrance.
"Option" means any option, warrant, call, convertible or
exchangeable security, subscription, preemptive right or voting trust or
agreement, any agreement restricting sale or transfer or other agreement or
right of similar nature.
"Orders" means any order, judgment, ruling, injunction,
assessment, award, decree or writ of any Governmental Authority.
"Person" means any natural person and any corporation, firm,
partnership, trust, estate, limited liability company or any other entity.
17
<PAGE>
"Representatives" means, with respect to a party, his or its
present and former employees, shareholders, partners, Affiliates, agents,
attorneys or representatives.
11.11 Consent To Jurisdiction And Service Of Process. Any and
all Actions arising out of or relating to this Agreement and any other Actions
by or among the Securities Holders (or my of them) or FBC and SIBG, on the one
hand, and the Securities Holders (or any of them), on the other hand, must be
brought in a court within the State of Ohio. Each Securities Holder irrevocably
consents to the jurisdiction of the state and federal courts located in the
State of Ohio and waives any objection which the Securities Holder may now or
hereafter have to the choice of forum whether personal jurisdiction, venue,
forum non conveniens or on any other ground. Each Securities Holder hereby
irrevocably designates, appoints and empowers the Secretary of State of the
State of Ohio to receive for and on behalf of such Securities Holder service of
process in the State of Ohio and each Securities Holder irrevocably consents to
the service of process outside of the territorial jurisdiction of said courts by
mailing copies thereof by registered or certified United States mail, postage
prepaid, to such Securities Holder's address as set forth pursuant to Section
11.2 hereof, with the same effect as if the Securities Holder were a resident of
the State of Ohio and had been lawfully served in such state. Nothing in this
Agreement prohibits service of process in any other manner permitted by law.
Each Securities Holder further agrees that final judgment against him in any
such Action will be conclusive and may be enforced in any other jurisdiction
within or outside the State of Ohio by suit on the judgment, a certified or
exemplified copy of which will be conclusive evidence of the fact and the amount
of such judgment.
11.12 Undertakings. The Securities Holders shall use their
reasonable efforts to provide to SIBG and FBC within thirty days of the date
hereof copies of the organizational documents and by-laws (or comparable
documents) of Austost and Balmore certified by their respective Corporate
Secretary or Officer.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
SIBG:
SNYDER INTERNATIONAL BREWING
GROUP, LLC
By: /s/ C. David Synder
-------------------------------
Name: C. David Synder
Title: Chairman and C.E.O.
FBC:
FREDERICK BREWING CO.
By: /s/ Kevin Brannon
-------------------------------
Name: Kevin Brannon
Title: Chairman and C.E.O.
SECURITIES HOLDERS:
AUSTOST ANSTALT SCHAAN
By: /s/ [ILLEGIBLE]
-------------------------------
Name: [ILLEGIBLE]
Title: Representative
BALMORE FUNDS S.A.
By: /s/ {ILLEGIBLE]
-------------------------------
Name: [ILLEGIBLE]
Title:
WORLD CAPITAL FUNDING, LLC
By: /s/ Keith Mayer
-------------------------------
Name: Keith Mayer
Title: Managing Partner
THE AUGUSTINE FUND L.P.
By: /s/ [ILLEGIBLE]
-------------------------------
Name: [ILLEGIBLE]
Title: COO, Augustine Capital
Management, Inc.,
General Partner
19
<PAGE>
CONGREGATION BETH MOREDECHAI
By: /s/
-------------------------------
Name:
Title:
BERTEK, INC.
By: /s/ [ILLEGIBLE]
-------------------------------
Name:
Title: Vice President
/s/ Ronald Williams, Sr.
-----------------------------------
Ron S. Williams, Sr.
/s/ Ronald Williams, Jr.
-----------------------------------
Ron S. Williams, Jr.
/s/ Dean Dowda
-----------------------------------
Dean Dowda
/s/ Fred Lenz
-----------------------------------
Fred Lenz
/s/ Jimmy Dean
-----------------------------------
Jimmy Dean
20
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Aggregate
Principal
Note Holder Amount of Note Address
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Austost Anstalt Schaan $125,000 7440 Fuerstentum
Lichenstein, Landstrasse 163
Facsimile: 011-431-534532895
with copy to:
Facsimile:
- -------------------------------------------------------------------------------------------------------
Balmore Funds S.A. $125,000 P.O. Box 4603
Zurich, Switzerland
Facsimile: 011-411-201-6262
with copy to:
Facsimile:
- -------------------------------------------------------------------------------------------------------
Ron Williams, Sr. $ 30,000 1817 Airpark Road
Edgewater, Florida 32132
Facsimile: 904-428-8732
with copy to:
Facsimile:
- -------------------------------------------------------------------------------------------------------
Ron Williams, Jr. $ 20,000 2736 Banyan Drive
Edgewater, Florida 32141
Facsimile: 904-428-8732
- -------------------------------------------------------------------------------------------------------
Dean Dowda $ 50,000 1982 Shannon Lane
Apopka, Florida 32703
Facsimile: 407-880-3745
- -------------------------------------------------------------------------------------------------------
Fred Lenz $100,000 113 Hattaway Drive
Altamonte Springs, Florida 32701
Facsimile: 407-831-6106
- -------------------------------------------------------------------------------------------------------
World Capital Funding, LLC $ 50,000 1499 Blake Street #6C
Denver, Colorado 80262
Facsimile: 303-620-9199
- -------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
EXHIBIT B
Form of Amended Note Warrant
22
<PAGE>
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 125,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
No. 1-A August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
AUSTOST ANSTALT SCHAAN, or assigns (the "Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company after August 24, 1999 at any
time or from time to time before 5:00 p.m., New York time, on June 7, 2002 (the
"Expiration Date"), up to 125,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $.0004 par value per share, of the Company, at a
per share purchase price of $0.50 per share (the "Warrant"), (such purchase
price per share as adjusted from time to time as herein provided is referred to
herein as the "Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein.
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term Company shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
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<PAGE>
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(d) The term "Registrable Securities" means (i) Common Stock issued
pursuant to the Warrant, (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization and (iii) any other shares
of Common Stock held by the Holder. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act of 1933 (the "Securities Act") or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company. For
purposes of this Warrant, the Holder shall be deemed to be a Holder of
Registrable Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Holder has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Holder shall be entitled to exercise the
rights of a Holder of Registrable Securities hereunder (it being understood,
however, that any Registrable Securities which are not shares of Common Stock
shall be converted into or exercised for shares of Common Stock immediately
prior to the closing of any registration pursuant to which such Common Stock is
to be sold).
2. Amendment and Restatement. By execution of this Warrant, the Common
Stock Purchase Warrant executed between the Company and the parties, dated June
7, 1999, (the "June 7th Warrant") is hereby amended and restated in its entirety
and is of no further force and effect. The parties acknowledge and agree that
they have no further rights, interests, claims or obligations whatsoever arising
out of, or relating to, the June 7th Warrant.
3. Exercise of Warrant.
3.1. Number of Shares Issuable upon Exercise. From and after
the date hereof through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 3.2 or upon exercise of this Warrant in
part in accordance with subsection 3.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 6.
3.2. Full Exercise. This Warrant may be exercised in full by
the Holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
Holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 13), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
2
<PAGE>
3.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 3.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
3.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
3.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing obligation to afford to such Holder any rights to
which such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
3.6. Trustee for Warrant Holder. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the Warrant
pursuant to subsection 5.2, such bank
3
<PAGE>
or trust company shall have all the powers and duties of a warrant agent
appointed pursuant to Section 12 and shall accept, in its own name for the
account of the Company or such successor person as may be entitled thereto, all
amounts otherwise payable to the Company or such successor, as the case may be,
on exercise of this Warrant pursuant to this Section 3.
4. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the
name of and delivered to the Holder hereof, or as such Holder (upon payment by
such Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise, pursuant to Section 3 or otherwise.
5. Adjustment for Reorganization, Consolidation,- Merger, etc.
5.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
5.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable by the Holder of the Warrant after the
effective date of such dissolution pursuant to this Section 5 to a bank or trust
company having its principal office in New York, NY, as trustee for the Holder
of the Warrant.
5.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 5.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such
4
<PAGE>
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 6. In the event this Warrant does continue
in full force and effect after the consummation of the transaction described in
this Section 5.3, then only in such event will the Company's securities and
property (including cash, where applicable) receivable by the Holder of the
Warrant be delivered to the Trustee as contemplated by Section 5.2.
6. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 6. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 3, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 6) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 6)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 12 hereof).
8. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
5
<PAGE>
9. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by the registered Holder hereof (a "Transferor") with respect to
any or all of the shares of Common Stock due to the Holder under this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes will issue and
deliver to or on the order of the Transferor thereof a new warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face thereof for the number of shares of Common Stock called for on the face
of the Warrant so surrendered by the Transferor.
10. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrent and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Registration Rights. FBC hereby provides the Holder with
registration rights as set forth in this Section 11.
(a) Definitions. The following terms, as used in this Section
11, have the following meanings (all terms defined herein in the
singular to have the correlative meanings when used in the plural and
vice versa):
"Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor statute, and the rules
and regulations promulgated thereunder.
"Initial Shares" means the FBC Common Stock issued to the
Holder upon exercise of the Warrants pursuant to this Agreement.
"Person" means a natural person, a corporation, a
partnership, a limited liability company, a trust, a joint venture,
any regulatory authority or any other entity or organization.
"Piggyback Registration" means any registration of
Registrable Shares under the Securities Act effected in accordance with
Section 11(b).
"Registrable Shares" means (i) the Initial Shares, and
(ii) any other securities issued or issuable with respect to the
Initial Shares by way of stock dividend, stock split or dividend or
distribution in the form of securities or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Shares,
such securities shall cease to be Registrable Shares when (i) a
registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of pursuant
6
<PAGE>
to such registration statement, (ii) such securities shall have been
distributed in accordance with Rule 144, (iii) such securities shall
have ceased to be outstanding, or (iv) such securities are transferred
to any Person that is not an assignee permitted by Section 11.
"Registration Expenses" means all expenses incident to
the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all registration and filing fees,
(b) all registration, filing, qualification and other fees and expenses
of complying with securities or blue sky laws of all jurisdictions in
which the securities are to be registered and any legal fees and
expenses incurred in connection with the blue sky qualifications of the
Registrable Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses and
(d) the fees and disbursements of counsel for FBC and of its
independent public accountants.
"Rule 144" means Rule 144 promulgated by the SEC under
the Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"Selling Expenses" means all costs and expenses incident
to the Holder's sale of Registrable Shares as provided for in Section
11 of this Agreement, including, without limitation, commissions to
brokers and/or dealers and fees and expenses of any Person retained by
the Holder in connection with such sale or sales, but excluding
Registration Expenses.
"Shares" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
(i) If the Company at any time proposes to register
any of its equity securities under the Securities Act for its
own account (other than by a registration on Form S-4 or Form
S-8 or any successor or similar form then in effect) in a form
and in a manner that would permit registration of the
Registrable Shares, it will give prompt (but in no event less
than thirty days prior to the proposed date of filing the
registration statement relating to such registration) notice
to the Holder of the Company's intention to do so and of such
Holder's rights under this Section 11(b). Upon the request of
the Holder made within twenty days after the receipt by the
Holder of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by the Holder)
(the "Piggyback Registration Notice"), the Company will use
commercially reasonable efforts to effect the registration
under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the Holder, to
the extent required to permit the disposition (in accordance
with the manner of distribution contemplated by the Company
with respect to such registration by the Company) of the
Registrable Shares so to be
7
<PAGE>
registered; provided, however, that if, at any time after
giving notice of its intention to register any equity
securities and prior to the effective date of the registration
statement filed in connection with such registration, the
Company shall determine for any reason not to register or to
delay registration of such equity securities, the Company may,
at its election, give notice of such determination to each
such Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to
register any Registrable Shares in connection with such
registration and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any
Registrable Shares for the same period as the delay in
registering such other equity securities.
(ii) If the Company at any time proposes to register
any of its equity securities for its own account under the
Securities Act as contemplated by this Section 11(b) and
such securities are to be distributed by or through one or
more underwriters, the Company will, if requested by the
Holder and subject to Section 11(b), include the Registrable
Shares requested by the Holder among the securities to be
distributed by such underwriters. The Holder shall become a
party to the underwriting agreement between the Company and
such underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to the Company.
(iii) If (A) a registration pursuant to this Section
11(b) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a
transaction and (B) the managing underwriter of such
underwritten offering shall inform the Company and the Holder
requesting such registration by letter of its belief that the
amount of securities requested to be included in such
registration exceeds the amount which can be sold in (or
during the time of) such offering within a price range
acceptable to the Company, the Company will include in such
registration such amount of securities which the Company is so
advised can be sold in (or during the time of) such offering
as follows: first, all securities proposed by the Company to
be sold for its own account; second, such Registrable Shares
requested to be included in such registration by the Holder
thereof pro rata on the basis of the amount of such securities
so proposed to be sold and so requested to be included by the
holders of Warrants issued in connection with the Company's
10% Convertible Notes dated June 7, 1999; and third, all other
securities of the Company requested to be included in such
registration pro rata on the basis of the amount of such
securities so proposed to be sold and so requested to be
included.
(c) Registration Terms and Procedures. (i) The Holder shall
pay its own share of the Selling Expenses (as the case may be) incurred
in connection with a registration to be effected (whether or not
effected or deemed effected) pursuant to this Agreement. The Company
shall pay all Registration Expenses in connection with a registration
to be effected (whether or not effected or deemed effected) pursuant to
this Agreement.
(ii) In connection with the Company's obligations to
register Registrable Shares pursuant to this Agreement, the
Company will use commercially reasonable
8
<PAGE>
efforts to effect such registration so as to permit the sale
of any Registrable Shares included in such registration in
accordance with the intended method or methods of distribution
thereof, and pursuant thereto the Company will as
expeditiously as possible prepare and (as soon thereafter as
practicable) file with the SEC the requisite registration
statement containing all information required thereby to
effect such registration and thereafter use commercially
reasonable efforts to cause such registration statement to
become and remain effective in accordance with the terms of
this Agreement.
(iii) The Holder shall furnish to the Company such
information regarding the Holder, the Registrable Shares held
by the Holder and the intended plan of distribution of such
securities as the Company may from time to time reasonably
request in writing in connection with such registration. If
any registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, then
the Holder shall have the right to require that such reference
to be in a form reasonably satisfactory to the Holder or in
the event that such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar
federal or state blue sky statute and the rules and
regulations thereunder then in force, the deletion of the
reference to the Holder.
(d) [intentionally omitted]
(e) Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Holder, in the case of registration of Registrable Shares pursuant to
Section 11(b), its underwriters or agents, if any, and its respective
counsel and accountants reasonable access to its books and records and
such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Holder's and such underwriters' or agents' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities
Act.
(f) Indemnification. The Company and the Holder acknowledge
and agree that as a condition precedent to the exercise of the
registration rights herein contained, the Company and the Holder
electing to avail itself of the rights specified in this Section 11
shall each agree to and shall exchange such indemnities as are
customary and reasonable in connection with public offerings of
securities in circumstances similar to the circumstances of any
offering effected pursuant to the rights herein contained, which
indemnities shall be acceptable to the Company and its counsel in their
sole discretion. The Holder shall provide such information and
undertake such other actions as requested by the Company in connection
with such registration.
(g) Holdback Agreement. The Holder agrees not to effect any
public sale or distribution of equity of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities during the ten days prior to and the 180-day period
beginning on the effective date of any underwritten registration
pursuant to Section 11(b) (except as part of such underwritten
registration), unless the underwriters managing the registered public
offering otherwise agree.
9
<PAGE>
(h) Assignment. The rights of the Holder hereunder shall only
be assignable in connection with the transfer of Registrable Shares by
the Holder that is required by operation of law, or in connection with
a transfer by the Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of the Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 11(f) and the rights of any party hereto with respect to the
breach of any provision hereof shall survive termination of this
Agreement.
12. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 3, exchanging
this Warrant pursuant to Section 9, and replacing this Warrant pursuant to
Section 10, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, etc. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. Maximum Exercise. The Holder shall not be entitled to exercise, on
an exercise date, this Warrant in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock of the Company on such exercise date. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation l3d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to
10
<PAGE>
aggregate exercises which would result in the issuance of more than 9.99%. The
restriction described in this paragraph may be revoked upon 75 days prior notice
from the Holder to the Company.
11
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: /s/ C. David Snyder
-------------------------------
Name: C. David Snyder
Title: Chairman and CEO
Witness:
[ILLEGIBLE]
- ---------------------------
12
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, ___________________
shares of Common Stock of Frederick Brewing Co. and herewith makes payment of
$___________________ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to _______________ whose address
is _______________________________________________________ __________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _____________________________
--------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
13
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Tranferees Percentage Number
---------- Transferred Transferred
----------- -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:________________, 19___ -------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the warrant)
Signed in the presence of:
- -------------------------------- -------------------------------------------
(Name) (address)
ACCEPTED AND AGREED: --------------------------------------------
[TRANSFEREE] (address)
- --------------------------------
(Name)
14
<PAGE>
EXHIBIT C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Face Face
Amount of No. of Common Amount of No. of Common
Preferred Share Holder Series F Shares to be Series G Shares to be
- ---------------------- Preferred Received Upon Preferred Received Upon
Stock Conversion Stock Conversion
----- ---------- ----- ----------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Austost Anstalt Schaan $388,000 776,000 0 0
- ------------------------------------------------------------------------------------------------------------------------
Balmore Funds S.A. $388,000 776,000 0 0
- ------------------------------------------------------------------------------------------------------------------------
The Augustine Fund L.P. 0 0 $71,000 142,000
- ------------------------------------------------------------------------------------------------------------------------
Congregation Beth Mordechai 0 0 $38,500 77,000
- ------------------------------------------------------------------------------------------------------------------------
Bertek, Inc. 0 0 $61,000 122,000
- ------------------------------------------------------------------------------------------------------------------------
Dean Dowda 0 0 $60,000 120,000
- ------------------------------------------------------------------------------------------------------------------------
Totals $776,000 1,552,000 $230,500 461,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Schedule 6.1
Other FBC Securities
16
<PAGE>
Schedule 6.1
<TABLE>
<CAPTION>
Common Preferred Convertible
Name Stock Stock Warrants Options Notes
- ---- ----- ----- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Austost Anstalt Schaan 607 0 0 0 $125,000
Balmore Funds S.A. 5,279 0 0 0 $125,000
World Capital Funding, LLC 29,600 0 30,000* 0 $ 50,000
The Augustine Fund L.P. 84,271 0 0 0 0
Congregation Beth Moredechai 67,923 0 0 0 0
Bertek, Inc. 0 0 0 0 0
Ron S. Williams Sr. 0 0 0 0 $ 20,000
Ron S. Williams Jr. 0 0 0 0 $ 30,000
Dean Dowda 0 0 0 0 $ 50,000
Fred Lenz 0 0 0 0 $100,000
</TABLE>
Shares Exercise Price Exp. Date
- ------------------------------------------------------------------
10,000 43.750 3/31/02
10,000 48.760 3/31/02
5,000 5.00 11/20/01
5,000 10.00 11/20/01
17
Exhibit 3(b)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 125,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
No. 1-A August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
AUSTOST ANSTALT SCHAAN, or assigns (the "Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company after August 24, 1999 at any
time or from time to time before 5:00 p.m., New York time, on June 7, 2002 (the
"Expiration Date"), up to 125,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $.0004 par value per share, of the Company, at a
per share purchase price of $0.50 per share (the "Warrant"), (such purchase
price per share as adjusted from time to time as herein provided is referred to
herein as the "Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein.
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term Company shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
1
<PAGE>
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(d) The term "Registrable Securities" means (i) Common Stock issued
pursuant to the Warrant, (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization and (iii) any other shares of
Common Stock held by the Holder. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act of 1933 (the "Securities Act") or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company. For
purposes of this Warrant, the Holder shall be deemed to be a Holder of
Registrable Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Holder has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Holder shall be entitled to exercise the
rights of a Holder of Registrable Securities hereunder (it being understood,
however, that any Registrable Securities which are not shares of Common Stock
shall be converted into or exercised for shares of Common Stock immediately
prior to the closing of any registration pursuant to which such Common Stock is
to be sold).
2. Amendment and Restatement. By execution of this Warrant, the Common
Stock Purchase Warrant executed between the Company and the parties, dated June
7, 1999, (the "June 7th Warrant") is hereby amended and restated in its entirety
and is of no further force and effect. The parties acknowledge and agree that
they have no further rights, interests, claims or obligations whatsoever arising
out of, or relating to, the June 7th Warrant.
3. Exercise of Warrant.
3.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the Holder hereof shall
be entitled to receive, upon exercise of this Warrant in whole in accordance
with the terms of subsection 3.2 or upon exercise of this Warrant in part in
accordance with subsection 3.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 6.
3.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
Holder, to the Company at its principal office or at the
2
<PAGE>
office of its Warrant agent (as provided in Section 13), accompanied by payment,
in cash or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price (as
hereinafter defined) then in effect.
3.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 3.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
3.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean the Fair Market
Value of a share of the Company's Common Stock. Fair Market Value of a share of
Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is
traded in the over-the-counter market, then the mean of the closing bid and
asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules then
standing of the American Arbitration Association, before a single arbitrator to
be chosen from a panel of persons qualified by education and training to pass on
the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
3.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing
3
<PAGE>
obligation to afford to such Holder any rights to which such Holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant. If the Holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Holder any such rights.
3.6. Trustee for Warrant Holder. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of the Warrant
pursuant to subsection 5.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 3.
4. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise, pursuant to Section 3 or otherwise.
5. Adjustment for Reorganization, Consolidation,- Merger, etc.
5.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
5.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property
4
<PAGE>
(including cash, where applicable) receivable by the Holder of the Warrant after
the effective date of such dissolution pursuant to this Section 5 to a bank or
trust company having its principal office in New York, NY, as trustee for the
Holder of the Warrant.
5.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 5.3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 5.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the Holder of the Warrant be delivered to the Trustee as
contemplated by Section 5.2.
6. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 6. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 3, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 6) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 6)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The
5
<PAGE>
Company will forthwith mail a copy of each such certificate to the Holder of the
Warrant and any Warrant agent of the Company (appointed pursuant to Section 12
hereof).
8. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
9. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by the registered Holder hereof (a "Transferor") with respect to
any or all of the shares of Common Stock due to the Holder under this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes will issue and
deliver to or on the order of the Transferor thereof a new warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face thereof for the number of shares of Common Stock called for on the face
of the Warrant so surrendered by the Transferor.
10. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Registration Rights. FBC hereby provides the Holder with
registration rights as set forth in this Section 11.
(a) Definitions. The following terms, as used in this Section 11,
have the following meanings (all terms defined herein in the singular
to have the correlative meanings when used in the plural and vice
versa):
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"INITIAL SHARES" means the FBC Common Stock issued to the
Holder upon exercise of the Warrants pursuant to this Agreement.
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"PERSON" means a natural person, a corporation, a partnership,
a limited liability company, a trust, a joint venture, any regulatory
authority or any other entity or organization.
"PIGGYBACK REGISTRATION" means any registration of Registrable
Shares under the Securities Act effected in accordance with Section
11(b).
"REGISTRABLE SHARES" means (i) the Initial Shares, and (ii) any
other securities issued or issuable with respect to the Initial Shares
by way of stock dividend, stock split or dividend or distribution in
the form of securities or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Shares, such securities
shall cease to be Registrable Shares when (i) a registration statement
with respect to the sale of such securities shall have become effective
under the Securities Act and such securities shall have been disposed
of pursuant to such registration statement, (ii) such securities shall
have been distributed in accordance with Rule 144, (iii) such
securities shall have ceased to be outstanding, or (iv) such securities
are transferred to any Person that is not an assignee permitted by
Section 11.
"REGISTRATION EXPENSES" means all expenses incident to the
Company's performance of or compliance with this Agreement, including,
without limitation, (a) all registration and filing fees, (b) all
registration, filing, qualification and other fees and expenses of
complying with securities or blue sky laws of all jurisdictions in
which the securities are to be registered and any legal fees and
expenses incurred in connection with the blue sky qualifications of the
Registrable Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses and
(d) the fees and disbursements of counsel for FBC and of its
independent public accountants.
"RULE 144" means Rule 144 promulgated by the SEC under the
Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"SELLING EXPENSES" means all costs and expenses incident to the
Holder's sale of Registrable Shares as provided for in Section 11 of
this Agreement, including, without limitation, commissions to brokers
and/or dealers and fees and expenses of any Person retained by the
Holder in connection with such sale or sales, but excluding
Registration Expenses.
"SHARES" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
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(i) If the Company at any time proposes to register
any of its equity securities under the Securities Act for its
own account (other than by a registration on Form S-4 or Form
S-8 or any successor or similar form then in effect) in a form
and in a manner that would permit registration of the
Registrable Shares, it will give prompt (but in no event less
than thirty days prior to the proposed date of filing the
registration statement relating to such registration) notice
to the Holder of the Company's intention to do so and of such
Holder's rights under this Section 11(b). Upon the request of
the Holder made within twenty days after the receipt by the
Holder of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by the Holder)
(the "PIGGYBACK REGISTRATION NOTICE"), the Company will use
commercially reasonable efforts to effect the registration
under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the Holder, to
the extent required to permit the disposition (in accordance
with the manner of distribution contemplated by the Company
with respect to such registration by the Company) of the
Registrable Shares so to be registered; provided, however,
that if, at any time after giving notice of its intention to
register any equity securities and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not
to register or to delay registration of such equity
securities, the Company may, at its election, give notice of
such determination to each such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Shares in
connection with such registration and (ii) in the case of a
determination to delay registering, shall be permitted to
delay registering any Registrable Shares for the same period
as the delay in registering such other equity securities.
(ii) If the Company at any time proposes to register
any of its equity securities for its own account under the
Securities Act as contemplated by this Section 11(b) and such
securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Holder and
subject to Section 11(b), include the Registrable Shares
requested by the Holder among the securities to be distributed
by such underwriters. The Holder shall become a party to the
underwriting agreement between the Company and such
underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to the Company.
(iii) If (A) a registration pursuant to this Section
11(b) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a
transaction and (B) the managing underwriter of such
underwritten offering shall inform the Company and the Holder
requesting such registration by letter of its belief that the
amount of securities requested to be included in such
registration exceeds the amount which can be sold in (or
during the time of) such offering within a price range
acceptable to the Company, the Company will include in such
registration such amount of securities which the Company is so
advised can be sold in (or during the time of) such offering
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as follows: first, all securities proposed by the Company to
be sold for its own account; second, such Registrable Shares
requested to be included in such registration by the Holder
thereof pro rata on the basis of the amount of such securities
so proposed to be sold and so requested to be included by the
holders of Warrants issued in connection with the Company's
10% Convertible Notes dated June 7, 1999; and third, all other
securities of the Company requested to be included in such
registration pro rata on the basis of the amount of such
securities so proposed to be sold and so requested to be
included.
(c) Registration Terms and Procedures. (i) The Holder shall pay its
own share of the Selling Expenses (as the case may be) incurred in
connection with a registration to be effected (whether or not effected
or deemed effected) pursuant to this Agreement. The Company shall pay
all Registration Expenses in connection with a registration to be
effected (whether or not effected or deemed effected) pursuant to this
Agreement.
(ii) In connection with the Company's obligations to
register Registrable Shares pursuant to this Agreement, the
Company will use commercially reasonable efforts to effect
such registration so as to permit the sale of any Registrable
Shares included in such registration in accordance with the
intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible
prepare and (as soon thereafter as practicable) file with the
SEC the requisite registration statement containing all
information required thereby to effect such registration and
thereafter use commercially reasonable efforts to cause such
registration statement to become and remain effective in
accordance with the terms of this Agreement.
(iii) The Holder shall furnish to the Company such
information regarding the Holder, the Registrable Shares held
by the Holder and the intended plan of distribution of such
securities as the Company may from time to time reasonably
request in writing in connection with such registration. If
any registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, then
the Holder shall have the right to require that such reference
to be in a form reasonably satisfactory to the Holder or in
the event that such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar
federal or state blue sky statute and the rules and
regulations thereunder then in force, the deletion of the
reference to the Holder.
(d) [INTENTIONALLY OMITTED]
(e) Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Holder, in the case of registration of Registrable Shares pursuant to
Section 11(b), its underwriters or agents, if any, and its respective
counsel and accountants reasonable access to its books and records and
such
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<PAGE>
opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Holder's and such underwriters' or agents' respective counsel, to
conduct a reasonable investigation within the meaning of the
Securities Act.
(f) Indemnification. The Company and the Holder acknowledge and
agree that as a condition precedent to the exercise of the registration
rights herein contained, the Company and the Holder electing to avail
itself of the rights specified in this Section 11 shall each agree to
and shall exchange such indemnities as are customary and reasonable in
connection with public offerings of securities in circumstances similar
to the circumstances of any offering effected pursuant to the rights
herein contained, which indemnities shall be acceptable to the Company
and its counsel in their sole discretion. The Holder shall provide such
information and undertake such other actions as requested by the
Company in connection with such registration.
(g) [INTENTIONALLY OMITTED]
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(h) Assignment. The rights of the Holder hereunder shall only be
assignable in connection with the transfer of Registrable Shares by the
Holder that is required by operation of law, or in connection with a
transfer by the Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of the Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 11(f) and the rights of any party hereto with respect to the
breach of any provision hereof shall survive termination of this
Agreement.
12. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 3, exchanging
this Warrant pursuant to Section 9, and replacing this Warrant pursuant to
Section 10, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, etc. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. Maximum Exercise. The Holder shall not be entitled to exercise, on
an exercise date, this Warrant in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock of the Company on such exercise date. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to aggregate exercises which would result in the issuance
of more than 9.99%. The restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company.
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IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: __________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
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Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
_______________________________
(Signature must conform to name of Holder as
specified on the face of the Warrant)
______________________________
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Tranferees Percentage Number
Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
14
Exhibit 3(c)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 125,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
No. 2-A August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
BALMORE FUNDS S.A., or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company after August 24, 1999 at any time
or from time to time before 5:00 p.m., New York time, on June 7, 2002 (the
"Expiration Date"), up to 125,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $.0004 par value per share, of the Company, at a
per share purchase price of $0.50 per share (the "Warrant"), (such purchase
price per share as adjusted from time to time as herein provided is referred to
herein as the "Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein.
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term Company shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
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securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(d) The term "Registrable Securities" means (i) Common Stock issued
pursuant to the Warrant, (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization and (iii) any other shares of
Common Stock held by the Holder. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act of 1933 (the "Securities Act") or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company. For
purposes of this Warrant, the Holder shall be deemed to be a Holder of
Registrable Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Holder has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Holder shall be entitled to exercise the
rights of a Holder of Registrable Securities hereunder (it being understood,
however, that any Registrable Securities which are not shares of Common Stock
shall be converted into or exercised for shares of Common Stock immediately
prior to the closing of any registration pursuant to which such Common Stock is
to be sold).
2. Amendment and Restatement. By execution of this Warrant, the Common
Stock Purchase Warrant executed between the Company and the parties, dated June
7, 1999, (the "June 7th Warrant") is hereby amended and restated in its entirety
and is of no further force and effect. The parties acknowledge and agree that
they have no further rights, interests, claims or obligations whatsoever arising
out of, or relating to, the June 7th Warrant.
3. Exercise of Warrant.
3.1. Number of Shares Issuable upon Exercise. From and after
the date hereof through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 3.2 or upon exercise of this Warrant in
part in accordance with subsection 3.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 6.
3.2. Full Exercise. This Warrant may be exercised in full by
the Holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
Holder, to the Company at its principal office or at the
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office of its Warrant agent (as provided in Section 13), accompanied by payment,
in cash or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price (as
hereinafter defined) then in effect.
3.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 3.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
3.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
3.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing
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obligation to afford to such Holder any rights to which such Holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant. If the Holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Holder any such rights.
3.6. Trustee for Warrant Holder. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the Warrant
pursuant to subsection 5.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 3.
4. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise, pursuant to Section 3 or otherwise.
5. Adjustment for Reorganization, Consolidation,- Merger, etc.
5.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
5.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property
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<PAGE>
(including cash, where applicable) receivable by the Holder of the Warrant after
the effective date of such dissolution pursuant to this Section 5 to a bank or
trust company having its principal office in New York, NY, as trustee for the
Holder of the Warrant.
5.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 5.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 5.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the Holder of the Warrant be delivered to the Trustee as
contemplated by Section 5.2.
6. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 6. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 3, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 6) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 6)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The
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Company will forthwith mail a copy of each such certificate to the Holder of the
Warrant and any Warrant agent of the Company (appointed pursuant to Section 12
hereof).
8. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
9. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by the registered Holder hereof (a "Transferor") with respect to
any or all of the shares of Common Stock due to the Holder under this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes will issue and
deliver to or on the order of the Transferor thereof a new warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face thereof for the number of shares of Common Stock called for on the face
of the Warrant so surrendered by the Transferor.
10. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Registration Rights. FBC hereby provides the Holder with
registration rights as set forth in this Section 11.
(a) Definitions. The following terms, as used in this Section
11, have the following meanings (all terms defined herein in the
singular to have the correlative meanings when used in the plural and
vice versa):
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute, and the
rules and regulations promulgated thereunder.
"INITIAL SHARES" means the FBC Common Stock issued to
the Holder upon exercise of the Warrants pursuant to this Agreement.
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"PERSON" means a natural person, a corporation, a
partnership, a limited liability company, a trust, a joint venture, any
regulatory authority or any other entity or organization.
"PIGGYBACK REGISTRATION" means any registration of
Registrable Shares under the Securities Act effected in accordance with
Section 11(b).
"REGISTRABLE SHARES" means (i) the Initial Shares,
and (ii) any other securities issued or issuable with respect to the
Initial Shares by way of stock dividend, stock split or dividend or
distribution in the form of securities or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Shares,
such securities shall cease to be Registrable Shares when (i) a
registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of pursuant to such registration
statement, (ii) such securities shall have been distributed in
accordance with Rule 144, (iii) such securities shall have ceased to be
outstanding, or (iv) such securities are transferred to any Person that
is not an assignee permitted by Section 11.
"REGISTRATION EXPENSES" means all expenses incident
to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all registration and filing fees,
(b) all registration, filing, qualification and other fees and expenses
of complying with securities or blue sky laws of all jurisdictions in
which the securities are to be registered and any legal fees and
expenses incurred in connection with the blue sky qualifications of the
Registrable Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses and
(d) the fees and disbursements of counsel for FBC and of its
independent public accountants.
"RULE 144" means Rule 144 promulgated by the SEC
under the Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"SELLING EXPENSES" means all costs and expenses
incident to the Holder's sale of Registrable Shares as provided for in
Section 11 of this Agreement, including, without limitation,
commissions to brokers and/or dealers and fees and expenses of any
Person retained by the Holder in connection with such sale or sales,
but excluding Registration Expenses.
"SHARES" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
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(i) If the Company at any time proposes to register
any of its equity securities under the Securities Act for its
own account (other than by a registration on Form S-4 or Form
S-8 or any successor or similar form then in effect) in a form
and in a manner that would permit registration of the
Registrable Shares, it will give prompt (but in no event less
than thirty days prior to the proposed date of filing the
registration statement relating to such registration) notice
to the Holder of the Company's intention to do so and of such
Holder's rights under this Section 11(b). Upon the request of
the Holder made within twenty days after the receipt by the
Holder of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by the Holder)
(the "PIGGYBACK REGISTRATION NOTICE"), the Company will use
commercially reasonable efforts to effect the registration
under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the Holder, to
the extent required to permit the disposition (in accordance
with the manner of distribution contemplated by the Company
with respect to such registration by the Company) of the
Registrable Shares so to be registered; provided, however,
that if, at any time after giving notice of its intention to
register any equity securities and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not
to register or to delay registration of such equity
securities, the Company may, at its election, give notice of
such determination to each such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Shares in
connection with such registration and (ii) in the case of a
determination to delay registering, shall be permitted to
delay registering any Registrable Shares for the same period
as the delay in registering such other equity securities.
(ii) If the Company at any time proposes to register
any of its equity securities for its own account under the
Securities Act as contemplated by this Section 11(b) and such
securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Holder and
subject to Section 11(b), include the Registrable Shares
requested by the Holder among the securities to be distributed
by such underwriters. The Holder shall become a party to the
underwriting agreement between the Company and such
underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to the Company.
(iii) If (A) a registration pursuant to this Section
11(b) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a
transaction and (B) the managing underwriter of such
underwritten offering shall inform the Company and the Holder
requesting such registration by letter of its belief that the
amount of securities requested to be included in such
registration exceeds the amount which can be sold in (or
during the time of) such offering within a price range
acceptable to the Company, the Company will include in such
registration such amount of securities which the Company is so
advised can be sold in (or during the time of) such offering
8
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as follows: first, all securities proposed by the Company to
be sold for its own account; second, such Registrable Shares
requested to be included in such registration by the Holder
thereof pro rata on the basis of the amount of such securities
so proposed to be sold and so requested to be included by the
holders of Warrants issued in connection with the Company's
10% Convertible Notes dated June 7, 1999; and third, all other
securities of the Company requested to be included in such
registration pro rata on the basis of the amount of such
securities so proposed to be sold and so requested to be
included.
(c) Registration Terms and Procedures. (i) The Holder shall
pay its own share of the Selling Expenses (as the case may be) incurred
in connection with a registration to be effected (whether or not
effected or deemed effected) pursuant to this Agreement. The Company
shall pay all Registration Expenses in connection with a registration
to be effected (whether or not effected or deemed effected) pursuant to
this Agreement.
(ii) In connection with the Company's obligations to
register Registrable Shares pursuant to this Agreement, the
Company will use commercially reasonable efforts to effect
such registration so as to permit the sale of any Registrable
Shares included in such registration in accordance with the
intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible
prepare and (as soon thereafter as practicable) file with the
SEC the requisite registration statement containing all
information required thereby to effect such registration and
thereafter use commercially reasonable efforts to cause such
registration statement to become and remain effective in
accordance with the terms of this Agreement.
(iii) The Holder shall furnish to the Company such
information regarding the Holder, the Registrable Shares held
by the Holder and the intended plan of distribution of such
securities as the Company may from time to time reasonably
request in writing in connection with such registration. If
any registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, then
the Holder shall have the right to require that such reference
to be in a form reasonably satisfactory to the Holder or in
the event that such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar
federal or state blue sky statute and the rules and
regulations thereunder then in force, the deletion of the
reference to the Holder.
(d) [INTENTIONALLY OMITTED]
(e) Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Holder, in the case of registration of Registrable Shares pursuant to
Section 11(b), its underwriters or agents, if any, and its respective
counsel and accountants reasonable access to its books and records and
such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Holder's and such
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underwriters' or agents' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
(f) Indemnification. The Company and the Holder acknowledge
and agree that as a condition precedent to the exercise of the
registration rights herein contained, the Company and the Holder
electing to avail itself of the rights specified in this Section 11
shall each agree to and shall exchange such indemnities as are
customary and reasonable in connection with public offerings of
securities in circumstances similar to the circumstances of any
offering effected pursuant to the rights herein contained, which
indemnities shall be acceptable to the Company and its counsel in their
sole discretion. The Holder shall provide such information and
undertake such other actions as requested by the Company in connection
with such registration.
(g) [INTENTIONALLY OMITTED]
(h) Assignment. The rights of the Holder hereunder shall only
be assignable in connection with the transfer of Registrable Shares by
the Holder that is required by operation of law, or in connection with
a transfer by the Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of the Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 11(f) and the rights of any party hereto with respect to the
breach of any provision hereof shall survive termination of this
Agreement.
12. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 3, exchanging
this Warrant pursuant to Section 9, and replacing this Warrant pursuant to
Section 10, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, etc. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
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15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. Maximum Exercise. The Holder shall not be entitled to exercise, on
an exercise date, this Warrant in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock of the Company on such exercise date. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to aggregate exercises which would result in the issuance
of more than 9.99%. The restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company.
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IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: __________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
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Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
--------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Percentage Number
Tranferees Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: 19 --------------------------------------------
---------------, --- (Signature must conform to name of Holder as
specified on the face of the warrant)
Signed in the presence of:
- ------------------------------ --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- ------------------------------
(Name)
14
Exhibit 3(d)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 30,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
No. 3-A August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
RON WILLIAMS SR., or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company after August 24, 1999 at any time
or from time to time before 5:00 p.m., New York time, on June 7, 2002 (the
"Expiration Date"), up to 30,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $.0004 par value per share, of the Company, at a
per share purchase price of $0.50 per share (the "Warrant"), (such purchase
price per share as adjusted from time to time as herein provided is referred to
herein as the "Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein.
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term Company shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
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securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(d) The term "Registrable Securities" means (i) Common Stock issued
pursuant to the Warrant, (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization and (iii) any other shares of
Common Stock held by the Holder. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act of 1933 (the "Securities Act") or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company. For
purposes of this Warrant, the Holder shall be deemed to be a Holder of
Registrable Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Holder has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Holder shall be entitled to exercise the
rights of a Holder of Registrable Securities hereunder (it being understood,
however, that any Registrable Securities which are not shares of Common Stock
shall be converted into or exercised for shares of Common Stock immediately
prior to the closing of any registration pursuant to which such Common Stock is
to be sold).
2. Amendment and Restatement. By execution of this Warrant, the Common
Stock Purchase Warrant executed between the Company and the parties, dated June
7, 1999, (the "June 7th Warrant") is hereby amended and restated in its entirety
and is of no further force and effect. The parties acknowledge and agree that
they have no further rights, interests, claims or obligations whatsoever arising
out of, or relating to, the June 7th Warrant.
3. Exercise of Warrant.
3.1. Number of Shares Issuable upon Exercise. From and after
the date hereof through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 3.2 or upon exercise of this Warrant in
part in accordance with subsection 3.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 6.
3.2. Full Exercise. This Warrant may be exercised in full by
the Holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
Holder, to the Company at its principal office or at the
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office of its Warrant agent (as provided in Section 13), accompanied by payment,
in cash or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price (as
hereinafter defined) then in effect.
3.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 3.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
3.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
3.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing
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obligation to afford to such Holder any rights to which such Holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant. If the Holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Holder any such rights.
3.6. Trustee for Warrant Holder. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the Warrant
pursuant to subsection 5.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 3.
4. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise, pursuant to Section 3 or otherwise.
5. Adjustment for Reorganization, Consolidation,- Merger, etc.
5.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
5.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property
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(including cash, where applicable) receivable by the Holder of the Warrant after
the effective date of such dissolution pursuant to this Section 5 to a bank or
trust company having its principal office in New York, NY, as trustee for the
Holder of the Warrant.
5.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 5.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 5.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the Holder of the Warrant be delivered to the Trustee as
contemplated by Section 5.2.
6. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 6. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 3, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 6) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 6)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The
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Company will forthwith mail a copy of each such certificate to the Holder of the
Warrant and any Warrant agent of the Company (appointed pursuant to Section 12
hereof).
8. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
9. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by the registered Holder hereof (a "Transferor") with respect to
any or all of the shares of Common Stock due to the Holder under this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes will issue and
deliver to or on the order of the Transferor thereof a new warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face thereof for the number of shares of Common Stock called for on the face
of the Warrant so surrendered by the Transferor.
10. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Registration Rights. FBC hereby provides the Holder with
registration rights as set forth in this Section 11.
(a) Definitions. The following terms, as used in this Section
11, have the following meanings (all terms defined herein in the
singular to have the correlative meanings when used in the plural and
vice versa):
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute, and the
rules and regulations promulgated thereunder.
"INITIAL SHARES" means the FBC Common Stock issued to
the Holder upon exercise of the Warrants pursuant to this Agreement.
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"PERSON" means a natural person, a corporation, a
partnership, a limited liability company, a trust, a joint venture, any
regulatory authority or any other entity or organization.
"PIGGYBACK REGISTRATION" means any registration of
Registrable Shares under the Securities Act effected in accordance with
Section 11(b).
"REGISTRABLE SHARES" means (i) the Initial Shares,
and (ii) any other securities issued or issuable with respect to the
Initial Shares by way of stock dividend, stock split or dividend or
distribution in the form of securities or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Shares,
such securities shall cease to be Registrable Shares when (i) a
registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of pursuant to such registration
statement, (ii) such securities shall have been distributed in
accordance with Rule 144, (iii) such securities shall have ceased to be
outstanding, or (iv) such securities are transferred to any Person that
is not an assignee permitted by Section 11.
"REGISTRATION EXPENSES" means all expenses incident
to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all registration and filing fees,
(b) all registration, filing, qualification and other fees and expenses
of complying with securities or blue sky laws of all jurisdictions in
which the securities are to be registered and any legal fees and
expenses incurred in connection with the blue sky qualifications of the
Registrable Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses and
(d) the fees and disbursements of counsel for FBC and of its
independent public accountants.
"RULE 144" means Rule 144 promulgated by the SEC
under the Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"SELLING EXPENSES" means all costs and expenses
incident to the Holder's sale of Registrable Shares as provided for in
Section 11 of this Agreement, including, without limitation,
commissions to brokers and/or dealers and fees and expenses of any
Person retained by the Holder in connection with such sale or sales,
but excluding Registration Expenses.
"SHARES" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
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(i) If the Company at any time proposes to register
any of its equity securities under the Securities Act for its
own account (other than by a registration on Form S-4 or Form
S-8 or any successor or similar form then in effect) in a form
and in a manner that would permit registration of the
Registrable Shares, it will give prompt (but in no event less
than thirty days prior to the proposed date of filing the
registration statement relating to such registration) notice
to the Holder of the Company's intention to do so and of such
Holder's rights under this Section 11(b). Upon the request of
the Holder made within twenty days after the receipt by the
Holder of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by the Holder)
(the "PIGGYBACK REGISTRATION NOTICE"), the Company will use
commercially reasonable efforts to effect the registration
under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the Holder, to
the extent required to permit the disposition (in accordance
with the manner of distribution contemplated by the Company
with respect to such registration by the Company) of the
Registrable Shares so to be registered; provided, however,
that if, at any time after giving notice of its intention to
register any equity securities and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not
to register or to delay registration of such equity
securities, the Company may, at its election, give notice of
such determination to each such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Shares in
connection with such registration and (ii) in the case of a
determination to delay registering, shall be permitted to
delay registering any Registrable Shares for the same period
as the delay in registering such other equity securities.
(ii) If the Company at any time proposes to register
any of its equity securities for its own account under the
Securities Act as contemplated by this Section 11(b) and such
securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Holder and
subject to Section 11(b), include the Registrable Shares
requested by the Holder among the securities to be distributed
by such underwriters. The Holder shall become a party to the
underwriting agreement between the Company and such
underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to the Company.
(iii) If (A) a registration pursuant to this Section
11(b) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a
transaction and (B) the managing underwriter of such
underwritten offering shall inform the Company and the Holder
requesting such registration by letter of its belief that the
amount of securities requested to be included in such
registration exceeds the amount which can be sold in (or
during the time of) such offering
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within a price range acceptable to the Company, the Company
will include in such registration such amount of securities
which the Company is so advised can be sold in (or during the
time of) such offering as follows: first, all securities
proposed by the Company to be sold for its own account;
second, such Registrable Shares requested to be included in
such registration by the Holder thereof pro rata on the basis
of the amount of such securities so proposed to be sold and so
requested to be included by the holders of Warrants issued in
connection with the Company's 10% Convertible Notes dated June
7, 1999; and third, all other securities of the Company
requested to be included in such registration pro rata on the
basis of the amount of such securities so proposed to be sold
and so requested to be included.
(c) Registration Terms and Procedures. (i) The Holder shall
pay its own share of the Selling Expenses (as the case may be) incurred
in connection with a registration to be effected (whether or not
effected or deemed effected) pursuant to this Agreement. The Company
shall pay all Registration Expenses in connection with a registration
to be effected (whether or not effected or deemed effected) pursuant to
this Agreement.
(ii) In connection with the Company's obligations to
register Registrable Shares pursuant to this Agreement, the
Company will use commercially reasonable efforts to effect
such registration so as to permit the sale of any Registrable
Shares included in such registration in accordance with the
intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible
prepare and (as soon thereafter as practicable) file with the
SEC the requisite registration statement containing all
information required thereby to effect such registration and
thereafter use commercially reasonable efforts to cause such
registration statement to become and remain effective in
accordance with the terms of this Agreement.
(iii) The Holder shall furnish to the Company such
information regarding the Holder, the Registrable Shares held
by the Holder and the intended plan of distribution of such
securities as the Company may from time to time reasonably
request in writing in connection with such registration. If
any registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, then
the Holder shall have the right to require that such reference
to be in a form reasonably satisfactory to the Holder or in
the event that such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar
federal or state blue sky statute and the rules and
regulations thereunder then in force, the deletion of the
reference to the Holder.
(d) [INTENTIONALLY OMITTED]
(e) Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Holder, in the case of registration of Registrable Shares pursuant to
Section 11(b), its underwriters or agents, if any, and its respective
counsel and accountants reasonable access to its books and records and
such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Holder's and such
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underwriters' or agents' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
(f) Indemnification. The Company and the Holder acknowledge
and agree that as a condition precedent to the exercise of the
registration rights herein contained, the Company and the Holder
electing to avail itself of the rights specified in this Section 11
shall each agree to and shall exchange such indemnities as are
customary and reasonable in connection with public offerings of
securities in circumstances similar to the circumstances of any
offering effected pursuant to the rights herein contained, which
indemnities shall be acceptable to the Company and its counsel in their
sole discretion. The Holder shall provide such information and
undertake such other actions as requested by the Company in connection
with such registration.
(g) [INTENTIONALLY OMITTED]
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(h) Assignment. The rights of the Holder hereunder shall only
be assignable in connection with the transfer of Registrable Shares by
the Holder that is required by operation of law, or in connection with
a transfer by the Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of the Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 11(f) and the rights of any party hereto with respect to the
breach of any provision hereof shall survive termination of this
Agreement.
12. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 3, exchanging
this Warrant pursuant to Section 9, and replacing this Warrant pursuant to
Section 10, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, etc. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. Maximum Exercise. The Holder shall not be entitled to exercise, on
an exercise date, this Warrant in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock of the Company on such exercise date. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to aggregate exercises which would result in the issuance
of more than 9.99%. The restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company.
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IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: __________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
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Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
--------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Percentage Number
Tranferees Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: 19 --------------------------------------------
---------------, --- (Signature must conform to name of Holder as
specified on the face of the warrant)
Signed in the presence of:
- ------------------------------ --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- ------------------------------
(Name)
14
Exhibit 3(e)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 20,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
No. 4-A August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
RON WILLIAMS JR., or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company after August 24, 1999 at any time
or from time to time before 5:00 p.m., New York time, on June 7, 2002 (the
"Expiration Date"), up to 20,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $.0004 par value per share, of the Company, at a
per share purchase price of $0.50 per share (the "Warrant"), (such purchase
price per share as adjusted from time to time as herein provided is referred to
herein as the "Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein.
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term Company shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
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securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(d) The term "Registrable Securities" means (i) Common Stock issued
pursuant to the Warrant, (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization and (iii) any other shares of
Common Stock held by the Holder. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act of 1933 (the "Securities Act") or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company. For
purposes of this Warrant, the Holder shall be deemed to be a Holder of
Registrable Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Holder has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Holder shall be entitled to exercise the
rights of a Holder of Registrable Securities hereunder (it being understood,
however, that any Registrable Securities which are not shares of Common Stock
shall be converted into or exercised for shares of Common Stock immediately
prior to the closing of any registration pursuant to which such Common Stock is
to be sold).
2. Amendment and Restatement. By execution of this Warrant, the Common
Stock Purchase Warrant executed between the Company and the parties, dated June
7, 1999, (the "June 7th Warrant") is hereby amended and restated in its entirety
and is of no further force and effect. The parties acknowledge and agree that
they have no further rights, interests, claims or obligations whatsoever arising
out of, or relating to, the June 7th Warrant.
3. Exercise of Warrant.
3.1. Number of Shares Issuable upon Exercise. From and after
the date hereof through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 3.2 or upon exercise of this Warrant in
part in accordance with subsection 3.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 6.
3.2. Full Exercise. This Warrant may be exercised in full by
the Holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
Holder, to the Company at its principal office or at the
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office of its Warrant agent (as provided in Section 13), accompanied by payment,
in cash or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price (as
hereinafter defined) then in effect.
3.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 3.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
3.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
3.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing
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obligation to afford to such Holder any rights to which such Holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant. If the Holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Holder any such rights.
3.6. Trustee for Warrant Holder. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the Warrant
pursuant to subsection 5.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 3.
4. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise, pursuant to Section 3 or otherwise.
5. Adjustment for Reorganization, Consolidation,- Merger, etc.
5.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
5.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property
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(including cash, where applicable) receivable by the Holder of the Warrant after
the effective date of such dissolution pursuant to this Section 5 to a bank or
trust company having its principal office in New York, NY, as trustee for the
Holder of the Warrant.
5.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 5.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 5.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the Holder of the Warrant be delivered to the Trustee as
contemplated by Section 5.2.
6. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 6. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 3, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 6) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 6)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The
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Company will forthwith mail a copy of each such certificate to the Holder of the
Warrant and any Warrant agent of the Company (appointed pursuant to Section 12
hereof).
8. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
9. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by the registered Holder hereof (a "Transferor") with respect to
any or all of the shares of Common Stock due to the Holder under this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes will issue and
deliver to or on the order of the Transferor thereof a new warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face thereof for the number of shares of Common Stock called for on the face
of the Warrant so surrendered by the Transferor.
10. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Registration Rights. FBC hereby provides the Holder with
registration rights as set forth in this Section 11.
(a) Definitions. The following terms, as used in this Section
11, have the following meanings (all terms defined herein in the
singular to have the correlative meanings when used in the plural and
vice versa):
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute, and the
rules and regulations promulgated thereunder.
"INITIAL SHARES" means the FBC Common Stock issued to
the Holder upon exercise of the Warrants pursuant to this Agreement.
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"PERSON" means a natural person, a corporation, a
partnership, a limited liability company, a trust, a joint venture, any
regulatory authority or any other entity or organization.
"PIGGYBACK REGISTRATION" means any registration of
Registrable Shares under the Securities Act effected in accordance with
Section 11(b).
"REGISTRABLE SHARES" means (i) the Initial Shares,
and (ii) any other securities issued or issuable with respect to the
Initial Shares by way of stock dividend, stock split or dividend or
distribution in the form of securities or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Shares,
such securities shall cease to be Registrable Shares when (i) a
registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of pursuant to such registration
statement, (ii) such securities shall have been distributed in
accordance with Rule 144, (iii) such securities shall have ceased to be
outstanding, or (iv) such securities are transferred to any Person that
is not an assignee permitted by Section 11.
"REGISTRATION EXPENSES" means all expenses incident
to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all registration and filing fees,
(b) all registration, filing, qualification and other fees and expenses
of complying with securities or blue sky laws of all jurisdictions in
which the securities are to be registered and any legal fees and
expenses incurred in connection with the blue sky qualifications of the
Registrable Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses and
(d) the fees and disbursements of counsel for FBC and of its
independent public accountants.
"RULE 144" means Rule 144 promulgated by the SEC
under the Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"SELLING EXPENSES" means all costs and expenses
incident to the Holder's sale of Registrable Shares as provided for in
Section 11 of this Agreement, including, without limitation,
commissions to brokers and/or dealers and fees and expenses of any
Person retained by the Holder in connection with such sale or sales,
but excluding Registration Expenses.
"SHARES" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
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(i) If the Company at any time proposes to register
any of its equity securities under the Securities Act for its
own account (other than by a registration on Form S-4 or Form
S-8 or any successor or similar form then in effect) in a form
and in a manner that would permit registration of the
Registrable Shares, it will give prompt (but in no event less
than thirty days prior to the proposed date of filing the
registration statement relating to such registration) notice
to the Holder of the Company's intention to do so and of such
Holder's rights under this Section 11(b). Upon the request of
the Holder made within twenty days after the receipt by the
Holder of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by the Holder)
(the "PIGGYBACK REGISTRATION NOTICE"), the Company will use
commercially reasonable efforts to effect the registration
under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the Holder, to
the extent required to permit the disposition (in accordance
with the manner of distribution contemplated by the Company
with respect to such registration by the Company) of the
Registrable Shares so to be registered; provided, however,
that if, at any time after giving notice of its intention to
register any equity securities and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not
to register or to delay registration of such equity
securities, the Company may, at its election, give notice of
such determination to each such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Shares in
connection with such registration and (ii) in the case of a
determination to delay registering, shall be permitted to
delay registering any Registrable Shares for the same period
as the delay in registering such other equity securities.
(ii) If the Company at any time proposes to register
any of its equity securities for its own account under the
Securities Act as contemplated by this Section 11(b) and such
securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Holder and
subject to Section 11(b), include the Registrable Shares
requested by the Holder among the securities to be distributed
by such underwriters. The Holder shall become a party to the
underwriting agreement between the Company and such
underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to the Company.
(iii) If (A) a registration pursuant to this Section
11(b) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a
transaction and (B) the managing underwriter of such
underwritten offering shall inform the Company and the Holder
requesting such registration by letter of its belief that the
amount of securities requested to be included in such
registration exceeds the amount which can be sold in (or
during the time of) such offering within a price range
acceptable to the Company, the Company will include in such
registration such amount of securities which the Company is so
advised can be sold in (or during the time of) such offering
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as follows: first, all securities proposed by the Company to
be sold for its own account; second, such Registrable Shares
requested to be included in such registration by the Holder
thereof pro rata on the basis of the amount of such securities
so proposed to be sold and so requested to be included by the
holders of Warrants issued in connection with the Company's
10% Convertible Notes dated June 7, 1999; and third, all other
securities of the Company requested to be included in such
registration pro rata on the basis of the amount of such
securities so proposed to be sold and so requested to be
included.
(c) Registration Terms and Procedures. (i) The Holder shall
pay its own share of the Selling Expenses (as the case may be) incurred
in connection with a registration to be effected (whether or not
effected or deemed effected) pursuant to this Agreement. The Company
shall pay all Registration Expenses in connection with a registration
to be effected (whether or not effected or deemed effected) pursuant to
this Agreement.
(ii) In connection with the Company's obligations to
register Registrable Shares pursuant to this Agreement, the
Company will use commercially reasonable efforts to effect
such registration so as to permit the sale of any Registrable
Shares included in such registration in accordance with the
intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible
prepare and (as soon thereafter as practicable) file with the
SEC the requisite registration statement containing all
information required thereby to effect such registration and
thereafter use commercially reasonable efforts to cause such
registration statement to become and remain effective in
accordance with the terms of this Agreement.
(iii) The Holder shall furnish to the Company such
information regarding the Holder, the Registrable Shares held
by the Holder and the intended plan of distribution of such
securities as the Company may from time to time reasonably
request in writing in connection with such registration. If
any registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, then
the Holder shall have the right to require that such reference
to be in a form reasonably satisfactory to the Holder or in
the event that such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar
federal or state blue sky statute and the rules and
regulations thereunder then in force, the deletion of the
reference to the Holder.
(d) [INTENTIONALLY OMITTED]
(e) Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Holder, in the case of registration of Registrable Shares pursuant to
Section 11(b), its underwriters or agents, if any, and its respective
counsel and accountants reasonable access to its books and records and
such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Holder's and such
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underwriters' or agents' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
(f) Indemnification. The Company and the Holder acknowledge
and agree that as a condition precedent to the exercise of the
registration rights herein contained, the Company and the Holder
electing to avail itself of the rights specified in this Section 11
shall each agree to and shall exchange such indemnities as are
customary and reasonable in connection with public offerings of
securities in circumstances similar to the circumstances of any
offering effected pursuant to the rights herein contained, which
indemnities shall be acceptable to the Company and its counsel in their
sole discretion. The Holder shall provide such information and
undertake such other actions as requested by the Company in connection
with such registration.
(g) [INTENTIONALLY OMITTED]
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(h) Assignment. The rights of the Holder hereunder shall only
be assignable in connection with the transfer of Registrable Shares by
the Holder that is required by operation of law, or in connection with
a transfer by the Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of the Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 11(f) and the rights of any party hereto with respect to the
breach of any provision hereof shall survive termination of this
Agreement.
12. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 3, exchanging
this Warrant pursuant to Section 9, and replacing this Warrant pursuant to
Section 10, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, etc. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. Maximum Exercise. The Holder shall not be entitled to exercise, on
an exercise date, this Warrant in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock of the Company on such exercise date. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to aggregate exercises which would result in the issuance
of more than 9.99%. The restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company.
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IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: __________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
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Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
--------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Percentage Number
Tranferees Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
14
Exhibit 3(f)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 50,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
No. 5-A August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
DEAN DOWDA, or assigns (the "Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company after August 24, 1999 at any time or
from time to time before 5:00 p.m., New York time, on June 7, 2002 (the
"Expiration Date"), up to 50,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $.0004 par value per share, of the Company, at a
per share purchase price of $0.50 per share (the "Warrant"), (such purchase
price per share as adjusted from time to time as herein provided is referred to
herein as the "Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein.
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term Company shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
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(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(d) The term "Registrable Securities" means (i) Common Stock issued
pursuant to the Warrant, (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization and (iii) any other shares of
Common Stock held by the Holder. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act of 1933 (the "Securities Act") or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company. For
purposes of this Warrant, the Holder shall be deemed to be a Holder of
Registrable Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Holder has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Holder shall be entitled to exercise the
rights of a Holder of Registrable Securities hereunder (it being understood,
however, that any Registrable Securities which are not shares of Common Stock
shall be converted into or exercised for shares of Common Stock immediately
prior to the closing of any registration pursuant to which such Common Stock is
to be sold).
2. Amendment and Restatement. By execution of this Warrant, the Common
Stock Purchase Warrant executed between the Company and the parties, dated June
7, 1999, (the "June 7th Warrant") is hereby amended and restated in its entirety
and is of no further force and effect. The parties acknowledge and agree that
they have no further rights, interests, claims or obligations whatsoever arising
out of, or relating to, the June 7th Warrant.
3. Exercise of Warrant.
3.1. Number of Shares Issuable upon Exercise. From and after
the date hereof through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 3.2 or upon exercise of this Warrant in
part in accordance with subsection 3.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 6.
3.2. Full Exercise. This Warrant may be exercised in full by
the Holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
Holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 13), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by
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<PAGE>
multiplying the number of shares of Common Stock for which this Warrant is then
exercisable by the Purchase Price (as hereinafter defined) then in effect.
3.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 3.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
3.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
3.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing obligation to afford to such Holder any rights to
which such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall fail to make
any
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such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
3.6. Trustee for Warrant Holder. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the Warrant
pursuant to subsection 5.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 3.
4. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise, pursuant to Section 3 or otherwise.
5. Adjustment for Reorganization, Consolidation,- Merger, etc.
5.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
5.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable by the Holder of the Warrant after the
effective date
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of such dissolution pursuant to this Section 5 to a bank or trust company having
its principal office in New York, NY, as trustee for the Holder of the Warrant.
5.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 5.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 5.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the Holder of the Warrant be delivered to the Trustee as
contemplated by Section 5.2.
6. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 6. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 3, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 6) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 6)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The
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<PAGE>
Company will forthwith mail a copy of each such certificate to the Holder of the
Warrant and any Warrant agent of the Company (appointed pursuant to Section 12
hereof).
8. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
9. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by the registered Holder hereof (a "Transferor") with respect to
any or all of the shares of Common Stock due to the Holder under this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes will issue and
deliver to or on the order of the Transferor thereof a new warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face thereof for the number of shares of Common Stock called for on the face
of the Warrant so surrendered by the Transferor.
10. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Registration Rights. FBC hereby provides the Holder with
registration rights as set forth in this Section 11.
(a) Definitions. The following terms, as used in this Section
11, have the following meanings (all terms defined herein in the
singular to have the correlative meanings when used in the plural and
vice versa):
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute, and the
rules and regulations promulgated thereunder.
"INITIAL SHARES" means the FBC Common Stock issued to
the Holder upon exercise of the Warrants pursuant to this Agreement.
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<PAGE>
"PERSON" means a natural person, a corporation, a
partnership, a limited liability company, a trust, a joint venture, any
regulatory authority or any other entity or organization.
"PIGGYBACK REGISTRATION" means any registration of
Registrable Shares under the Securities Act effected in accordance with
Section 11(b).
"REGISTRABLE SHARES" means (i) the Initial Shares,
and (ii) any other securities issued or issuable with respect to the
Initial Shares by way of stock dividend, stock split or dividend or
distribution in the form of securities or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Shares,
such securities shall cease to be Registrable Shares when (i) a
registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of pursuant to such registration
statement, (ii) such securities shall have been distributed in
accordance with Rule 144, (iii) such securities shall have ceased to be
outstanding, or (iv) such securities are transferred to any Person that
is not an assignee permitted by Section 11.
"REGISTRATION EXPENSES" means all expenses incident
to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all registration and filing fees,
(b) all registration, filing, qualification and other fees and expenses
of complying with securities or blue sky laws of all jurisdictions in
which the securities are to be registered and any legal fees and
expenses incurred in connection with the blue sky qualifications of the
Registrable Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses and
(d) the fees and disbursements of counsel for FBC and of its
independent public accountants.
"RULE 144" means Rule 144 promulgated by the SEC
under the Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"SELLING EXPENSES" means all costs and expenses
incident to the Holder's sale of Registrable Shares as provided for in
Section 11 of this Agreement, including, without limitation,
commissions to brokers and/or dealers and fees and expenses of any
Person retained by the Holder in connection with such sale or sales,
but excluding Registration Expenses.
"SHARES" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
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(i) If the Company at any time proposes to register
any of its equity securities under the Securities Act for its
own account (other than by a registration on Form S-4 or Form
S-8 or any successor or similar form then in effect) in a form
and in a manner that would permit registration of the
Registrable Shares, it will give prompt (but in no event less
than thirty days prior to the proposed date of filing the
registration statement relating to such registration) notice
to the Holder of the Company's intention to do so and of such
Holder's rights under this Section 11(b). Upon the request of
the Holder made within twenty days after the receipt by the
Holder of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by the Holder)
(the "PIGGYBACK REGISTRATION NOTICE"), the Company will use
commercially reasonable efforts to effect the registration
under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the Holder, to
the extent required to permit the disposition (in accordance
with the manner of distribution contemplated by the Company
with respect to such registration by the Company) of the
Registrable Shares so to be registered; provided, however,
that if, at any time after giving notice of its intention to
register any equity securities and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not
to register or to delay registration of such equity
securities, the Company may, at its election, give notice of
such determination to each such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Shares in
connection with such registration and (ii) in the case of a
determination to delay registering, shall be permitted to
delay registering any Registrable Shares for the same period
as the delay in registering such other equity securities.
(ii) If the Company at any time proposes to register
any of its equity securities for its own account under the
Securities Act as contemplated by this Section 11(b) and such
securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Holder and
subject to Section 11(b), include the Registrable Shares
requested by the Holder among the securities to be distributed
by such underwriters. The Holder shall become a party to the
underwriting agreement between the Company and such
underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to the Company.
(iii) If (A) a registration pursuant to this Section
11(b) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a
transaction and (B) the managing underwriter of such
underwritten offering shall inform the Company and the Holder
requesting such registration by letter of its belief that the
amount of securities requested to be included in such
registration exceeds the amount which can be sold in (or
during the time of) such offering within a price range
acceptable to the Company, the Company will include in such
registration such amount of securities which the Company is so
advised can be sold in (or during the time of) such offering
8
<PAGE>
as follows: first, all securities proposed by the Company to
be sold for its own account; second, such Registrable Shares
requested to be included in such registration by the Holder
thereof pro rata on the basis of the amount of such securities
so proposed to be sold and so requested to be included by the
holders of Warrants issued in connection with the Company's
10% Convertible Notes dated June 7, 1999; and third, all other
securities of the Company requested to be included in such
registration pro rata on the basis of the amount of such
securities so proposed to be sold and so requested to be
included.
(c) Registration Terms and Procedures. (i) The Holder shall
pay its own share of the Selling Expenses (as the case may be) incurred
in connection with a registration to be effected (whether or not
effected or deemed effected) pursuant to this Agreement. The Company
shall pay all Registration Expenses in connection with a registration
to be effected (whether or not effected or deemed effected) pursuant to
this Agreement.
(ii) In connection with the Company's obligations to
register Registrable Shares pursuant to this Agreement, the
Company will use commercially reasonable efforts to effect
such registration so as to permit the sale of any Registrable
Shares included in such registration in accordance with the
intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible
prepare and (as soon thereafter as practicable) file with the
SEC the requisite registration statement containing all
information required thereby to effect such registration and
thereafter use commercially reasonable efforts to cause such
registration statement to become and remain effective in
accordance with the terms of this Agreement.
(iii) The Holder shall furnish to the Company such
information regarding the Holder, the Registrable Shares held
by the Holder and the intended plan of distribution of such
securities as the Company may from time to time reasonably
request in writing in connection with such registration. If
any registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, then
the Holder shall have the right to require that such reference
to be in a form reasonably satisfactory to the Holder or in
the event that such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar
federal or state blue sky statute and the rules and
regulations thereunder then in force, the deletion of the
reference to the Holder.
(d) [INTENTIONALLY OMITTED]
(e) Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Holder, in the case of registration of Registrable Shares pursuant to
Section 11(b), its underwriters or agents, if any, and its respective
counsel and accountants reasonable access to its books and records and
such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Holder's and such
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underwriters' or agents' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
(f) Indemnification. The Company and the Holder acknowledge
and agree that as a condition precedent to the exercise of the
registration rights herein contained, the Company and the Holder
electing to avail itself of the rights specified in this Section 11
shall each agree to and shall exchange such indemnities as are
customary and reasonable in connection with public offerings of
securities in circumstances similar to the circumstances of any
offering effected pursuant to the rights herein contained, which
indemnities shall be acceptable to the Company and its counsel in their
sole discretion. The Holder shall provide such information and
undertake such other actions as requested by the Company in connection
with such registration.
(g) [INTENTIONALLY OMITTED]
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(h) Assignment. The rights of the Holder hereunder shall only
be assignable in connection with the transfer of Registrable Shares by
the Holder that is required by operation of law, or in connection with
a transfer by the Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of the Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 11(f) and the rights of any party hereto with respect to the
breach of any provision hereof shall survive termination of this
Agreement.
12. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 3, exchanging
this Warrant pursuant to Section 9, and replacing this Warrant pursuant to
Section 10, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, etc. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. Maximum Exercise. The Holder shall not be entitled to exercise, on
an exercise date, this Warrant in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock of the Company on such exercise date. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to aggregate exercises which would result in the issuance
of more than 9.99%. The restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company.
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IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: __________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
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Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
--------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Percentage Number
Tranferees Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
14
Exhibit 3(g)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 100,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
No. 6-A August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
FRED LENZ, or assigns (the "Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company after August 24, 1999 at any time or
from time to time before 5:00 p.m., New York time, on June 7, 2002 (the
"Expiration Date"), up to 100,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $.0004 par value per share, of the Company, at a
per share purchase price of $0.50 per share (the "Warrant"), (such purchase
price per share as adjusted from time to time as herein provided is referred to
herein as the "Purchase Price"). The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein.
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term Company shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
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(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(d) The term "Registrable Securities" means (i) Common Stock issued
pursuant to the Warrant, (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization and (iii) any other shares of
Common Stock held by the Holder. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act of 1933 (the "Securities Act") or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company. For
purposes of this Warrant, the Holder shall be deemed to be a Holder of
Registrable Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Holder has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Holder shall be entitled to exercise the
rights of a Holder of Registrable Securities hereunder (it being understood,
however, that any Registrable Securities which are not shares of Common Stock
shall be converted into or exercised for shares of Common Stock immediately
prior to the closing of any registration pursuant to which such Common Stock is
to be sold).
2. Amendment and Restatement. By execution of this Warrant, the Common
Stock Purchase Warrant executed between the Company and the parties, dated June
7, 1999, (the "June 7th Warrant") is hereby amended and restated in its entirety
and is of no further force and effect. The parties acknowledge and agree that
they have no further rights, interests, claims or obligations whatsoever arising
out of, or relating to, the June 7th Warrant.
3. Exercise of Warrant.
3.1. Number of Shares Issuable upon Exercise. From and after
the date hereof through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 3.2 or upon exercise of this Warrant in
part in accordance with subsection 3.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 6.
3.2. Full Exercise. This Warrant may be exercised in full by
the Holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
Holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 13), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by
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multiplying the number of shares of Common Stock for which this Warrant is then
exercisable by the Purchase Price (as hereinafter defined) then in effect.
3.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 3.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
3.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
3.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing obligation to afford to such Holder any rights to
which such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall fail to make
any
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such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
3.6. Trustee for Warrant Holder. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the Warrant
pursuant to subsection 5.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 3.
4. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise, pursuant to Section 3 or otherwise.
5. Adjustment for Reorganization, Consolidation,- Merger, etc.
5.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
5.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable by the Holder of the Warrant after the
effective date
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of such dissolution pursuant to this Section 5 to a bank or trust company having
its principal office in New York, NY, as trustee for the Holder of the Warrant.
5.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 5.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 5.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the Holder of the Warrant be delivered to the Trustee as
contemplated by Section 5.2.
6. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 6. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 3, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 6) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 6)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The
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Company will forthwith mail a copy of each such certificate to the Holder of the
Warrant and any Warrant agent of the Company (appointed pursuant to Section 12
hereof).
8. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
9. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by the registered Holder hereof (a "Transferor") with respect to
any or all of the shares of Common Stock due to the Holder under this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes will issue and
deliver to or on the order of the Transferor thereof a new warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face thereof for the number of shares of Common Stock called for on the face
of the Warrant so surrendered by the Transferor.
10. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Registration Rights. FBC hereby provides the Holder with
registration rights as set forth in this Section 11.
(a) Definitions. The following terms, as used in this Section
11, have the following meanings (all terms defined herein in the
singular to have the correlative meanings when used in the plural and
vice versa):
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute, and the
rules and regulations promulgated thereunder.
"INITIAL SHARES" means the FBC Common Stock issued to
the Holder upon exercise of the Warrants pursuant to this Agreement.
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"PERSON" means a natural person, a corporation, a
partnership, a limited liability company, a trust, a joint venture, any
regulatory authority or any other entity or organization.
"PIGGYBACK REGISTRATION" means any registration of
Registrable Shares under the Securities Act effected in accordance with
Section 11(b).
"REGISTRABLE SHARES" means (i) the Initial Shares,
and (ii) any other securities issued or issuable with respect to the
Initial Shares by way of stock dividend, stock split or dividend or
distribution in the form of securities or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Shares,
such securities shall cease to be Registrable Shares when (i) a
registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of pursuant to such registration
statement, (ii) such securities shall have been distributed in
accordance with Rule 144, (iii) such securities shall have ceased to be
outstanding, or (iv) such securities are transferred to any Person that
is not an assignee permitted by Section 11.
"REGISTRATION EXPENSES" means all expenses incident
to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all registration and filing fees,
(b) all registration, filing, qualification and other fees and expenses
of complying with securities or blue sky laws of all jurisdictions in
which the securities are to be registered and any legal fees and
expenses incurred in connection with the blue sky qualifications of the
Registrable Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses and
(d) the fees and disbursements of counsel for FBC and of its
independent public accountants.
"RULE 144" means Rule 144 promulgated by the SEC
under the Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"SELLING EXPENSES" means all costs and expenses
incident to the Holder's sale of Registrable Shares as provided for in
Section 11 of this Agreement, including, without limitation,
commissions to brokers and/or dealers and fees and expenses of any
Person retained by the Holder in connection with such sale or sales,
but excluding Registration Expenses.
"SHARES" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
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(i) If the Company at any time proposes to register
any of its equity securities under the Securities Act for its
own account (other than by a registration on Form S-4 or Form
S-8 or any successor or similar form then in effect) in a form
and in a manner that would permit registration of the
Registrable Shares, it will give prompt (but in no event less
than thirty days prior to the proposed date of filing the
registration statement relating to such registration) notice
to the Holder of the Company's intention to do so and of such
Holder's rights under this Section 11(b). Upon the request of
the Holder made within twenty days after the receipt by the
Holder of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by the Holder)
(the "PIGGYBACK REGISTRATION NOTICE"), the Company will use
commercially reasonable efforts to effect the registration
under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the Holder, to
the extent required to permit the disposition (in accordance
with the manner of distribution contemplated by the Company
with respect to such registration by the Company) of the
Registrable Shares so to be registered; provided, however,
that if, at any time after giving notice of its intention to
register any equity securities and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not
to register or to delay registration of such equity
securities, the Company may, at its election, give notice of
such determination to each such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Shares in
connection with such registration and (ii) in the case of a
determination to delay registering, shall be permitted to
delay registering any Registrable Shares for the same period
as the delay in registering such other equity securities.
(ii) If the Company at any time proposes to register
any of its equity securities for its own account under the
Securities Act as contemplated by this Section 11(b) and such
securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Holder and
subject to Section 11(b), include the Registrable Shares
requested by the Holder among the securities to be distributed
by such underwriters. The Holder shall become a party to the
underwriting agreement between the Company and such
underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to the Company.
(iii) If (A) a registration pursuant to this Section
11(b) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a
transaction and (B) the managing underwriter of such
underwritten offering shall inform the Company and the Holder
requesting such registration by letter of its belief that the
amount of securities requested to be included in such
registration exceeds the amount which can be sold in (or
during the time of) such offering within a price range
acceptable to the Company, the Company will include in such
registration such amount of securities which the Company is so
advised can be sold in (or during the time of) such offering
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as follows: first, all securities proposed by the Company to
be sold for its own account; second, such Registrable Shares
requested to be included in such registration by the Holder
thereof pro rata on the basis of the amount of such securities
so proposed to be sold and so requested to be included by the
holders of Warrants issued in connection with the Company's
10% Convertible Notes dated June 7, 1999; and third, all other
securities of the Company requested to be included in such
registration pro rata on the basis of the amount of such
securities so proposed to be sold and so requested to be
included.
(c) Registration Terms and Procedures. (i) The Holder shall
pay its own share of the Selling Expenses (as the case may be) incurred
in connection with a registration to be effected (whether or not
effected or deemed effected) pursuant to this Agreement. The Company
shall pay all Registration Expenses in connection with a registration
to be effected (whether or not effected or deemed effected) pursuant to
this Agreement.
(ii) In connection with the Company's obligations to
register Registrable Shares pursuant to this Agreement, the
Company will use commercially reasonable efforts to effect
such registration so as to permit the sale of any Registrable
Shares included in such registration in accordance with the
intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible
prepare and (as soon thereafter as practicable) file with the
SEC the requisite registration statement containing all
information required thereby to effect such registration and
thereafter use commercially reasonable efforts to cause such
registration statement to become and remain effective in
accordance with the terms of this Agreement.
(iii) The Holder shall furnish to the Company such
information regarding the Holder, the Registrable Shares held
by the Holder and the intended plan of distribution of such
securities as the Company may from time to time reasonably
request in writing in connection with such registration. If
any registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, then
the Holder shall have the right to require that such reference
to be in a form reasonably satisfactory to the Holder or in
the event that such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar
federal or state blue sky statute and the rules and
regulations thereunder then in force, the deletion of the
reference to the Holder.
(d) [INTENTIONALLY OMITTED]
(e) Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Holder, in the case of registration of Registrable Shares pursuant to
Section 11(b), its underwriters or agents, if any, and its respective
counsel and accountants reasonable access to its books and records and
such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Holder's and such
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underwriters' or agents' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
(f) Indemnification. The Company and the Holder acknowledge
and agree that as a condition precedent to the exercise of the
registration rights herein contained, the Company and the Holder
electing to avail itself of the rights specified in this Section 11
shall each agree to and shall exchange such indemnities as are
customary and reasonable in connection with public offerings of
securities in circumstances similar to the circumstances of any
offering effected pursuant to the rights herein contained, which
indemnities shall be acceptable to the Company and its counsel in their
sole discretion. The Holder shall provide such information and
undertake such other actions as requested by the Company in connection
with such registration.
(g) [INTENTIONALLY OMITTED]
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(h) Assignment. The rights of the Holder hereunder shall only
be assignable in connection with the transfer of Registrable Shares by
the Holder that is required by operation of law, or in connection with
a transfer by the Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of the Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 11(f) and the rights of any party hereto with respect to the
breach of any provision hereof shall survive termination of this
Agreement.
12. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 3, exchanging
this Warrant pursuant to Section 9, and replacing this Warrant pursuant to
Section 10, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, etc. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. Maximum Exercise. The Holder shall not be entitled to exercise, on
an exercise date, this Warrant in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock of the Company on such exercise date. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to aggregate exercises which would result in the issuance
of more than 9.99%. The restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company.
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IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: __________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
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Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
--------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Percentage Number
Tranferees Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
14
Exhibit 3(h)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 50,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
No. 7-A August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
WORLD CAPITAL FUNDING, LLC, or assigns (the "Holder"), is entitled, subject to
the terms set forth below, to purchase from the Company after August 24, 1999 at
any time or from time to time before 5:00 p.m., New York time, on June 7, 2002
(the "Expiration Date"), up to 50,000 fully paid and nonassessable shares of
Common Stock (as hereinafter defined), $.0004 par value per share, of the
Company, at a per share purchase price of $0.50 per share (the "Warrant"), (such
purchase price per share as adjusted from time to time as herein provided is
referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term Company shall include Frederick Brewing Co. and any
corporation which shall succeed or assume the obligations of Frederick Brewing
Co. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
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securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
(d) The term "Registrable Securities" means (i) Common Stock issued
pursuant to the Warrant, (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization and (iii) any other shares of
Common Stock held by the Holder. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act of 1933 (the "Securities Act") or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force) or repurchased by the Company. For
purposes of this Warrant, the Holder shall be deemed to be a Holder of
Registrable Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Holder has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Holder shall be entitled to exercise the
rights of a Holder of Registrable Securities hereunder (it being understood,
however, that any Registrable Securities which are not shares of Common Stock
shall be converted into or exercised for shares of Common Stock immediately
prior to the closing of any registration pursuant to which such Common Stock is
to be sold).
2. Amendment and Restatement. By execution of this Warrant, the Common
Stock Purchase Warrant executed between the Company and the parties, dated June
7, 1999, (the "June 7th Warrant") is hereby amended and restated in its entirety
and is of no further force and effect. The parties acknowledge and agree that
they have no further rights, interests, claims or obligations whatsoever arising
out of, or relating to, the June 7th Warrant.
3. Exercise of Warrant.
3.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the Holder hereof shall
be entitled to receive, upon exercise of this Warrant in whole in accordance
with the terms of subsection 3.2 or upon exercise of this Warrant in part in
accordance with subsection 3.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 6.
3.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
Holder, to the Company at its principal office or at the
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office of its Warrant agent (as provided in Section 13), accompanied by payment,
in cash or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price (as
hereinafter defined) then in effect.
3.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 3.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
3.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean the Fair Market
Value of a share of the Company's Common Stock. Fair Market Value of a share of
Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is
traded in the over-the-counter market, then the mean of the closing bid and
asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules then
standing of the American Arbitration Association, before a single arbitrator to
be chosen from a panel of persons qualified by education and training to pass on
the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.
3.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing
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obligation to afford to such Holder any rights to which such Holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant. If the Holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Holder any such rights.
3.6. Trustee for Warrant Holder. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of the Warrant
pursuant to subsection 5.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 3.
4. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise, pursuant to Section 3 or otherwise.
5. Adjustment for Reorganization, Consolidation,- Merger, etc.
5.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
5.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property
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(including cash, where applicable) receivable by the Holder of the Warrant after
the effective date of such dissolution pursuant to this Section 5 to a bank or
trust company having its principal office in New York, NY, as trustee for the
Holder of the Warrant.
5.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 5.3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 5.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the Holder of the Warrant be delivered to the Trustee as
contemplated by Section 5.2.
6. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 6. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 3, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 6) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 6)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The
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Company will forthwith mail a copy of each such certificate to the Holder of the
Warrant and any Warrant agent of the Company (appointed pursuant to Section 12
hereof).
8. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
9. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by the registered Holder hereof (a "Transferor") with respect to
any or all of the shares of Common Stock due to the Holder under this Warrant.
On the surrender for exchange of this Warrant, with the Transferor's endorsement
in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes will issue and
deliver to or on the order of the Transferor thereof a new warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face thereof for the number of shares of Common Stock called for on the face
of the Warrant so surrendered by the Transferor.
10. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Registration Rights. FBC hereby provides the Holder with
registration rights as set forth in this Section 11.
(a) Definitions. The following terms, as used in this Section 11,
have the following meanings (all terms defined herein in the singular
to have the correlative meanings when used in the plural and vice
versa):
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"INITIAL SHARES" means the FBC Common Stock issued to the
Holder upon exercise of the Warrants pursuant to this Agreement.
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"PERSON" means a natural person, a corporation, a partnership,
a limited liability company, a trust, a joint venture, any regulatory
authority or any other entity or organization.
"PIGGYBACK REGISTRATION" means any registration of Registrable
Shares under the Securities Act effected in accordance with Section
11(b).
"REGISTRABLE SHARES" means (i) the Initial Shares, and (ii) any
other securities issued or issuable with respect to the Initial Shares
by way of stock dividend, stock split or dividend or distribution in
the form of securities or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Shares, such securities
shall cease to be Registrable Shares when (i) a registration statement
with respect to the sale of such securities shall have become effective
under the Securities Act and such securities shall have been disposed
of pursuant to such registration statement, (ii) such securities shall
have been distributed in accordance with Rule 144, (iii) such
securities shall have ceased to be outstanding, or (iv) such securities
are transferred to any Person that is not an assignee permitted by
Section 11.
"REGISTRATION EXPENSES" means all expenses incident to the
Company's performance of or compliance with this Agreement, including,
without limitation, (a) all registration and filing fees, (b) all
registration, filing, qualification and other fees and expenses of
complying with securities or blue sky laws of all jurisdictions in
which the securities are to be registered and any legal fees and
expenses incurred in connection with the blue sky qualifications of the
Registrable Shares and the determination of their eligibility for
investment under the laws of all such jurisdictions, (c) all word
processing, duplicating, printing, messenger and delivery expenses and
(d) the fees and disbursements of counsel for FBC and of its
independent public accountants.
"RULE 144" means Rule 144 promulgated by the SEC under the
Securities Act and any successor provision thereto.
"SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"SELLING EXPENSES" means all costs and expenses incident to the
Holder's sale of Registrable Shares as provided for in Section 11 of
this Agreement, including, without limitation, commissions to brokers
and/or dealers and fees and expenses of any Person retained by the
Holder in connection with such sale or sales, but excluding
Registration Expenses.
"SHARES" means shares of FBC Common Stock.
(b) Registration Under the Securities Act.
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(i) If the Company at any time proposes to register any of its
equity securities under the Securities Act for its own account
(other than by a registration on Form S-4 or Form S-8 or any
successor or similar form then in effect) in a form and in a manner
that would permit registration of the Registrable Shares, it will
give prompt (but in no event less than thirty days prior to the
proposed date of filing the registration statement relating to such
registration) notice to the Holder of the Company's intention to do
so and of such Holder's rights under this Section 11(b). Upon the
request of the Holder made within twenty days after the receipt by
the Holder of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by the Holder) (the
"PIGGYBACK REGISTRATION NOTICE"), the Company will use commercially
reasonable efforts to effect the registration under the Securities
Act of all Registrable Shares which the Company has been so
requested to register by the Holder, to the extent required to
permit the disposition (in accordance with the manner of
distribution contemplated by the Company with respect to such
registration by the Company) of the Registrable Shares so to be
registered; provided, however, that if, at any time after giving
notice of its intention to register any equity securities and prior
to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for
any reason not to register or to delay registration of such equity
securities, the Company may, at its election, give notice of such
determination to each such Holder and, thereupon, (i) in the case
of a determination not to register, shall be relieved of its
obligation to register any Registrable Shares in connection with
such registration and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any
Registrable Shares for the same period as the delay in registering
such other equity securities.
(ii) If the Company at any time proposes to register any of its
equity securities for its own account under the Securities Act as
contemplated by this Section 11(b) and such securities are to be
distributed by or through one or more underwriters, the Company
will, if requested by the Holder and subject to Section 11(b),
include the Registrable Shares requested by the Holder among the
securities to be distributed by such underwriters. The Holder shall
become a party to the underwriting agreement between the Company
and such underwriters; provided, however, that such agreement is
reasonably satisfactory in substance and form to the Company.
(iii) If (A) a registration pursuant to this Section 11(b)
involves an underwritten offering of the securities being
registered to be distributed (on a firm commitment basis) by or
through one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction and (B) the
managing underwriter of such underwritten offering shall inform the
Company and the Holder requesting such registration by letter of
its belief that the amount of securities requested to be included
in such registration exceeds the amount which can be sold in (or
during the time of) such offering within a price range acceptable
to the Company, the Company will include in such registration such
amount of securities which the Company is so advised can be sold in
(or during the time of) such offering
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as follows: first, all securities proposed by the Company to be
sold for its own account; second, such Registrable Shares requested
to be included in such registration by the Holder thereof pro rata
on the basis of the amount of such securities so proposed to be
sold and so requested to be included by the holders of Warrants
issued in connection with the Company's 10% Convertible Notes dated
June 7, 1999; and third, all other securities of the Company
requested to be included in such registration pro rata on the basis
of the amount of such securities so proposed to be sold and so
requested to be included.
(c) Registration Terms and Procedures. (i) The Holder shall pay its
own share of the Selling Expenses (as the case may be) incurred in
connection with a registration to be effected (whether or not effected
or deemed effected) pursuant to this Agreement. The Company shall pay
all Registration Expenses in connection with a registration to be
effected (whether or not effected or deemed effected) pursuant to this
Agreement.
(ii) In connection with the Company's obligations to register
Registrable Shares pursuant to this Agreement, the Company will use
commercially reasonable efforts to effect such registration so as
to permit the sale of any Registrable Shares included in such
registration in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will as
expeditiously as possible prepare and (as soon thereafter as
practicable) file with the SEC the requisite registration statement
containing all information required thereby to effect such
registration and thereafter use commercially reasonable efforts to
cause such registration statement to become and remain effective in
accordance with the terms of this Agreement.
(iii) The Holder shall furnish to the Company such information
regarding the Holder, the Registrable Shares held by the Holder and
the intended plan of distribution of such securities as the Company
may from time to time reasonably request in writing in connection
with such registration. If any registration statement refers to the
Holder by name or otherwise as the holder of any securities of the
Company, then the Holder shall have the right to require that such
reference to be in a form reasonably satisfactory to the Holder or
in the event that such reference to the Holder by name or otherwise
is not required by the Securities Act or any similar federal or
state blue sky statute and the rules and regulations thereunder
then in force, the deletion of the reference to the Holder.
(d) [INTENTIONALLY OMITTED]
(e) Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Holder, in the case of registration of Registrable Shares pursuant to
Section 11(b), its underwriters or agents, if any, and its respective
counsel and accountants reasonable access to its books and records and
such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the
Holder's and such
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underwriters' or agents' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
(f) Indemnification. The Company and the Holder acknowledge and
agree that as a condition precedent to the exercise of the registration
rights herein contained, the Company and the Holder electing to avail
itself of the rights specified in this Section 11 shall each agree to
and shall exchange such indemnities as are customary and reasonable in
connection with public offerings of securities in circumstances similar
to the circumstances of any offering effected pursuant to the rights
herein contained, which indemnities shall be acceptable to the Company
and its counsel in their sole discretion. The Holder shall provide such
information and undertake such other actions as requested by the
Company in connection with such registration.
(g) [INTENTIONALLY OMITTED]
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(h) Assignment. The rights of the Holder hereunder shall only be
assignable in connection with the transfer of Registrable Shares by the
Holder that is required by operation of law, or in connection with a
transfer by the Holder by gift or to heirs, executors, legal
representatives and immediately family members or any other Person who
agree or agrees in writing to be bound by all the terms of this
Agreement.
(i) Termination of Certain Rights. The rights and obligations
hereunder of the Holder shall terminate with respect to such party at
such time when neither it nor any of its permitted assigns holds
Registrable Shares or two years from the date of this Agreement,
whichever occurs earlier; provided, however, that the provisions of
Section 11(f) and the rights of any party hereto with respect to the
breach of any provision hereof shall survive termination of this
Agreement.
12. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 3, exchanging
this Warrant pursuant to Section 9, and replacing this Warrant pursuant to
Section 10, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, etc. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. Maximum Exercise. The Holder shall not be entitled to exercise, on
an exercise date, this Warrant in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 9.99% of the outstanding shares of Common
Stock of the Company on such exercise date. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to aggregate exercises which would result in the issuance
of more than 9.99%. The restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company.
11
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: ____________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
12
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
______________________________
(Signature must conform to name of Holder as
specified on the face of the Warrant)
______________________________
(Address)
13
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Tranferees Percentage Number
Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
14
Exhibit 3(i)
EXECUTION COPY
--------------
PURCHASE AGREEMENT
by and among
SNYDER INTERNATIONAL BREWING GROUP, LLC
Buyer
and
EDWARD D. SCOTT, CATHERINE D. SCOTT, ROBERT SCHUERHOLZ,
NICHOLAS P. FORIS
and VISHNAMPET S. JAYANTHIMATH
Sellers
Dated as of August 24, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
PURCHASE AGREEMENT ......................................................1
RECITALS ................................................................1
AGREEMENT ...............................................................1
ARTICLE I DEFINITIONS ...................................................1
1.1 Defined Terms ..........................................1
ARTICLE II PURCHASE AND SALE OF THE SELLER UNITS ........................4
2.1 Transfer of the Seller Units ...........................4
2.2 FCNB Payment ...........................................4
2.3 Purchase Price .........................................5
2.4 Closing ................................................5
2.5 Closing Deliveries by Sellers...........................7
2.6 Closing Deliveries by Buyer.............................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS....................7
3.1 Ownership of Seller Units...............................7
3.2 Ownership of Blue II....................................7
3.3 Authorization...........................................7
3.4 Organization and Standing...............................7
3.5 No Conflict; Required Filings and Consents .............8
3.6 Consents and Approvals .................................8
3.7 Litigation .............................................8
3.8 Financial Statements ...................................8
3.9 Taxes ..................................................8
3.10 Leased Premises ........................................9
3.11 Zoning ................................................10
3.12 Environmental Issues ..................................10
3.13 Contracts .............................................10
3.14 Insurance .............................................11
3.15 Related Party Transactions ............................11
3.16 Compliance with Laws ..................................11
3.17 No Reliance ...........................................11
3.18 Broker's Fees .........................................11
3.19 Full Disclosure .......................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER .....................12
4.1 Authorization .........................................12
4.2 Consents and Approvals ................................12
4.3 No Conflict or Violation ..............................12
4.4 Litigation ............................................12
4.5 Acquisition for Investment ............................12
<PAGE>
4.6 Broker's Fees..........................................12
ARTICLE V COVENANTS AND AGREEMENTS .....................................13
5.1 Further Assurances ....................................13
5.2 Refinancing of Blue II's Debt Obligations .............13
5.3 Release of Claims .....................................13
5.4 Limited Release of Sellers ............................13
ARTICLE VI INDEMNIFICATION ............................................14
6.1 Survival Periods ......................................14
6.2 Indemnification .......................................14
6.3 Claims ................................................14
ARTICLE VII MISCELLANEOUS ..............................................15
7.1 Successors and Assigns ................................15
7.2 Notices ...............................................15
7.3 Choice of Law .........................................16
7.4 Consent To Jurisdiction And Service Of Process ........16
7.5 Entire Agreement; Amendments and Waivers ..............16
7.6 Counterparts ..........................................16
7.7 Invalidity ............................................16
7.8 Headings ..............................................16
7.9 Expenses ..............................................17
7.10 No Third Party Beneficiaries ..........................17
Schedules
- ---------
3.5 No Conflicts
3.8 Financial Statements
3.13 Contracts
3.14 Insurance
3.16 Compliance with Laws
3.19 Full Disclosure
<PAGE>
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT, dated as of August 24, 1999 (this "Agreement")
is by and among EDWARD D. SCOTT ("Scott"), CATHERINE D. SCOTT ("CD Scott"),
ROBERT SCHUERHOLZ ("Schuerholz"), NICHOLAS P. FORIS ("Foris") and VISHNAMPET S.
JAYANTHIMATH ("Jayanthimath") (Scott, CD Scott, Schuerholz, Foris and
Jayanthimath are, individually, a "Seller" and, collectively, the "Sellers") and
SNYDER INTERNATIONAL BREWING GROUP, LLC, an Ohio limited liability company
("Buyer").
RECITALS
--------
A. The Sellers are parties to the Operating Agreement of Blue II, dated
as of December 20, 1995 (the "Operating Agreement"). Pursuant to such Operating
Agreement, the Sellers own 100% of the outstanding membership interests of Blue
II.
B. The Sellers desire to sell, assign and transfer to Buyer all of the
Sellers' right, title and interest in and to their membership interests in Blue
II (the "Membership Interests") and any and all other rights and interests in
Blue II (such Membership Interests, rights and interests are, collectively, the
"Seller Units"), and Buyer desires to purchase from the Sellers the Seller
Units, subject to and in accordance with the terms of this Agreement.
C. The obligations (other than Section 2.2) of the Buyer and Sellers
hereunder are conditioned on consummation of Buyer's investment of up to $2.0
million in FBC (the "Investment Closing").
AGREEMENT
---------
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements contained in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the terms and conditions set forth below, Buyer and
the Sellers hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Defined Terms. For purposes of this Agreement the following terms
have the meanings (such meanings to be equally applicable to both singular and
plural forms of the defined terms) set forth below:
"Actions" means any action, suit, or legal, administrative or arbitral
proceeding before any Governmental Authority.
"Additional Loan Documents" has the meaning set forth in Section
2.4(e).
"Assignment" has the meaning set forth in Section 2.4(a).
<PAGE>
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Blue II" means Blue II, LLC, a Maryland limited liability company.
"Buyer" has the meaning set forth in the preamble to this Agreement.
"CD Scott" has the meaning set forth in the preamble to this Agreement.
"Claims" means any and all claims, Actions, suits, liabilities, costs,
demands, assessments, accounts, causes of action, rights of levy, execution or
recission, remedies, judgments, obligations, damages, expenses, interest,
penalties and charges of every kind and nature whatsoever, whether in law or in
equity, whether known or unknown, foreseen or unforeseen, matured or unmatured,
absolute or contingent, determined or determinable.
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.3.
"Contracts" has the meaning set forth in Section 3.13.
"Cross Receipt" has the meaning set forth in Section 2.4(b).
"CTIC" has the meaning set forth in Section 2.4(g).
"Damages" has the meaning set forth in Section 6.2.
"Environmental Damages" means any and all Claims which are incurred at
any time as a result of the existence (a) at or prior to Closing of Hazardous
Materials upon, about or beneath the Leased Premises or migrating or threatening
to migrate to or from the Leased Premises, or (b) of a violation of
Environmental Requirements pertaining to the Leased Premises, regardless of
whether the existence of such Hazardous Materials or the violation of
Environmental Requirements arose prior to the present ownership or operation of
the Leased Premises.
"Environmental Requirements" means all applicable Laws, Permits and
similar items of any Governmental Authority relating to the protection of human
health or the environment, including, without limitation, (a) all requirements
pertaining to reporting, licensing, permitting, investigation, and remediation
of emissions, discharges, releases, or threatened releases of Hazardous
Materials; (b) all requirements pertaining to the protection of the health and
safety of employees or the public; and (c) all other limitations, restrictions,
conditions, standards, prohibitions, obligations, schedules and timetables
contained therein or in any notice or demand letter issued, entered, promulgated
or approved thereunder.
"FBC" means Frederick Brewing Co., a Maryland corporation.
"FCNB" has the meaning set forth in Section 2.4(e).
2
<PAGE>
"Foris" has the meaning set forth in the preamble to this Agreement.
"Governmental Authority" means any government or political subdivision,
whether federal, state, local or foreign, or any agency or instrumentality of
any such government or political subdivision, or any federal, state, local or
foreign court or arbitrator.
"Hazardous Materials" means any substance: (a) the presence of which
requires investigation or remediation under any Environmental Requirement; (b)
which is or has been identified as a potential hazardous waste, hazardous
substance, pollutant or contaminant under any Environmental Requirement; or (c)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, reactive, or otherwise hazardous and has been
identified as regulated by any Governmental Authority.
"Indemnified Party" has the meaning set forth in Section 6.2.
"Indemnifying Party" has the meaning set forth in Section 6.2.
"Investment Closing" has the meaning set forth in recitals to this
Agreement.
"Jayanthimath" has the meaning set forth in the preamble to this
Agreement.
"knowledge" means the actual knowledge of such Person.
"Laws" means any law, statute, code, ordinance, regulation or legally
enforceable rule of any Governmental Authority.
"Lease Agreement" means the Lease Agreement and Option to Purchase,
dated July 17, 1996, by and between Blue II and FBC.
"Leased Premises" means the land and building where FBC's brewery is
located, as more particularly described in the Lease Agreement.
"Liens" means any mortgage, lien, Option, pledge, adverse claim,
interest, charge or other encumbrance.
"Loan and Financing Agreement" has the meaning set forth in Section
2.4(e).
"Material Adverse Effect" means, with respect to Blue II, a material
adverse effect on the business, assets (including, without limitation, the
Leased Premises), liabilities or financial condition of Blue II, taken as a
whole.
"MEDCO" has the meaning set forth in Section 2.5(e).
"Membership Interest" has the meaning set forth in the recitals to this
Agreement.
"MIDFA" has the meaning set forth in Section 2.4(e).
3
<PAGE>
"Operating Agreement" has the meaning set forth in the recitals to this
Agreement.
"Option" means any option, warrant, call, convertible or exchangeable
security, subscription, preemptive right or voting trust or agreement, any
agreement restricting sale or transfer or other agreement or right of similar
nature.
"Orders" means any order, judgment, ruling, injunction, assessment,
award, decree or writ of any Governmental Authority.
"Permits" means any licenses, permits, approvals, variances,
registrations, certificates, including, without limitation, certificates of
occupancy and other evidence of authority.
"Person" means any natural person and any corporation, firm,
partnership, trust, estate, limited liability company or any other entity.
"Phase I Report" means the Phase I Environmental Site Assessment, dated
April 19, 1996, prepared by Compliance Consulting Group, Inc., Project Number
0396-001.100.
"Policy" has the meaning set forth in Section 2.4(g).
"Purchase Price" has the meaning set forth in Section 2.2.
"Representatives" means, with respect to a party, the party's present
and former employees, shareholders, partners, agents, attorneys, officers,
directors, representatives or Affiliates and the present and former employees,
shareholders, partners, agents, attorneys, officers, directors or
representatives of any such Affiliates.
"Schuerholz" has the meaning set forth in the preamble to this
Agreement.
"Scott" has the meaning set forth in the preamble to this Agreement.
"Seller" and "Sellers" have the meaning set forth in the preamble to
this Agreement.
"Seller Units" has the meaning set forth in the recitals to this
Agreement.
"Transaction" has the meaning set forth in Section 2.1.
"Warrants" has the meaning set forth in Section 2.2.
4
<PAGE>
ARTICLE II
PURCHASE AND SALE OF THE SELLER UNITS
-------------------------------------
2.1 Transfer of the Seller Units. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, (a) each Seller shall
sell, assign and transfer the number of Seller Units set forth opposite his name
on Exhibit A to Buyer, free and clear of all Liens, (b) the Sellers shall
deliver to Buyer the Assignment evidencing the sale, assignment and transfer of
their respective Seller Units, (d) Buyer shall purchase the Seller Units free
and clear of any and all Liens and (e) Buyer shall pay and deliver to Seller the
Purchase Price as provided in Section 2.2 below (the "Transaction").
2.2 FCNB Payment. On the date of this Agreement, Buyer shall pay to
FCNB Bank ("FCNB") an amount equal to $60,000 to be credited by FCNB in respect
of the delinquent mortgage payments due under the Loan and Financing Agreement
(as defined below) on June 30, 1999 and July 31, 1999 (the "FCNB Payment").
2.3 Purchase Price. In full consideration for the Seller Units and the
release set forth in Section 5.3 hereof, at the Closing:
(a) Buyer shall pay on behalf of each Seller, by wire transfer
of immediately available funds to the Sellers' broker account designated by the
Sellers, an amount equal to $250,000 in the aggregate (exclusive of the FCNB
Payment); and
(b) Buyer shall issue to the Sellers warrants to purchase an
aggregate of 132,000 shares of common stock of FBC at price per share of $1.00,
and such warrants will be in the form substantially set forth on Exhibit B (the
"Warrants") and will not be subject to restrictions on resale other than those
provided under federal and state securities Laws (Sections 2.2 and 2.3(a)-(b)
are, collectively, the "Purchase Price").
2.4 Closing. The closing with respect to the Transaction (the
"Closing") will be held at the offices of Jones, Day, Reavis & Pogue, 901
Lakeside Avenue, Cleveland, Ohio 44114-1190 on August 24, 1999 (the "Closing
Date") simultaneously with the consummation of the Investment Closing. If the
Investment Closing does not occur, Buyer shall have no obligation or liability
to the Sellers under this Agreement except with respect to the FCNB Payment. If
the Investment Closing occurs, the Sellers shall be obligated to consummate; the
transactions contemplated by this Agreement simultaneously with the Investment
Closing provided, however, that the period between the date hereof and the date
of the consummation of the Investment Closing shall not exceed thirty days.
After the date of this Agreement until the Closing or the receipt of written
notice from the Buyer that the Investment Closing shall not occur, none of the
Sellers shall, directly or indirectly, (i) initiate, discuss or negotiate any
sale or merger of Blue II or sale or other transaction involving the Leased
Premises or entertain any inquiries concerning the foregoing or (ii) provide any
information relating to Blue II or any aspects of its business or the Leased
Premises to any Person, with the exception of information necessary to comply
with the requirements of any Governmental Authority.
2.5 Closing Deliveries by Sellers. At the Closing, the Sellers shall
deliver to Buyer:
5
<PAGE>
(a) An instrument of assignment, transfer and conveyance
substantially in the form set forth on Exhibit C (the "Assignment"), executed by
each Seller, evidencing the assignment, transfer and conveyance by each Seller
of his respective Seller Units to Buyer;
(b) A cross receipt substantially in the form set forth on
Exhibit D hereto (the "Cross Receipt"), executed by each Seller, evidencing
receipt by the Sellers of the Purchase Price;
(c) Resignation of Scott as Managing Member of Blue II,
executed by Scott;
(d) Resignation of each other Seller as a manager and/or
officer of Blue II, to the extent applicable;
(e) Evidence from FCNB and the Maryland Industrial Development
Financing Authority ("MIDFA") in form satisfactory to the Buyer, in its sole
discretion, (i) consenting to the change in control and ownership of Blue II
contemplated by this Agreement, (ii) certifying that such change in control and
ownership (x) is not a default under Section 10.1 of the Loan and Financing
Agreement by and among the Maryland Economic Development Corporation ("MEDCO"),
Blue II, FBC and FCNB, as successor to Signet Bank, dated July 19, 1996, as
amended (the "Loan and Financing Agreement"), (y) does not violate any other
provision of the Loan and Financing Agreement and (z) does not violate, or
constitute a default under, any other documentation entered into in connection
with the Loan and Financing Agreement (the "Additional Loan Documents") and
(iii) approving Buyer's proposed amendments and modifications to the Lease
Agreement.
(f) Evidence that the Sellers have terminated or caused Blue
II to terminate the Petition-For Warrant of Restitution filed on behalf of Blue
II with the District Court of Maryland for Frederick County.
(g) The Sellers shall deliver to Chicago Title Insurance
Company ("CTIC") such affidavits and/or indemnities required by CTIC in order
for CTIC to issue such an ALTA Owner's Policy of Title Insurance and
endorsements insuring that Blue II is the owner of fee simple title to the
Leased Premises in the amount of $2,920,000 and showing such exceptions and
otherwise in such form as reasonably satisfactory to the Buyer, which Policy
shall include, without limitation, a non-imputation endorsement (the "Title
Policy").
(h) [intentionally omitted]
(i) A zoning letter from the County of Frederick, Maryland in
form reasonably satisfactory to the Buyer, certifying that the use of the Leased
Premises as a beer manufacturing and distribution facility and other related
uses complies with all applicable Laws.
(j) Articles of organization of Blue II, certified by the
Secretary of State of Maryland;
6
<PAGE>
(k) Good standing certificate of Blue II, or an equivalent
document, issued by the Secretary of State of Maryland; and
(1) A certificate of the Managing Member of Blue II certifying
as to (i) resolutions authorizing this Agreement and the Transaction and the
other transactions contemplated hereby, (ii) the Operating Agreement and (iii)
the incumbency of each officer of Blue II executing any documents in connection
with this Agreement.
2.6 Closing Deliveries by Buyer. At the Closing, Buyer shall deliver
to the Sellers:
(a) The Purchase Price, including the Convertible Note,
executed by Buyer; and
(b) The Cross Receipt, executed by Buyer, acknowledging
receipt by Buyer of the Assignment of the Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
The Sellers, jointly and severally, represent and warrant to Buyer as
follows (except with respect to Sections 3.1 and 3.3 which each Seller
represents and warrants as to himself only):
3.1 Ownership of Seller Units. Each Seller is the sole and exclusive
owner of, and has valid title to, the Seller Units set forth opposite his name
on Exhibit A, and such Seller Units constitute all of the Seller's right, title
and interest (membership or otherwise) in and to Blue II. After giving effect to
the Transaction, (a) Buyer will acquire valid title to such Seller Units, free
and clear of all Liens, (b) each Seller will no longer be a member of, or own
any Membership Interests or other interests in, Blue II and (c) no other Person
(other than Buyer) will have any right to or interest in such Seller Units.
3.2 Ownership of Blue II. The Sellers own all of the outstanding
Membership Interests in Blue II. Upon the sale, transfer and conveyance of the
Seller Units hereunder, Buyer will own the entire right, title and interest in
and to Blue II. There are no agreements, commitments or contracts relating to
the issuance, sale or transfer of any equity securities or other securities of
Blue II.
3.3 Authorization. Each Seller has the legal capacity, power and
authority to enter into this Agreement and perform his obligations under this
Agreement and has received all necessary authorization to consummate the
Transaction and to perform Seller's obligations under this Agreement. This
Agreement has been duly executed and delivered by each Seller and is the legal,
valid and binding obligation of each Seller, enforceable against each Seller in
accordance with its terms.
7
<PAGE>
3.4 Organization and Standing. Blue II is duly organized, validly
existing and in good standing under the laws of the State of Maryland and is
duly qualified to do business in the State of Maryland.
3.5 No Conflict; Required Filings and Consents. Neither the execution
and delivery of this Agreement by the Sellers, nor the consummation by the
Sellers of the Transaction, nor compliance by the Sellers with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of the Operating Agreement or any other organizational document of Blue II, (ii)
except as set forth in Schedule 3.5, constitute or result in the breach of any
term, condition or provision of, or constitute a default under, or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation or imposition of any Lien upon any property or assets of
Blue II pursuant to, any note, bond, mortgage, indenture, license, agreement,
lease or other instrument or obligation to which any of the Sellers or Blue II
is a party or by which any of Blue II's properties or assets may be subject, and
that would, in any such event, have a Material Adverse Effect on Blue II or a
material adverse effect on any material assets or property of, or used by, Blue
II, or (iii) violate any Order or Law applicable to Blue II or any of its
properties or assets.
3.6 Consents and Approvals. Except for the consent of MIDFA and FCNB,
required by the Loan and Financing Agreement, no approval or authorization of,
or declaration, filing or registration with, any Governmental Authority is
required to be made or obtained by the Sellers in connection with the execution,
delivery and performance of this Agreement and the consummation of the
Transaction.
3.7 Litigation. Except for any enforcement action relating to the Tap
Agreement, there are no Actions instituted or pending or, to the Sellers'
knowledge, threatened against, any of the Sellers or Blue II or against any
property, asset, interest or right of Blue II or any Seller. None of the Sellers
or Blue II are subject to any Order relating to Blue II or this performance of
their obligations under this Agreement.
3.8 [intentionally omitted]
3.9 Taxes.
(a) Blue II is a limited liability company but for federal and the
State of Maryland income tax purposes is treated as a partnership and no actions
have been taken by Blue II or any of the Sellers that is inconsistent with the
foregoing, nor with any such actions be taken in the future.
(b) All tax returns (federal, state and local) of Blue II have been
timely filed and all information contained in any such tax returns is true and
complete.
(c) Sellers will be responsible for any and all taxes of Blue II for
all transactions through the Closing Date and must promptly reimburse Buyer for
any such taxes upon demand except for any real property taxes on the real
property and improvements constituting the Leased Premises and any utility
related charges, including those under the Tap Agreement.
8
<PAGE>
(d) Sellers are all U.S. Persons and Blue II has not been required to
withhold any amounts pursuant to Section 1441 et. seq. of the Internal Revenue
Code of 1986, as amended.
3.10 Leased Premises. Blue II has good and marketable fee simple title
to the Leased Premises, free and clear of all Liens except those shown on the
Policy delivered to Buyer pursuant to Section 2.4(g) of this Agreement and the
Connection Fee Agreement and Mortgage, dated July 19, 1996, by and between Blue
II and The Board of County Commissioners of Frederick County, Maryland (the "Tap
Agreement"). With respect to the Leased Premises:
(a) No portion of the Leased Premises is subject to any
pending condemnation proceeding or, except for the enforcement of the Tap
Agreement, any other Action adverse to the Leased Premises and, to the knowledge
of the Sellers, there is no threatened condemnation proceeding or other Action
with respect to the Leased Premises;
(b) To the Sellers' knowledge, the business located on the
Leased Premises is supplied with utilities and other services necessary for the
operation of the business as presently conducted, and all of such services are
adequate to conduct the business currently operated on the Leased Premises;
(c) The Leased Premises are not located in either a special
service district or an area for which federal flood risk insurance is necessary;
(d) To the Sellers' knowledge, there is no water diffusion or
other intrusion into any buildings, structures or other improvements included in
the Leased Premises that would impair the value or use of the Leased Premises in
connection with the conduct of the business currently operated thereon;
(e) No notice of any increase in the assessed valuation of the
Leased Premises and, except for the enforcement of the Tap Agreement, no notice
of any contemplated special assessment has been received by the Sellers and, to
the knowledge of the Sellers, there is no threatened special assessment
pertaining to the Leased Premises;
(f) Except for the Tap Agreement, the Loan and Financing
Agreement and the Additional Loan Documents, there are no contracts or
agreements to which any of the Sellers or Blue II is a party or by which the
Leased Premises are bound, granting to any person or entity the right of use or
occupancy of any portion of the Leased Premises, except for the Lease Agreement,
and the Lease Agreement is in full force and effect and there are no defaults
thereunder or matters which, upon the passage of time or giving of notice, would
rise to the level of a default under the Lease Agreement;
(g) There is no person or entity (other than FBC) in
possession of the Leased Premises;
(h) Except as shown in the survey delivered pursuant to
Section 2.4(h) of this Agreement, the Leased Premises do not encroach upon the
property of others; and
9
<PAGE>
(i) Except for those listed in Schedule B, Item 2 of the Title
Policy, Blue II is not a member of any property association nor is the Leased
Premises subject to any restrictive covenants.
3.11 Zoning. As of the date hereof, the zoning of the Leased Premises
permits the presently existing improvements and the continuation of the business
currently operated on the Leased Premises as a conforming use. The existing use
of each tract of the Leased Premises is not dependent on the use or availability
of any other tract except for offsite easements for storm water management
facilities and utilities, or on the right to continue the operation of the
business currently operated thereon.
3.12 Environmental Issues.
(a) Since the date Blue II acquired the real property
constituting the Leased Premises and except to the extent set forth in writing
in the Phase I Report, neither the Sellers nor, to the Sellers' knowledge, any
other Person has engaged in or permitted any operations or activities upon, or
any use or occupancy of, the Leased Premises, or any portion thereof, resulting
in the storage, emission, release, discharge, dumping or disposal of any
Hazardous Materials on, under, in or about the Leased Premises, nor have any
Hazardous Materials migrated from the Leased Premises to, upon, about or beneath
the Leased Premises.
(b) To the Sellers' knowledge, except to the extent set forth
in writing in the Phase I Report, (i) there is not, nor has there been, applied,
placed, deposited, stored, disposed of or located on the Leased Premises any
asbestos, or lead paint, (ii) no underground improvements, including, without
limitation, treatment or storage tanks, pumps, sumps, or water, gas or oil wells
are or have been located on the Leased Premises, (iii) there are no
polychlorinated biphenyls (PCBs) or transformers, capacitors, ballasts, or other
equipment containing PCBs constructed, placed, deposited, stored, disposed of or
located on the Leased Premises, (iv) neither the Sellers nor any prior owner or
occupant of the Leased Premises, has received any notice or other communication
concerning any alleged violation of Environmental Requirements, whether or not
corrected to the satisfaction of the appropriate Governmental Authority, or any
notice or other communication concerning alleged liability for Environmental
Damages in connection with the Leased Premises and (v) there exist no Claims
pending or, to the knowledge of the Sellers, threatened, relating to the
ownership, use, maintenance or operation of the Leased Premises by any Person,
or arising from the alleged violation of Hazardous Materials on the Leased
Premises or potential migration to the Leased Premises, and there are no
existing facts or conditions that could give rise to any such violation or
liabilities.
(c) To the Sellers' knowledge, no Lien has been filed, and no
circumstances or conditions exist that could result in the filing of a Lien,
against the Leased Premises under any Environmental Requirement.
3.13 Contracts. Except for the ownership and leasing of the Leased
Premises, Blue II has not engaged, directly or indirectly, in any business or
activity of any type or kind or entered into any agreement or arrangement with
any Person and is not bound by any obligation or undertaking except for the
Lease Agreement, the Loan and Financing Agreement, the Additional Loan Documents
and the Tap Agreement (the Lease Agreement, the Loan and Financing Agreement and
the Additional Loan Documents are, collectively, the "Contracts").
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Blue II has not incurred, directly or indirectly, any liabilities or obligations
except for those under the Contracts. Except as set forth on Schedule 3.13, each
of the Contracts is in full force and effect and is a legal, valid and binding
contract or agreement, and there is no default or breach (or any event that,
with the giving of notice or lapse of time or both, would result in a material
default or breach) by Blue II, or, to the Sellers' knowledge, any other party,
in the timely performance of any obligation to be performed or paid under the
Contracts or any other material provision of the Contracts, that, individually
or in the aggregate, would have a Material Adverse Effect on Blue II. Except as
set forth in Schedule 3.13, Blue II has not received from any party to any
Contract notice of cancellation, termination or failure to renew such Contract.
Blue II is not party to any agreement that restricts it from conducting its
business as presently conducted.
3.14 Insurance. Schedule 3.14 lists all policies of insurance covering
Blue II. Except as set forth in Schedule 3.14, (a) Blue II's policies of
insurance are valid and enforceable policies duly in force; (b) the amounts and
types of coverage under such policies of insurance are customary and reasonable
with respect to risks usually insured against by businesses with similar
operations or, in the case of property insurance, with similar properties in the
localities where such properties are located; (c) Blue II has not during the
last three fiscal years, been denied or had revoked or rescinded any policy of
insurance; (d) all policies are held by and for the benefit of Blue II; (e) all
insurance proceeds under such policies, if and when received, shall be the
property of Blue II; (f) all insurance premiums have been paid when due or
within any applicable grace period; (g) to the Sellers' knowledge, there has
occurred no insurable event or occurrence for which notice was not timely given
by Blue II to the appropriate insurer; and (h) to the Sellers' knowledge, Blue
II is in compliance with all material conditions of each insurance policy.
3.15 Related Party Transactions. No Person related to or controlled by
the Sellers other than Kline, Scott & Visco Commercial Real Estate, Inc. ("KSV")
and Maribeth Visco (a) has any direct or indirect interest (i) in, or is a
director, officer or employee of, any entity which is a client, customer,
supplier, lessor, lessee, debtor or creditor of Blue II, or (ii) in any
property, asset or right which is owned or used by Blue II in the conduct of its
business, or (b) is a party to any contract with Blue II.
3.16 Compliance with Laws. Except as set forth in Schedule 3.16, Blue
II as to itself and exclusive of the Leased Premises: (a) is in compliance with
all Laws and Orders applicable to its business or employees or members
conducting its business; and (b) has received no notification or communication
from any Governmental Authority (i) asserting that Blue II is not in compliance
with any Law or Order or (ii) threatening to revoke any Permit of any
Governmental Authority. To the Sellers' knowledge, except as set forth in
Schedule 3.16, Blue II with respect to the Leased Premises: (a) is in compliance
with all Laws and Orders applicable to its business or employees or members
conducting its business; and (b) has received no notification or communication
from any Governmental Authority (i) asserting that Blue II is not in compliance
with any Law or Order or (ii) threatening to revoke any Permit of any
Governmental Authority.
3.17 No Reliance. Each Seller has (a) served as a member of Blue II
through the date of this Agreement and has had access to information regarding
Blue II, its business and financial condition, (b) had an opportunity to ask
questions of, and obtain additional information from, Blue II regarding its
business, financial condition and prospects and
11
<PAGE>
(c) had the opportunity to seek legal counsel regarding the Transaction and this
Agreement. The sale by each Seller of the Seller Units pursuant to this
Agreement is not done in reliance upon any representation made, or information
provided by, Buyer, Blue II, FBC or any of their respective Representatives,
except for the representations and warranties set forth in this Agreement.
3.18 Broker's Fees. Except for KSV, no person has acted directly or
indirectly as a broker, finder or financial advisor for the Sellers in
connection with the Transaction or this Agreement, and except for KSV, whose fee
shall be the sole responsibility of the Sellers, no person is entitled to any
fee or commission or like payment in connection with the Transaction or this
Agreement.
3.19 Full Disclosure. To the Sellers' knowledge, except as set forth on
Schedule 3.19, no representation or warranty made by Sellers in this Agreement
or in any schedule hereto contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements herein or
therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as follows:
4.1 Authorization. Buyer has the legal capacity, power and authority to
enter into this Agreement and perform its obligations under this Agreement, and
has taken all actions necessary to consummate the Transaction and to perform
Buyer's obligations under this Agreement. This Agreement has been duly executed
and delivered by Buyer and is the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
4.2 Consents and Approvals. No approval or authorization of, or
declaration, filing or registration with, any Governmental Authority is required
to be made or obtained by Buyer in connection with the execution, delivery and
performance of this Agreement and the consummation of the Transaction.
4.3 No Conflict or Violation. Neither the execution, delivery or
performance of this Agreement nor the consummation of the Transaction will
result in (a) a violation by Buyer of any Laws or Orders applicable to Buyer,
which violation would have a material adverse effect on Buyer or the ability of
Buyer to consummate the Transaction, or (b) a violation or conflict with any
provision of any contract or agreement to which Buyer is a party.
4.4 Litigation. There are no Actions instituted or pending against
Buyer that seek to prevent or prohibit the consummation of the Transaction.
Buyer is not subject to any Order.
4.5 Acquisition for Investment. Buyer is acquiring the Seller Units for
investment purposes for its own account and not with a view to a distribution or
resale of such Seller Units.
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<PAGE>
4.6 Broker's Fees. No person has acted directly or indirectly as a
broker, finder or financial advisor for Buyer in connection with the Transaction
or this Agreement, and no person is entitled to any fee or commission or like
payment in connection with the Transaction or this Agreement.
ARTICLE V
COVENANTS AND AGREEMENTS
------------------------
5.1 Further Assurances. Following the Closing, Buyer and Seller shall
perform such further deeds, acts, things and assurances as are necessary,
reasonable, advisable or appropriate to consummate the Transaction and otherwise
to carry out or facilitate the performance of the terms of this Agreement. If,
at any time after the Closing, any further action is necessary or desirable to
carry out this Agreement or the Transaction, Buyer and/or the Seller shall take
all such necessary action.
5.2 Refinancing of Blue II's Debt Obligations. Following the Closing,
Buyer agrees to use its reasonable commercial efforts to refinance the terms and
conditions of the Loan and Financing Agreement and the Additional Loan Documents
or to enter into new credit arrangements reasonably satisfactory to Buyer, in
its sole discretion, as soon as reasonably practicable. In connection therewith,
Buyer has received letters from FCNB and MIDFA consenting to the release of the
Sellers from the Guaranty, dated July 19, 1996, by the Sellers in favor of MEDCO
and FCNB, as successor to Signet Bank.
5.3 Release of Claims. Each Seller, on behalf of himself and his
dependents, successors, assigns, heirs, executors, administrators and
Representatives (the "Releasors"), hereby releases, remises, acquits and
discharges forever, irrevocably and unconditionally, Buyer, Blue II and FBC and
their respective Representatives, successors and assigns (the "Releasees"),
from, against and with respect to any and all Claims which any of the Releasors
has, ever had or may hereafter have against the Releasees, at any time on or
prior to the date of this Agreement or on account of or arising out of any
matter, cause or event occurring on or prior to the date of this Agreement;
provided, however, that nothing in this Section 5.3 will operate to release any
obligation of Buyer arising under this Agreement. Each Seller, on behalf of
himself and the other Releasors, hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any Claim, or commencing, instituting or
causing to be commenced or instituted, any Action of any kind against any party
released under this Section 5.3 based on any matter purported to be released
under this Section 5.3. The provisions of this Section 5.3 are intended to be
for the benefit of, and will be enforceable by, each Releasee, his, her or its
heirs and his, her or its Representatives, successors and assigns.
5.4 Limited Release of Sellers. Buyer hereby releases Sellers from all
claims arising from or related to any failure to assert or waiver of any of its
rights to enforce the terms of the Lease Agreement and the Tap Agreement,
including but not limited to claims for delinquent rent and other damages
arising thereunder. Buyer hereby irrevocably covenants to refrain from, directly
or indirectly, asserting any claims, or commencing, instituting or causing to be
commenced or instituted any action of any kind against Sellers based on any
matter purported to be released under this Section 5.4. The provisions in this
Section 5.4 are intended
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<PAGE>
to be for the benefit of and will be enforceable by the Sellers, his, her or its
heirs, personal representatives, successors and assigns.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 Survival Periods. The representations and warranties of the parties
contained in this Agreement will survive the Closing Date, but expire on the
first anniversary of the Closing Date, except (a) that the expiration date for
any claim relating to breach of the representations and warranties set forth in
Section 3.9 will be the expiration of the statute of limitations applicable to
such claims, and (b) there will be no expiration date for any claim relating to
a breach of representations and warranties set forth in Sections 3.1, 3.2, 3.3
and 3.18. The covenants and agreements of the parties hereto will survive the
Closing in accordance with their terms. From and after the Closing, the Sellers,
jointly and severally, hereby agree to indemnify and hold harmless Buyer and
Blue II, and Buyer hereby agrees to indemnify and hold harmless each Seller,
against certain liabilities, in accordance with the terms of this Article VI.
6.2 Indemnification. Subject to the other provisions of this Article
VI, from and after the Closing, a party providing indemnification pursuant to
this Article VI (an "Indemnifying Party") shall indemnify and hold harmless the
other party (the "Indemnified Party") from and against any costs or expenses
(including, without limitation, reasonable attorneys' fees), judgments, fines,
losses, claims and damages (collectively, "Damages") to the extent they are the
result of any inaccuracy of any representation or warranty or failure to perform
or breach of any covenant or agreement made by the Indemnifying Party under this
Agreement.
6.3 Claims. (a) If an Indemnified Party intends to seek indemnification
pursuant to this Article VI, such Indemnified Party shall promptly notify the
Indemnifying Party in writing of such claim describing such claim in reasonable
detail; provided, that the failure to provide such notice will not affect the
obligations of the Indemnifying Party unless such Party is actually prejudiced
thereby. If such claim involves a claim by a third party against the Indemnified
Party, the Indemnifying Party will have 30 days after receipt of such notice to
decide whether it will undertake, conduct and control, through counsel of its
own choosing and at its own expense, the settlement or defense of such claim,
and if it so decides, the Indemnified Party shall cooperate with the
Indemnifying Party in connection with the settlement or defense; provided, that
the Indemnified Party may participate in such settlement or defense through
counsel chosen by it; and provided further, that the reasonable fees and
expenses of such counsel must be paid by the Indemnified Party. The Indemnifying
Party shall not, without the written consent of the Indemnified Party, settle or
compromise any action in any manner that would materially and adversely affect
the Indemnified Party. If the Indemnifying Party does not notify the Indemnified
Party within 30 days after the receipt of the Indemnified Party's notice of a
claim of indemnity under this Agreement that it elects to undertake the defense
of such claim, the Indemnified Party will have the right to contest, settle or
compromise the claim but does not thereby waive any right to indemnity for such
claim pursuant to this Agreement. As long as the Indemnifying Party is
contesting any such claim in good faith, the Indemnified Party shall not pay or
settle any such claim. Notwithstanding the foregoing, the Indemnified Party will
have the right to pay or settle any such claim; provided,
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<PAGE>
that as long as the Indemnifying Party is contesting such claim in good faith,
any such settlement must include as an unconditional term thereof the delivery
by the claimant or plaintiff to the Indemnifying Party of a duly executed
written release of the Indemnifying Party from all liability and obligation in
respect of such action; and provide further, that in such event Indemnified
Party shall waive any right to indemnity for such claim by the Indemnifying
Party; and provided further, that the Indemnified Party shall provide the
Indemnifying Party reasonable advance notice of any proposed settlement or
payment and may not pay or settle any claim if the Indemnifying Party reasonably
objects.
(b) The Indemnified Party shall cooperate fully in all aspects
of any investigation, defense, pretrial activities, trial, compromise,
settlement or discharge of any claim in respect of which indemnity is sought
pursuant to Article VI, including, without limitation, by providing the other
party with reasonable access to any employees (including as witnesses) and other
information.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 Successors and Assigns. This Agreement is binding upon and inures
to the benefit of the parties and their respective successors and assigns, but
is not assignable by any party without the prior written consent of the other
parties.
7.2 Notices. Unless otherwise provided in this Agreement, any notice,
request, instruction or other document to be given under this Agreement by Buyer
or the Sellers must be in writing and will be deemed duly given (a) when
received if personally delivered or sent by facsimile, (b) within one business
day after being sent by recognized overnight delivery service or (c) within five
business days after being mailed by certified mail, postage prepaid, return
receipt requested, and in each case addressed as follows:
If to a Seller:
To the address set forth opposite of the Seller's name on Exhibit A
hereto.
If to Buyer:
Snyder International Brewing Group, LLC
1101 Center Street
Cleveland, Ohio 44113
Facsimile: (216) 771-7990
Attn: C. David Snyder
15
<PAGE>
With a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attn: Patrick J. Leddy
Facsimile: (216) 579-0212
or to such other place and with such other copies as any of the foregoing may
designate by written notice to the other party.
7.3 Choice of Law. This Agreement is governed by and will be construed
and enforced in accordance with the laws of the State of Ohio without regard to
principles of conflicts of laws.
7.4 Consent To Jurisdiction And Service Of Process. Any and all Actions
arising out of or relating to this Agreement and any other Actions by or among
the Sellers (or any of them) or the Buyer and the Sellers (or any of them) must
be brought in a court within the State of Ohio. Each Seller irrevocably consents
to the jurisdiction of the state and federal courts located in the State of Ohio
and waives any objection which the Seller may now or hereafter have to the
choice of forum whether personal jurisdiction, venue, forum non conveniens or on
any other ground. Each Seller irrevocably consents to the service of process
outside of the territorial jurisdiction of said courts by mailing copies thereof
by registered or certified United States mail, postage prepaid, to such Seller's
address as set forth pursuant to Section 7.2 hereof, with the same effect as if
the Seller were a resident of the State of Ohio and had been lawfully served in
such state. Nothing in this Agreement prohibits service of process in any other
manner permitted by law. Each Seller further agrees that final judgment after
all rights to appeal have been exhausted against him in any such Action will be
conclusive and may be enforced in any other jurisdiction within or outside the
State of Ohio by suit on the judgment, a certified or exemplified copy of which
will be conclusive evidence of the fact and the amount of such judgment.
7.5 Entire Agreement; Amendments and Waivers. This Agreement, together
with all Exhibits, constitutes the entire agreement of the parties pertaining to
this subject matter and supersedes all prior agreements, understandings,
negotiations or discussions, whether oral or written, of the parties, including,
without limitation, the Letter Agreement, dated July 28, 1999, by and among
Buyer and each of the Sellers. No supplement, modification or waiver of this
Agreement will be binding unless executed in writing by the party or the parties
to be bound thereby. No waiver of any of the provisions of this Agreement will
be deemed or will constitute a waiver of any other provision of this Agreement
(whether or not similar), nor will such waiver constitute a continuing waiver
unless otherwise expressly provided.
7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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<PAGE>
7.7 Invalidity. If any one or more of the provisions contained in this
Agreement or in any other instrument referred to in this Agreement, is, for any
reason, held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability will not affect any other provision
of this Agreement.
7.8 Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
7.9 Expenses. The Sellers and Buyer are liable for their own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Agreement.
7.10 No Third Party Beneficiaries. Except as set forth in Section 5.3,
nothing expressed or implied in this Agreement is intended, or will be
construed, to confer upon or give any person or entity other than the parties
hereto any rights or remedies under or by reason of this Agreement.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SELLERS:
/s/ Edward D. Scott
-----------------------------------
Edward D. Scott
/s/ Catherine D. Scott
-----------------------------------
Catherine D. Scott
/s/ Robert Schuerholz
-----------------------------------
Robert Schuerholz
/s/ Nicholas P. Foris
-----------------------------------
Nicholas P. Foris
/s/ Vishnampet S. Jayanthimath
-----------------------------------
Vishnampet S. Jayanthimath
BUYER:
SNYDER INTERNATIONAL BREWING
GROUP, LLC
By: /s/ C. David Synder
-------------------------------
Name: C. David Snyder
Title: Chairman and CEO
18
<PAGE>
EXHIBIT A
---------
- --------------------------------------------------------------------------------
Number of
Seller Address
Seller Units
- --------------------------------------------------------------------------------
Edward D. Scott 25 117 W. Patrick Street
Frederick, MD 21701
Facsimile: 301-694-6592
with a copy to:
Scott Miller
Weinberg & Weinberg
15 North Court St.
Frederick, MD 21701
Facsimile: 301-662-1166
- --------------------------------------------------------------------------------
Catherine D. Scott 15 117 W. Patrick Street
Frederick, MD 21701
Facsimile: 301-694-6592
with a copy to:
Scott Miller
Weinberg & Weinberg
15 North Court St.
Frederick, MD 21701'
Facsimile: 301-662-1166
- --------------------------------------------------------------------------------
Robert Schuerholz 25 117 W. Patrick Street
Frederick, MD 21701
Facsimile: 301-694-6592
with a copy to:
Scott Miller
Weinberg & Weinberg
15 North Court St.
Frederick, MD 21701
Facsimile: 301-662-1166
- --------------------------------------------------------------------------------
Nicholas P. Foris 25 117 W. Patrick Street
Frederick, MD 21701
Facsimile: 301-694-6592
with a copy to:
Scott Miller
Weinberg & Weinberg
15 North Court St.
Frederick, MD 21701
Facsimile: 301-662-1166
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Number of
Seller Seller Address
Units
- --------------------------------------------------------------------------------
Vishnampet S. 10 117 W. Patrick Street
Jayanthimath Frederick, MD 21701
Facsimile: 301-694-6592
with a copy to:
Scott Miller
Weinberg & Weinberg
15 North Court St.
Frederick, MD 21701
Facsimile: 301-662-1166
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT B
---------
FORM OF WARRANT
<PAGE>
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 33,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. B-1 August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "Company"), hereby certifies that, for value received,
EDWARD D. SCOTT or his assigns, is entitled, subject to the terms set forth
below, to purchase from the Company after August 24, 1999 (the "Effective
Date"), at any time or from time to time before 5:00 p.m., Cleveland, Ohio time,
on August 24, 2002, (the "Expiration Date"), up to 33,000 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $.0004 par value
per share, of the Company, at a per share purchase price of $1.00 per share
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" includes Frederick Brewing Co. and any
corporation which succeeds or assumes the obligations of Frederick Brewing Co.
hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the Effective Date, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
<PAGE>
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after
the Effective Date, through and including the Expiration Date, the holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of Subsection 1.2 or upon exercise of this Warrant in
part in accordance with Subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in Subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue an deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of the date of exercise of this Warrant (the "Determination Date")
shall mean the Fair Market Value of a share of the Company's Common Stock. Fair
Market Value of a share of Common Stock as of the Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately prior to the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately prior to the
Determination Date.
2
<PAGE>
(c) If the Company's Common Stock is not publicly
traded, then as the Holder and the Company agree or, in the absence of
agreement, by arbitration in accordance with the rules then standing of the
American Arbitration Association, before a single arbitrator to be chosen from a
panel of persons qualified by education and training to pass on the matter to be
decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other
amounts to be payable per share in respect of the Common Stock in liquidation
under the charter, assuming for the purposes of this clause (d) that all of the
shares of Common Stock then issuable upon exercise of all of the Warrants are
outstanding at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the holders of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent appointed pursuant to Section 10 and
shall accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the Company
or such successor, as the case may be, on exercise of this Warrant pursuant to
this Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise, pursuant to Section 1 or otherwise.
3. Adjustment for Reorganization, Consolidation,- Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company (a) effects a reorganization, (b)
consolidates with or merges into any other person, or (c) transfers all or
substantially all of its properties or assets to any other person under any
3
<PAGE>
plan or arrangement contemplating the dissolution of the Company, then, in each
such case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the Common Stock and Other Securities and property
(including cash, where applicable) receivable by the holders of the Warrants
after the effective date of such dissolution pursuant to this Section 3 to a
bank or trust company having its principal office in Cleveland, Ohio, as trustee
for the holder or holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of Common Stock
and Other Securities and property receivable on the exercise of this Warrant
after the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4. In the event this Warrant does continue in full force and effect
after the consummation of the transaction described in this Section 3.3, then
only in such event will the Company's Other Securities and property (including
cash, where applicable) receivable by the holders of the Warrants be delivered
to the Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased or decreased to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Purchase Price that
4
<PAGE>
would otherwise (but for the provisions of this Section 4) be in effect, and (b)
the denominator is the Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable Securities
Laws, the Company at its expense but with payment by the Transferor of any
applicable transfer taxes will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to each holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this
5
<PAGE>
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder
hereof as the absolute owner hereof for all purposes, notwithstanding any notice
to the contrary.
11. Notices, etc. Unless otherwise provided in this Warrant, any
notice, request, instruction or other document to be given under this Warrant
from the Company to the holder of this Warrant must be in writing and will be
deemed duly given (a) when received if personally delivered or sent by
facsimile, (b) within one (1) business day after being sent by recognized
overnight delivery service or (c) within five (5) business days after being
mailed by certified mail, postage prepaid, return receipt requested, and in each
case addressed to such address as may have been furnished to the Company in
writing by tile holder of this Warrant or, until such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
12. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio without giving effect to any conflicts
of laws principles. Any dispute relating to this Warrant shall be adjudicated in
the State of Ohio. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: /s/ C. David Snyder
--------------------------------
Name: C. David Snyder
Title: Chairman and CEO
Witness:
/s/ [ILLEGIBLE]
- -----------------------------
6
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of $_________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ____________ whose address is _______________________
_____________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:
----------------------
--------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Tranferees Percentage Number
Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
<PAGE>
EXECUTION COPY
--------------
INSTRUMENT OF ASSIGNMENT, TRANSFER AND CONVEYANCE
-------------------------------------------------
FOR VALUE RECEIVED, upon the terms and subject to the conditions set
forth in that certain Purchase Agreement (the "Purchase Agreement"), dated as of
August 24, 1999, by and among the undersigned and Snyder International Brewing
Group, LLC ("Buyer"), each of the undersigned hereby sell, assign, transfer and
convey to Buyer all of their respective right, title and interest in and to the
Seller Units (as defined in the Purchase Agreement).
IN WITNESS WHEREOF, the undersigned have executed this Instrument of
Assignment, Transfer and Conveyance as of August 24, 1999.
/s/ Vishnampet S. Jayanthimath
-----------------------------------
Vishnampet S. Jayanthimath
/s/ Catherine D. Scott
-----------------------------------
Catherine D. Scott
/s/ Robert Schuerholz
-----------------------------------
Robert Schuerholz
/s/ Nicholas P. Foris
-----------------------------------
Nicholas P. Foris
/s/ Edward D. Scott
-----------------------------------
Edward D. Scott
<PAGE>
EXECUTION COPY
--------------
CROSS RECEIPT
-------------
Edward D. Scott, Katherine D. Scott, Robert Schuerholz, Nicholas P.
Foris and Vishnampet S. Jayanthimath (the "Sellers") have this day delivered to
Snyder International Brewing Group, LLC ("Buyer") an Instrument of Assignment,
Transfer and Conveyance (the "Assignment") pursuant to that certain Purchase
Agreement, dated as of August 24, 1999, by and among the Sellers and Buyer (the
"Purchase Agreement"). Buyer hereby acknowledges receipt from the Sellers on the
date hereof of the Assignment evidencing the assignment, transfer and conveyance
of the Seller Units (as defined in the Purchase Agreement) to Buyer.
In connection with the Sellers' delivery of the Assignment pursuant to
the Purchase Agreement, each Seller hereby acknowledges receipt on the date
hereof from Buyer of the Purchase Price, representing payment in full for the
Seller Units.
IN WITNESS WHEREOF, the undersigned have executed this Cross Receipt as
of August 24, 1999.
SELLERS:
/s/ Edward D. Scott
-----------------------------------
Edward D. Scott
/s/ Catherine D. Scott
-----------------------------------
Catherine D. Scott
/s/ Robert Schuerholz
-----------------------------------
Robert Schuerholz
/s/ Nicholas P. Foris
-----------------------------------
Nicholas P. Foris
/s/ Vishnampet S. Jayanthimath
-----------------------------------
Vishnampet S. Jayanthimath
BUYER
By: /s/ C. David Snyder
-------------------------------
Name: C. David Snyder
Title: Chairman and CEO
Exhibit 3(j)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 33,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. B-1 August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "COMPANY"), hereby certifies that, for value received,
EDWARD D. SCOTT or his assigns, is entitled, subject to the terms set forth
below, to purchase from the Company after August 24, 1999 (the "EFFECTIVE
DATE"), at any time or from time to time before 5:00 p.m., Cleveland, Ohio time,
on August 24, 2002, (the "EXPIRATION DATE"), up to 33,000 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $.0004 par value
per share, of the Company, at a per share purchase price of $1.00 per share
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "PURCHASE PRICE"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" includes Frederick Brewing Co. and any
corporation which succeeds or assumes the obligations of Frederick Brewing Co.
hereunder.
(b) The term "COMMON STOCK" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the Effective Date, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
<PAGE>
(c) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
Effective Date through and including the Expiration Date, the holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of Subsection 1.2 or upon exercise of this Warrant in
part in accordance with Subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in Subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of the date of exercise of this Warrant (the "DETERMINATION DATE") shall mean
the Fair Market Value of a share of the Company's Common Stock. Fair Market
Value of a share of Common Stock as of the Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately prior to the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is
traded in the over-
2
<PAGE>
the-counter market, then the mean of the closing bid and asked prices reported
for the last business day immediately prior to the Determination Date.
(c) If the Company's Common Stock is not publicly traded, then
as the Holder and the Company agree or, in the absence of agreement, by
arbitration in accordance with the rules then standing of the American
Arbitration Association, before a single arbitrator to be chosen from a panel of
persons qualified by education and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 10 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise, pursuant to Section 1 or otherwise.
3
<PAGE>
3. Adjustment for Reorganization, Consolidation,- Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company (a) effects a reorganization, (b) consolidates
with or merges into any other person, or (c) transfers all or substantially all
of its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the holder of this Warrant, on
the exercise hereof as provided in Section 1 at any time after the consummation
of such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the Common Stock and Other Securities and property (including cash,
where applicable) receivable by the holders of the Warrants after the effective
date of such dissolution pursuant to this Section 3 to a bank or trust company
having its principal office in Cleveland, Ohio, as trustee for the holder or
holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3.3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of Common Stock and Other
Securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 3.3, then only in such event will
the Company's Other Securities and property (including cash, where applicable)
receivable by the holders of the Warrants be delivered to the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect.
4
<PAGE>
The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this Section
4. The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased or decreased to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Purchase Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "TRANSFEROR") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached hereto (the
"TRANSFEROR ENDORSEMENT FORM") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable Securities
Laws, the Company at its expense but with payment by the Transferor of any
applicable transfer taxes will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "TRANSFEREE"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender
5
<PAGE>
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to each holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Notices, etc. Unless otherwise provided in this Warrant, any
notice, request, instruction or other document to be given under this Warrant
from the Company to the holder of this Warrant must be in writing and will be
deemed duly given (a) when received if personally delivered or sent by
facsimile, (b) within one (1) business day after being sent by recognized
overnight delivery service or (c) within five (5) business days after being
mailed by certified mail, postage prepaid, return receipt requested, and in each
case addressed to such address as may have been furnished to the Company in
writing by the holder of this Warrant or, until such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
12. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio without giving effect to any conflicts
of laws principles. Any dispute relating to this Warrant shall be adjudicated in
the State of Ohio. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: ____________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
6
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
______________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
______________________________
(Address)
7
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Tranferees Percentage Number
Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
8
Exhibit 3(k)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 19,800 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. B-2 August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "COMPANY"), hereby certifies that, for value received,
CATHERINE D. SCOTT or his assigns, is entitled, subject to the terms set forth
below, to purchase from the Company after August 24, 1999 (the "EFFECTIVE
DATE"), at any time or from time to time before 5:00 p.m., Cleveland, Ohio time,
on August 24, 2002, (the "EXPIRATION DATE"), up to 19,800 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $.0004 par value
per share, of the Company, at a per share purchase price of $1.00 per share
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "PURCHASE PRICE"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" includes Frederick Brewing Co. and any
corporation which succeeds or assumes the obligations of Frederick Brewing Co.
hereunder.
(b) The term "COMMON STOCK" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the Effective Date, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
<PAGE>
(c) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
Effective Date through and including the Expiration Date, the holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of Subsection 1.2 or upon exercise of this Warrant in
part in accordance with Subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in Subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of the date of exercise of this Warrant (the "DETERMINATION DATE") shall mean
the Fair Market Value of a share of the Company's Common Stock. Fair Market
Value of a share of Common Stock as of the Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately prior to the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is
traded in the over-
2
<PAGE>
the-counter market, then the mean of the closing bid and asked prices reported
for the last business day immediately prior to the Determination Date.
(c) If the Company's Common Stock is not publicly traded, then
as the Holder and the Company agree or, in the absence of agreement, by
arbitration in accordance with the rules then standing of the American
Arbitration Association, before a single arbitrator to be chosen from a panel of
persons qualified by education and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 10 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise, pursuant to Section 1 or otherwise.
3
<PAGE>
3. Adjustment for Reorganization, Consolidation,- Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company (a) effects a reorganization, (b) consolidates
with or merges into any other person, or (c) transfers all or substantially all
of its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the holder of this Warrant, on
the exercise hereof as provided in Section 1 at any time after the consummation
of such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the Common Stock and Other Securities and property (including cash,
where applicable) receivable by the holders of the Warrants after the effective
date of such dissolution pursuant to this Section 3 to a bank or trust company
having its principal office in Cleveland, Ohio, as trustee for the holder or
holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3.3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of Common Stock and Other
Securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 3.3, then only in such event will
the Company's Other Securities and property (including cash, where applicable)
receivable by the holders of the Warrants be delivered to the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect.
4
<PAGE>
The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this Section
4. The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased or decreased to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Purchase Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "TRANSFEROR") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached hereto (the
"TRANSFEROR ENDORSEMENT FORM") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable Securities
Laws, the Company at its expense but with payment by the Transferor of any
applicable transfer taxes will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "TRANSFEREE"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender
5
<PAGE>
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to each holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Notices, etc. Unless otherwise provided in this Warrant, any
notice, request, instruction or other document to be given under this Warrant
from the Company to the holder of this Warrant must be in writing and will be
deemed duly given (a) when received if personally delivered or sent by
facsimile, (b) within one (1) business day after being sent by recognized
overnight delivery service or (c) within five (5) business days after being
mailed by certified mail, postage prepaid, return receipt requested, and in each
case addressed to such address as may have been furnished to the Company in
writing by the holder of this Warrant or, until such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
12. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio without giving effect to any conflicts
of laws principles. Any dispute relating to this Warrant shall be adjudicated in
the State of Ohio. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: ____________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- ---------------------------
6
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
______________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
______________________________
(Address)
7
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Tranferees Percentage Number
Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of Holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
8
Exhibit 3(l)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 33,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. B-4 August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "COMPANY"), hereby certifies that, for value received,
NICHOLAS P. FORIS or his assigns, is entitled, subject to the terms set forth
below, to purchase from the Company after August 24, 1999 (the "EFFECTIVE
DATE"), at any time or from time to time before 5:00 p.m., Cleveland, Ohio time,
on August 24, 2002, (the "EXPIRATION DATE"), up to 33,000 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $.0004 par value
per share, of the Company, at a per share purchase price of $1.00 per share
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "PURCHASE PRICE"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" includes Frederick Brewing Co. and any
corporation which succeeds or assumes the obligations of Frederick Brewing Co.
hereunder.
(b) The term "COMMON STOCK" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the Effective Date, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
1
<PAGE>
(c) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after
the Effective Date through and including the Expiration Date, the holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of Subsection 1.2 or upon exercise of this Warrant in
part in accordance with Subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in Subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of the date of exercise of this Warrant (the "DETERMINATION DATE")
shall mean the Fair Market Value of a share of the Company's Common Stock. Fair
Market Value of a share of Common Stock as of the Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately prior to the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-
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the-counter market, then the mean of the closing bid and asked prices reported
for the last business day immediately prior to the Determination Date.
(c) If the Company's Common Stock is not publicly
traded, then as the Holder and the Company agree or, in the absence of
agreement, by arbitration in accordance with the rules then standing of the
American Arbitration Association, before a single arbitrator to be chosen from a
panel of persons qualified by education and training to pass on the matter to be
decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the holders of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent appointed pursuant to Section 10 and
shall accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the Company
or such successor, as the case may be, on exercise of this Warrant pursuant to
this Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise, pursuant to Section 1 or otherwise.
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3. Adjustment for Reorganization, Consolidation,- Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company (a) effects a reorganization, (b)
consolidates with or merges into any other person, or (c) transfers all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the Common Stock and Other Securities and property
(including cash, where applicable) receivable by the holders of the Warrants
after the effective date of such dissolution pursuant to this Section 3 to a
bank or trust company having its principal office in Cleveland, Ohio, as trustee
for the holder or holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of Common Stock
and Other Securities and property receivable on the exercise of this Warrant
after the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4. In the event this Warrant does continue in full force and effect
after the consummation of the transaction described in this Section 3.3, then
only in such event will the Company's Other Securities and property (including
cash, where applicable) receivable by the holders of the Warrants be delivered
to the Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect.
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The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this Section
4. The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased or decreased to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Purchase Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "TRANSFEROR") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached hereto (the
"TRANSFEROR ENDORSEMENT FORM") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable Securities
Laws, the Company at its expense but with payment by the Transferor of any
applicable transfer taxes will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "TRANSFEREE"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender
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and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to each holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Notices, etc. Unless otherwise provided in this Warrant, any
notice, request, instruction or other document to be given under this Warrant
from the Company to the holder of this Warrant must be in writing and will be
deemed duly given (a) when received if personally delivered or sent by
facsimile, (b) within one (1) business day after being sent by recognized
overnight delivery service or (c) within five (5) business days after being
mailed by certified mail, postage prepaid, return receipt requested, and in each
case addressed to such address as may have been furnished to the Company in
writing by the holder of this Warrant or, until such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
12. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio without giving effect to any conflicts
of laws principles. Any dispute relating to this Warrant shall be adjudicated in
the State of Ohio. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: __________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
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<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
--------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Percentage Number
Tranferees Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
Exhibit 3(m)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 33,000 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. B-3 August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "COMPANY"), hereby certifies that, for value received,
ROBERT SCHUERHOLZ or his assigns, is entitled, subject to the terms set forth
below, to purchase from the Company after August 24, 1999 (the "EFFECTIVE
DATE"), at any time or from time to time before 5:00 p.m., Cleveland, Ohio time,
on August 24, 2002, (the "EXPIRATION DATE"), up to 33,000 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $.0004 par value
per share, of the Company, at a per share purchase price of $1.00 per share
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "PURCHASE PRICE"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" includes Frederick Brewing Co. and any
corporation which succeeds or assumes the obligations of Frederick Brewing Co.
hereunder.
(b) The term "COMMON STOCK" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the Effective Date, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
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(c) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after
the Effective Date through and including the Expiration Date, the holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of Subsection 1.2 or upon exercise of this Warrant in
part in accordance with Subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in Subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of the date of exercise of this Warrant (the "DETERMINATION DATE")
shall mean the Fair Market Value of a share of the Company's Common Stock. Fair
Market Value of a share of Common Stock as of the Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap
Market, then the closing or last sale price, respectively, reported for the last
business day immediately prior to the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-
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the-counter market, then the mean of the closing bid and asked prices reported
for the last business day immediately prior to the Determination Date.
(c) If the Company's Common Stock is not publicly
traded, then as the Holder and the Company agree or, in the absence of
agreement, by arbitration in accordance with the rules then standing of the
American Arbitration Association, before a single arbitrator to be chosen from a
panel of persons qualified by education and training to pass on the matter to be
decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the holders of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent appointed pursuant to Section 10 and
shall accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the Company
or such successor, as the case may be, on exercise of this Warrant pursuant to
this Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise, pursuant to Section 1 or otherwise.
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3. Adjustment for Reorganization, Consolidation,- Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at
any time or from time to time, the Company (a) effects a reorganization, (b)
consolidates with or merges into any other person, or (c) transfers all or
substantially all of its properties or assets to any other person under any
plan or arrangement contemplating the dissolution of the Company, then, in each
such case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the Common Stock and Other Securities and property
(including cash, where applicable) receivable by the holders of the Warrants
after the effective date of such dissolution pursuant to this Section 3 to a
bank or trust company having its principal office in Cleveland, Ohio, as trustee
for the holder or holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3.3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of Common Stock
and Other Securities and property receivable on the exercise of this Warrant
after the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4. In the event this Warrant does continue in full force and effect
after the consummation of the transaction described in this Section 3.3, then
only in such event will the Company's Other Securities and property (including
cash, where applicable) receivable by the holders of the Warrants be delivered
to the Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect.
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The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this Section
4. The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased or decreased to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Purchase Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "TRANSFEROR") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached hereto (the
"TRANSFEROR ENDORSEMENT FORM") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable Securities
Laws, the Company at its expense but with payment by the Transferor of any
applicable transfer taxes will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "TRANSFEREE"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender
5
<PAGE>
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to each holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Notices, etc. Unless otherwise provided in this Warrant, any
notice, request, instruction or other document to be given under this Warrant
from the Company to the holder of this Warrant must be in writing and will be
deemed duly given (a) when received if personally delivered or sent by
facsimile, (b) within one (1) business day after being sent by recognized
overnight delivery service or (c) within five (5) business days after being
mailed by certified mail, postage prepaid, return receipt requested, and in each
case addressed to such address as may have been furnished to the Company in
writing by the holder of this Warrant or, until such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
12. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio without giving effect to any conflicts
of laws principles. Any dispute relating to this Warrant shall be adjudicated in
the State of Ohio. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: ___________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
6
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
--------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
7
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Percentage Number
Tranferees Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
8
Exhibit 3(n)
EXECUTION COPY
--------------
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FREDERICK BREWING CO. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 13,200 Shares of Common
Stock of Frederick Brewing Co. (subject
to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. B-5 August 24, 1999
FREDERICK BREWING CO., a corporation organized under the laws of the
State of Maryland (the "COMPANY"), hereby certifies that, for value received,
VISHNAMPET S. JAYANTHIMATH or his assigns, is entitled, subject to the terms set
forth below, to purchase from the Company after August 24, 1999 (the "EFFECTIVE
DATE"), at any time or from time to time before 5:00 p.m., Cleveland, Ohio time,
on August 24, 2002, (the "EXPIRATION DATE"), up to 13,200 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $.0004 par value
per share, of the Company, at a per share purchase price of $1.00 per share
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "PURCHASE PRICE"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" includes Frederick Brewing Co. and any
corporation which succeeds or assumes the obligations of Frederick Brewing Co.
hereunder.
(b) The term "COMMON STOCK" includes (a) the Company's Common Stock,
$.0004 par value per share, as authorized on the Effective Date, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
<PAGE>
(c) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
Effective Date through and including the Expiration Date, the holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of Subsection 1.2 or upon exercise of this Warrant in
part in accordance with Subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the "Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in Subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of the date of exercise of this Warrant (the "DETERMINATION DATE") shall mean
the Fair Market Value of a share of the Company's Common Stock. Fair Market
Value of a share of Common Stock as of the Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately prior to the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is
traded in the over-
9
<PAGE>
the-counter market, then the mean of the closing bid and asked prices reported
for the last business day immediately prior to the Determination Date.
(c) If the Company's Common Stock is not publicly traded, then
as the Holder and the Company agree or, in the absence of agreement, by
arbitration in accordance with the rules then standing of the American
Arbitration Association, before a single arbitrator to be chosen from a panel of
persons qualified by education and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 10 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise, pursuant to Section 1 or otherwise.
3
<PAGE>
3. Adjustment for Reorganization, Consolidation,- Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company (a) effects a reorganization, (b) consolidates
with or merges into any other person, or (c) transfers all or substantially all
of its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the holder of this Warrant, on
the exercise hereof as provided in Section 1 at any time after the consummation
of such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the Common Stock and Other Securities and property (including cash,
where applicable) receivable by the holders of the Warrants after the effective
date of such dissolution pursuant to this Section 3 to a bank or trust company
having its principal office in Cleveland, Ohio, as trustee for the holder or
holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3.3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of Common Stock and Other
Securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 3.3, then only in such event will
the Company's Other Securities and property (including cash, where applicable)
receivable by the holders of the Warrants be delivered to the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect.
4
<PAGE>
The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this Section
4. The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased or decreased to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Purchase Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "TRANSFEROR") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached hereto (the
"TRANSFEROR ENDORSEMENT FORM") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable Securities
Laws, the Company at its expense but with payment by the Transferor of any
applicable transfer taxes will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "TRANSFEREE"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender
5
<PAGE>
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Warrant Agent. The Company may, by written notice to each holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
10. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
11. Notices, etc. Unless otherwise provided in this Warrant, any
notice, request, instruction or other document to be given under this Warrant
from the Company to the holder of this Warrant must be in writing and will be
deemed duly given (a) when received if personally delivered or sent by
facsimile, (b) within one (1) business day after being sent by recognized
overnight delivery service or (c) within five (5) business days after being
mailed by certified mail, postage prepaid, return receipt requested, and in each
case addressed to such address as may have been furnished to the Company in
writing by the holder of this Warrant or, until such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
12. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio without giving effect to any conflicts
of laws principles. Any dispute relating to this Warrant shall be adjudicated in
the State of Ohio. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
FREDERICK BREWING CO.
By: ____________________________
Name: C. David Snyder
Title: Chairman and CEO
Witness:
- --------------------------
6
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Frederick Brewing Co.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of Frederick Brewing Co. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________ whose address is
____________________________________________________ _______________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: _______________
______________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
______________________________
(Address)
7
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Frederick Brewing Co. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name (s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Frederick Brewing Co. with full power of substitution in the premises.
- --------------------------------------------------------------------------------
Tranferees Percentage Number
Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the warrant)
Signed in the presence of:
- ----------------------------- --------------------------------------------
(Name) (address)
--------------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- -----------------------------
(Name)
8
