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Exhibit 4.19
RED XXXX BREWING COMPANY
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made this 20th day of March, 2001, by and
between XXXXXX X. XXXXX ("Xxxxx"), RED XXXX BREWING COMPANY, a Pennsylvania
corporation (the "Company"), and XXXXX X. XXXX ("Xxxx").
BACKGROUND
Pursuant to a promissory note dated March 3, 2000 (the "Note"), Xxxxx
loaned the principal amount of $260,000 to Red Xxxx Brewing & Pub Company-State
College, Inc., a subsidiary of the Company, which Note became due and payable on
June 3, 2000. As of the date hereof, the amount of principal and accrued
interest due under the Note, together with legal fees of Xxxxx associated
therewith is $395,000.00 ("Amount Due"). In furtherance of the satisfaction of
the obligations to pay the Amount Due and for the cancellation of certain of the
security interests granted to Xxxxx to secure the obligations under the Note,
the Company is issuing to Xxxxx unrestricted shares of Common Stock of the
Company (the "Common Stock"). Xxxx is the President and controlling shareholder
of the Company.
AGREEMENT
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. ISSUANCE AND SALE OF STOCK. On the Effective Date (as defined below),
the Company shall issue 103,066 shares of Common Stock (the "Initial Shares") to
Xxxxx and Xxxxx shall acquire the Initial Shares from the Company. The Initial
Shares, together with the Additional Shares (as defined below), are being issued
to Xxxxx by the Company in lieu of the payment by the Company of the principal
and interest due under the Note. On the Effective Date, the Company will deliver
to Xxxxx or his designated agent a certificate representing the Initial Shares.
It is intended by the parties hereto that, following the registration thereof,
Xxxxx may sell the Initial Shares, together with any Additional Shares issued to
him hereunder, in the public market in order to obtain Net Proceeds (as defined
below) to him at least equal to the Amount Due. For purposes hereof, "Net
Proceeds" shall be defined as the actual proceeds from the sale of any Initial
Shares or Additional Shares in the public market, less any brokerage commissions
incurred by Xxxxx.
2. TERMINATION OF PLEDGE AND GUARANTY DOCUMENTS. In consideration for the
issuance of the Initial Shares, and any Additional Shares, to Xxxxx, on the
Effective Date the Pledge of Corporate Stock dated March 3, 2000 between Xxxxx
X. Xxxx and Xxxxx, the Pledge of Corporate Stock dated March 3, 2000 between the
Company and Xxxxx, and the Guaranty and Suretyship Agreement dated March 1, 2000
between the Company and Xxxxx (collectively "Pledge and Guaranty Documents")
shall be automatically terminated and of no further force and effect whatsoever
and shall be deemed null and void, and each party thereto shall be relieved of
all responsibilities, obligations and liabilities for any benefits, obligations
or duties to the other party thereto incurred under the terms of these
agreements, without any further actions.
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3. EFFECTIVE DATE. This Agreement shall become effective on the date on
which the Common Stock commences trading on the NASDAQ OTC Bulletin Board or
other national market system (the "Effective Date"). In the event the Effective
Date does not occur on or before April 6, 2001, this Agreement shall
automatically terminate, be null and void, and have no force and effect in any
respects.
4. NOTE; SECURITY INTEREST IN LIQUOR LICENSE. Until the Amount Due has
been collected in full by Xxxxx, the Note, the Security Agreement between the
Subsidiary and Xxxxx dated March 3, 2000 (the "Security Agreement"), the
Irrevocable Power of Attorney from the Subsidiary in favor of Xxxxx dated March
1, 2000, the UCC-1 financing statements filed in connection with the Security
Agreement, as well as any other documents related thereto (other than the Note,
the "Security Documents"), shall remain in full force and effect; provided that
from the Effective Date until June 18, 2001, Xxxxx agrees to forbear from
exercising any collection efforts on the Note or any rights and remedies under
the Security Documents. In the event any of the following shall occur during the
forbearance period, Xxxxx shall no longer be required to forbear hereunder: (a)
Xxxxx is deemed to be an "affiliate" of the Company as defined in Rule 144(a)(1)
of the Securities Act of 1933, as amended (the "Act"); (b) the SB-2 Registration
Statement (as defined below) has not been declared effective by the Securities
and Exchange Commission on or before May 1, 2001; or (c) following the effective
date of the SB-2 Registration Statement, the Net Proceeds to Xxxxx from the sale
of the Initial Shares and any Additional Shares are less than $50,000 for any
consecutive thirty (30) day period. Upon the receipt in full of the Amount Due,
Xxxxx shall take any and all action requested by the Company to terminate the
Note and the Security Documents. Notwithstanding anything else set forth in this
Agreement, in no event shall Xxxxx be entitled to receive monies in excess of
$390,000 on account of the Note (other than pursuant to the second to last
sentence of Section 5 or pursuant to the Security Documents).
5. ADDITIONAL SHARES. If, following the sale by Xxxxx of the Initial
Shares (or any Additional Shares issued to Xxxxx hereunder), the Net Proceeds
are less than the Amount Due, then the Company shall, from time to time at the
request of Xxxxx, expeditiously issue to Xxxxx additional shares of
unrestricted, registered Common Stock in an amount to be agreed upon between
Xxxxx and the Company ("Additional Shares"). Upon the receipt by Xxxxx of Net
Proceeds equal to the Amount Due, Xxxxx shall not be entitled to receive any
further any Additional Shares, but may retain any shares of Common Stock
previously issued to him under this Agreement and the Note shall be deemed fully
satisfied. All Additional Shares shall be subject to the provisions of the
Registration Rights Agreement.
6. REGISTRATION OF INITIAL SHARES AND ADDITIONAL SHARES. Promptly
following the execution of this Agreement, the Company shall file a registration
statement on Form SB-2 (the "SB-2 Registration Statement") registering the
Initial Shares and an additional 103,066 shares of Common Stock for purposes of
the Additional Shares (the "Shelf"), in accordance with the Registration Rights
Agreement attached hereto as Exhibit A (the "Registration Rights Agreement").
Until the Amount Due has been paid, the Shelf shall be used by the Company only
to satisfy the obligation of the Company to issue the Additional Shares to Xxxxx
pursuant to Section 5 hereof. Xxxxx agrees that all sales of the Initial Shares
and the Additional Shares shall be sold pursuant to the manner of sale
requirements set forth under Rule 144(f) of the Act.
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7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND XXXX. The Company and
Xxxx hereby jointly and severally make the following representations and
warranties to Xxxxx:
A. The issuance of the Initial Shares and the Additional Shares has
been duly authorized by all necessary corporate action, and when issued, the
Initial Shares and the Additional Shares will be validly issued, fully paid and
non-assessable. Upon transfer and delivery of the Initial Shares and any
Additional Shares, Xxxxx shall obtain full legal title to all of such Shares,
free and clear of any lien, charge or other encumbrance of any nature.
B. The execution and delivery of this Agreement and the Registration
Rights Agreement, and the consummation of the transactions contemplated hereby,
has been duly authorized by all necessary corporate action of the Company.
C. The Company has the full right, power and authority to enter into
this Agreement and the Registration Rights Agreement and to consummate the
transaction described herein and therein. This Agreement and the Registration
Rights Agreement have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with their terms.
D. The Security Documents and the security interests granted
thereunder remain in full force and effect as first priority liens. Neither the
Company nor any of its subsidiaries has granted any other security interest or
lien in or upon the liquor license which is the collateral under the Security
Documents.
E. Upon the registration of the Initial Shares and the Additional
Shares pursuant to this Agreement and the Registration Rights Agreement, the
Initial Shares and the Additional Shares shall be fully tradable by Xxxxx, free
of any and all restrictions other than the manner of sale requirements set forth
under Rule 144(f) of the Act.
X. Xxxxx is not now, nor has he been, an "affiliate" of the
Company as defined in Rule 144(a)(1) of the Act.
8. REPRESENTATIONS AND WARRANTIES OF XXXXX. Xxxxx hereby makes the
following representations and warranties to the Company:
X. Xxxxx understands that the Stock is being offered and sold under
an exemption from registration under the Act, and offering exemptions contained
in the securities laws of Pennsylvania; that Xxxxx is purchasing the Stock
without being furnished any offering literature or prospectus of any sort
relating to the Company; and that all documents, records and books pertaining to
this investment and the Company have been made available by the Company to Xxxxx
and Xxxxx"s representatives.
X. Xxxxx understands that the Initial Shares have not, and except as
provided in the Registration Rights Agreement between the parties, will not be
registered under the Act or any state securities laws, and that in order to sell
or transfer the Initial Shares, such Initial Shares must either be registered
under such laws or an appropriate exemption from registration must be available.
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X. Xxxxx is a bona fide resident and domiciliary of the Commonwealth
of Pennsylvania and has no present intention of becoming a resident or
domiciliary of any other jurisdiction.
X. Xxxxx is an accredited investor as defined in Rule 501 under the
Act.
X. Xxxxx understands and has fully considered, for purposes of this
investment, that there are substantial restrictions on the transferability of
the Initial Shares and there is currently no established public market for the
Initial Shares and no liquidity is present in connection with the Initial
Shares.
X. Xxxxx has such knowledge and experience in financial and business
matters that Xxxxx is capable of evaluating the merits and risks of an
investment in the Common Stock and of making an informed investment decision.
X. Xxxxx confirms that in making his decision to purchase the
Initial Shares hereby subscribed for, Xxxxx has relied solely upon his own
independent investigation of the Company and the Security Documents, and not on
any representations, warranties or statements made by or on behalf of the
Company (other than those made herein), and that he has been given the
opportunity to ask questions of and to receive answers from the Company
concerning the Company, its financial condition and business, and to obtain any
additional information which the Company possesses or can acquire without
unreasonable effort or expense.
H. The Common Stock hereby subscribed for is being acquired by Xxxxx
in good faith solely for his own account for investment purposes only and is not
being purchased with a view to or for the resale, distribution, subdivision or
fractionalization thereof (other than following the registration of such Common
Stock pursuant to Section 6); Xxxxx has no contract, understanding, undertaking,
agreement or arrangement, formal or informal, with any person to sell, transfer
or pledge to any person the Stock for which Xxxxx hereby subscribes for or any
part thereof. Xxxxx understands that the legal consequences of the foregoing
representations and warranties are that Xxxxx must bear the economic risk of an
investment in the Common Stock for an indefinite period of time because the
Initial Shares and the Additional Shares have not been registered under the Act
or applicable state securities laws and therefore cannot be sold unless such
Shares are subsequently registered under the Act or applicable state securities
laws (which the Company has agreed to do under the Registration Rights
Agreement) or an exemption from such registration is available.
X. Xxxxx consents to the placement of a legend on the certificate
representing the Initial Shares being purchased by Xxxxx, which legend will be
in substantially the following form (the "Securities Legend"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
OTHER JURISDICTION. THE SALE OR OTHER DISPOSITION OF THESE
SECURITIES IS PROHIBITED UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL
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SATISFACTORY TO IT AND ITS COUNSEL THAT SUCH SALE OR OTHER
DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 AND OTHER APPLICABLE STATUTES."
X. Xxxxx has not sold, assigned, transferred or conveyed any
interest in or to the Pledge and Guaranty Documents to any person or entity.
9. ADDITIONAL COVENANTS OF THE COMPANY AND XXXX.
A. Notwithstanding anything else set forth herein, it is the
parties' intention that at no time shall Xxxxx be deemed an affiliate of the
Company as defined in Rule 144(a)(1) of the Act. The issuance of any Additional
Shares to Xxxxx is subject to receipt by the Company of an opinion of the
Company's legal counsel that such issuance would not cause Xxxxx to become an
affiliate. The Company agrees to promptly seek such opinion upon becoming aware
of the need hereunder to issue Additional Shares.
B. Upon the registration of the Initial Shares pursuant to the
Registration Rights Agreement, the Company shall promptly either remove the
Securities Legend or issue an opinion of counsel to the transfer agent to the
effect that sales of the Initial Shares may be made without restrictions.
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AGREEMENTS AND
REMEDIES. Except as specifically provided otherwise herein, all representations,
warranties, covenants, agreements and remedies of the parties hereto, shall
survive the date hereof.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
and agreement between the parties hereto with respect to the transactions
contemplated herein, supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties, and there have been no warranties, representations or promises, written
or oral, made by any of the parties hereto except as herein expressly set forth
herein.
12. BINDING AGREEMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, as well as their respective heirs, personal
representatives, successors and assigns but no party may assign its obligations
hereunder.
13. GOVERNING LAW. This Agreement shall be construed in accordance with
and shall be governed by the laws of the Commonwealth of Pennsylvania without
regard to its conflicts of law rules.
14. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall constitute an original and which together shall constitute a single
agreement.
15. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
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IN WITNESS WHEREOF, each of the undersigned, intending to be legally bound
hereby, has executed this Subscription Agreement as of the date set forth above.
/s/ Xxxxxx Xxxxx
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XXXXXX X. XXXXX
RED XXXX BREWING COMPANY
By: /s/ Xxxxx X. Xxxx
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Xxxxx X. Xxxx, President
/s/ Xxxxx X. Xxxx
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XXXXX X. XXXX
