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Ex 4.17
CONVERSION RIGHTS AGREEMENT
This Conversion Rights Agreement is made this 5th day of February 2001, by
and between RED XXXX BREWING COMPANY, a Pennsylvania corporation ("RED XXXX"),
and CDB FINANCE CORPORATION, a Pennsylvania corporation ("CDB").
BACKGROUND
RED XXXX has executed and delivered to CDB a note dated of even date
herewith in the original principal amount of $57,000 due on or before August ,
2001 ("Note"). As more fully set forth herein, RED XXXX has granted to CDB the
right to convert all or any portion of the principal of the Note into shares of
RED XXXX Common Stock ("Common Stock").
AGREEMENT
NOW THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Conversion Rights.
A. Conversion. Subject to the terms and conditions hereof, CDB may
convert all or any portion of the principal amount of the Note at any time or
from time to time prior to the maturity date of the Note, into fully paid and
non-assessable shares of RED XXXX'x Common Stock, subject to adjustment as
provided in Section 2 hereof ("Conversion Rights"). The number of shares of
Common Stock to be issued upon any such conversion shall be determined by
dividing the principal amount of the Note to be converted by the Conversion
Price (as defined herein). Subject to adjustment, the Note is convertible into
19,000 shares of Common Stock.
B. Conversion Price. The Conversion Rights shall be exercised by
delivery to RED XXXX (prior to the maturity date) of the Note certificate and
the completed Election To Convert Form which is attached hereto. The Conversion
Price shall be $3.00 per share of Common Stock, subject to adjustment as
provided in Section 2 hereof ("Conversion Price").
C. Exercise. Upon the surrender of the Note certificate and the
completed Election To Convert Form as aforesaid, RED XXXX shall issue and cause
to be delivered with all reasonable dispatch to CDB a certificate or
certificates for the number of full shares
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of Common Stock so purchased upon the exercise of the Conversion Rights. Such
certificate or certificates shall be deemed to have been issued and CDB shall be
deemed to have become a holder of record of such Common Stock on and as of the
date of the delivery to RED XXXX of the Note certificate and the completed
Election To Convert Form as aforesaid. If, however, at the date of surrender of
the Note certificate and the completed Election To Convert Form, the transfer
books for the Common Stock issuable upon the exercise of the Conversion Rights
shall be closed, the certificates for the Common Stock in respect to which any
such Conversion Rights are then exercised shall be issued and CDB shall become a
record owner of such Common Stock on and as of the next date on which such books
shall be opened, and until such date RED XXXX shall be under no duty to deliver
any certificate for such Common Stock.
D. Partial Conversion. The Conversion Rights shall be exercisable,
at the election of CDB, either as an entirety, or from time to time for any part
of the outstanding principal amount of the Note, and in the event that the
Conversion Rights are exercised with respect to less than the entire then
outstanding principal amount of the Note, at any time prior to the maturity
date, a new certificate will be issued to CDB in the remaining principal amount
of the Note.
E. Maturity Date.
1. All of the Conversion Rights must be exercised in
accordance with the terms hereof prior to the maturity date of the Note. At and
after the maturity date any and all unexercised rights hereunder shall expire
and all such unexercised Conversion Rights shall without any action on behalf of
RED XXXX become null and void. RED XXXX shall not be required to provide notice
to CDB of the expiration of the Conversion Rights hereunder, and the Conversion
Rights shall automatically expire without any required prior notice from RED
XXXX.
2. If RED XXXX elects to prepay the Note in whole or in part
any time prior to the maturity date, CDB shall have the right to convert all of
(but not less than all of) the principal amount to be prepaid by RED XXXX into
shares of Common Stock pursuant to the terms and conditions hereof. Such right
to convert must be exercised within five(5) days following receipt by the holder
hereof from RED XXXX of notice of prepayment.
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F. Reservation. There has been reserved, and RED XXXX shall at all
times keep reserved out of the authorized and unissued shares of Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of the
Conversion Rights. RED XXXX agrees that all shares of Common Stock issued upon
exercise of the Note shall be, at the time of delivery of the certificates for
such Common Stock, validly issued and outstanding, fully paid and
non-assessable.
G. Fractional Shares. RED XXXX shall not issue any fractional shares
of Common Stock pursuant to any conversion of the Note and shall pay cash to CDB
in lieu of any such fractional shares.
2. Conversion Price Adjustments. The Conversion Price shall be subject to
adjustment from time to time only as set forth hereinafter:
A. In case RED XXXX shall declare a Common Stock dividend on the
Common Stock, then the Conversion Price shall be proportionately decreased as of
the close of business on the date of record of said Common Stock dividend in
proportion to such increase of outstanding shares of Common Stock.
B. If RED XXXX shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the Conversion
Price immediately prior to such subdivision shall be proportionately decreased,
and, if RED XXXX shall at any time combine the outstanding shares of Common
Stock by recapitalization, reclassification, reverse stock split, or combination
thereof, the Conversion Price immediately prior to such combination shall be
proportionately increased. Any such adjustment to the Conversion Price shall
become effective at the close of business on the record date for such
subdivision or combination. The Conversion Price shall be proportionately
increased or decreased, as the case may be, in proportion to such increase or
decrease, as the case may be, of outstanding shares of Common Stock.
C. (i) If Red Xxxx shall issue any Additional Stock (as defined
below) at any time prior to the maturity date of the Note for consideration per
share less than the Conversion Price in effect immediately prior to the issuance
of such Additional Stock, the Conversion Price in effect immediately prior to
each such issuance shall be adjusted to a price determined by multiplying
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such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate consideration received by
Red Xxxx for all such Additional Stock so issued would purchase at such
Conversion Price in effect immediately prior to the issuance of such Additional
Stock, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of shares of
such Additional Stock; provided that, for the purpose of this subsection (i),
all shares of Common Stock issuable upon conversion of the Note shall be deemed
to be outstanding.
(ii) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any discounts, commissions or other expenses allowed, paid or incurred
by Red Xxxx for any underwriting or otherwise in connection with the issuance
and sale thereof.
(iii) In the case of issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as reasonably determined by
the Board of Directors, irrespective of any accounting treatment.
(iv) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities (which are not excluded from the
definition of Additional Stock), the following provisions shall apply:
1. The aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections (ii)and (iii)), if any,
received by Red Xxxx upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby.
2. The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of
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options to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
Red Xxxx for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by Red Xxxx upon the conversion
or exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
subsections (ii) and (iii)).
(v) "Additional Stock" shall mean any shares of Common Stock issued
(or deemed to have been issued pursuant to subsection (iv)) by Red Xxxx after
the date of this Agreement other than (a) the issuance of securities upon
exchange or conversion of Red Xxxx options, warrants, debentures or other
convertible securities outstanding as of the date hereof; (b) Common Stock
issued pursuant to a transaction described in subsections A or B hereof; (c) the
grant of additional options or warrants, or the issuance of additional shares of
Common Stock, after the date hereof to current or former employees, officers,
directors, or consultants of Red Xxxx directly or pursuant to a stock option
plan or stock plan or an Employee Benefit Plan (as defined in Rule 405 of the
Act);(d) Common Stock issued or issuable upon conversion of the Note; or (e) the
issuance by Red Xxxx of debt securities with no equity feature.
D. Whenever the Conversion Price is adjusted as herein provided, RED
XXXX shall promptly mail to CDB a statement signed by an officer of RED XXXX
setting forth the adjusted Conversion Price, determined as so provided.
3. Restrictive Legend.
A. The Common Stock into which the Note may be converted may not be
offered for sale or sold, or otherwise transferred in any transaction which
would constitute a sale thereof within the meaning of the Securities Act of
1933, as amended (the "Act"), unless: (i) such security has been registered for
sale under the Act and registered or qualified under applicable state securities
laws relating to the offer and sale of securities; or (ii) exemptions from the
registration requirements of the Act and the registration or qualification
requirements of all such state securities laws are available and RED XXXX shall
have received an
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opinion of counsel reasonably satisfactory to RED XXXX that the proposed sale or
other disposition of such securities may be effected without registration under
the Act and would not result in any violation of any applicable securities laws
relating to the registration or qualification of securities for sale.
B. As set forth above, and except as provided in the Registration
Rights Agreement dated of even date herewith between RED XXXX and CDB, the
Common Stock into which the Note is convertible shall not be registered under
the Act or any state securities laws, and shall constitute restricted securities
as defined under Rule 144 promulgated under the Act.
4. No Right. CDB, as holder of the Note, shall not be entitled to any of
the rights of a shareholder of RED XXXX prior to the date of issuance of the
Common Stock by RED XXXX pursuant to any conversion of the Note.
5. Securities Laws. As a condition to the issuance of any Common Stock,
CDB shall execute and deliver such representations, warranties, and covenants,
that may be required by applicable federal and state securities law, or that RED
XXXX determines is reasonably necessary in connection with the issuance of such
Common Stock. In addition, the certificates representing the Common Stock shall
contain such legends, or restrictive legends, or stop transfer instructions, as
shall be required by applicable Federal or state securities laws, or as shall be
reasonably required by RED XXXX or its transfer agent.
6. Choice of Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the Commonwealth of Pennsylvania
without regard to Pennsylvania's conflict of laws provisions.
7. Assigns, Etc..This Agreement shall be binding upon and inure to the
benefit of RED XXXX'x successors and assigns and subject to Section 3 hereof,
CDB's permitted successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date and year first above written.
RED XXXX BREWING COMPANY
By: Xxxxx X. Xxxx
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Xxxxx X. Xxxx,
President
CDB FINANCE CORPORATION
By: Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx,
President
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RED XXXX BREWING COMPANY
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxx,
President
ELECTION TO CONVERT FORM
The undersigned hereby irrevocably elects to exercise the rights of
conversion set forth in the Conversion Rights Agreement dated February , 2001
between RED XXXX and CDB FINANCE CORPORATION. The undersigned desires to convert
$ of the principal amount of the attached Note certificate into shares
of Common Stock all as provided for in the Conversion Rights Agreement and
tenders herewith the original Note, all in accordance with the Agreement. The
undersigned requests that a certificate representing such shares of Common Stock
shall be issued to and registered in the name of the undersigned and delivered
to the undersigned at the address set forth below. If less than the entire
principal amount of the Note represented by the certificate has been converted,
then a new Note certificate in the remaining principal amount of the Note shall
be issued to and registered in the name of the undersigned and delivered to the
undersigned at the address set forth below.
Dated: ____________ , 20__ Signature:__________________________________
Print Name:_________________________________
Print Address:______________________________
____________________________________________
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