AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1996
REGISTRATION NO. 33-99180
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FIRST SOUTH AFRICA CORP., LTD.
(Exact name of registrant as specified in its charter)
BERMUDA 3599 Not Applicable
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation
or organization)
CLARENDON HOUSE, CHURCH STREET, HAMILTON HM CX, BERMUDA
(441) 295-1422
(Address, including zip code, and
telephone number, including
area code, of registrant's
principal executive offices)
CLIVE KABATZNIK,
PRESIDENT
FIRST SOUTH AFRICA MANAGEMENT CORP.
2665 SOUTH BAYSHORE, SUITE 702
COCONUT GROVE, FLORIDA 33133
(305) 857-5009
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
HENRY I. ROTHMAN, ESQ.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Tel: (212) 704-6000
Fax: (212) 704-6288
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [X] (No. 33-99180)
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
FIRST SOUTH AFRICA CORP., LTD.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM OF FORM S-1 LOCATION IN PROSPECTUS
<S> <C>
1. Forepart of the Registration Statement and Front Cover Page of Registration
Outside Front Cover Page of Prospectus........... Statement; Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page of Prospectus;
Additional Information; Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges..................... Prospectus Summary; Risk Factors
4. Use of Proceeds.................................. Use of Proceeds
5. Determination of Offering Price.................. Underwriting
6. Dilution......................................... Dilution
7. Selling Security-Holders......................... Concurrent Offering
8. Plan of Distribution............................. Outside Front Cover Page of
Prospectus; Underwriting
9. Description of Securities to be Registered....... Description of Capital Stock
10. Interests of Named Experts and Counsel........... Legal Matters
11. Information with Respect to the Registrant....... Prospectus Summary; The Company;
Dividend Policy; Capitalization;
Selected Historical and Pro Forma
Consolidated Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management;
Certain Transactions; Principal
Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... *
</TABLE>
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* Item is inapplicable, or the answer thereto is in the negative, and is
omitted.
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) up to
2,300,000 shares of Common Stock $.01 par value ("Common Stock") of First South
Africa Corp., Ltd. (the "Company") and 2,300,000 redeemable Class B Warrants
(the "Class B Warrants") underlying the exercise of certain outstanding
redeemable Class A Warrants (the "Class A Warrants") issued by the Company in
its initial public offering effective on January 24, 1996, pursuant to a
Prospectus dated January 24, 1996, and 4,600,000 shares of Common Stock
underlying the exercise of Class B Warrants, and (ii) an additional 650,000
shares of Common Stock underlying the exercise of 650,000 Class A Warrants (the
"Selling Securityholder Warrants"), by the holders thereof (the "Selling
Securityholders"), 650,000 Class B Warrants (the "Selling Securityholder Class B
Warrants") underlying the Selling Securityholder Warrants and 650,000 shares of
Common Stock (which together with the 650,000 shares of Common Stock underlying
the Selling Securityholder Warrants are hereinafter collectively referred to as
the "Selling Securityholder Stock") underlying the exercise of the Selling
Securityholder Class B Warrants, for resale from time to time by the Selling
Securityholders. The Selling Securityholder Warrants, the Selling Securityholder
Class B Warrants and the Selling Securityholder Stock are sometimes collectively
referred to herein as the "Selling Securityholder Securities."
The complete Prospectus relating to the offering by the Company follows
immediately after this Explanatory Note. Following such Prospectus are pages of
the Prospectus relating solely to the Selling Securityholder Securities,
including alternative front and back cover pages and sections entitled
"Concurrent Public Offering," "Plan of Distribution," and "Selling
Securityholders" to be used in lieu of the sections entitled "Concurrent
Offering" and "Warrant Solicitation Fee" in the Prospectus relating to the
offering by the Company. Certain sections of the Prospectus for the offering by
the Company will not be used in the Prospectus relating to the Selling
Securityholder Securities such as "Use of Proceeds" and "Dilution."
<PAGE>
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
================================================================================
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1996
PROSPECTUS
FIRST SOUTH AFRICA CORP., LTD.
2,300,000 SHARES OF COMMON STOCK
2,300,000 REDEEMABLE CLASS B WARRANTS
(UNDERLYING THE EXERCISE OF OUTSTANDING CLASS A WARRANTS)
4,600,000 SHARES OF COMMON STOCK
(UNDERLYING THE EXERCISE OF CLASS B WARRANTS)
This Prospectus is being delivered to the holders of 2,300,000
Redeemable Class A Warrants (the "Class A Warrants") and 2,300,000 Redeemable
Class B Warrants (the "Class B Warrants") that were issued by First South Africa
Corp., Ltd., a Bermuda corporation (the "Company") in its initial public
offering that was effective on January 24, 1996 (the "Offering"). Each Class A
Warrant entitles the registered holder thereof to purchase one share of Common
Stock, $.01 par value ("Common Stock") and one Class B Warrant at an exercise
price of $6.50, subject to adjustment, at any time until January 24, 2001. Each
Class B Warrant entitles the registered holder thereof to purchase one share of
Common Stock at an exercise price of $8.75, subject to adjustment, at any time
until January 24, 2001. Beginning January 24, 1997 (or earlier at the discretion
of the Company with the consent of D.H. Blair Investment Banking Corp. ("D.H.
Blair")), the Class A Warrants and the Class B Warrants (collectively, the
"Warrants") are subject to redemption by the Company at a redemption price of
$.05 per Warrant on 30 days' prior written notice, provided the average of the
closing bid prices of the Common Stock exceeds $9.10 with respect to the Class A
Warrants or $12.25 with respect to the Class B Warrants (subject to adjustment
in each case) for 30 consecutive business days ending within 15 days of the date
on which notice of redemption is given. See "Description of Securities." The
Common Stock and the Class B Common Stock are substantially identical on a
share-for-share basis, except that the holders of Class B Common Stock have five
votes per share on each matter considered by shareholders and the holders of
Common Stock have one vote per share on each matter considered by shareholders,
and except that the holders of each class will vote as a separate class with
respect to any matter requiring class voting by the Companies Act 1981 of
Bermuda.
The Units issued in the Offering (each consisting of one share of
Common Stock, one Class A Warrant and one Class B Warrant), the Common Stock,
the Class A Warrants and the Class B Warrants are listed on the Nasdaq SmallCap
Market ("Nasdaq") under the symbols FSAUF, FSACF, FSAWF and FSAZF, respectively.
There can be no assurance that an active trading market in the Company's
securities will be sustained. The exercise price and other terms of the Warrants
were arbitrarily determined by negotiation between the Company and D.H. Blair
and were not related to the Company's asset value, net worth, financial
condition or other established criteria of value. On November 11, 1996, the
closing sales price for each of the Units and the Common Stock was $8.25 and
$5.50, respectively. On November 6, 1996, the closing sales price of the Class B
Warrants was $1.047. On November 5, 1996, the closing sales price of the Class A
Warrants was $3.156.
Concurrently with the Offering, the Company registered for resale by
certain securityholders (the "Selling Securityholders") 650,000 Class A Warrants
(the "Selling Securityholders' Warrants"), the Common Stock and Class B Warrants
underlying the Selling Securityholders' Warrants and the Common Stock issuable
upon exercise of such Class B Warrants. The Selling Securityholder Warrants and
the securities underlying such warrants are sometimes collectively referred to
as the "Selling Securityholder Securities." The Selling Securityholders'
Warrants were issued on the closing of the Offering to the Selling
Securityholders upon the automatic conversion of warrants (the "Bridge
Warrants") acquired by them in the Company's private placement in November 1995
(the "Bridge Financing"). Sales of the Selling Securityholder Warrants or the
underlying securities, or the potential of such sales, may have an adverse
effect on the market price of the securities offered hereby. The Company will
not receive any proceeds from the sale of any of the Selling Securityholder
Warrants.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS"
BEGINNING ON PAGE 8 AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
WARRANTHOLDER(1)(2) COMMISSIONS (3) COMPANY (4)
- --------------------------------------------------------------------------------
Per Share $6.50 $.325 $6.175
Total (4) $14,950,000 $747,500 $14,202,500
- --------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
(1) Includes only Class A Warrants. There is no assurance that the market
value of the shares of Common Stock underlying such Warrants will at
any time after exercise thereof exceed the exercise price paid
therefor.
(2) Assumes the exercise of the Class A Warrants. Does not assume the
exercise of any Class B Warrants.
(3) Pursuant to an Underwriting Agreement entered into between the Company
and D.H. Blair on January 24, 1996, in connection with its initial
public offering, the Company has agreed to pay D.H. Blair, a warrant
solicitation fee of five (5%) percent of the aggregate exercise price
of the Warrants whose exercise is solicited by a member of the National
Association of Securities Dealers, Inc. ("NASD") and meets certain
other criteria. The Company cannot presently estimate to what extent
any such warrant solicitation fee will be paid.
(4) Assumes exercise of all of the presently outstanding Class A Warrants.
All funds received from the exercise of the Warrants will be turned
over to the Company with the exception of: (i) expenses incurred in
connection with the preparation of this Prospectus, including printing
and professional fees estimated at $55,000; and (ii) a five (5%)
percent warrant solicitation fee which may be paid to D.H. Blair upon
the exercise of Warrants. See "Warrant Solicitation Fee." Does not
include additional proceeds to be received by the Company upon the
exercise by D.H. Blair of the Unit Purchase Options.
The Company intends to furnish its shareholders and holders of Warrants
annual reports containing audited financial statements and such interim reports
as it deems appropriate or as may be required by law.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information in this Prospectus does not give
effect to the exercise of (i) the Warrants, (ii) the Unit Purchase Options
issued in connection with the Offering, and (iii) options to purchase shares of
Common Stock reserved for issuance under the Company's Stock Option Plan. See
"Description of Securities." Unless otherwise indicated, references in this
Prospectus to "Rand" or "R" are to South African Rand. On November 8, 1996, the
market average exchange rate was approximately 4.70 Rand per U.S. dollar. See
"Risk Factors - Risks Relating to Operations in South Africa, Currency
Considerations." Unless otherwise indicated, U.S. dollar equivalent information
in South African Rand for a period is based on the average of the daily exchange
rates for the days in the period, and U.S. dollar information for South African
Rand as of a specified date is based on the exchange rate for that date unless
otherwise indicated. Certain numbers in this Prospectus have been rounded.
THE COMPANY
First South Africa Corp., Ltd., (the "Company") was organized to
acquire, own and operate seasoned, closely-held companies in South Africa with
annual sales in the range of approximately $5 to $50 million. Since its initial
public offering on January 24, 1996, the Company has acquired through its
wholly-owned subsidiary, First South African Holdings (Pty) Ltd.("FSAH"), seven
businesses based in South Africa ("the Acquisitions") that are as a group
engaged in the following industry segments:
1. High quality plastic packaging machinery.
2. Metal washers used in the fastener industry.
3. Air conditioning and refrigeration machinery components.
4. Processed foods.
Upon completion of its initial public offering the Company acquired
Starpak (Pty) Limited, which is engaged in the manufacture of high quality
plastic packaging machinery; L.S. Pressing (Pty) Limited, which is engaged in
the manufacture of washers for the use in the fastener industry; and Europair
Africa (Pty) Ltd., which is engaged in the manufacture and supply of air
conditioning products. In April 1996, L.S. Pressings acquired through Crowle
Investments (Pty) Limited, the assets and business of Paper & Metal Industries;
a small manufacturer of rough washers for use in the fastener industry. In April
1996, Europair acquired the assets and business of Universal Refrigeration, an
agent and supplier of refrigeration products. In June 1996, FSAH acquired
Piemans Pantry (Pty) Limited ("Piemans Pantry"), a manufacturer and distributor
of high quality meat pies. In October 1996, FSAH acquired Astoria Bakery CC
("Astoria Bakery") and Astoria Bakery Lesotho Proprietary Ltd., ("Astoria Bakery
Lesotho") manufacturers and distributors of speciality baked breads and
confectionary products (collectively referred to as "Astoria").
FSAH manages the Company's business interest in South Africa. FSAH
monitors the operational performance of its subsidiaries and seeks out
prospective acquisition candidates in businesses that complement or are
otherwise related to the Company's existing acquisitions, and in other
businesses that may be identified by the Company's management.
The Company was formed in September 1995. The Company's principal
executive offices are located at Clarendon House, Church Street, Hamilton HM II
Bermuda, and its telephone number at such location is: (441) 295-1422. Certain
management, shareholder relations and administrative services are provided to
the
3
<PAGE>
Company by First South Africa Management Corp., a Delaware corporation that is a
wholly-owned subsidiary of the Company ("FSAM"). FSAM's principal executive
offices are located at 2665 South Bayshore, Suite 405, Coconut Grove, Florida
33133, and its telephone number at such location is (305) 857-5009.
4
<PAGE>
THE OFFERING
Securities Offered by the Company...........2,300,000 shares of Common Stock and
2,300,000 Class B Warrants
underlying the exercise of 2,300,000
Class A Warrants issued in the
initial public offering and
4,600,000 shares of Common Stock
underlying the exercise of Class B
Warrants. Each Class A Warrant
entitles the holder to purchase one
share of Common Stock and one Class
B Warrant at an exercise price of
$6.50, subject to adjustment, at any
time until January 24, 2001. Each
Class B Warrant entitles the holder
to purchase one share of Common
Stock at an exercise price of $8.75,
subject to adjustment, at any time
until January 24, 2001. The Warrants
are subject to redemption in certain
circumstances. See "Description of
Securities."
Securities Offered Concurrently by
Selling Securityholders...................650,000 shares of Common Stock
underlying 650,000 Selling
Securityholder Warrants, 650,000
Selling Securityholder Class B
Warrants issuable upon exercise of
the Selling Securityholder Warrants
and 650,000 shares of Common Stock
issuable upon exercise of these
Selling Securityholder Class B
Warrants. The Selling Securityholder
Warrants are identical to the Class
A Warrants, except that the holders
thereof have agreed to certain
restrictions on transferability and
exercisability. See "Concurrent
Offering."
Number of Shares of Common Stock
Outstanding:
Before the offering (1).....................2,300,000 shares of Common Stock (2)
1,862,500 shares of Class B Common
Stock (3)(4)
After the offering (1)(5)...................4,600,000 shares of Common Stock (2)
1,842,500 shares of Class B Common
Stock (3)(4)
Nasdaq Symbols..............................Units - FSAUF
Common Stock - FSACF
Class A Warrants - FSAWF
Class B Warrants - FSAZF
Risk Factors................................An investment in the securities
offered hereby involves a high
degree of risk and immediate
substantial dilution to public
investors. See "Risk Factors" and
"Dilution."
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(footnotes on next page)
5
<PAGE>
(1) For a description of the voting and other rights of the Common Stock
and Class B Common Stock, see "Description of Securities."
(2) Excludes (i) an aggregate of 1,300,000 shares of Common Stock reserved
for issuance upon exercise of the Selling Securityholder Warrants, (ii)
7,200,000 shares issuable upon exercise of the Warrants included in the
Units offered in connection with the Offering; (iii) 800,000 shares
issuable upon exercise of the Unit Purchase Options and the Warrants
included in the Units underlying the Unit Purchase Options; (iv)
350,000 shares reserved for issuance under the Company's 1995 Stock
Option Plan, (v) 331,579 shares of Common Stock to be issued by the
Company to the FSAH Escrow Agent pursuant to the Pieman's FSAH Escrow
Agreements, and (vi) 186,000 shares of Common Stock which the Company
has agreed to issue to the FSAH Escrow Agent in connection with the
Company's acquisition of Astoria. See "Management - Stock Option Plan,"
"Description of Securities," "Concurrent Offering," "Certain
Transactions - FSAH Escrow Agreements" and "Warrant Solicitation Fee."
(3) Includes 729,979 shares of Class B Common Stock issued upon the
consummation of the Offering to the American Stock Transfer & Trust
Company (the "FSAH Escrow Agent") pursuant to an escrow agreement
entered into by and among certain holders of FSAH Class B Stock, the
FSAH Escrow Agent, FSAH and the Company prior to the closing of the
Offering (the "FSAH Escrow Agreement"), pursuant to which such FSAH
shareholders may tender their shares of FSAH Class B Stock to the FSAH
Escrow Agent against payment by the FSAH Escrow Agent of the purchase
price therefor, which payment may be made through the sale by the FSAH
Escrow Agent of an equal number of shares of Class B Common Stock
(which shall be automatically converted to shares of Common Stock upon
such sale) and delivery of the net proceeds thereof. See "Certain
Transactions - FSAH Escrow Agreement" and "Principal Shareholders."
(4) In addition to the restrictions set forth in the FSAH Escrow Agreement,
all of the holders of Class B Common Stock have agreed not to sell,
transfer or assign such shares without the prior written consent of
D.H. Blair for a period of 13 months from the closing of the Offering.
See "Shares Eligible for Future Sale."
(5) Assumes exercise of all the Class A Warrants and no exercise of Class B
Warrants. Inasmuch as the Company has received no firm commitments
therefore, there can be no assurances, however, as to the number of
Class A Warrants which will be exercised. See "Risk Factors."
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PREDECESSOR COMPANY (1) THE COMPANY
----------------------- -----------
MARCH 1, 1995 JULY 1, 1995
YEARS ENDED FEBRUARY 28, TO JUNE 30, 1995 TO JUNE 30, 1996
-------------------------- ---------------- ----------------
1992 1993 1994 1995
$ $ $ $ $ $
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net sales...................... 5,374,147 6,256,667 6,851,457 8,826,856 3,297,507 14,911,097
Total operating expenses....... 4,744,035 5,818,092 6,414,144 8,179,083 292,806 19,833,942 (3)
Operating income............... 630,112 438,575 437,313 647,773 334,701 (4,922,845)
Interest paid.................. 219,424 223,314 180,960 152,163 18,801 865,733 (4)
Net income before tax.......... 361,678 269,251 321,319 536,440 359,045 (5,248,942)
Net income after tax........... 271,036 138,839 207,916 313,882 213,829 (5,737,560)
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY (1) THE COMPANY
FEBRUARY 28, JUNE 30,
------------ ---------
1992 1993 1994 1995 1996
$ $ $ $ $
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets................... 4,446,132 3,976,769 3,976,974 5,161,709 23,604,994
Long term liabilities.......... 1,562,095 1,140,244 1,112,391 1,123,665 2,361,372
Net working capital............ 1,305,961 1,177,250 1,194,931 1,366,602 4,624,417
Stockholder's equity........... 2,280,434 1,527,356 1,580,826 1,828,656 12,792,376
</TABLE>
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(1) Represents the combined results for Starpak and L.S. Pressings, which
are deemed to be the predecessor of the Company due to the common
ownership and control of such entities. The Company's fiscal year end
is June 30.
(2) No dividends were declared or paid during the periods presented.
(3) Includes a one time non-cash escrow shares charge of $6,314,000 related
to the release of 1.1 million shares under the terms of an Earnout
Escrow Agreement, as amended, between the Company, certain shareholders
of the Company and American Stock Transfer and Trust Company.
(4) Includes a non-cash charge of $396,500 relating to costs incurred in
connection with a November 1995 Bridge Note Financing.
7
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," such as those
concerning future revenues, certain statements contained under "Business," such
as statements concerning the effect of market conditions, and other statements
contained in this Prospectus regarding matters that are not historical facts are
forward-looking statements (as such term is defined in the rules promulgated
pursuant to the Securities Act of 1933, as amended (the "Securities Act")).
Because such forward-looking statements include risks and uncertainties, actual
results may differ materially from those expressed in or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially include, but are not limited to, those discussed herein under "Risk
Factors." The Company undertakes no obligation to release publicly the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RISK FACTORS
An investment in the securities offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information
contained in this Prospectus, prospective investors should carefully consider
the following risk factors before purchasing the securities offered hereby.
RISKS RELATING TO OPERATIONS IN SOUTH AFRICA
The Company's operations are conducted through its direct and indirect
subsidiaries located in South Africa. For the foreseeable future, the Company
expects to continue to focus all of its efforts in South Africa. The conduct of
the Company's business in South Africa exposes the Company to certain risks,
including the following:
Political Risks. Historically, the social structure of South Africa was
governed according to the apartheid system. Racial tensions in South Africa have
from time to time resulted in social unrest, strikes, riots and other sporadic
localized violence. The apartheid system also resulted in the imposition of
international financial and trade sanctions against South Africa. Although a new
interim constitution was adopted providing for universal suffrage and the first
national election under the new constitution took place in April 1994, there can
be no assurance that social unrest, which could range in magnitude from civil
disobedience to civil war, will not occur. The Company's businesses in South
Africa have experienced politically-related work stoppages in the past, although
since 1994 no such disturbance has been material. In addition, certain other
countries in the region are currently engaged in or have had civil war with the
corresponding severe adverse economic and social conditions and effects.
Moreover, there can be no assurance as to the economic and tax policies which
the South African government may pursue and whether those policies may include
nationalization, expropriation and confiscatory taxation. Nationalization,
expropriation or confiscatory taxation, as well as currency blockage, political
changes, government regulation, strikes, political or social instability or
diplomatic developments could adversely affect the economy of South Africa and
could have a material adverse effect on the Company.
Risks Related to Currency Exchange. All of the Company's operating
subsidiaries do business in South African Rand and the Company's revenues are
generally received in such currency. Historically, there has been significant
inflation in South Africa (averaging 10-15% per annum in recent years) and
significant fluctuations in the exchange rate of the South African Rand. Because
South Africa's inflation rate would impact its economy both domestically and
internationally, and higher levels of inflation have frequently
8
<PAGE>
reduced the real return on capital and investment (thereby lowering the demand
for capital goods including the types that the Company produces), South Africa's
level of inflation may increase the Company's risk related to currency
fluctuation. The U.S. Dollar equivalent of the Company's net assets and results
of operations will be adversely affected by reductions in the value of the Rand
relative to the U.S. Dollar. Similarly, if the exchange rate declines between
the time the Company incurs expenses in other currencies and the time cash
expenses are paid, the amount of South African Rand required to be converted
into such other currencies in order to pay such expenses could be greater than
the equivalent amount of such expenses in South African Rand at the time they
were incurred. The exchange rate for South African Rand against the U.S. dollar
declined during fiscal year 1996 during which period the average rate of
exchange for the Rand against the dollar was $1.00 to Rand 3.85 as compared with
an average rate of $1.00 to Rand 3.53 for fiscal year 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Economic Risks. The economy of South Africa may differ unfavorably from
the U.S. economy in such respects as growth of gross domestic product or gross
national product, rate of inflation, taxation, capital reinvestment, resource
self-sufficiency and balance of payments position. South Africa may be
particularly susceptible to changes in the world price of gold and other primary
commodities as these represent a majority of South Africa's exports. Any such
unfavorable aspects of the South African economy may materially adversely affect
the financial condition of the Company.
Government Regulatory Considerations. Generally, the making of loans by
the Company to its subsidiaries, the ability of those subsidiaries to borrow
from South African sources and the repatriation of dividends, interest and
royalties by those subsidiaries is regulated by the Exchange Control Department
of the South African Reserve Bank (the "Reserve Bank"). South Africa formerly
operated a dual currency system comprising the commercial rand and the financial
rand, which was abolished in 1995. The financial rand was the investment
currency, which traded at a discount to the commercial rand. No guarantee can be
given that the financial rand will not be reintroduced in the future with
possible adverse consequences on the U.S. dollar value of the Company's
investments in South Africa. Current South African Exchange Control Regulations
provide that, subject to any exemption which may be granted by the South African
Treasury (the "Treasury"), no non-resident of South Africa and no "affected
person" (which includes any entity (i) that may distribute 25% or more of its
capital, assets or earnings to a non-resident of South Africa or (ii) 25% or
more of the voting power of which is controlled by a non-resident of South
Africa) may provide any "financial assistance" to any South African resident.
"Financial assistance" is broadly defined to include any loans, guarantees,
sale/leasebacks, etc. Because FSAH will be deemed to be an "affected person,"
the Company is generally required to obtain the permission of the Treasury prior
to loaning money to, providing guarantees on behalf of, or otherwise providing
"financial assistance" to FSAH. Notwithstanding the above, a South African
company such as FSAH is permitted a certain level of local borrowing without
reference to the exchange control regulations and without prior consent. The
amount which any affected person may borrow is calculated in accordance with the
following formula:
100%+ (Percentage South African interest X 100%)
------------------------------------------
(percentage non-resident interest).
In addition, the terms of repayment of any such loan and the interest rate
(which is generally market related) will be regulated.
Under other regulations, no person may, without permission, acquire any
security from a non-resident or make any entry in a security register which
involves the transfer of a security into or out of the name of a
9
<PAGE>
non-resident. The control is exercised by placing the endorsement "non-resident"
on all securities owned by non-residents or in which non-residents have an
interest. The non-resident endorsement is placed on the share certificates by a
bank and is in practice easy to obtain.
Certain other regulations impact the remittance of dividends and
interest from South Africa, including any potential dividends to the Company
from a South African subsidiary. In practice, the South African Reserve Bank
does not restrict the remittance of genuine dividends from income earned by
South African companies although approval must be obtained. As a result, there
can be no assurance that a South African subsidiary would be permitted to
declare and pay a dividend to the Company. See "South Africa - Foreign Direct
Investment."
RISKS RELATING TO THE COMPANY'S UNPROVEN STRATEGY
The Company's strategy, which depends in part upon a belief that
macroeconomic factors will result in the expansion of the South African economy,
is generally unproven and based upon rapidly changing and unpredictable events.
Although the Company perceives a growth potential in the South African economy,
there can be no assurance that such potential will be realized or, even assuming
such growth, that the Company will be able to benefit therefrom. A significant
element of the Company's growth strategy is to acquire additional companies in
South Africa. There can be no assurance that the Company will successfully
identify, complete or integrate additional acquisitions or that any successfully
completed acquisitions will perform as expected, will not result in significant
unexpected liabilities or will ever contribute significant revenues or profits
to the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
BROAD DISCRETIONARY USE OF PROCEEDS
The Company has broad discretion with respect to the specific
application of the net proceeds to be obtained by the Company upon the exercise
of the Warrants. Such amounts are intended to be applied toward consummating
acquisitions in accordance with the Company's strategy. In addition, the Company
may also determine to use all or a portion of its excess working capital, if
any, for acquisitions. Thus, purchasers of the Common Stock upon exercise of the
Warrants will be entrusting their funds to the Company's management, upon whose
judgment the investors must depend, with only limited information concerning
management's specific intentions. See "Use of Proceeds."
ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO ACQUISITIONS
Although management of the Company will endeavor to evaluate the risks
inherent in any particular acquisition, there can be no assurance that the
Company will properly ascertain all such risks. Management of the Company will
have virtually unrestricted flexibility in identifying and selecting prospective
acquisition candidates. The Company does not intend to seek stockholder approval
for any acquisitions unless required by applicable law or regulations and
stockholders will most likely not have an opportunity to review financial
information on an acquisition candidate prior to consummation of an acquisition.
See "Description of Securities - Differences in Corporate Law."
South African companies that may be acquired by the Company are subject
to South African GAAP which, in certain instances, may differ from U.S. GAAP.
Although the Company intends to prepare financial statements in accordance with
U.S. GAAP, the Company can provide no assurance that it will be able to do so.
Although the Company is unaware of any South African GAAP requirement that would
adversely affect it, there can be no assurance that the Company's financial
condition or the ability of the Company to
10
<PAGE>
consummate future acquisitions will not be adversely affected by differences
between South African GAAP and U.S. GAAP.
POSSIBLE FLUCTUATIONS IN OPERATING RESULTS
There can be no assurance that the Company's operating subsidiaries
will continue to operate profitably, or that prior trends will be indicative of
future results of operations. Future results of operations may fluctuate
significantly based upon factors such as increases in competition, losses
incurred by new businesses that may be acquired in the future, currency
fluctuations, political changes, macroeconomic factors, the continued
availability of new materials and other circumstances that may not be reasonably
foreseeable at this time.
COMPETITION
The Company competes with a number of companies, from South Africa and
from other countries, offering similar products and services, some of whom may
have substantially greater financial, management, technical and other resources
than the Company. As a result of South Africa's recent political transformation,
some South African businesses may be adversely affected by increased competition
from foreign firms doing business in South Africa. In addition, South Africa has
historically imposed significant tariffs against a number of industrial
products. To the extent such tariffs are reduced or removed to comply with
international treaty requirements or otherwise, the Company would face much
greater pressure from globally competitive firms. There can be no assurance that
the Company will compete effectively with such other companies or that other
companies will not develop products which are superior to the Company's or which
achieve greater market penetration. In addition, the Company may experience
competition from other companies seeking to identify and consummate acquisitions
of South African companies. Such competition may result in the loss of an
acquisition candidate or an increase in the price the Company would be required
to pay for any such acquisition. See "Business - Competition."
LABOR RELATIONS
A significant number of South Africa's workers belong to either
registered or unregistered trade unions, and most of the major industries are
unionized. A number of the trade unions have close links to various political
parties. In the past, trade unions have had a significant influence in South
Africa as vehicles for social and political reform as well as the collective
bargaining process. It is uncertain whether labor disruptions will be used to
advocate political causes in the future. Significant labor disruptions could
have a material adverse effect on the financial condition of the Company.
South Africa has also recently enacted a new Labour Relations Act. The
Act entrenches the rights of employees to belong to trade unions and the rights
of trade unions to have access to the workplace. The right to strike is
guaranteed, as is the right to participate in secondary strikes, in certain
prescribed circumstances. The right to picket has also been entrenched. The Act
recognizes the rights of employers to belong to employers' associations.
Importantly, the Act increases the role of employees in the decision making of
companies by providing for the compulsory establishment of workplace forums to
represent the interests of employees where a company employs more than 100
employees. The range of issues on which the workplace forum must be consulted
include restructurings of the workplace, partial or total plant closures,
mergers and transfers of ownership insofar as these affect employees, and
retrenchments. The implementation of the Act's provisions may have a material
adverse effect on the Company's cost of labor and consequently on its financial
condition.
11
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of its
executive officers, most of whom are also principal stockholders of the Company,
and the continued contributions of the management of Starpak, L.S. Pressings,
Europair, Piemans Pantry and Astoria. The Company has obtained key man insurance
in the amounts of $2,000,000 on the lives of each of Michael Levy and Clive
Kabatznik. The business of the Company could be adversely affected by the loss
of services of, or a material reduction in the amount of time devoted to the
Company, by its executive officers. See "Management."
CONTROL BY INSIDERS; OWNERSHIP OF SHARES HAVING DISPROPORTIONATE VOTING RIGHTS;
POSSIBLE DEPRESSIVE EFFECT ON THE PRICE OF THE COMPANY'S SECURITIES
The Company's founders and certain other shareholders own 1,842,500
shares of Class B Common Stock (excluding options), representing approximately
44% of the Company's outstanding capital stock and approximately 80% of the
total voting power and are able to elect all of the Company's directors and
otherwise control the Company's operations. Furthermore, the disproportionate
vote afforded the Class B Common Stock could also serve to impede or prevent a
change of control of the Company. As a result, potential acquirers may be
discouraged from seeking to acquire control of the Company through the purchase
of Common Stock, which could have a depressive effect on the price of the
Company's securities and will make it less likely that shareholders receive a
premium for their shares as a result of any such attempt. See "Principal
Shareholders," "Certain Transactions - FSAH Escrow Agreement" and "Description
of Securities."
DILUTION
There will be immediate substantial dilution to purchasers of the
shares offered hereby, since the net tangible book value of the Company's
securities after the offering will be substantially less than the public
offering price. See "Dilution."
DIVIDENDS UNLIKELY
The Company has not paid any cash dividends and does not anticipate
paying any such cash dividends in the foreseeable future. Earnings, if any, will
be retained to finance future growth. See "Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock by existing stockholders pursuant to Rule
144 under the Securities Act, pursuant to the Concurrent Offering or otherwise,
could have an adverse effect on the price of the Company's securities. In
connection with the Concurrent Offering, 650,000 Selling Securityholder Warrants
and the underlying securities were registered for resale concurrently with the
Offering. Holders of the outstanding shares of Class B Common Stock have agreed
not to sell any shares of Common Stock for a period of 13 months from the
initial public offering without the prior written consent of D.H. Blair. D.H.
Blair has "demand" and "piggy-back" registration rights covering the securities
underlying the Unit Purchase Options. Future sales of Common Stock, or the
possibility of such sales in the public market, may adversely affect the market
price of the securities offered hereby. See "Concurrent Offering," "Description
of Securities" and "Shares Eligible for Future Sale." None of the shares of
Common Stock issuable upon conversion of the Class B Common Shares that were
issued prior to the Company's initial public offering are eligible for sale
under Rule 144 until September 1997.
12
<PAGE>
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
Commencing on January 24, 1997, the Warrants may be redeemed by the
Company at a redemption price of $.05 per Warrant upon 30 days' prior written
notice if the average bid price per share of the Common Stock exceeds $9.10
(subject to adjustment) with respect to the Class A Warrants and $12.25 (subject
to adjustment) with respect to the Class B Warrants, for 30 consecutive trading
days ending within 15 days of the notice of redemption. Redemption of the
Warrants could force the holders to exercise the Warrants and pay the exercise
price therefor at a time when it may be disadvantageous for the holders to do
so, to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants, or to accept the redemption price, which,
at the time the Warrants are called for redemption, is likely to be
substantially less than the market value of the Warrants. See "Description of
Securities - Warrants."
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS
Holders of Warrants will only be able to exercise the Warrants if (i) a
current prospectus under the Securities Act relating to the securities
underlying the Warrants is then in effect and (ii) such securities are qualified
for sale or exempt from qualification under the applicable securities laws of
the states. Although the Company has undertaken to use its best efforts to
maintain the effectiveness of a current prospectus covering the securities
underlying the Warrants, there can be no assurance that the Company will be able
to do so. The value of the Warrants may be greatly reduced if a current
prospectus, covering the securities issuable upon the exercise of the Warrants,
is not kept effective or if such securities are not qualified or exempt from
qualification under applicable state securities laws. See "Description of
Securities - Warrants."
POSSIBLE DEPRESSIVE EFFECT OF FUTURE SALES OF COMMON STOCK; REGISTRATION RIGHTS
Immediately following the effectiveness of this offering, there will be
an aggregate of 2,300,000 shares of Common Stock and 1,842,500 Class B Common
Stock outstanding. In addition, an aggregate of 1,300,000 shares of Common Stock
are issuable pursuant to the Selling Securityholder Warrants and Selling
Securityholder Class B Warrants. The 2,300,000 shares of Common Stock included
as part of the Units sold pursuant to the Offering were freely tradeable without
restriction under the Securities Act immediately following this offering. All
other shares of Common Stock and the shares of Class B Common Stock, are
"restricted securities" as that term is defined under the Securities Act, and in
the future may be sold in compliance with Rule 144 under the Securities Act or
pursuant to a Registration Statement filed under the Securities Act. See
"Description of Securities - Class B Common Stock." Of the 1,842,500 shares of
Class B Common Stock issued and outstanding upon the closing of the Offering,
729,979 shares were issued to the FSAH Escrow Agent pursuant to the terms of the
FSAH Escrow Agreement. See "Certain Transactions." Such shares of Class B Common
Stock are "restricted securities" which in the future may be sold in compliance
with Rule 144 or pursuant to a registration statement filed under the Securities
Act. None of the shares of Class B Common Stock will be eligible for sale under
Rule 144 until September 1997. Rule 144 generally provides that a person holding
restricted securities for a period of two years may sell every three months in
brokerage transactions and/or market-maker transactions an amount not to exceed
the greater of (a) one percent (1%) of the Company's issued and outstanding
Common Stock, or (b) the average weekly trading volume of the Common Stock
during the four calendar weeks prior to such sale. Rule 144 also permits, under
certain circumstances, the sale of shares without any quantity limitation by a
person who is not an affiliate of the Company and who has satisfied a three-year
holding period. The Company anticipates that an additional 331,539 shares of
Common Stock and 186,000 shares of Common Stock will be issued during the second
quarter of fiscal year 1997 to the FSAH Escrow Agent in connection with the
Company's acquisitions of Piemans Pantry and Astoria, respectively. See "Certain
Transactions - FSAH Escrow Agreements."
13
<PAGE>
Commencing on January 24, 1997, D.H. Blair and certain other holders
have the right to two demand registrations of the Units underlying the Unit
Purchase Options. The holders of the Unit Purchase Options also will have
certain piggyback registration rights. The exercise of registration rights may
involve substantial expense to the Company and have a depressive effect on the
market price of the Company's securities. See "Description of Securities -
Shares Eligible for Future Sale."
POTENTIAL ANTI-TAKEOVER EFFECTS OF PREFERRED STOCK
The Company's Memorandum of Association authorizes the issuance of
5,000,000 shares of preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without shareholder approval
(but subject to applicable government regulatory restrictions), to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
the Company's Common Stock. In the event of issuance, the preferred stock could
be utilized, under certain circumstances, as a method of discouraging, delaying
or preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future. See "Description of
Securities."
LIMITED RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW
The Company's corporate affairs are governed by its Memorandum of
Association and bye-laws, as well as the common law of Bermuda relating to
companies and the Companies Act 1981. The laws of Bermuda relating to
shareholder rights, protection of minorities, fiduciary duties of directors and
officers, matters of corporate governance, corporate restructurings, mergers and
similar arrangements, takeovers, shareholder suits, indemnification of directors
and inspection of corporate records, may differ from those that would apply if
the Company were incorporated in a jurisdiction within the United States. The
rights of shareholders in a Bermuda company may not be as extensive as the
rights of a shareholder of a United States company and, accordingly, the holders
of the Company's shares of Common Stock may be more limited in their ability to
protect their interests in the Company. In addition, there is uncertainty
whether the courts of Bermuda would enforce judgements of the courts of the
United States and of other foreign jurisdictions. There is also uncertainty
whether the courts of Bermuda would enforce actions brought in Bermuda which are
predicated upon the securities laws of the United States. See "Enforceability of
Civil Liabilities," "Description of Securities - Differences in Corporate Law"
and "Certain Provisions of Bermuda Law."
UNITED STATES FEDERAL INCOME TAX RISKS
It is possible that based on stock ownership and/or types of income,
the Company may be classified as a passive foreign investment company, a
controlled foreign corporation, a foreign personal holding company or a personal
holding company for United States federal income tax purposes. Under the special
rules that apply to such companies, United States Investors (as defined in
"Certain Tax Considerations - United States Federal Income Tax Considerations")
may be required to include certain amounts in income before it is actually
distributed to them. Although the Company intends, to the extent consistent with
its other business goals, to operate in a manner that will minimize the adverse
effects of such provisions, if applicable, no assurance of such a result can be
given. See "Certain Tax Considerations - United States Federal Income Tax
Considerations."
14
<PAGE>
USE OF PROCEEDS
The net proceeds which may be realized by the Company upon the exercise
of all of the Company's Class A Warrants (assuming no exercise of any Class B
Warrants), after provision for the possible payment of a warrant solicitation
fee of five (5%) percent (see "Warrant Solicitation Fee") and deduction of
expenses of this offering will be $14,147,500. Inasmuch as the Company has
received no firm commitments for the exercise of the Class A Warrants and Class
B Warrants, no assurance can be given that all of the Class A Warrants and Class
B Warrants will be exercised.
Any net proceeds received from the exercise of the Warrants are
intended to be used to consummate acquisitions in accordance with the Company's
strategy and for working capital.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock and
does not anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain earnings, if any, to finance the growth of the
Company. The Board of Directors of the Company will review its dividend policy
from time to time to determine the feasibility and desirability of paying
dividends, after giving consideration to the Company's earnings, financial
condition, capital requirements and such other factors as the Board of Directors
deems relevant.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) at
June 30, 1996; and (ii) as adjusted to give effect to the issuance and sale of
the shares of Common Stock underlying the exercise of the Class A Warrants and
Class B Warrants. See "Use of Proceeds." This table should be read in
conjunction with the Financial Statements and the Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Long term debt........................................................................ $2,361,372 $2,361,372
Stockholders' Equity:
Preferred Stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and
outstanding..................................................................... 0 0
Common Stock, $0.01 par value; 23,000,000 shares authorized; 2,300,000 shares issued
and outstanding actual; 4,600,000 shares issued and outstanding as adjusted(1)(2).. 22,000 45,000
Class B Common Stock, $0.01 par value; 2,000,000 shares authorized; 1,942,500 shares
issued and outstanding; actual and as adjusted(1)(2)(3)......................... 19,701 19,701
Additional paid-in capital......................................................... 18,518,986 32,643,486
Deficit............................................................................ (3,887,407) (3,887,407)
Foreign currency translation adjustments........................................... (1,888,211) (1,888,211)
Income restricted as to distribution............................................... 7,307 7,307
Total Stockholders' Equity......................................................... 12,792,376 26,939,876
---------- ----------
Total capitalization.................................................................. 15,153,748 29,301,248
========== ==========
</TABLE>
- ------------------
(1) The Common Stock and Class B Common Stock are essentially identical
except that each share of Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to five votes. See
"Description of Securities".
(2) Excludes (i) an aggregate of 1,300,000 shares of Common Stock reserved
for issuance upon exercise of the Selling Securityholder Warrants, (ii)
7,200,000 shares issuable upon exercise of the Warrants included in the
Units offered in connection with the Offering; (iii) 800,000 shares
issuable upon exercise of the Unit Purchase Options and the Warrants
included in the Units underlying the Unit Purchase Options; (iv)
350,000 shares reserved for issuance under the Company's 1995 Stock
Option Plan, (v) 331,579 shares of Common Stock to be issued by the
Company to the FSAH Escrow Agent pursuant to the Pieman's FSAH Escrow
Agreements, and (vi) 186,000 shares of Common Stock which the Company
has agreed to issue to the FSAH Escrow Agent in connection with the
Company's acquisition of Astoria. See "Management - Stock Option Plan,"
"Description of Securities," "Concurrent Offering" and "Warrant
Solicitation Fee."
(3) Includes 729,979 shares of Class B Common Stock issued upon the
consummation of the Offering to the American Stock Transfer & Trust
Company ("the FSAH Escrow Agent") pursuant to an escrow agreement
entered into by and among certain holders of FSAH Class B Stock, the
FSAH Escrow Agent, FSAH and the Company prior to the closing of the
Offering ("the FSAH Escrow Agreement"), pursuant to which such FSAH
shareholders may tender their shares of FSAH Class B Stock to the FSAH
Escrow Agent against payment by the FSAH Escrow Agent of the purchase
price therefor, which payment may be made through the sale by the FSAH
Escrow Agent of an equal number of shares of Class B Common Stock
(which shall be automatically converted to shares of Common Stock upon
such sale) and delivery of the net proceeds thereof. See "Certain
Transactions - FSAH Escrow Agreements" and "Principal Shareholders."
16
<PAGE>
(4) In addition to the restrictions set forth in the FSAH Escrow Agreement,
all of the holders of Class B Common Stock have agreed not to sell,
transfer or assign such shares without the prior written consent of
D.H. Blair for a period of 13 months from the closing of the Offering.
See "Shares Eligible for Future Sale".
(5) Assumes exercise of all the Class A Warrants and no exercise of Class B
Warrants. Inasmuch as the Company has received no firm commitments
therefor, there can be no assurances, however, as to the number of
Class A Warrants which will be exercised. See "Risk Factors".
BRIDGE FINANCING
In November 1995, the Company completed the Bridge Financing of
$1,300,000 principal amount of Notes and 650,000 Bridge Warrants in which it
received net proceeds of approximately $1,113,000 (after expenses of such
financing). The Notes were repaid, together with interest at the rate of 10% per
annum, upon the completion of the Offering. The Bridge Warrants were exchanged
automatically on the closing of the Offering for the Selling Securityholder
Warrants, each of which is identical to the Class A Warrants included in the
Units. The Selling Securityholder Securities have been registered for resale in
the Registration Statement of which this Prospectus forms a part, subject to the
contractual restriction that the Selling Securityholders not exercise the
Selling Securityholder Warrants prior to January 24, 1997. Purchasers of the
Selling Securityholder Warrants will not be subject to such restriction. See
"Concurrent Offering."
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On January 24, 1996 , the Company's Common Stock, Units, Class A
Warrants and Class B Warrants were listed for quotation on the SmallCap Market
on the Nasdaq System under the symbols FSAUF, FSACF, FSAWF and FSAZF,
respectively. The following table sets forth, for the periods indicated the high
and low bid prices for the Common Stock, Units, Class A Warrants and Class B
Warrants as reported by Nasdaq. Quotations reflect prices between dealers,
without retail mark-up, mark down or commissions and may not necessarily
represent actual transactions.
17
<PAGE>
HIGH BID LOW BID
-------- -------
COMMON STOCK
- ------------
1996
3rd Quarter $4. 75 $2.88
4th Quarter $6.00 $3.00
1997
1st Quarter $6.50 $4.50
2nd Quarter $5.75 $4.00
(through November 6, 1996)
UNITS
- -----
1996
3rd Quarter $6.50 $5.38
4th Quarter $10.00 $5.25
1997
1st Quarter $9.72 $6.75
2nd Quarter $11.00 $8.25
(through November 8, 1996)
CLASS A WARRANTS
- ----------------
1996
3rd Quarter $3.00 $1.50
4th Quarter $2.87 $1.58
1997
1st Quarter $3.00 $2.25
2nd Quarter $5.00 $2.75
(through November 6, 1996)
CLASS B WARRANTS
- ----------------
1996
3rd Quarter $1.62 $.62
4th Quarter $.88 $.62
1997
1st Quarter $1.25 $.25
2nd Quarter $1.50 $.625
(through November 6, 1996)
As of November 1, 1996, there were approximately 1,450 shareholders
both of record and beneficial, of the Company's Common Stock.
18
<PAGE>
DILUTION
As of June 30, 1996, the Company had a net tangible book value of
$12,792,376 or approximately $2.86 per share based on 2,300,000 shares of Common
Stock outstanding and 1,842,500 shares of Class B Common Stock outstanding. Net
tangible book value per share represents the amount of the Company's total
tangible assets (total assets less intangible assets) less its total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the issuance of 2,300,000 shares of Common Stock to persons
exercising the Class A Warrants issued by the Company in its initial public
offering (the "New Investors") at an exercise price of $6.50 per Class A Warrant
and receipt of the net proceeds therefrom (and assuming no exercise of any Class
B Warrants), the as adjusted net tangible book value of the Company at June 30,
1996 would have been $26,939,876, or approximately $3.98 per share, representing
an increase in net tangible book value of approximately $1.12 per share to
present shareholders and an immediate dilution to New Investors of approximately
$2.52 per share from the Class A Warrant exercise price. Dilution per share
represents the difference between the Class A Warrant exercise price per share
and the as adjusted net tangible book value per share after this offering.
The following table assumes no exercise of Class B Warrants and
illustrates this per share dilution to the New Investors:
<TABLE>
<CAPTION>
<S> <C>
Price of Common Stock issuable upon exercise of the Class A Warrants.... $ 6.50
Actual net tangible book value before offering.......................... 2.86
Increase attributable to New Investors resulting from offering.......... 1.12
As adjusted a net tangible book value after offering.................... 3.98
----------
Dilution per share to New Investors..................................... $ 2.52
==========
</TABLE>
The above table allocates no value to the Warrants contained in the
Unit Purchase Options or other outstanding options. In the event such options
are exercised, there may be further dilution to New Investors. See
"Capitalization - Bridge Financing," "Management - Stock Options" and
"Description of Securities."
19
<PAGE>
SELECTED HISTORICAL AND PRO FORMA
CONDENSED COMBINED FINANCIAL DATA
The following selected financial data for Starpak and L.S. Pressings,
the Company's predecessor, as of and for the periods presented have been derived
from the combined audited financial statements of Starpak and L.S. Pressings.
The unaudited financial data, in the opinion of management, contain all
adjustments (consisting only of normal and recurring adjustments) necessary for
a fair presentation of such data. The result of the interim periods are not
necessarily indicative of the results of a full year. All of the financial data
set forth below should be read in conjunction with the information appearing
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
PREDECESSOR COMPANY (1) THE COMPANY
----------------------- -----------
MARCH 1, 1995 JULY 1, 1995
YEARS ENDED FEBRUARY 28, TO JUNE 30, 1995 TO JUNE 30, 1996
-------------------------- ---------------- ----------------
1992 1993 1994 1995
$ $ $ $ $ $
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net sales................... 5,374,147 6,256,667 6,851,457 8,826,856 3,297,507 14,911,097
Total operating expenses.... 4,744,035 5,818,092 6,414,144 8,179,083 292,806 19,833,942 (3)
Operating income............ 630,112 438,575 437,313 647,773 334,701 (4,922,845)
Interest paid............... 219,424 223,314 180,960 152,163 18,801 865,733 (4)
Net income before tax....... 361,678 269,251 321,319 536,440 359,045 (5,248,942)
Net income after tax........ 271,036 138,839 207,916 313,882 213,829 (5,737,560)
PREDECESSOR COMPANY (1) THE COMPANY
FEBRUARY 28, JUNE 30,
------------ ---------
1992 1993 1994 1995 1996
$ $ $ $ $
---- ---- ---- ---- ----
BALANCE SHEET DATA
Total assets................ 4,446,132 3,976,769 3,976,974 5,161,709 23,604,994
Long term liabilities....... 1,562,095 1,140,244 1,112,391 1,123,665 2,361,372
Net working capital......... 1,305,961 1,177,250 1,194,931 1,366,602 4,624,417
Stockholder's equity........ 2,280,434 1,527,356 1,580,826 1,828,656 12,792,376
</TABLE>
- ---------------
(1) Represents the combined results for Starpak and L.S. Pressings, which
are deemed to be the predecessor of the Company due to the common
ownership and control of such entities. The Company's fiscal year end
is June 30.
(2) No dividends were declared or paid during the periods presented.
(3) Includes a one time non-cash escrow shares charge of $6,314,000 related
to the release of 1.1 million shares under the terms of an Earnout
Escrow Agreement between the Company, certain shareholders and D.H.
Blair.
(4) Includes a non-cash charge of $396,500 relating to costs incurred in
connection with a November 1995 Bridge Note Financing.
PRO FORMA FINANCIAL INFORMATION
Pro forma adjustments have been made to the consolidated statements of
income for the year ended June 30, 1996 to reflect the acquisitions of the
combined Starpak and L.S. Pressings operations, Europair and of the Piemans
Pantry operations as if these acquisitions had occurred on July 1, 1994.
The Starpak and L.S Pressings transactions were accounted for as
predecessor to the Company, and the Europair transaction as a purchase for
financial reporting purposes.
The unaudited pro forma combined financial statements of the Company
have been derived from the historical financial statements of Starpak, L.S.
Pressings, Europair and Piemans Pantry. The pro forma combined statement of
operations data set forth below do not purport to be indicative of the combined
financial position or combined results of operations that would have occurred
had the transactions been completed on July 1, 1994 or which may be expected to
occur in the future.
20
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED JUNE 30, 1996 AND JUNE 30, 1995
(UNAUDITED)
1996 1995
$ $
----------- -----------
Revenues 36,907,198 33,062,715
----------- -----------
Operating expenses
Cost of sales 19,555,997 17,983,400
Selling, general and administrative costs 13,670,868 12,110,748
Non-cash escrow share charge 6,314,000 --
----------- -----------
39,540,865 30,094,148
----------- -----------
OPERATING (LOSS) /INCOME (2,633,667) 2,968,567
Other income 832,519 466,356
Interest expense (1,428,617) (768,413)
----------- -----------
(Loss) /income before income taxes (3,229,765) 2,666,510
Provision for taxes on income (1,293,084) (944,383)
----------- -----------
Net (loss) /income (4,522,849) 1,722,127
=========== ===========
Net (loss)/profit per share ($ 1.34) $ 0.51
Weighted average number of shares outstanding 3,374,079 3,374,079
The pro forma information has been prepared assuming that the
acquisitions consummated prior to June 30, 1996 had taken place and that
operations had commenced on July 1, 1994.
The proforma information does not purport to be indicative of the
results that would have actually been obtained if the acquisitions consummated
prior to June 30, 1996 had occurred at the beginning of the period nor is it
indicative of future results.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company was incorporated in September 1995 to acquire, own and
operate closely held companies in South Africa with annual sales in the range of
approximately $5 million to $50 million. In this regard, the Company, through
its South African subsidiary, FSAH, has acquired seven South African companies
(collectively, the "Acquisitions") engaged in the following industry segments
(i) the manufacture of high-quality plastic packaging machinery through Starpak,
(ii) the manufacture of washers for use in the fastener industry through L.S.
Pressings and its subsidiary Paper and Metal Industries, (iii) the manufacture
and supply of air conditioning and refrigeration products through Europair and
its subsidiary Europair Refrigeration, and (iv) the manufacture and distribution
of processed food products through Piemans Pantry and Astoria. See "Business"
and "Certain Transactions." The Company has funded itself since inception
primarily through stockholders' loans and capital contributions and the Bridge
Financing of Notes and Warrants and the proceeds of its initial public offering
completed in January 1996. The Company anticipates that it will derive revenues
primarily through income generated from the operations of acquired operating
companies in South Africa.
The annual rate of inflation in South Africa for the periods set forth
below was as follows:
FISCAL YEAR 1995 FISCAL YEAR 1996
10.0% 6.9%
The average rate for the South African Rand against the U.S. dollar for
the periods under discussion were as follows:
FISCAL YEAR 1995 FISCAL YEAR 1996
$1 = R3.53 $1 = R3.85
Depreciation of 9.06%
Results of Operations
This discussion should be read in conjunction with the Selected
Historical and Pro Forma Combined Financial Data and the financial statements
and notes thereto appearing elsewhere in this document. In this discussion, "Pro
Forma" includes all the combined results for the Company's acquisitions that
have been consummated since the Company's Initial Public Offering in January,
The "Pro Forma" results may not be representative of the actual results that
would have been achieved had such events actually occurred at the beginning of
the periods indicated.
The Company's Consolidated Balance Sheet and Statement of Income
reflect the twelve month period ending June 30, 1996. The Statement of Income
includes the operations of L.S. Pressings (Pty) Limited and Starpak (Pty)
Limited for the full twelve month period, the operations of Europair (Pty)
Limited from January 24, 1996 and the operation of Piemans Pantry (Pty) Limited
from June 3, 1996. Starpak and
22
<PAGE>
L.S. Pressings are deemed capital predecessors of the Company, while the
operations of Europair and Piemans Pantry have been accounted for upon
consummation of their acquisition.
Due to the lack of comparative prior financial periods, and in order to
provide a meaningful reference point in the Management's Discussion and
Analysis, comparative twelve month pro forma results have been added for the
twelve-month periods ended June 30, 1996 and 1995 respectively. These pro forma
results include the results for all of the Company's acquisitions, including
those made after January 24, 1996. Attention is drawn to the Management's
Discussion and Analysis for the Pro Forma periods mentioned above. This section
provides the most meaningful analysis of the Company's performance on a broader
time scale.
PROFORMA (UNAUDITED)
Year Ended Year ended
June 30, 1996 June 30, 1995
Costs of sales................................. 53.0% 53.4%
Gross profit................................... 47.0% 46.6%
Selling, general and administrative
expenses.................................... 37.0% 36.0%
Interest expense............................... 3.9% 2.3%
Operating income (pre-noncash escrow
charge)..................................... 10.0% 9.0%
Other income (net of other expenses)........... 2.3% 1.4%
Income before income taxes (pre-noncash
escrow charge).............................. 8.4% 8.1%
Income before income taxes..................... (8.7%) 8.1%
Pro Forma Twelve Months Ended June 30, 1996
Compared to Pro Forma Twelve Months Ended June 30, 1995
Proforma sales for the 12 months ended June 30, 1996 increased 11.6% to
$36,907,198 from $33,062,715 for the period ended June 30, 1995. The increase
included a 2.0% decrease in the combined sales of L.S. Pressings, and of
Starpak, a 3.9% increase in the sales of Europair Africa and a 26% increase in
the sales of Piemans Pantry. The decrease in sales of L.S. Pressings and Starpak
as well as the relatively slow growth of Europair Africa can be primarily
attributed to the above average macro-economic growth South Africa experienced
following the April 1994 elections. In the 12 months leading up to the first
South African national elections the country faced tremendous uncertainty.
Corporate capital expenditures were frozen pending the results of the election.
Upon the peaceful conclusion of the election, business confidence was boosted
and spending on capital goods resumed at an above average pace, resulting in
increased volume sales for all three companies. Capital spending rates have
decreased in fiscal 1996 as opposed to the above average rates following the
April 1994 elections. In contrast, Piemans Pantry's rapid growth continued to be
fueled by an overall increase in the South African meat pie market.
Proforma cost of goods sold were $19,555,997 and $17,983,400 for the
twelve months ended June 30, 1996 and 1995 respectively. This represented 53% of
sales for the twelve months ended June 30,
23
<PAGE>
1996 versus 54.4 % for the corresponding period in 1995. This decrease can be
primarily explained by improved productivity at Piemans Pantry due to increased
automation.
Proforma sales, general and administrative costs increased to
$13,670,868 from $12,110,748 for the twelve months ended June 30, 1996 and 1995,
respectively. This represented 37.0% of sales for the twelve months ended June
30, 1996 versus 36.6% for the corresponding period a year earlier. During the
period in fiscal 1996, the Company's net corporate expenses accounted for
approximately .6% of this increase.
Proforma interest expenses increased to $1,428,617 during the twelve
months ended June 30, 1996 from $768,413 for the twelve months ended June 30,
1995. Most of this increase can be attributed to a non-cash charge of $396,000
that the Company took in connection with its November 1995 private placement of
Bridge Notes. In addition, long-term debt increased as a result of debt utilized
as part of the Company's acquisition financing as well as increased investment
in fixed assets which was facilitated through the utilization of long-term debt
facilities.
Proforma other income was $832,519 and $466,356 for the twelve months
ended June 30, 1996 and 1995, respectively, primarily as a result of interest
earned on greater net positive cash balances for the year ended June 30, 1996,
as opposed to the corresponding period in 1995.
The Company recorded a non-cash escrow share charge of $6,314,000 for
the year ended June 30, 1996. This charge relates to the release of 1,100,000
shares pursuant to an Earnout Escrow Agreement that the Company entered into on
October 30, 1995, as amended. Under the terms of this agreement, 1,100,000
shares were deposited in escrow subject to the Company achieving certain pre-tax
Pro Forma earnings results as set forth in such agreement, as amended. It is
management's belief that the Pro Forma results for June 30, 1996 have met the
earnout requirements of this agreement, as amended, and as a result the Company
has taken this one time non-cash charge which is calculated by multiplying
1,100,000 shares by the current bid price of the Company's Common Stock. The
$6,314,000 charge has been reflected as additional Capital in Excess of Par in
the June 30, 1996 Balance Sheets. The release of such 1,100,000 shares from the
earnout escrow was effected in October 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - PREDECESSOR COMPANY.
The annual rate of inflation in South Africa for the period set forth below was
as follows:
1993 1994 1995
---- ---- ----
13.9% 9.7% 8.6% (est.)
The average rate for the South African Rand against the U.S. dollar for the
periods under discussion were as follows:
FISCAL YEAR 1993 FISCAL YEAR 1994 FISCAL YEAR 1995
$1 = R2.90 $1 = R3.32 $1 = R3.53
Depreciation of 14.48% 6.3%
24
<PAGE>
Based on these figures, in evaluating the comparable sales and expense
numbers for the companies in question for the period ended February 28, 1995
versus the period ended February 28, 1994, approximately 3.5% of the increase in
sales and expenses can be attributed to the net effect of the rate of inflation
of South Africa. The calendar year figures are provided with the fiscal year
figures as set forth above to provide an effective comparison of inflation
figures for the periods in question.
Results of Operations
This discussion should be read in conjunction with the Selected
Historical and Pro Forma Combined Financial Data and the financial statements
and notes thereto appearing elsewhere in this Prospectus. In this discussion,
"Historical" reflects the combined historical financial data of Starpak and L.S.
Pressings. Prior to the Company's initial public offering, such entities were
each principally owned by FSA Stock Trust, a principal stockholder of the
Company, and are therefore treated as the Company's predecessor. "Pro Forma"
assumes the consummation of this Offering and the acquisition of Europair.
COMBINED RESULTS FOR STARPAK AND L.S. PRESSINGS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 1, 1995 TO
AS PERCENTAGE OF SALES JUNE 30, 1995 FISCAL YEAR ENDED FEBRUARY 28,
---------------------- ------------- -------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C>
Costs of sales........................ 57.0% 57.3% 65.9% 66.0%
Gross profit.......................... 43.0% 42.7% 34.1% 34.0%
Selling, general and administrative
expenses.............................. 32.8% 35.4% 27.7% 27.0%
Interest expense...................... 20.5% 1.7% 2.6% 3.6%
Operating income...................... 10.1% 7.3% 6.4% 7.0%
Other income (net of other expenses).. 1.3% 0.5% 0.9% 0.9%
Income before income taxes............ 1.9% 6.1% 4.7% 4.3%
</TABLE>
Twelve Months Ended February 28, 1995 Compared to Twelve Months Ended February
28, 1994
Historical sales for the twelve months ended February 28, 1995
increased 28.8% to $8,826,856 from $6,851,457 for the period ended February 28,
1994. As adjusted for inflation, historical sales volume increased approximately
25%. The increase included a 48% increase in sales of L.S. Pressings (or
approximately 45% volume increase) and a .05% decrease (a 3% volume increase
adjusting for inflation) in the sales of Starpak. The overall growth in the
volume of sales of the companies can be primarily attributable to the
improvement in macro-economic conditions in South Africa following the April
1994 elections, as described above.
The Historical cost of goods sold were $5,058,749 and $4,513,384 for
the twelve months ended February 28, 1995 and 1994, respectively. This
represented 57.3% of sales for the twelve months ended February 28, 1995 versus
65.9% for the corresponding period a year earlier. Decreases in cost of goods
sold were experienced in both Starpak and L.S. Pressings and can be attributed
primarily to more efficient production that resulted from the increase in
revenues, as both companies have relatively fixed manufacturing overhead costs.
In addition, labor costs as a percentage of sales were reduced, as there were a
number of work stoppages in support of political causes prior to the elections
which negatively impacted on the cost of sales for the year ended February 28,
1994.
25
<PAGE>
Historical sales, general and administrative costs increased 64% to
$3,120,334 from $1,900,760 for the twelve months ended February 28, 1995 and
1994, respectively. This represented 35.4% of sales for the twelve months ended
February 28, 1995 versus 27.7% for the corresponding period a year earlier.
These increases were experienced in both companies and can be attributed
primarily to increased expenditures in administrative personnel as well as an
increase of $213,280 in management profit sharing bonuses which resulted from an
increase in operating profits.
Historical interest expenses declined to $152,163 during the twelve
months ended February 28, 1995 from $180,960 for the twelve months ended
February 28, 1994. This decrease can be attributed primarily to a decline in the
average level of borrowings during the year. However, in order to support
expansion, the companies increased their investment in fixed assets during the
last quarter of the fiscal year. As a result, despite the lower average level of
borrowings during the year, the aggregate interest-bearing debt at February 28,
1995 was $1,180,000 while the corresponding balance at February 28, 1994 was
$1,070,000.
Historical other income was $40,830 and $64,966 for the twelve months
ended February 28, 1995 and 1994, respectively. The decrease can be attributed
primarily to a decline in other income earned by Starpak due to the release of
bad debt provisions in 1994, as well as a loss on the disposal of fixed assets.
During fiscal 1995 the South African tax authorities lowered corporate
income taxes from 40% to 35%. This has resulted in a 5% increase in net income
for the Company for the year ended February 28, 1995 as compared to the
corresponding period in 1994.
Twelve Months Ended February 28, 1994 compared to Twelve Months Ended February
28, 1993.
Historical sales for the twelve months ended February 28, 1994
increased 9.5% to $6,851,457 from $6,256,667 for the period ended February 28,
1994. The increase included a 3.7% increase in volume sales of L.S. Pressings,
and a 9.3% increase in the volume sales of Starpak.
Historical cost of goods sold were $4,513,384 and $4,128,047 for the
twelve months ended February 28, 1994 and 1993, respectively. This represented
65.9% of sales for the twelve months ended February 28, 1994 versus 66.0% for
the corresponding period in the prior year.
Historical sales, general and administrative costs increased to
$1,900,760 from $1,690,045 for the twelve months ended February 28, 1994 and
1993, respectively. This represented 27.7% of sales for the twelve months ended
February 28, 1994 versus 27.0% for the corresponding period in the prior year.
Historical interest expenses declined to $180,960 during the twelve
months ended February 28, 1994 from $223,314 for the twelve months ended
February 28, 1993. This decrease can be attributed primarily to a decline in the
level of borrowings. The reduction in interest expense for the fiscal year ended
February 28, 1994 relative to fiscal year ended February 28, 1993 was due
principally to a reduction in interest rates, as the prime borrowing rate was
reduced from 20.25% at February 28, 1993 to 15.25% at February 28, 1994.
Historical other income was $64,996 and $53,990 for the twelve months
ended February 28, 1994 and 1993, respectively.
26
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In January 1996, the Company raised approximately $9 million in net
proceeds after all fees and expenses from its initial public offering. Proceeds
of that offering have been primarily utilized to fund the Company's acquisitions
as well as to provide a certain amount of working capital to its South African
subsidiaries. Approximately $1 million in cash was provided to FSAH, of which
approximately $550,000 was lent to Europair for working capital purposes in
fulfillment of the Company's commitment under its Share Purchase and Sale
Agreement with Bruce Thomas. An additional $3 million was utilized for the
Piemans Pantry acquisition. In addition, FSAH utilized a portion of a $1,100,000
new bank facility to fund this acquisition. Currently, the Company has a cash
commitment of approximately $1.3 million in connection with its agreement to
acquire Astoria Bakery. Such commitment will be funded from existing cash on
hand.
As of June 30, 1996, the Company had $4,682,035 in cash with working
capital of $4,624,417. As of June 30, 1996, the Company had a total of
$5,208,895 in bank debt, of which $2,847,523 was classified as current.
Cash flows provided by operating activities for the period ended June
30, 1996 totaled $876,607. Cash flows used in investing activities for the
period ended June 30, 1996 totaled $5,510,105 primarily attributable to the
purchase of assets and acquisition of subsidiaries. Net cash provided by
financing activities generated $9,020,069 during the period ended June 30, 1996.
The Company's operating subsidiaries generally collect their
receivables within 65 - 90 days and reserve approximately 19% for doubtful
accounts. Historically, the Company's operating and capital needs have been met
by internal cash flow and outside bank borrowing. It is management's belief that
capital expenditures for the foreseeable future can continue to be met by
internal cash flow and bank borrowing. The Company's operating subsidiaries
engage in certain hedging transactions with respect to certain overseas
purchases in order to lock in a specified exchange rate. In addition, in May
1996, the Company, through Swiss Bank Corporation, purchased a 12 month option
to acquire the equivalent of $5 million in South African Rand at the strike
price of Five Rand to the Dollar. This option has the effect of hedging $5
million of the Company's fiscal 1997 earnings, in the event the exchange rate of
the South African Rand falls below this strike price. The cost of such option
was approximately $150,000 and is being amortized over the length of the option.
On June 3, 1996, the Company, through FSAH, acquired all of the
outstanding stock of Piemans Pantry Proprietary Ltd., and Surfs-Up Proprietary
Ltd. (collectively referred to as "Piemans Pantry") from John Welch, Heinz
Andreas and Michael Morgan. The consideration for all of the stock and assets of
Piemans Pantry was 40,000,000 South African Rand (approximately $9.2 million as
of June 3, 1996) which consideration was comprised of both cash and Class B
Shares of FSAH, $3,400,000 of which remains to be paid subsequent to the date of
this Prospectus.
On October 24, 1996, the Company, through FSAH, acquired all of the
outstanding stock of Astoria from Wolfgang Burre. The consideration for all of
the stock and assets of Astoria was 24,000,000 South African Rand (approximately
$5,106,383.00 as of November 8, 1996) which consideration was comprised of both
cash and Class B shares of FSAH, of which approximately 50% remains to be paid
subsequent to the date of this Prospectus.
The Company intends to continue to pursue an acquisition strategy in
South Africa and anticipates utilizing a substantial portion of its cash
balances and operating earnings to fund this strategy to the extent that
suitable acquisition candidates can be identified.
27
<PAGE>
The Company may be required to incur additional indebtedness or equity
financing in connection with future acquisitions. There is no assurance that the
Company will be able to incur additional indebtedness or raise additional equity
to finance future acquisitions on terms acceptable to management, if at all.
28
<PAGE>
BUSINESS
GENERAL
The Company was organized to acquire, own and operate seasoned, closely
held companies in South Africa with annual sales in the range of approximately
$5 to $50 million. Since its initial public offering on January 24, 1996, the
Company has acquired through FSAH, seven businesses based in South Africa that
are as a group engaged in the following industry segments:
1. High quality plastic packaging machinery.
2. Metal washers used in the fastener industry.
3. Air conditioning and refrigeration machinery components.
4. Processed foods.
Upon completion of its initial public offering the Company acquired
Starpak (Pty) Limited, which is engaged in the manufacture of high quality
plastic packaging machinery; L.S. Pressing (Pty) Limited, which is engaged in
the manufacture of washers for the use in the fastener industry; and Europair
Africa (Pty) Ltd., which is engaged in the manufacture and supply of air
conditioning products. In April 1996, L.S. Pressings acquired through Crowle
Investments (Pty) Limited, the assets and business of Paper & Metal Industries,
a small manufacturer of rough washers for use in the fastener industry. In April
1996, Europair acquired the assets and business of Universal Refrigeration, an
agent and supplier of refrigeration products. In June 1996, FSAH acquired
Piemans Pantry, a manufacturer and distributor of high quality meat pies. In
October 1996, FSAH acquired Astoria, a manufacturer and distributor of specialty
baked breads and confectionary products.
FSAH manages the Company's business interest in South Africa. FSAH
monitors the operational performance of its subsidiaries and seeks out
prospective acquisition candidates in businesses that complement or are
otherwise related to the Company's existing acquisitions, and in other
businesses that may be identified by the Company's management.
HISTORY
The Company was founded in September 1995 in response to management's
perception of a growing global interest in South Africa as an emerging market.
The Company believes that the recent relaxation of trade and financial sanctions
and the reintegration of South Africa into the world economic community may
increase the opportunity for improved growth in the South African economy in
general and more particularly in the industry segments in which the Company is
engaged.
STRATEGY
The Company intends to continue to focus its efforts on businesses
related to infrastructure development and consumer goods that the Company
believes are well situated to benefit from South Africa's on-going
transformation into an active participant in the global market place. The
Company's strategy is to expand and improve its current operations in the
industry sectors in which its operating subsidiaries are currently engaged, and
in other related industry sectors, by acquiring mid-size, closely-held,
companies in South Africa that operate efficiently, profitably and have seasoned
management. The Company believes that it can acquire these types of companies at
lower multiples of earnings than comparable companies would command in the
United States. The Company seeks to benefit from the combination of business
factors that
29
<PAGE>
South Africa has to offer, which includes a skilled work force, effective and
expanding infrastructure and increasing access to foreign markets. The Company
may also consider investments in businesses that are located in other countries,
or are engaged in other industries, and in South African companies, the
securities of which are publicly traded, that meet the Company's price and
quality requirements. The Company has and will continue to identify potential
acquisition candidates through the industry contacts of management and the
managements of its subsidiaries, as well as through other general business
sources. To date, the Company has financed its acquisitions through a
combination of cash, issuance of shares of stock of FSAH or the Company and debt
financing. The Company anticipates that it will continue to follow similar
financing strategies in its future acquisitions.
THE ACQUISITIONS
The following is a description of the businesses in each of the
Company's industry segments:
PLASTIC PACKAGING MACHINERY
STARPAK
Starpak manufactures high quality plastic packaging machinery and does
business under the name of Levy and Smith. Starpak's operations are located in
Johannesburg with service offices in Durban and Cape Town. Machinery
manufactured by Starpak is generally used by manufacturers to provide low cost
and high quality packaging for a broad spectrum of consumer goods. Its machines
are used in industries such as food, baking, beverages, cosmetics,
pharmaceuticals, chemicals, motor oils, printing, hardware and general trade.
Starpak markets its products directly and through independent sales agents. Over
90% of Starpak's sales are generated through its in-house sales force. During
the last fiscal year no one customer accounted for more than 10% of Starpak's
annual sales. Prior to such time, Albany Bakeries, which developed a new bread
packaging product, and the Premier Group, which purchased a wide range of bakery
packaging equipment, accounted for more than 10% of Starpak's annual sales in
the previous two fiscal years.
Starpak competes on the basis of quality. Starpak faces competition
from major competitors whose machines are frequently less expensive, although
Starpak believes that they are of lower quality than machines produced by
Starpak. To the best of its knowledge, management estimates that the total
market for shrink packaging machinery in South Africa in 1995 was approximately
$10,000,000. Of this total market, Starpak has an estimated 48.3% share, with
the remainder of the market being serviced by a number of small packaging
machine manufacturing companies. In the past, Starpak has experienced a seasonal
down-turn in its business during the period commencing mid-December and ending
at the end of February. This down-turn appears to be due to the main summer
holidays in South Africa that occur during such period. The most active period
for receipt of orders has historically been from July to the beginning of
December. As of August 31, 1996, Starpak's backlog of firm orders was
approximately $1,225,000 compared to approximately $1,000,000 as of August 31,
1995.
Although Starpak's principal suppliers are foreign companies, each
principal supplier is represented locally in South Africa and to date, Starpak
has not experienced material difficulties or delays in obtaining products or
supplies. Almost all local suppliers are on thirty-day terms, while items
purchased directly from overseas suppliers require irrevocable letters of
credit. Motors, which comprise approximately 5% of the cost of the machines, are
imported directly from non-African sources. Other products obtained by Starpak
from its suppliers include electronic controllers, pneumatics, overloads,
contractors, switches and Teflon tape.
30
<PAGE>
FASTENER INDUSTRY
L.S. PRESSINGS
L.S. Pressings and its subsidiary, Paper & Metal Industries,
manufacture washers for supply to distributors of nuts and bolts who in turn
distribute L. S. Pressing products to end users in various industries and
markets. L.S. Pressings' operations are located in Johannesburg. L.S Pressings
manufactures a full range of washers to metric, capital imperial as well as U.S.
specifications. In addition, it manufactures special size washers to suit
customers specific requirements. Washers are manufactured from mild steel, black
(heat tempered) steel, copper, brass, fiber and various plastics. Washers are
used in numerous industries, including automotive, electrical, furniture and
construction industries. They are also used for sealing purposes, water piping
and as a non-conductive element. L.S. Pressings has no sales representatives
with orders being placed directly by customers. Substantially all of the
customers are distributors who resell the washers to end users.
L.S. Pressings believes that it is the single largest supplier of
washers in the South African market, although a number of competitors compete
with L.S. Pressings in particular niches. L.S. Pressings' strongest competition
is from importers of standard size washers manufactured in Taiwan. However,
importers of Taiwanese washers generally do not offer a "one-stop" source of
supply and L.S. Pressings believes it competes successfully with respect to
pricing. As a result, the importers have not had a substantial impact on L.S.
Pressings' sales although there can be no assurance that this will remain the
case. L.S. Pressings believes that no other South African manufacturer of
washers offers a comparable range of products. L.S. Pressings typically
manufactures to order and delivers within approximately 10 days of order.
Backlog numbers are therefore not significant for L.S. Pressings and tend to
vary widely. However, as of August 31, 1996, L.S. Pressings' firm order backlog
was $65,000 as compared with $90,000 on August 31, 1995.
All of L.S. Pressings' suppliers are local companies. In the last year
there has been a shortage of scrap metal in South Africa, although L.S.
Pressings has had no material problems obtaining scrap required for its
operations. Spring washers, which comprise approximately 10% of L.S. Pressings'
annual sales, are manufactured using a different process to that adopted by L.S.
Pressings. As a result, L.S. Pressings purchases spring washers from
locally-represented suppliers. Apart from the month of December when its
factories are closed, there is no particular seasonality to these businesses.
AIR CONDITIONING AND REFRIGERATION
EUROPAIR
Europair manufactures and supplies products, parts and accessories to
the heating, ventilation and air conditioning industry ("HVAC") in South Africa.
Europair's operations are located in Johannesburg with branch offices in Durban,
Cape Town, Port Elizabeth, East London, Nelspruit and Pietersburg. Europair
seeks to provide a single source of components and accessories for original
equipment manufacturers, contractors and duct shops in South Africa and
neighboring countries. Its products include grilles, flexible ducting, flanging,
insulation, humidifiers, fire dampers and other accessory products for the air
conditioning industry. Europair markets its products primarily through its sales
personnel directly to air conditioning and building contractors as well as to
other agents.
Europair believes it is unique in South Africa in its increasing
capacity as a full-range supplier to the HVAC industry and believes it does not
currently compete directly with any supplier that offers as comprehensive a
range of products. Europair does, however, have a number of competitors in each
of its product groups. Increasingly, the threat of competition is presented by
less expensive imports, although such imports are sometimes lower quality and
the importers are generally unable to stock a broad range of products.
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As Europair is in the air conditioning and refrigeration business it experiences
a seasonality that corresponds with the summer months in the Southern
hemisphere. Typically, sales are higher in the months of October through
February. As of August 31, 1996 Europair's firm order backlog was $93,500 as
compared with $56,500 on August 31, 1995.
Europair relies on local suppliers to provide it with aluminum
extrusions, aluminum foil, fiberglass and other insulation material, fire
dampers, steel and wire in the manufacturing of Europair's products and for
inclusion in other products sold by Europair. The principal foreign suppliers of
Europair provide it with humidifiers, glue, air valves, vinyl, polyester, access
doors and fans. Ordinarily, Europair does not experience material difficulty in
procuring the raw materials required for its production processes. Aluminum
prices are, however, commodity driven and change frequently. The Durban factory
experienced a substantial inventory shortage with respect to its aluminum
requirements in October and November 1994 due to a countrywide shortage of
aluminum. In response to such shortage Europair has accumulated and maintains a
substantial stockpile of aluminum.
Universal Refrigeration has been renamed Europair Refrigeration, it is
a wholly-owned subsidiary of Europair engaged as an agent in the distribution
and supply of various refrigeration related products. Its sales are generated
through Europair's existing national sales network.
PROCESSED FOODS
PIEMANS PANTRY
Piemans Pantry was acquired by the Company in June 1996. Piemans Pantry
manufactures, sells and distributes quality meat, vegetarian and fruit pies,
both in the baked and frozen, unbaked form. The business manufactures, markets
and distributes from its headquarters in Krugerdorp, Gauteng and has a regional
sales office in KwaZulu-Natal. Piemans Pantry strives to emphasize the highest
standards of quality control and consistency of product. It's major customers
are independent retail baker shops, pie shop franchises, in-store bakeries,
national bread bakery groups, institutional cafeterias and convenience stores.
Piemans Pantry's sales are conducted through its own employees, as well as
through distributors/agents. Approximately 71% of Piemans' sales are internally
generated with the remainder through agents. During the last fiscal year the
Spar Group (a cooperative of independent supermarkets) accounted for 17% of the
Piemans Pantry's sales, while the London Pie Company (a pie store franchise
chain) contributed 10% of Piemans Pantry's sales. In the previous two fiscal
years, no company accounted for more than 10% of Piemans Pantry's sales.
Piemans Pantry competes on the basis of quality. It faces competition
from a number of manufacturers, primarily those supplying to the lower end of
the market. Piemans Pantry believes that it has only one significant competitor
and that its market share is currently around 20%. Piemans Pantry's business is
slightly stronger in the months of July through October as well as in December.
However, these increases are not significant to make this a seasonal business.
Piemans Pantry manufactures to order on a daily basis. Backlog is therefore not
counted, nor is it relevant in the analysis of Piemans Pantry's business.
Piemans Pantry's principal suppliers for its pastry and filling
ingredients are both local and foreign companies. All suppliers except one have
immediate alternative sources. Piemans Pantry selects its suppliers on the basis
of quality and price and to date it has no difficulty in obtaining sufficient
supplies.
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ASTORIA BAKERY
Astoria Bakery manufacturers, sells and distributes high margin
specialty breads such as special rye breads, pumpernickel etc., in the
Johannesburg area. In addition, Astoria Bakery Lesotho manufactures, sells and
distributes staple bread to the Lesotho market. The Johannesburg operation
manufactures, markets and distributes from its headquarters in Randburg. The
Lesotho operation manufactures, makes and distributes products from a bakery in
Maseru, the capital of Lesotho. Astoria strives to emphasize the highest
standards of quality as well as uniqueness of product in its specialty lines. In
Johannesburg its major customers are its own retail outlet accounting for
approximately 13% of sales, national supermarket chains and retail bakery and
convenience stores. Astoria's sales both in Johannesburg and Lesotho are
conducted through its own employees. During the last fiscal year, Woolworths (a
large South African department store chain) accounted for approximately 60% of
Astoria Johannesburg's sales (approximately 30% of total sales). In the previous
two fiscal years Woolworths accounted for approximately 20% of Astoria's sales.
Astoria competes on the basis of quality and uniqueness of product. In
Johannesburg it faces competition from a number of manufacturers, however,
Astoria believes that it dominates the market for specialty breads in
Johannesburg. In Lesotho, Astoria has one major competitor and has approximately
50% of the Lesotho bread market with the remainder controlled by this
competitor. Astoria sees an increase in business during the December period,
however, this increase is not significant enough to make this a seasonable
business. As its baked goods are a perishable item, Astoria manufacturers to
order on a daily basis and backlog is not relevant in an analysis of its
business.
Astoria's principal suppliers for raw materials are mostly local. All
suppliers have immediate alternative sources. Astoria selects its suppliers on
the basis of quality and price and to date has had no difficulty obtaining
adequate supplies.
REGULATION
The Company's South African business operation is subject to a number
of laws and regulations governing the use and disposition of hazardous
substances, air and water pollution and other activities that effect the
environment. The Company's management believes that each of its subsidiaries is
in substantial compliance with applicable South African law and the regulations
promulgated under such law and that no violation of any such law or regulation
by any such company has occurred which would have a material adverse effect on
the financial condition of the Company.
EMPLOYEES
As of September 30, 1996, in addition to its President who devotes
substantially all of his business time to the Company, the Company had only one
full-time salaried employee. "See Management - Employment Agreements". As of
such date, FSAH had no full-time salaried employees. The Company intends to add
employees as necessary to meet management and other requirements from time to
time. On July 1, 1996, FSAH entered into an employment agreement with Cornelius
J. Roodt to act as its Managing Director. -"See Employment Contracts". As of
September 30, 1996, the Company's operating subsidiaries employed approximately
1,087 people.
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PROPERTIES
The Company's principal executive offices are located at Clarendon
House, Church Street, Hamilton, HM 11, Bermuda. The Company's U.S. subsidiary,
First South African Management Corp. (FSAM) has its principal executive offices
at 2665 South Bayshore Drive, Suite 702, Coconut Grove, Florida 33133. FSAM's
offices consist of approximately 2,000 square feet of office space in an office
section of Coconut Grove, Florida, which FSAM occupies pursuant to a three-year
lease agreement with a monthly rental of $2,400. FSAH's principal executive
offices are located in the facilities of Europair in South Africa.
Starpak and L.S. Pressings operate out of a facility made up of
adjacent buildings owned by Levy & Smith Properties (Proprietary) Limited, a
wholly-owned subsidiary of Starpak. The facility has a total lot size of
approximately 30,000 square feet. The facility has three floors at 85% coverage
equal to a total of 76,500 square feet. The Company anticipates that it will
require additional space and is considering the rental of additional space at a
nearby location. Starpak also has branches in Durban and Cape Town, South
Africa.
Europair operates from premises and facilities that it owns in Gauteng
and from leased premises in KwaZulu-Natal, Western Cape and the Eastern Cape.
Pursuant to an option granted by the Company, Mr. Bruce Thomas (the Chief
Executive Officer of Europair) has acquired Europair's premises for $890,868 and
entered into a ten year lease with Europair with respect to such premises for an
initial rental rate of $110,111 per annum. Europair believes this property is
well suited to Europair's operations and can accommodate relatively large
increases in manufacturing and storage. Europair's other leased properties are
located in Durban, Cape Town and Port Elizabeth.
Piemans Pantry operates from premises and facilities that it owns in
Krugersdorp. The facility has two floors with a total size of 38,000 square
feet. In addition, Piemans Pantry rents a retail facility in Krugersdorp, as
well as an office space in KwaZulu-Natal.
Paper & Metal Industries rents two adjacent industrial properties in
Germiston, Gauteng. The total size of the facility is 8,975 square feet. Paper &
Metal have a two year lease at approximately $34,744 per annum.
Astoria leases approximately 20,000 square feet of space in Randberg
for which it pays an annual rental amount of approximately $100,000. Astoria
also leases approximately 6,000 square feet in Lesotho for which it pays an
annual rental amount of approximately $7,000.
LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries are subject to any
material legal proceedings.
SOUTH AFRICA
Except where otherwise indicated, sources of the statistical
information contained in this section include data compiled and made public by
the following South African governmental agencies: the Department of Manpower
(with respect to labor and employment statistics), the Department of Customs and
Excise (with respect to trade statistics), the Central Statistical Service (with
respect to data on the economy) and SATOUR (South African Tourist Board with
respect to data on tourism). The source for statistical information relating to
investment, spending, consumption and exchange rates is information compiled and
made publicly available by the South African Reserve Bank.
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BACKGROUND
The Republic of South Africa ("South Africa") is located on the
southernmost portion of the African continent and has a land area of
approximately 471,000 square miles, which is approximately one eighth the size
of the United States and five times the size of the United Kingdom. The country
is bounded by the Atlantic and Indian Oceans on the east, west and south, and by
Zimbabwe, Mozambique, Namibia, Botswana and Swaziland to the north. In addition,
the independent Kingdom of Lesotho is situated within South Africa's borders.
South Africa is currently divided into nine provinces: Eastern Cape, Mpumalanga,
Kwazulu/Natal, Northern Province, Northwest, Free State, Gauteng, Northern Cape
and Western Cape. South Africa is a signatory to the GATT agreement and is a
member of the Organization of African Unity and the Southern African Customs
Union which includes Botswana, Swaziland, Lesotho and Namibia.
According to Government estimates, the population of South Africa was
approximately 40.4 million at June 30, 1994. Government statistics and estimates
generally are believed to be inaccurate due to significant undercounting of the
black population. The last official Government census was conducted in 1991.
DOMESTIC ECONOMY
South Africa has a highly developed free market economy. The base of
the economy has evolved from agriculture to mining and, more recently, to
manufacturing, which accounted for approximately 24% (as of the third quarter of
1993) of the gross domestic product. The historic strength of the South African
economy has been its extensive mineral deposits. Diamonds, gold and other metals
account for a majority of South Africa's annual exports. Government incentives
have been introduced in recent years to encourage greater processing and
finishing by the country's industrial sector of South Africa's wealth of natural
resources to add value to the economy and increase foreign export earnings.
Although the country represents only 4% of the land area of the continent of
Africa and accounts for just over 6% of its total population, South Africa
accounted for approximately 33% of the continent's gross domestic product
("GDP") in 1992. Apart from manufacturing and mining, agriculture, finance,
communications, transport and energy also play an important part in the South
African economy. Alongside South Africa's developed economy there also exists a
large informal economy which was effectively imposed by apartheid. Due to the
political changes currently taking place, it is anticipated that the formal and
informal economies will eventually merge.
LABOR AND SOCIAL LEGISLATION
The economically active population in 1994 (wage and salary earners,
self-employed individuals and unemployed individuals) was estimated by means of
mid-year estimates at 12,564,000 individuals. The total employment in the formal
non-agricultural sectors was (as of April 1993) 5,169,635 of which approximately
27% was employed in manufacturing, 12% in mining, 37% in service industries, 14%
in the trade sector, comprised of wholesale, retail and motor trade, and 7% in
the construction sector. Data for the agricultural sector is not published; only
estimates are available. Total estimated employment in the formal agricultural
sector in 1991 was 1,224,000.
Approximately 56% of South Africa's wage and salary earners in the
formal non-agricultural sector were unionized as of year-end 1992. As of
December 31, 1992, 2,906,100 employees (24% of the economically active
population), belonged to registered trade unions. The remaining union employees
were members of unregistered trade unions. Unions must be registered with the
Department of Manpower in order to operate within the framework of the Labor
Relations Act, which provides procedures for arbitration and court action in
industrial disputes.
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Most of the major industries in South Africa are unionized. There are
well developed collective bargaining structures and many of the unions have
affiliated themselves to trade union federations such as the non-racial Congress
of South African Trade Unions and the National Congress of Trade Unions. A
number of the trade unions and their leaderships have close links to various
political parties. Similarly, many employers have become affiliated with
employer organizations and federations of these organizations, such as the Steel
Engineering Industries Federation of South Africa, for purposes of collective
bargaining with trade unions. In some industries there are industrial councils
which provide a forum for collective bargaining and which administer the
collective bargaining agreements arrived at. Existing legislation requires
parties to industrial disputes to endeavor, in most cases, to settle their
disputes through conciliation prior to embarking on industrial action or having
the dispute resolved through adjudication by the industrial court. The
industrial court has a wide unfair labor practice jurisdiction intended to
further the aim of maintaining industrial peace through adjudicating upon and,
where possible, preventing harm arising from disputes of right such as unfair
dismissals. Both the industrial court and the Supreme Court are empowered to
make orders preventing the occurrence or continuation of illegal strikes or
lock-outs.
FOREIGN DIRECT INVESTMENT
South Africa imposes restrictions on the debt-equity ratio of a
foreign-owned Company, which restrictions are imposed and administered by the
South African Reserve Bank. Also, if 25% or more of the shares of a South
African company are held by a foreigner, the ability of the local company to
borrow from local sources is restricted. The restriction is calculated by
reference to the company's so-called "effective capital" which is comprised of,
among other things, share capital and share premium, foreign and local
shareholders loans (local shareholders loans are only included to the extent
that they are pro-rata to foreign shareholders loans) and retained earnings. The
local borrowing restrictions are often waived for listed companies with
dispersed shareholders. Although the current debt-equity restrictions are
imposed and administered by the South African Reserve Bank, amendments to the
Income Tax Act passed in July 1995 impose similar statutory thin-capitalization
rules which provide that excessive interest will be treated as a dividend,
disallowed for tax purposes, and subjected to secondary tax on companies at the
rate of 12.5% of the disallowed interest. It is likely that a safe harbor
debt-equity ratio of 3:1 will be permissible. Debt-equity ratios in excess of
this will require approval from the taxation authorities. The Company intends to
utilize a substantial portion of the use of proceeds from this Offering to
acquire additional companies in South Africa. The Company anticipates that these
acquisitions will be funded with sufficient equity infusions into FSAH so that
the safe harbor debt equity ratio should be easily maintained. The Company and
its auditors intend to monitor the Company's compliance with these debt/equity
restrictions on an ongoing basis. The Company does not anticipate these
restrictions will significantly impact the Company's acquisition strategies or
its ongoing operations.
RECONSTRUCTION AND DEVELOPMENT PROGRAMME
The Government of National Unity has adopted a Reconstruction and
Development Programme (the "RDP") to address the inequalities arising from
apartheid. The RDP is intended to provide a framework for social and economic
policy. The Government of National Unity wishes to implement the RDP within a
framework of fiscal discipline and it is expected that much of the finance for
the RDP will be made available from the reallocation of existing financial
resources.
The RDP aims to achieve numerous objectives. These include meeting the
basic needs of the population (such as for housing and water), the development
of human resources, building the economy, democratizing the South African state
and society at large and the reform of government structures.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The officers and directors of the Company, their ages and present
positions held with the Company are as follows:
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
Michael Levy 50 Chairman of the Board of Directors
Clive Kabatznik 40 Chief Executive Officer, President, Chief Financial
Officer, Controller and Director
Tucker Hall 39 Secretary
Charles S. Goodwin 56 Director
John Mackey 54 Director
The following is a brief summary of the background of each director and
executive officer of the Company:
MICHAEL LEVY is a co-founder of the Company and has served as Chairman
of the Board of Directors since the Company's inception. Since 1987, Mr. Levy
has been the Chief Executive Officer and Chairman of the Board of Arpac L.P., a
Chicago-based manufacturer of plastic packaging machinery.
CLIVE KABATZNIK is a co-founder of the Company and has served as a
director and its President since its inception and as its Vice Chairman, Chief
Executive Officer and Chief Financial Officer since October 1995. Since June
1992, Mr. Kabatznik has served as President of Colonial Capital, Inc. a
Miami-based investment banking Company that specializes in advising middle
market companies in areas concerning mergers, acquisitions, private and public
agency funding and debt placements. From 1989 to 1992, Mr. Kabatznik was the
President of Biltmore Capital Group, a financial holding Company that he
co-founded that controlled a registered NASD broker-dealer. From 1981 to 1986,
Mr. Kabatznik was the Chief Financial Officer of the Learning Annex, Inc., which
he co-founded. Mr. Kabatznik was born in South Africa.
TUCKER HALL has been the Secretary of the Company since its inception
and is an employee of Codan Services Limited, an affiliated company of Conyers,
Dill & Pearman, Bermuda counsel to the Company, and has been employed by such
Company as a manager since 1989.
CHARLES S. GOODWIN has been a director for the Company since its
inception and has been Managing Director and Chief Executive Officer of
Tessellar Investment, Ltd., a money management firm operating from Cape Cod,
Massachusetts since 1985. Mr. Goodwin was Senior Vice President and Director of
International Research of Arnhold & S. Bleichnoder, Inc., an institutional
brokerage firm from 1983 to 1984. During the period 1971 to 1983, Mr. Goodwin
was a Director and Vice President of Warburg Pincus Capital Corp., EMW Ventures;
a Director, Senior Vice President and Director of Research for Warburg Pincus
Counsellors, and a Partner and Managing Director of E.M. Warburg Pincus & Co.,
an investment counseling and venture capital firm. Mr. Goodwin is the author of
"The Third World Century" and "A Resurrection of the Republican Ideal" published
by University Press of America, Lanham, Md. in 1994 and 1995 respectively. Mr.
Goodwin received his Bachelor of Arts in Russian History from Harvard College in
1961 and his Master of Business Administration - International Finance from the
Columbia University Graduate School of Business in 1965.
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JOHN MACKEY is the Chairman of the Board of QTI, Inc., a privately-held
global trading firm doing business in Africa, Asia and in the United States
since 1992. Mr. Mackey has also been a member of the Board of Advisors of the
Leukemia Society of America since 1987, and a member of the Board of Advisors of
the Syracuse University Business School since 1990. Mr. Mackey played football
for 10 seasons in the National Football League and was elected to the Pro
Football Hall of Fame in 1992. Mr. Mackey has been a director of the Company
since January 24, 1996.
OTHER KEY EMPLOYEES
Cornelius J. Roodt, 37. Mr. Roodt was appointed Managing Director and
Chief Financial Officer of FSAH, on July 1, 1996. Mr. Roodt is responsible for
overseeing all the activities of FSAH's operations in South Africa. From 1994 to
1996 Mr. Roodt was a senior partner at Price Waterhouse Corporate Finance, South
Africa. From 1991 to 1994 he was an audit partner at Price Waterhouse, South
Africa. Prior to that he was a partner at the accounting firm of Wiehahn
Meyernel in South Africa.
Samuel S. Smith, 41. Mr. Smith is a joint Managing Director of Starpak.
Mr. Smith has been employed by Starpak and its predecessor since 1976. Mr. Smith
is responsible for the technical operations of Starpak which include conceptual
design of machinery, management of the factory and production processes,
commissioning and installation of machinery at customers' premises.
Alan R. Grant, 45. Mr. Grant is the financial director of Starpak and
L.S. Pressings and is responsible for all of Starpak's accounting,
administrative and financial management functions as well as its industrial
relations and statutory personnel functions. Mr. Grant has been employed by
Starpak since 1981.
Rhona L. Kabatznik, 61. Ms. Kabatznik is a General Manager and Director
of L.S. Pressings. Ms. Kabatznik's responsibilities include production and sales
administration. Ms. Kabatznik is the mother of Clive Kabatznik, the Vice
Chairman, President and Chief Executive Officer of the Company, and a first
cousin of Michael Levy, the Chairman of the Company's Board of Directors.
Raymond Shaftoe, 45. Mr. Shaftoe has been a joint Managing Director of
Starpak since 1986 and has been employed by Starpak since 1980. Mr. Shaftoe has
also served on the Board of Directors of Starpak since 1986. His current
responsibilities include supervision of the sales and marketing of Starpak's
products, administration and product development.
Bruce Thomas, 44. Mr. Thomas is the Chief Executive Officer of
Europair. He has held this position since 1991 and was the principal shareholder
of Europair until its sale to the Company. Prior to that he was the Chief
Financial Officer for Europair and held that position from 1976. His
responsibilities include the management of Europair, product development, sales
and financial oversight.
John Welch, 48. Mr. Welch is the founder and Managing Director of
Piemans Pantry, a company he established in 1982. His responsibilities include
overall supervision of all aspects of the business.
Michael Morgan, 49. Mr. Morgan is Director of Human Resources at
Piemans Pantry, a position he has held since joining Piemans Pantry in 1989 and
is responsible for all aspects of labor relations and employee benefits.
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Helen Britz, 41. Ms. Britz is National Sales Manager for Piemans Pantry
and has held that position since 1992 when she joined Piemans Pantry. Prior to
such time, Ms. Britz was the National Sales Manager for a rival pie
manufacturer. Ms. Britz oversees Piemans Pantry national sales staff.
Malcolm Moore, 38. Mr. Moore is the Financial Manager of Piemans
Pantry, a position he has held for the last three years. Prior to such time, Mr.
Moore was Financial Manager of Burhose, a leading South African hosiery
manufacturer.
Trevor Knight, 36. Mr. Knight is the Factory Manager for Piemans
Pantry, a position he has held for the last five years. Mr. Knight was an
independent food consultant prior to joining Piemans Pantry. He is responsible
for all aspects of plant production at Piemans Pantry.
Wolfgang Burre, 55. Mr. Burre is the founder of Astoria. He is a fifth
generation master baker and is responsible for overall corporate strategy,
product development and quality control. Mr. Burre traditionally has devote 50%
of his time to Astoria and will continue to do so.
Mrs. H. Hoffman, 60. Mrs. Hoffman is the General Manager of Astoria
Bakery. Mrs. Hoffman is in charge of all financial and operational issues at
Astoria Bakery. She has been employed in this position since 1975.
Wilfred Wesslau, 48. Mr. Wesslau is the joint General Manager of
Astoria Bakery Lesotho. Mr. Wesslau focuses on technical production issues, as
well as all aspects of distribution, including motor vehicle repair and
maintenance. He has held this position since 1981.
Ms. Dagmar Blanker, 54. Ms. Blanker is the General Manager of Astoria
Bakery Lesotho. Ms. Blanker is in charge of all financial matters as well as
sales. She has held this position since 1981.
Each of the above key employees, other than Bruce Thomas, Cornelius J.
Roodt, John Welch, Michael Morgan, Wolfgang Burre, H. Hoffman, Wilfred Wesslau
and Dagmar Blanker has entered into a three-year service contract with their
respective companies, commencing March 1, 1995. Bruce Thomas and Europair have
executed a Management Agreement which shall be in effect for a three year period
commencing January 24, 1996. Cornelius Roodt and FSAH entered into an employment
agreement commencing July 1, 1996. John Welch and Michael Morgan have each
entered into a two year employment agreement with Piemans Pantry commencing
March 1, 1996. Wolfgang Burre, H. Hoffman, Wilfred Wesslau and Dagmar Blanker
have each agreed to enter into three year employment agreements to be effective
as of July 1, 1996.
All directors of the Company hold office until the next annual meeting
of shareholders or until their successors are elected and qualified. The
officers of the Company are elected by the Board of Directors at the first
meeting after each annual meeting of the Company's shareholders, and hold office
until their death, until they resign or until they have been removed from
office. The Company has no executive committee. Pursuant to the Underwriting
Agreement, dated January 24, 1996 by and among the Company, FSA Stock Trust and
D.H. Blair and executed with respect to certain provisions thereof by Messrs
Clive Kabatznik and Michael Levy, the Company is required to nominate a designee
of D.H. Blair of its initial public offering to the Board of Directors for a
period of five years from the date of the completion of the Offering. D.H. Blair
has not yet selected such a designee.
Except for Mr. Levy, directors of the Company do not receive fixed
compensation for their services as directors other than options to purchase
5,000 shares under the Company's stock option plan. Mr. Levy
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receives an annual service fee of $30,000 and options to purchase 5,000 shares
of the Company's Common Stock for every year of service as a director of the
Company. However, directors will be reimbursed for their reasonable
out-of-pocket expenses incurred in connection with their duties to the Company.
COMMITTEES OF THE BOARD
The Board has an Audit Committee (the "Audit Committee") and a
Compensation Committee (the "Compensation Committee"). The Audit Committee is
composed of Clive Kabatznik, Charles Goodwin and John Mackey. The Audit
Committee is responsible for recommending annually to the Board of Directors the
independent auditors to be retained by the Company, reviewing with the
independent auditors the scope and results of the audit engagement and
establishing and monitoring the Company's financial policies and control
procedures. The Compensation Committee is composed of Charles Goodwin and John
Mackey. These persons are intended to be Non-Employee Directors within the
meaning of Rule 16b-3(b)(3)(i) promulgated under the Securities Exchange Act of
1934 (the Securities Exchange Act). The responsibilities of the Compensation
Committee are described below under the heading Stock Option Plan.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company to its Chief Executive Officer
during the Period from September 6, 1995 through June 30, 1996. Apart from Mr.
Kabatznik, whose annual salary is $180,000, no executive officer of the Company
received compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
YEAR SALARY STOCK OPTIONS
Clive Kabatznik, President
and Chief Executive Officer 1996 $135,000 205,000
EMPLOYMENT AGREEMENTS
FSAM has entered into an Employment Agreement with Clive Kabatznik, the
Vice Chairman President and Chief Executive Officer of the Company and of FSAM.
Under the terms of such agreement, Mr. Kabatznik shall devote substantially all
of his business time, energies and abilities to the Company and its subsidiaries
and shall receive an annual salary of $180,000 and options to purchase 55,000
shares of Common Stock at an exercise price of $5.00 per share. Mr. Kabatznik's
salary under his Employment Agreement shall not increase until February 24,
1997. In addition, Mr. Kabatznik has been granted additional options to purchase
150,000 shares of Common Stock of the Company at the exercise price of $5.00 per
share, exercisable after the seventh anniversary following the grant date,
provided that vesting of such options will be accelerated as follows: (i) 50,000
options will be exercisable on such earlier date that the Company realizes
earnings per share of $.75 or more on a fiscal year basis, (ii) an additional
50,000 options will be exercisable on such earlier date that the Company
realizes earnings per share of $1.00 or more on a fiscal year basis, and (iii)
an additional 50,000 options will be exercisable on such earlier date that the
Company realizes earnings per share of $1.50 or more on a fiscal year basis. The
Company intends, during the term of Mr. Kabatznik's employment agreement, to pay
Mr. Kabatznik an annual incentive bonus of five percent of the Minimum Pretax
Income (as provided in Mr. Kabatznik's employment agreement) above $4,000,000,
as shall be
40
<PAGE>
reported in the Company's audited financial statements for each fiscal year in
which Mr. Kabatznik is employed, exclusive of any extraordinary earnings or
charges which would result from the release of the Earnout Escrow Shares.
FSAM has entered into a consulting agreement with Michael Levy,
pursuant to which he shall serve as a consultant to FSAM and shall receive
compensation of $30,000 per annum. The term of the agreement is for a period of
three years.
FSAH has entered into an Employment Agreement with Cornelius J. Roodt,
the Managing Director and Chairman of the Board of FSAH. Under the terms of such
agreement, Mr. Roodt shall devote substantially all of his business time,
energies and abilities to the Company and its subsidiaries and shall receive an
annual salary of $150,000 and options to purchase 150,000 shares of FSAH Class B
Stock at an exercise price of Rand 13.05 per share. Mr. Roodt's salary under his
Employment Agreement shall be reviewed on an annual basis. In addition, the
150,000 shares of FSAH Class B Stock are exercisable after the fifth anniversary
following the grant date, provided that vesting of such options will be
accelerated as follows: (i) 50,000 options will be exercisable on such earlier
date that the Company realizes earnings per share of $.75 or more on a fiscal
year basis, (ii) an additional 50,000 options will be exercisable on such
earlier date that the Company realizes earnings per share of $1.00 or more on a
fiscal year basis, and (iii) an additional 50,000 options will be exercisable on
such earlier date that the Company realizes earnings per share of $1.50 or more
on a fiscal year basis. The Company intends, during the term of Mr. Roodt's
employment agreement, to pay Mr. Roodt an annual incentive bonus of four percent
of the Minimum Pretax Income (as provided in Mr. Roodt's employment agreement)
above $5,000,000, as shall be reported in the Company's audited financial
statements for each fiscal year in which Mr. Roodt is employed, exclusive of any
extraordinary earnings or charges which would result from the release of the
Earnout Escrow Shares.
STOCK OPTION PLAN
The Board of Directors of the Company has adopted and the shareholders
(prior to the Company's initial public offering) approved the Company's 1995
Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan provides for
the grant of (i) options that are intended to qualify as incentive stock options
(Incentive Stock Options) within the meaning of Section 422 of the Code to key
employees and (ii) options not intended to so qualify (Nonqualified Stock
Options) to key employees (including directors and officers who are employees of
the Company), and to directors and consultants who are not employees. The total
number of shares of Common Stock for which options may be granted under the
Stock Option Plan is 350,000 shares.
The Stock Option Plan is to be administered by the Compensation
Committee of the Board of Directors. The Committee shall determine the terms of
options exercised, including the exercise price, the number of shares subject to
the option and the terms and conditions of exercise. No option granted under the
Stock Option Plan is transferable by the optionee other than by will or the laws
of descent and distribution and each option is exercisable during the lifetime
of the optionee only by such optionee or his legal representatives.
The exercise price of Incentive Stock Options granted under the Stock
Option Plan must be at least equal to the fair market value of such shares on
the date of grant (110% of fair market value in the case of an optionee who owns
or is deemed to own stock possessing more than 10% of the voting rights of the
outstanding capital stock of the Company (or any of its subsidiaries). The term
of each option granted pursuant to the Stock Option Plan shall be established by
the Committee, in its sole discretion; provided, however, that the maximum term
for each Incentive Stock Option granted pursuant to the Stock Option Plan is ten
years (five years in the case of an optionee who owns or is deemed to own stock
possessing more than 10% of the total combined
41
<PAGE>
voting power of the outstanding capital stock of the Company (or any of its
subsidiaries). Options shall become exercisable at such times and in such
installments as the Committee shall provide in the terms of each individual
option. The maximum number of shares for which options may be granted to any
individual in any fiscal year is 210,000.
The Stock Option Plan also contains an automatic option grant program
for the non-employee directors. Each non-employee director of the Company is
automatically granted an option for 5,000 shares of Common Stock. Thereafter,
each person who is a non-employee director of the Company following an annual
meeting of shareholders will be automatically granted an option for an
additional 5,000 shares of Common Stock. Each grant will have an exercise price
per share equal to the fair market value of the Common Stock on the grant date
and will have a term of five years measured from the grant date, subject to
earlier termination if an optionee's service as a Board member is terminated for
cause.
The Company has granted options to purchase 225,000 shares of Common
Stock under the Plan as described in the table set forth below:
OPTIONS GRANTED
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF TOTAL ANNUAL
OPTIONS GRANTED TO PER SHARE RATE OF STOCK PRICE
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION APPRECIATION FOR OPTION
GRANTED FISCAL YEAR (1) PRICE DATE TERM
------- --------------- ----- ---- ----
5% 10%
--- ---
<S> <C> <C> <C> <C> <C> <C>
Michael Levy............... 5,000 2.22% 5.00 (2) 6,900 15,273
Clive Kabatznik............ 205,000 91.12% 5.00 (3) 1,547,571 1,363,332
Laurence M. Nestadt........ 5,000 2.22% 5.00 (2) 6,900 15,275
Charles S. Goodwin......... 5,000 2.22% 5.00 (2) 6,900 15,275
John Mackey................ 5,000 2.22% 5.00 (2) 6,900 15,275
</TABLE>
- ---------------
(1) The numbers have been rounded for the purpose of this table.
(2) Options granted will expire five years from the date granted and are
immediately exercisable.
(3) 55,000 options granted will expire five years from the date granted;
150,000 additional options will be exercisable following the seventh
anniversary of the grant date and until the tenth anniversary of such
date, subject to accelerated vesting upon the Company's realization of
certain earnings per share targets.
42
<PAGE>
CERTAIN TRANSACTIONS
In connection with the Company's organization in September 1995, the
Company sold 1,212,521 shares of Class B Common Stock to Clive Kabatznik, the
President and Chief Executive Officer of the Company for a purchase price of
$.01 per share, which amount was paid by Mr. Kabatznik in the form of advances
made by him to pay for certain expenditures of the Company. In October 1995, Mr.
Kabatznik transferred 1,002,521 of such shares, which included 670,137 shares to
Mrs. Stephanie Levy as Trustee of the FSA Stock Trust, 97,210 shares to the
Stopia Trust, 97,210 shares to the 2 RAS Trust, 93,307 to the Presspack Trust,
24,657 shares to the Two Year Trust and 20,000 shares to Henry Rothman. The
transferees have paid Mr. Kabatznik $.01 per share for each of such shares.
STARPAK ACQUISITION
In January 1996, pursuant to the terms of an agreement executed by the
FSA Stock Trust, Raymond Shaftoe, Steven Smith and FSAH, as amended (the
"Starpak Agreement"), the previous shareholders of Starpak sold 100% of the
equity shares of Starpak (the "Starpak Stock") to FSAH in exchange for 167,709
shares of FSAH Class B Stock.
The 167,709 shares of FSAH Class B Stock delivered to the previous
Starpak shareholders may be tendered to the FSAH Escrow Agent against payment
therefor by the FSAH Escrow Agent, which payment may be made through the sale by
the FSAH Escrow Agent of an equal number of shares of Class B Common Stock of
the Company (which shares will automatically convert to Common Stock upon such
sale) and delivery of the net proceeds thereof pursuant to the terms of the FSAH
Escrow Agreement. See "Certain Transactions - FSAH Escrow Agreement."
L.S. PRESSINGS ACQUISITION
In January 1996, pursuant to the terms of an agreement executed by the
FSA Stock Trust, Rhona Kabatznik, Raymond Shaftoe, Samuel Smith and FSAH, as
amended, (the "L.S. Pressings Agreement"), the previous shareholders of L.S.
Pressings sold 100% of the equity shares of such company (the "L.S. Pressings
Stock") to FSAH in exchange for 380,181 shares of FSAH Class B Stock.
The 380,181 shares of FSAH Class B Stock delivered to the previous L.S.
Pressings' shareholders may be tendered to the FSAH Escrow Agent against payment
therefor by the FSAH Escrow Agent, which payment may be made through sale by the
FSAH Escrow Agent of an equal number of shares of Class B Common Stock of the
Company (which shares will be automatically converted to Common Stock upon such
sale) and delivery of the net proceeds thereof pursuant to the terms of the FSAH
Escrow Agreement.
In September 1995, prior to the execution of the Starpak Agreement and
the L.S. Pressings Agreement, Michael Levy transferred all of his shares in
Starpak and L.S. Pressings to the FSA Stock Trust, which shares constitute all
of the shares of Starpak and L.S. Pressings sold to the Company by the FSA Stock
Trust.
EUROPAIR ACQUISITION
In January 1996, pursuant to the terms of an Acquisition & Regulatory
Agreement executed by Bruce Thomas, FSAH, the Company and Europair, as amended
(the "Europair Agreement"), and certain other agreements described below, Bruce
Thomas, acting on his own behalf and on behalf of Dennis Gee, who
43
<PAGE>
together comprised all the previous shareholders of Europair, sold 100% of the
equity shares of Europair (the "Europair Stock") to FSAH in consideration of an
aggregate of $1,386,300 with payment by FSAH as follows: (i) $630,135 (the
"Aggregate Cash Payment"), of which $534,243 (the "Closing Payment Amount") was
paid by FSAH on the closing of the Europair acquisition, and of which the
remaining $95,892 (the "Earn-Out Amount") was paid after such closing upon the
achievement of certain profit projections, (ii) 80,000 shares of FSAH Class B
Stock (valued at $400,000), which shares may be tendered to the FSAH Escrow
Agent against payment therefor by the FSAH Escrow Agent, which payment may be
made through sale by the FSAH Escrow Agent of an equal number of shares of Class
B Common Stock of the Company (which shares will automatically convert into
Common Stock upon such sale) and delivery of the net proceeds thereof pursuant
to the terms of the FSAH Escrow Agreement, (iii) $82,191 that was paid to Mr.
Thomas in consideration for Mr. Thomas' agreement not to compete with Europair
until three years following the termination of his employment with Europair and
the termination of the Management Agreement described below and (iv) $273,973
that was received by Mr. Thomas from the proceeds of the sale of certain real
property. The Europair Agreement also provides that in the event Mr. Thomas
shall sell his shares of FSAH Class B Stock (pursuant to the FSAH Escrow
Agreement) within two years of the closing of the Offering, or within three
months of his becoming entitled to sell such shares, whichever is later, and the
price the FSAH Escrow Agent pays Mr. Thomas for such shares of FSAH Class B
Stock is less than the prevailing Rand equivalent of $5.00 per share of FSAH
Class B Stock, then the Company would pay Mr. Thomas the difference. FSAH also
paid to Mr. Thomas upon the closing of the acquisition $54,794, representing a
portion of a loan in the aggregate amount of $219,178 previously advanced by Mr.
Thomas to Europair, and agreed to pay an additional $2,740 per month during the
term of his continuing employment with Europair until the remaining portion of
such loan has been repaid; provided, that any outstanding balance of the loan
will be forfeited upon the termination of Mr. Thomas' employment with Europair.
In addition, the Company loaned Europair $547,945 in subordinated debt to be
used for working capital purposes.
The cash portion paid upon the closing of the Europair acquisition was
funded in part by a sale of 52,089 shares of FSAH Class B Stock for a total
consideration of $260,445. Of such 52,089 shares, Michael Levy subscribed for
36,452 shares, Samuel Smith for 5,099 shares, Ray Shaftoe for 5,099 shares and
Rhona Kabatznik for 5,439 shares. These shares may be tendered to the FSAH
Escrow Agent pursuant to the terms of the FSAH Escrow Agreement. An additional
$287,250 of the purchase price was funded from the current cash reserves of L.S.
Pressings.
Mr. Thomas entered into a Management Agreement with Europair dated
October 27, 1995, pursuant to which he is paid (i) $4,110 per month payable on
the first day of each month with annual cost of living adjustments of at least
12% and (ii) a bonus equal to the monthly remuneration then payable under (i)
above, plus $6,027. Under the Management Agreement, Mr. Thomas may designate a
company under his or his family's control to fulfill the management obligations
under such agreement. The term of the Management Agreement is for a period of
three years commencing upon the closing of the Offering, after which period such
agreement will be terminable by either Mr. Thomas or Europair upon not less than
6 months written notice. The Management Agreement also provides for the
establishment of a share participation plan pursuant to which certain executives
of the Company will be entitled to receive certain shares of FSAH Class B Stock
based upon the achievement of certain milestones described in the Management
Agreement.
FSAH ESCROW AGREEMENTS
The FSAH Escrow Agreement, executed in January 1996, provided for the
concurrent issuance and delivery by the Company of 729,979 shares of Class B
Common Stock to the FSAH Escrow Agent. The FSAH Escrow Agreement is intended to
provide security for certain holders of FSAH Class B Stock, who are
44
<PAGE>
residents of South Africa and are prohibited by South African law from holding
shares in a foreign company. The FSAH Escrow Agreement provides that the parties
to such Agreement that are holders of FSAH Class B Stock will not sell such
shares of stock except as provided in such Agreement. Specifically, the FSAH
Escrow Agreement provides that the FSAH Class B Stock may be tendered to the
FSAH Escrow Agent against payment therefor by the FSAH Escrow Agent, which
payment may consist of the proceeds obtained from the sale by the FSAH Escrow
Agent of an equal number of shares of Class B Common Stock of the Company,
provided that the proceeds of such sale shall be delivered to the holder in
exchange for his or her shares of FSAH Class B Stock. Upon the sale by the FSAH
Escrow Agent of any shares of Class B Common Stock of the Company pursuant to
the FSAH Escrow Agreement, the FSAH Escrow Agent will deliver to the Company the
equivalent number of shares of FSAH Class B Stock tendered in connection
therewith. Such shares of FSAH Class B Stock will then automatically convert
into shares of FSAH Class A Stock and will be held by the Company together with
the other shares of FSAH Class A Stock owned by the Company. The Company has
granted certain piggyback registration rights to the FSAH Escrow Agent on behalf
of the holders of the shares of FSAH Class B Stock held pursuant to the FSAH
Escrow Agreement. Such shares of Class B Common Stock will be automatically
converted to Common Stock of the Company upon the sale of such shares by the
FSAH Escrow Agent pursuant to the terms of the FSAH Escrow Agreement. Such
shares of Class B Common Stock will be controlled by the terms of the FSAH
Escrow Agreement. Michael Levy has paid the purchase price of $.01 per share for
each of the shares of Class B Common Stock held pursuant to the FSAH Escrow
Agreement and the FSAH Escrow Agent has granted to Michael Levy an irrevocable
proxy to vote each of such shares of Class B Common Stock prior to the sale or
forfeiture of such shares, as the case may be. The Company owns 25,000,000
shares of FSAH Class A Stock, or approximately 97% of the total outstanding
shares of FSAH, and the remaining shares are held by the following persons in
the amounts set forth below:
FSAH CLASS B STOCK
FSA Stock Trust.............. 383,523 shares
--------------
Global Capital............... 50,000 shares
Bruce Thomas................. 80,000 shares
Samuel Smith................. 58,766 shares
Raymond Shaftoe.............. 58,766 shares
Rhona Kabatznik.............. 62,472 shares
Michael Levy................. 36,452 shares
--------------
Total.................... 729,979 shares
==============
ADDITIONAL SHARES ISSUED IN CONNECTION WITH THE PIEMAN'S PANTRY ACQUISITION(1)
Heinz Andreas................... 149,210 shares
John Welch...................... 149,210 shares
Michael Morgan.................. 33,159 shares
--------------
Total ..................... 331,579 shares(2)
==============
- --------
(1) The Company intends to issue, during the second quarter of the current
fiscal year, an additional 331,579 shares of Common Stock to the FSAH
Escrow Agent pursuant to the terms of certain escrow agreements by and
among the Company, the FSAH Escrow Agent, and each of Mr. Andreas, Mr.
Morgan and Mr. Welch (the "Piemans FSAH Escrow Agreements") the terms
of which are similar to the FSAH Escrow Agreement.
(2) Shares of FSAH Class B Stock.
45
<PAGE>
ADDITIONAL SHARES ISSUED IN CONNECTION WITH THE ASTORIA ACQUISITION(3)
Wolfgang Burre.................. 186,000 shares(4)
The rights and preferences accruing to holders of FSAH Class A Stock
and holders of FSAH Class B Stock are substantially identical except that (i)
FSAH is required to pay dividends to holders of FSAH Class B Stock equivalent,
on a pro rata basis, to the dividends paid by the Company to holders of its
Common Stock, (ii) payment of the above dividends on FSAH Class B Stock must be
made no later than three business days subsequent to payment of dividends by the
Company on its Common Stock, (iii) accrued dividends on FSAH Class B Stock must
be paid prior to payment of any declared dividends on FSAH Class A Stock and
(iv) any shares of FSAH Class B Stock acquired by the Company will be
automatically converted to shares of FSAH Class A Stock upon such acquisition.
J. LEVY LOAN
In 1986, Mr. J. Levy, Michael Levy's father, extended to Starpak a loan
in the principal amount of R600,000 (which equaled approximately $300,000 at the
prevailing exchange rate at the time of the loan), which loan bears interest at
1% per annum below the prime bank overdraft rate and is secured by a second
mortgage on certain property owned by Starpak having a book value of $767,180.
The original loan contained no fixed terms of repayment. Upon the closing of the
Offering, the terms of the loan were amended as follows: the loan bears interest
at 1% below the prime bank overdraft rate (currently 19.25% per annum) and is
repayable over a period of 30 months. The first twenty four monthly installments
are $5,563 each, inclusive of principal and interest, the first of which was
paid on October 30, 1995. The balance outstanding after twenty four months will
be repayable in six equal monthly installments.
MICHAEL LEVY LOAN AND MANAGEMENT FEES
During the period commencing March 1, 1995 and ending January 15, 1996,
Michael Levy received certain non-interest bearing loans from Starpak and L.S.
Pressings in the aggregate amount of $47,000. Mr. Levy shall repay such amount
by June 30, 1997. Mr. Levy has received no non-interest bearing loans from the
Company (or any of its subsidiaries since January 15, 1996). In the years ended
February 28, 1995 and 1994, Starpak and L.S. Pressings paid Mr. Levy management
fees of $83,570 and $93,670, respectively.
- --------
(3) The Company intends to issue, during the second quarter of the current
fiscal year, an additional 186,000 shares of Common Stock to the FSAH
Escrow Agent in connection with the Astoria acquisition.
(4) Shares of FSAH Class B Stock.
46
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as to the stock
ownership of (i) each person known by the Company to be the beneficial owner of
more than five percent of the Company's Common Stock or Class B Common Stock,
(ii) each director of the Company, (iii) each named executive officer and (iv)
all executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP(1)
-------------------------------
CLASS B COMMON PERCENTAGE OF PERCENTAGE OF VOTING
NAME AND ADDRESS OF -------------- ------------- --------------------
BENEFICIAL SHAREHOLDER COMMON STOCK STOCK (2)(3) OWNERSHIP(3) POWER(3)
- ---------------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Michael Levy................ 5,000(4) 1,300,116(5)(6) 31.4% 54.6%
9511 West River Street
Shiller Park, IL 60176
Clive Kabatznik............. 55,000(7) 210,000 6.4% 9.3%
2665 S. Bayshore
Suite 702
Coconut Grove, FL 37137
FSA Stock Trust............. 0 953,660(5)(8) 23.0% 40.0%
9511 West River Street
Shiller Park, IL 60176
Charles S. Goodwin.......... 5,000(4) 0 * *
801 Old Post Road
Cotuit, MA 02635
John Mackey................. 5,000(4) 0 * *
1198 Pacific Coast
Highway
Seal Beach, CA 90470
All executive officers and
directors as a group (4
persons) 70,000(9) 1,510,116 39.5% 66.1%
</TABLE>
- ----------------------
* Less than 1%
(1) Beneficial ownership is calculated in accordance with Rule 13d-3 under
the 1934 Act.
(2) Except as otherwise indicated, each of the parties listed has sole
voting and investment power with respect to all shares of Class B
Common Stock indicated below.
(3) For the purposes of this calculation, the Common Stock and the Class B
Common Stock are treated as a single class of Common Stock. The Class B
Common Stock is entitled to five votes per share, whereas the Common
Stock is entitled to one vote per share.
(4) Includes 5,000 shares of Common Stock issuable upon exercise of options
that are immediately exercisable.
47
<PAGE>
(5) For purposes of Rule 13d-3 under the Exchange Act, such individual or
entity is deemed to be the beneficial owner of the shares held pursuant
to the terms of the FSAH Escrow Agreement, although such individual or
entity disclaims ownership of such shares under South African law.
(6) Includes (i) 570,137 shares of Class B Common Stock owned by the FSA
Stock Trust, (ii) 383,523 shares of Class B Common Stock issued to the
FSAH Escrow Agent pursuant to the terms of the FSAH Escrow Agreement,
for which the FSA Stock Trust may be deemed the beneficial owner and
for which Mr. Levy has been granted a voting proxy and (iii) 36,452
shares of Class B Common Stock issued to the FSAH Escrow Agent pursuant
to the terms of the FSAH Escrow Agreement, which shares correspond to a
like number of shares of FSAH Class B Stock which was purchased by Mr.
Levy upon the closing of the Europair acquisition. Also includes
310,004 additional shares of Class B Common Stock issued to the FSAH
Escrow Agent, for which Mr. Levy has been granted a voting proxy. Mr.
Levy's wife is the trustee, and his wife and their children are the
beneficiaries, of the FSA Stock Trust. Mr. Levy disclaims ownership of
all shares held by the FSA Stock Trust, as well as the additional
shares held by the FSAH Escrow Agent for which he has been given a
voting proxy. See "Certain Transactions." Excludes (i) 331,579 shares
of Common Stock that the Company intends to issue to the FSAH Escrow
Agent in connection with the Piemans Pantry acquisition and (ii)
186,000 shares of Common Stock that the Company intends to issue the
FSAH Escrow Agent in connection with the Astoria acquisition, with
respect to which the Company expects the FSAH Escrow Agent to grant an
irrevocable proxy to Mr. Levy.
(7) Includes 55,000 shares of Common Stock issuable upon exercise of
options that are immediately exercisable. Does not include 150,000
shares issuable upon exercise of options not exercisable within 60
days.
(8) Includes (i) 570,137 shares of Class B Common Stock owned by the FSA
Stock Trust and (ii) 383,523 shares of Class B Common Stock issued to
the FSAH Escrow Agent pursuant to the terms of the FSAH Escrow
Agreement. See Certain Transactions - FSAH Escrow Agreement.
(9) Represents shares issuable upon exercise of options that are
immediately exercisable. Does not include 150,000 shares issuable upon
exercise of options not exercisable within 60 days.
CONCURRENT OFFERING
The registration statement of which this Prospectus forms a part also
includes a Prospectus with respect to an offering by the Selling Securityholders
of 650,000 shares of Common Stock and 650,000 Class B Warrants underlying the
exercise of Class A Warrants and 650,000 shares of Common Stock underlying the
exercise of such Class B Warrants, which may be sold in the open market, in
privately negotiated transactions, or otherwise directly by the holders thereof,
subject to each Selling Securityholder's agreement not to exercise the Selling
Securityholder Warrants until January 24, 1997. Purchasers of the Selling
Securityholder Warrants will not be subject to such restriction.
An aggregate of 650,000 Bridge Warrants to purchase 650,000 shares of
Common Stock at the price of $3.00 per share were originally issued to 40
Selling Securityholders in connection with the Bridge Financing. The Bridge
Warrants automatically converted into 650,000 Class A Warrants on the closing of
the Offering. See "Capitalization - Bridge Financing." To the Company's
knowledge, there are no material relationships between any of the Selling
Securityholders and the Company, nor have any such material relationships
existed within the past three years.
48
<PAGE>
The Company will not receive any proceeds from the sale of any of the
Selling Securityholder Warrants. Sales of the Selling Securityholder Securities
or the potential of such sales may have an adverse effect on the market price of
the securities offered hereby.
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company consists of an aggregate of
23,000,000 shares of Common Stock, par value $.01 per share, 2,000,000 shares of
Class B Common Stock, par value $.01 per share, and 5,000,000 shares of
Preferred Stock, par value $.01 per share. As of the date hereof, 1,842,500
shares of Class B Common Stock are outstanding. The following statements are
summaries of certain provisions of the Company's Memorandum of Association,
bye-laws and The Companies Act 1981 of Bermuda. These summaries do not purport
to be complete and are qualified in their entirety by reference to the full
Memorandum of Association and bye-laws which have been filed as exhibits to the
Company's Registration Statement of which this Prospectus is a part.
UNITS
Each Unit consists of one share of Common Stock, one Class A Warrant
and one Class B Warrant. Each Class A Warrant entitles the holder to purchase
one share of Common Stock and one Class B Warrant. Each Class B Warrant entitles
the holder to purchase one share of Common Stock. The Common Stock, Class A
Warrants and Class B Warrants comprising the Units were immediately separately
transferable upon issuance.
COMMON STOCK
Holders of Common Stock have one vote per share on each matter
submitted to a vote of the shareholders and a ratable right to the net assets of
the Company upon liquidation. Holders of the Common Stock do not have preemptive
rights to purchase additional shares of Common Stock or other subscription
rights. The Common Stock carries no conversion rights and is not subject to
redemption or to any sinking fund provisions. All shares of Common Stock are
entitled to share equally in dividends from legally available sources as
determined by the Board of Directors, subject to any preferential dividend
rights of the Preferred Stock (described below). Upon dissolution or liquidation
of the Company, whether voluntary or involuntary, holders of the Common Stock
are entitled to receive assets of the Company available for distribution to the
shareholders, subject to the preferential rights of the Preferred Stock. All of
the shares of Common Stock offered hereby are validly authorized and will be,
when issued, fully paid and non-assessable.
CLASS B COMMON STOCK
The Class B Common Stock and the Common Stock are substantially
identical on a share-for-share basis, except that the holders of Class B Common
Stock have five votes per share on each matter considered by shareholders and
the holders of the Common Stock have one vote per share on each matter
considered by shareholders, and except that the holders of each class will vote
as a separate class with respect to any matter requiring class voting by The
Companies Act 1981 of Bermuda.
Each share of Class B Common Stock is automatically converted into one
share of Common Stock upon (i) the death of the original holder thereof, or, if
such shares are subject to a shareholders agreement or
49
<PAGE>
voting trust granting the power to vote such shares to another original holder
of Class B Common Stock, then upon the death of such other original holder, or
(ii) the sale or transfer to any person other than the following transferees:
(a) the spouse of a holder of Class B Common Stock; (b) any lineal descendants
of a holder of Class B Common Stock, including adopted children (said
descendants, together with the holder of Class B Common Stock and his or her
spouse are hereinafter referred to as "Family Members"); (c) a trust for the
sole benefit of a Class B Common shareholder's Family Members; (d) a partnership
made up exclusively of Class B Common shareholders and their Family Members or a
corporation wholly-owned by a holder of Class B Common Stock and their Family
Members, and (e) any other holder of Class B Common Stock thereof. Presently,
there are 1,842,500 shares of Class B Common Stock issued and outstanding. The
difference in voting rights increases the voting power of the holders of Class B
Common Stock and accordingly has an anti-takeover effect. The existence of the
Class B Common Stock may make the Company a less attractive target for a hostile
takeover bid or render more difficult or discourage a merger proposal, an
unfriendly tender offer, a proxy contest, or the removal of incumbent
management, even if such transactions were favored by the shareholders of the
Company other than the holders of Class B Common Stock. Thus, the shareholders
may be deprived of an opportunity to sell their shares at a premium over
prevailing market prices in the event of a hostile takeover bid. Those seeking
to acquire the Company through a business combination will be compelled to
consult first with the holders of Class B Common Stock in order to negotiate the
terms of such business combination. Any such proposed business combination will
have to be approved by the Board of Directors, which may be under the control of
the holders of Class B Common Stock, and if shareholder approval were required,
the approval of the holders of Class B Common Stock will be necessary before any
such business combination can be consummated.
REDEEMABLE WARRANTS
Class A Warrants. Each Class A Warrant entitles the registered holder
to purchase one share of Common Stock and one Class B Warrant, at an exercise
price of $6.50, until January 24, 2001. Beginning January 24, 1997 (or earlier
at the discretion of the Company with the consent of D.H. Blair), the Class A
Warrants are redeemable by the Company on 30 days' prior written notice at a
redemption price of $.05 per Class A Warrant, if the "closing price" of the
Company's Common Stock for any 30 consecutive trading days ending within 15 days
of the notice of redemption averages in excess of $9.10 per share (subject to
adjustment by the Company, as described below, in the event of any reverse stock
split or similar events). "Closing price" shall mean the closing bid price, if
listed in the over-the-counter market on Nasdaq, or the closing sale price if
listed on the Nasdaq National Market or a national securities exchange. The
notice of redemption will be sent to the registered address of the registered
holder of the Class A Warrant. All Class A Warrants must be redeemed if any are
redeemed; provided, however, that the Class A Warrants underlying the Unit
Purchase Options may only be redeemed under limited circumstances. See "Warrant
Solicitation Fee."
Class B Warrants. Each Class B Warrant entitles the registered holder
to purchase one share of Common Stock at an exercise price of $8.75 per share at
any time after issuance until January 24, 2001. Beginning January 24, 1997 (or
earlier at the discretion of the Company with the consent of D.H. Blair), the
Class B Warrants are redeemable by the Company on 30 days' prior written notice
at a redemption price of $.05 per Class B Warrant, if the closing price of the
Company's Common Stock for any 30 consecutive trading days ending within 15 days
of the notice of redemption averages in excess of $12.25 per share (subject to
adjustment by the Company, as described below, in the event of any reverse,
stock split or similar events). The notice of redemption will be sent to the
registered address of the registered holder of the Class B Warrant. All Class B
Warrants must be redeemed if any are redeemed; provided, however, that the Class
B Warrants subject to the Unit Purchase Options may only be redeemed under
limited circumstances. See "Description of Securities - Unit Purchase Options."
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General. The Class A Warrants and Class B Warrants (collectively, the
"Warrants") were issued pursuant to a warrant agreement (the "Warrant
Agreement") among the Company, D.H. Blair and American Stock Transfer & Trust
Company as warrant agent (the "Warrant Agent"), and are evidenced by warrant
certificates in registered form. The exercise price of the Warrants and the
number and kind of shares of Common Stock or other securities and property to be
obtained upon exercise of the Warrants are subject to adjustment in certain
circumstances including a stock split of, or stock dividend on, or a
subdivision, combination or recapitalization of, the Common Stock or the
issuance of shares of Common Stock at less than the market price of the Common
Stock. Additionally, an adjustment would be made upon the sale of all or
substantially all of the assets of the Company for less than the market value, a
merger or other unusual events (other than share issuances pursuant to employee
benefit and stock incentive plans for directors, officers and employees of the
Company) so as to enable holders of Warrants, to purchase the kind and number of
shares or other securities or property (including cash) receivable in such event
by a holder of the kind and number of shares of Common Stock that might
otherwise have been purchased upon exercise of such Warrants. No adjustment for
previously paid cash dividends, if any, will be made upon exercise of the
Warrants.
The exercise prices of the Warrants were determined by negotiation
between the Company and D.H. Blair and should not be construed to be predictive
of, or to imply that, any price increases will occur in the Company's
securities.
The Warrants may be exercised upon surrender of the Warrant certificate
on or prior to the expiration date (or earlier redemption date) of such Warrants
at the offices of the Warrant Agent with the form of "Election of Purchase" on
the reverse side of the Warrant certificate completed and executed as indicated,
accompanied by payment of the full exercise price (by certified or bank check
payable to the order of the Company) for the number of Warrants being exercised.
Shares of Common Stock issuable upon exercise of Warrants and payment in
accordance with the terms of the Warrants will be fully paid and non-assessable.
The Warrants do not confer upon the holders of Warrants any voting or
other rights of the Shareholders of the Company. Upon notice to the holders of
Warrants, the Company has the right in its sole discretion to reduce the
exercise price or extend the expiration date of the Warrants. Although this
right is intended to benefit the holders of Warrants, to the extent the Company
exercises this right when the Warrants would otherwise be exercisable at a price
higher than the prevailing market price of the Common Stock, the likelihood of
exercise, and resultant increase in the number of shares outstanding, may result
in making more costly, or impeding, a change in control in the Company.
The description above is subject to the provisions of the Warrant
Agreement, which has been filed as an exhibit to the Registration Statement, a
copy of which this Prospectus forms a part, and reference is made to such
exhibit for a detailed description thereof summarized here.
UNIT PURCHASE OPTIONS
The Company granted to D.H. Blair the Unit Purchase Options to purchase
up to 200,000 Units. The Units issuable upon exercise of the Unit Purchase
Options will, when so issued, be identical to the Units offered in connection
with the Offering, except that the warrants contained therein are subject to
redemption by the Company, in accordance with the terms of the Warrant
Agreement, at any time after the Unit Purchase Option has been exercised and the
underlying warrants are outstanding. The Unit Purchase Options cannot be
transferred, sold, assigned or hypothecated for three years, except to any
officer of D.H. Blair or members of the selling group (in connection with the
Offering) or their officers. The Unit Purchase Options are exercisable during
the two year period commencing January 24, 1999 at an exercise price of $6.00
per Unit
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(120% of the initial public offering price) subject to adjustments in certain
events. The holders of the Unit Purchase Options have certain demand and
piggyback registration rights.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock. The Board of Directors has the authority to issue this Preferred Stock in
one or more series and to fix the number of shares and the relative rights,
conversion rights, voting rights and terms of redemption (including sinking fund
provisions) and liquidation preferences, without further vote or action by the
stockholders. If shares of Preferred Stock with voting rights are issued, such
issuance could affect the voting rights of the holders of the Company's Common
Stock by increasing the number of outstanding shares having voting rights, and
by the creation of class or series voting rights. If the Board of Directors
authorizes the issuance of shares of Preferred Stock with conversion rights, the
number of shares of Common Stock outstanding could potentially be increased by
up to the authorized amount. Issuance of Preferred Stock could, under certain
circumstances, have the effect of delaying or preventing a change in control of
the Company and may adversely affect the rights of holders of Common Stock.
Also, Preferred Stock could have preferences over the Common Stock (and other
series of preferred stock) with respect to dividend and liquidation rights. The
Company currently has no plans to issue any Preferred Stock.
ANTI-TAKEOVER PROTECTIONS
The voting provisions of the Common Stock and Class B Common Stock and
the broad discretion conferred upon the Board of Directors with respect to the
issuance of series of Preferred Stock (including with respect to voting rights)
could substantially impede the ability of one or more shareholders (acting in
concert) to acquire sufficient influence over the election of directors and
other matters to effect a change in control or management of the Company, and
the Board of Directors' ability to issue Preferred Stock could also be utilized
to change the economic and control structure of the Company. As a result, such
provisions, together with certain other provisions of the bye-laws summarized in
the succeeding paragraph, may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a shareholder
might consider in such shareholder's best interest, including attempts that
might result in a premium over the market price for the Common Stock held by
shareholders.
The bye-laws establish an advance notice procedure for the nomination,
other than by or at the direction of the Board of Directors, of candidates for
election as directors at annual general meetings of shareholders. In general,
notice of intent to nominate a director at such meeting must be received by the
Company not less than 90 days prior to the meeting and must contain certain
specified information concerning the person to be nominated or the matter to be
brought before the meeting and concerning the shareholder submitting the
proposal.
DIFFERENCES IN CORPORATE LAW
The Companies Act 1981 of Bermuda differs in certain material respects
from laws generally applicable to United States corporations and their
shareholders. Set forth below is a summary of certain significant provisions of
The Companies Act (including any modifications adopted pursuant to the Company's
bye-laws) applicable to the Company, which differ in certain respects from
provisions of Delaware corporate law. The following statements are summaries,
and do not purport to deal with all aspects of Bermuda law that may be relevant
to the Company and its shareholders.
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Interested Directors. The bye-laws provide that any transaction entered
into by the Company in which a director has an interest is not voidable by the
Company nor can such director be liable to the Company for any profit realized
pursuant to such transaction provided the nature of the interest is disclosed at
the first opportunity at a meeting of directors, or in writing to the directors.
Under Delaware law no such transaction would be voidable if (i) the material
facts as to such interested directors' relationship or interests are disclosed
or are known to the board of directors and the board in good faith authorizes
the transaction by the affirmative vote of a majority of the disinterested
directors, (ii) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the stockholders or (iii) the
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified. Under Delaware law, such interested director could be held
liable for any transaction for which such director derived an improper personal
benefit.
Merger and Similar Arrangements. The Company may acquire the business
of another Bermuda exempted company or a company incorporated outside Bermuda
and carry on such business when it is within the objects of the Company's
Memorandum of Association. See "Description of Securities - Certain Provisions
of Bermuda Law." A shareholder may apply to a Bermuda court for a proper
valuation of such shareholder's shares if such shareholder is not satisfied that
fair value has been paid for such shares. The court ordinarily would not
disapprove the transaction on that ground absent evidence of fraud or bad faith.
Under Delaware law, with certain exceptions, any merger, consolidation or sale
of all or substantially all the assets of a corporation must be approved by the
board of directors and a majority of the outstanding shares entitled to vote.
Under Delaware law, a stockholder of a corporation participating in certain
major corporate transactions may, under varying circumstances, be entitled to
appraisal rights pursuant to which such stockholder may receive cash in the
amount of the fair market value of the shares held by such stockholder (as
determined by a court or by agreement of the corporation and the stockholder) in
lieu of the consideration such stockholder would otherwise receive in the
transaction. Delaware law does not provide stockholders of a corporation with
voting or appraisal rights when the corporation acquires another business
through the issuance of its stock or other consideration (i) in exchange for the
assets of the business to be acquired, (ii) in exchange for the outstanding
stock of the corporation to be acquired or (iii) in a merger of the corporation
to be acquired with a subsidiary of the acquiring corporation. Under Bermuda
law, the Company's shareholders have the right to vote on (i) any compromise or
arrangement between the Company and its shareholders, (ii) a take-over scheme
for 100% of the Company's shares enabling the compulsory acquisition of a 10%
minority interest (iii) an amalgamation (merger) of the Company and (iv) the
discontinuance of the Company from Bermuda.
Takeover. Bermuda law provides that where an offer is made for shares
of another Company and, within four months of the offer the holders of not less
than 90% of the shares which are the subject of the offer accept, the offeror
may by notice require the nontendering shareholders to transfer their shares on
the terms of the offer. Dissenting shareholders may apply to the court within
one month of the notice objecting to the transfer. The burden is on the
dissenting shareholders to show that the court should exercise its discretion to
enjoin the required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion as between the offeror and
the holders of the shares who have accepted the offer as a means of unfairly
forcing out minority shareholders. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any shareholder
vote, may merge with any 90% or more owned subsidiary. Upon any such merger,
dissenting stockholders of the subsidiary would have appraisal rights.
Shareholder's Suit. The rights of shareholders under Bermuda law are
not as extensive as the right of shareholders under legislation or judicial
precedent in many United States jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda.
However, the Bermuda courts ordinarily would be expected to follow English case
law precedent, which would permit a
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shareholder to commence an action in the name of the Company to remedy a wrong
done to the Company where the act complained of is alleged to be beyond the
corporate power of the Company or is illegal or would result in the violation of
the Memorandum of Association and bye-laws. Furthermore, consideration would be
given by the court to acts that are alleged to constitute a fraud against the
minority shareholders or where an act requires the approval of a greater
percentage of the Company's shareholders than actually approved it. The winning
party in such an action generally would be able to recover a portion of
attorneys fees incurred in connection with such action. Class actions and
derivative actions generally are available to stockholders under Delaware law
for, among other things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions, the court has
discretion to permit the winning party to recover attorney fees incurred in
connection with such action.
Indemnification of Directors. The Company may indemnify its directors
or officers in their capacity as such in respect of any loss arising or
liability attaching to them by virtue of any rule of law in respect of any
negligence, default, breach of duty or breach of trust of which a director or
officer may be guilty in relation to the Company other than in respect of his
own wilful default, wilful neglect, fraud or dishonesty. Under Delaware law, a
corporation may adopt a provision eliminating or limiting the personal liability
of a director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for breaches of the director's
duty of loyalty, for acts or omission not in good faith or which involve
intentional misconduct or knowing violations of law, for improper payment of
dividends or for any transaction from which the director derived an improper
personal benefit. Delaware law has provisions and limitations similar to Bermuda
regarding indemnification by a corporation of its directors or officers, except
that under Delaware law the statutory rights to indemnification may not be as
limited.
Inspection of Corporate Records. Members of the general public have the
right to inspect the public documents of the Company available at the office of
the Registrar of Companies in Bermuda which will include the Memorandum of
Association (including its objects and powers) and any alteration to the
Memorandum of Association and documents relating to an increase, reduction or
other alteration of the Company's share capital. The shareholders have the
additional right to inspect the bye-laws, minutes of general meetings and
audited financial statements of the Company, which must be presented to the
annual general meeting of shareholders. The register of shareholders of the
Company is also open to inspection by shareholders without charge, and to
members of the public for a fee. The Company is required to maintain its share
register in Bermuda but may establish a branch register outside Bermuda. The
Company is required to keep at its registered office a register of its directors
and officers which is open for inspection by members of the public without
charge. Bermuda law does not, however, provide a general right for shareholders
to inspect or obtain copies of any other corporate records. Delaware law permits
any shareholder to inspect or obtain copies of a corporation's shareholder list
and its other books and records for any purpose reasonably related to such
person's interest as a shareholder.
CERTAIN PROVISIONS OF BERMUDA LAW
In a September 1, 1995 letter to the Company's Bermuda counsel, the
Bermuda Monetary Authority approved the Company's application for "non-resident"
status in Bermuda for exchange control purposes. The Bermuda Monetary Authority
has granted permission for the issuance of the Units, Warrants and shares of
Common Stock of the Company. Prior to the Offering, this Prospectus will be
filed with the Registrar of Companies in Bermuda in accordance with Bermuda law.
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In granting such permission and in accepting this Prospectus for
filing, neither the Bermuda Monetary Authority, nor the Registrar of Companies
in Bermuda accepts any responsibility for the financial soundness of the Company
or of the correctness of any of the statements made or opinions expressed in
this Prospectus.
The transfer of securities between persons regarded as resident outside
Bermuda for exchange control purposes and the issue of securities after the
completion of the Offering to such persons may be effected without specific
consent under the Exchange Control Act 1972 and regulations thereunder. Issues
and transfers of securities involving any person regarded as resident in Bermuda
for exchange control purposes require specific prior approval under the Exchange
Control Act 1972.
Owners of the Company's shares of Common Stock who are non-residents of
Bermuda for Bermuda exchange control purposes are not restricted in the exercise
of the rights to hold or vote their shares. Because the Company has been
designated as a non-resident for Bermuda exchange control purposes there are no
restrictions on its ability to transfer funds in and out of Bermuda or to pay
dividends to United States residents who are holders of the Company's Common
Stock, other than in respect of local Bermuda currency.
In accordance with Bermuda law, securities certificates are only issued
in the names of corporations, partnership or individuals. In the case of an
applicant acting in a special capacity (for example as a trustee), certificates
may, at the request of the applicant, record the capacity, in which the
applicant is acting. Notwithstanding the recording of any such special capacity
the Company is not bound to investigate or incur any responsibility in respect
of the proper administration of any such trust.
The Company will take no notice of any trust applicable to any of its
securities whether or not it had notice of such trust. Specifically, the Company
has no obligation under Bermuda law to ensure that a Trustee who is holding
shares of the Company subject to a trust is properly carrying out the terms of
such trust.
As an "exempted Company", the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted Company the Company may not participate in certain business
transactions including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years); (2) the taking of mortgages on land in Bermuda
to secure an amount in excess of $50,000 without the consent of the Minister of
Finance of Bermuda; (3) the acquisition of securities created or issued by, or
any interest in, any local Company or business, other than certain types of
Bermuda governmental securities of another "exempted" Company, partnership or
other corporation resident in Bermuda but incorporated abroad; or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or under a license granted by
the Minister of Finance of Bermuda.
TRANSFER AGENT AND WARRANT AGENT
The Company's transfer and warrant agent for the Units, Common Stock
and Warrants is American Stock Transfer & Trust Company, New York, New York.
CERTAIN TAX CONSIDERATIONS
The following discussion is a summary of certain anticipated tax
consequences of the operations of the Company and of an investment in the Units,
the Warrants and Common Stock under Bermuda tax laws and South African tax laws
and United States federal income tax laws. The discussion does not deal with all
possible tax consequences relating to the Company's operations or to an
investment in the Units, Warrants
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and Common Stock. In particular, the discussion does not address the tax
consequences under state, local and other (e.g., non-United States federal,
non-Bermuda) tax laws. Accordingly, each prospective investor should consult his
or her tax advisor regarding the tax consequences of an investment in the
[Units], Warrants and Common Stock. The discussion is based upon laws and
relevant interpretation thereof in effect as of the date of this Prospectus, all
of which are subject to change.
BERMUDA TAXATION
The following discussion describes correctly certain tax consequences
to the Company with respect to the Offering and with respect to ownership of
shares of Units, Warrants and Common Stock under Bermuda law. The Company will
not obtain an opinion of tax counsel with respect to tax consequences under
Bermuda law.
At the date hereof, there is no Bermuda income, corporation or profits
tax, withholding tax, capital gains tax, capital transfer tax, estate duty or
inheritance tax payable by the Company or its stockholders other than
stockholders ordinarily resident in Bermuda. The Company is not subject to stamp
or other similar duty on the issue, transfer or redemption of any of the Units,
Warrants and Common Stock.
The Company has obtained an assurance from the Minister of Finance of
Bermuda under the Exempted Undertaking Tax Protection Act 1966 that, in the
event there is enacted in Bermuda any legislation imposing tax computed on
profits or income or computed on any capital assets, gain or appreciation or any
tax in the nature of estate duty or inheritance tax, such tax shall not be
applicable to the Company or to its operations, or to the shares, debentures or
other obligations of the Company until March 28, 2016 except insofar as such tax
applies to persons ordinarily resident in Bermuda and holding such shares,
debentures or other obligations of the Company or any real property or leasehold
interests in Bermuda owned by the Company. No reciprocal tax treaty affecting
the Company exists between Bermuda and the United States.
As an exempted Company, the Company is liable to pay in Bermuda a
registration fee based upon its authorized share capital and the premium on its
issued shares at a rate not exceeding $25,000 per annum.
SOUTH AFRICA - TAXATION
The following discussion describes correctly certain tax consequences
to the Company with respect to the Offering and with respect to ownership of
Units, Warrants and Common Stock under South African law.
Taxation of the Company. Dividends received by the Company will not be
subject to South African withholding tax. Interest received by the Company will
not be subject to South African tax provided the Company is not managed and
controlled in South Africa. It is intended that the Company will not be managed
and controlled in South Africa. Royalties received by the Company from South
Africa will be subject to a flat rate of taxation equivalent to 12% of the gross
value of such royalties.
Taxation of FSAH
Income Tax. Income tax is levied in South Africa on income which is
classified as being of a "revenue" nature. Income of a capital nature is not
currently subject to tax. The current corporate income tax rate is 35%.
Dividends to be received by FSAH from its subsidiaries will be exempt from
income tax. Interest received by FSAH will be subject to income tax. No
assurance can be given that proceeds derived by FSAH
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from the sale of its investments in underlying companies will not be subject to
South African corporate income tax at a rate of 35%. Although an exemption from
tax is available under the South African Income Tax Act, an application by the
Company to take advantage of such exemption was not granted. Based on this
denial, the Company's income may be subject to South African income tax at a
rate of 35%. However, the denial of the application is not dispositive of the
ultimate tax treatment of the Company's realization gains, and although no
assurance can be given as to the tax treatment of such gains, the Company
believes that based on its investment policy of acquiring, owning and operating
closely-held South African companies, its realization gains will be held to be
of a capital nature. South Africa does not currently impose any tax on capital
gains. However, no assurance can be given that a capital gains tax will not be
introduced in the future.
Secondary Tax on Companies. A Company declaring a dividend becomes
liable to an additional tax known as secondary tax on companies ("STC"). STC is
levied at the rate of 12.5% on the difference between dividends declared by a
Company and dividends received by that Company in any given "dividend cycle." An
exemption from STC is available in respect of dividends declared by one South
African Company which is a wholly owned subsidiary of another South African
Company, where the subsidiary derives at least 90% of its profits from its
sources within South Africa and has notified the Commissioner for Inland Revenue
that it is availing itself of the exemption. The exemption will be available in
respect of dividends declared by wholly-owned subsidiaries of FSAH to FSAH.
Dividends declared by FSAH to the Company will be subject to STC.
Marketable Securities Tax and Stamp Duty. Any listed securities
purchased by FSAH through a stockbroker will be subject to marketable securities
tax. The current rate of marketable securities tax is 0.5% of the acquisition
price. Unlisted securities are subject to the payment of stamp duty at the rate
of 0.5% of the greater of the acquisition price or market value.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal
income tax consequences to a United States citizen or resident individual, a
United States corporation, a United States partnership, a trust in which one or
more U.S. fiduciaries have the authority to control all substantial decisions of
the trust and a U.S. court is able to exercise primary supervision over the
administration of the trust, or an estate subject to United States tax on all of
its income regardless of source, who purchases Warrants subsequent to the
Registration hereunder (each a "United States Investor") and holds such Warrants
and the underlying Common Stock and Warrants as a capital asset. This summary is
provided for general information only and does not purport to address all the
United States tax consequences that may be relevant to a United States Investor,
including without limitation the treatment of certain types of United States
Investors (e.g., persons who own, directly or constructively, at least 10% of
the voting power or value of the Company's outstanding stock, qualified plans,
financial institutions, insurance companies, tax-exempt organizations or other
persons subject to special treatment under United States federal income tax
laws) or persons other than United States Investors, all of whom may be subject
to tax rules that differ significantly from those summarized below. In addition,
it does not discuss any state, local, foreign or minimum income or other tax
considerations. The discussion is based upon the provisions of the United States
federal income tax law as of the date hereof, which is subject to change
retroactively as well as prospectively.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THEIR PARTICULAR CIRCUMSTANCES AND THE EFFECT OF ANY UNITED
STATES FEDERAL, STATE, LOCAL OR FOREIGN TAXES TO WHICH THEY MAY BE SUBJECT.
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Taxation of the Company and its Subsidiaries
In general, the Company and its foreign subsidiaries will be subject to
United States federal corporate income tax only to the extent they have income
which has its source in the United States or is effectively connected with a
United States trade or business. It is not anticipated that either the Company
or any of its foreign subsidiaries will be engaged in a trade or business in the
United States.
The United States subsidiary of the Company will be subject to United
States federal income taxation on its worldwide income, if any (subject to
reduction by allowable foreign tax credits), and distributions by such United
States subsidiary to the Company generally will be subject to United States
withholding taxes. There is no income tax treaty between the United States and
Bermuda.
Taxation of Purchasers of Warrants
Warrants. Upon a sale or exchange of a Warrant, a holder will recognize
capital gain or loss equal to the difference between the amount realized upon
the sale or exchange and the amount paid by the holder for such Warrant. Such
gain or loss will be long-term if, at the time of the sale or exchange, the
Warrant was held for more than one year. Long-term capital gains of
non-corporate taxpayers are generally taxed at more favorable rates than
ordinary income or short-term capital gains. Adjustments to the exercise price
or conversion ratio, or the failure to make adjustments, may result in the
receipt of a constructive dividend by the holder.
Upon the exercise of a Warrant, a holder's tax basis in the interest
acquired will be equal to his tax basis in the Warrant plus the exercise price
of the Warrant. In the case of the exercise of a Class A Warrant, such basis
must be allocated between the Common Stock and the Class B Warrant received in
proportion to their relative fair market values. His holding period with respect
to such interest will commence on the day after the date of exercise. If a
Warrant expires without being exercised, the holder will have a capital loss
equal to his tax basis in the Warrant as if the Warrant had been sold on such
date for no consideration.
Common Stock. A United States Investor receiving a distribution on the
Common Stock generally will be required to include such distribution in gross
income as a taxable dividend to the extent such distribution is paid from the
current or accumulated earnings and profits of the Company (determined under
United States federal income tax principles). Subject to the discussion below
under "Certain Special Rules," distributions in excess of the earnings and
profits of the Company generally will first be treated as a nontaxable return of
capital to the extent of the United States Investor's tax basis in the Common
Stock and any excess as capital gain. Dividends received on the Common Stock by
United States corporate shareholders will not be eligible for the corporate
dividends received deduction.
With certain exceptions and subject to the discussion below under
"Certain Special Rules," gain or loss on the sale or exchange of the Common
Stock will be treated as capital gain or loss. Such capital gain or loss will be
long-term capital gain or loss if the United States Investor has held the Common
Stock for more than one year at the time of the sale or exchange.
Certain Special Rules
Special rules, if applicable, may require United States Investors to
include certain amounts in income before it is actually received. The rules are
coordinated so that the same amount will not be taxed more than
58
<PAGE>
once. The Company intends to manage its affairs or the affairs of its
subsidiaries so as to attempt to avoid or minimize any adverse impact of these
rules, to the extent consistent with its other business goals.
Passive Foreign Investment Companies ("PFICs"). If the Company is a
PFIC, each United States Investor would, upon receipt of certain distributions
from the Company or a disposition of his shares of Common Stock received upon
exercise of the Warrants at a gain, be liable for income tax computed at the
highest applicable rate as if such distribution or gain had been recognized
ratably over the United States Investor's holding period for the Common Stock,
plus interest on the tax allocable to prior years included within such holding
period. Such tax and interest charge will be payable by the United States
Investors for the years in which the distribution or gain is actually realized
regardless of whether losses, credits or other tax benefits would have been
available to the United States Investor to offset such income if it had actually
been realized in such prior taxable years. Under Proposed Regulations which
would be effective retroactively, a Warrant would be treated in the same manner
as stock, and for this purpose the holding period of stock acquired through the
exercise of an option includes the period during which the option was held.
The Company will be treated as a PFIC if in the tax year or any prior
tax year either (a) 75% or more of the gross income of the Company is passive
income, or (b) at least 50% of the average percentage of assets of the Company
(by value, or in the case the Company is a "controlled foreign corporation" or
makes an election, based on the adjusted basis (for purposes of computing
earnings and profits under U.S. tax law) of the Company's assets) produce or are
held for the production of passive income ("passive assets"). Under special
"look through" rules, the Company is considered to own its pro rata share of the
gross income and assets of any corporation in which the Company owns (or is
considered to own) 25% or more of the stock (by value). Passive income for
purposes of the PFIC rules generally includes dividends, interest and other
types of investment income. Under the "start-up exception", a corporation which
would otherwise be a PFIC for its initial year will not be treated as a PFIC for
such tax year if it does not meet the income or asset test for each of the next
two years. The Company believes that it was not a PFIC during its initial tax
year ended June 30, 1996. However, even in the event the Company were a PFIC,
the Company believes that it will qualify for the "start-up exception", and
therefore will not be considered a PFIC during its initial year. Although the
Company intends to manage its affairs to avoid the application of the PFIC rules
to the extent possible, no assurance can be given since the determination
depends on future events.
Under certain circumstances, if the Company were to become a PFIC,
distributions and dispositions in respect of shares in a direct or indirect
foreign corporate subsidiary of the Company may be attributed in whole or in
part to a United States Investor, and such United States Investor may be taxed
under the PFIC rules with respect to such distributions or dispositions. The
Company does not anticipate, however, that any of its foreign corporate
subsidiaries will be treated as PFICs based on the active nature of their
operations, and the Company intends to manage its affairs to avoid the
application of this rule, if possible.
Because there is a risk that the Company may be treated as a PFIC, each
United States Investor should consider whether to elect to treat the Company as
a "qualified electing fund" ("QEF"). If such election is made, the tax treatment
described above will not apply; instead, the electing shareholder will be
required to include currently in taxable income his pro rata share of the
Company's ordinary earnings (as ordinary
59
<PAGE>
income) and a pro rata portion of the Company's net capital gains (as long-term
capital gain), whether or not distributions with respect to such earnings or
gains are actually made to such shareholder. If the United States Investor makes
the QEF election for the first tax year in which the Company is a PFIC, the
investor will be required to include its share of such income only for tax years
in which the Company meets either the income test or the asset test and not in
other tax years. Once made, the QEF election will be effective for the tax year
and all subsequent tax years, and may be revoked only with the consent of the
United States Internal Revenue Service. If the QEF election (or certain other
available elections) are not made but the Company had been a PFIC for any prior
year, any distributions and gains on disposition of the Common Stock realized by
a United States Investor at any time will be treated as though such amounts had
been received while the Company was a PFIC and will be subject to taxation and
interest charges on the tax allocable to prior years as described above, even
though the Company does not meet the income or asset tests to be characterized
as a PFIC in such year.
The Company intends to notify United States Investors in the event that
it concludes that it will be treated as a PFIC for any taxable year to enable
United States Investors to consider whether to elect to treat the Company as a
QEF, although the Company has no duty to make such determination. In addition,
if a United States Investor elects to have the Company treated as a QEF, the
Company will use its reasonable efforts to comply with the applicable
information reporting requirements necessary for the United States Investor to
comply with the QEF rules.
Foreign Personal Holding Companies ("FPHCs"). If the Company is
classified as an FPHC, each United States Investor who owns (or is deemed to
own) Common Stock on the last day of the Company's tax year would be treated as
if his pro rata share of the Company's undistributed FPHC income (generally,
taxable income computed as if it were a domestic corporation with certain
adjustments), including its share of any undistributed FPHC income of any
subsidiary which is owned through a chain of FPHCs as a distribution on the last
day of its taxable year. Similar rules apply to tax United States Investors
directly on the undistributed income of an indirect foreign subsidiary which is
owned by a foreign corporation which is not an FPHC. United States Investors who
dispose of their Common Stock prior to such date generally would not be subject
to tax under these rules. Certain tax reporting requirements apply to United
States Investors who own 5% or more of the value of the outstanding stock of an
FPHC.
A foreign corporation will be classified as an FPHC if (a) five or
fewer individuals, who are United States citizens or residents would, directly
or indirectly, own more than 50% of the corporation's stock (measured by voting
power or value) and (b) the corporation receives at least 60% of its gross
income (regardless of source), as specifically adjusted, from certain passive
sources. After a corporation becomes an FPHC, the income test percentage for
each subsequent taxable year is reduced to 50%.
Although the Company will likely meet the shareholder test, the Company
does not believe that it, or any of its foreign operating subsidiaries, will
satisfy the income test, and accordingly they should not be classified as FPHCs.
No assurances, however, can be given since the determination is based on future
events.
If the Company is treated both as an FPHC and a PFIC, and a United
States Investor has made a QEF election, the income of the Company will only be
taxed to such United States Investor under the FPHC rules and not under the QEF
rules applicable to the Company as a PFIC. Income which has been taxed to a
United States Investor under the FPHC rules is not thereafter subject to tax
under the PFIC rules.
60
<PAGE>
Backup Withholding and Other Rules
To prevent United States federal backup withholding equal to 31% of any
dividend with respect to the Common Stock and any proceeds from the sale,
exchange or redemption of the Common Stock or Warrants which are paid through a
United States broker or agent, each United States Investor must either (a)
qualify as an exempt payee (e.g., a corporation) and demonstrate this fact when
required, or (b) notify the United States payor of such stockholder's United
States taxpayer identification number (or certify that it has applied for a
taxpayer identification number), certify that it is not subject to backup
withholding and otherwise comply with the backup withholding rules. Backup
withholding is not an additional tax; rather, the stockholder is entitled to a
credit against his United States federal income tax for the amount of any backup
withholding. In addition, a United States Investor who fails to furnish its
taxpayer identification number may be subject to a penalty.
A United States Investor who owns or acquires 5% or more in value of
the Company's stock may be required to file certain additional reports with
respect to the Company with the United States Internal Revenue Service.
THE FOREGOING DISCUSSION OF CERTAIN UNITED STATES FEDERAL TAX
CONSEQUENCES IS NOT TAX ADVICE. EACH PERSON CONSIDERING THE PURCHASE OF WARRANTS
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES
TO HIM OR HER OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE WARRANTS, AND
THE UNDERLYING COMMON STOCK AND WARRANTS, INCLUDING THE APPLICABILITY AND EFFECT
OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND OF CHANGES IN APPLICABLE TAX
LAWS.
SHARES ELIGIBLE FOR FUTURE SALE
On the date of this Prospectus, the Company has outstanding an
aggregate of 2,300,000 shares of Common Stock and 1,842,500 shares of Class B
Common Stock, which shares of Class B Common Stock are held by 8 holders. In
addition, an aggregate of 6,000,000 shares of Common Stock are issuable upon
exercise of the Class A and Class B Warrants included in the Units and 1,300,000
shares of Common Stock are issuable upon the exercise of the Selling
Securityholder Securities. The 2,300,000 shares included in the Units sold in
connection with the Offering are freely transferable without restriction under
the Securities Act except for any shares purchased by any person who is or
thereby becomes an "affiliate" of the Company, which shares will be subject to
the resale limitations contained in Rule 144 promulgated under the Securities
Act. All of the 1,842,500 shares of Class B Common Stock outstanding prior to
this Offering are "restricted securities" as that term is defined under Rule 144
and may not be sold publicly unless they are registered under the Securities Act
or are sold pursuant to Rule 144 or another exemption from registration. See
"Certain Transactions." The Company anticipates that an additional 331,539
shares of Common Stock and 186,000 shares of Common Stock will be issued during
the second quarter of fiscal year 1997 to the FSAH Escrow Agent in connection
with the Company's acquisitions of Pieman's Pantry and Astoria, respectively.
See "Certain Transactions -FSAH Escrow Agreements." None of the shares of Class
B Common Stock issued prior to the Company's initial public offering will be
eligible for sale under Rule 144 until September 1997.
In general, under Rule 144, as currently in effect, a person (or
persons whose shares are aggregated) may sell within any three-month period a
number of restricted shares beneficially owned for at least two years which does
not exceed the greater of 1% of the then outstanding shares of such class of
securities or the average weekly trading volume during the four calendar weeks
prior to such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and the availability of current
public
61
<PAGE>
information about the Company. Rule 144 also permits, under certain
circumstances, the sale of shares beneficially owned for at least three years by
a person who is not an affiliate of the Company without regard to the volume or
other resale limitations. For shares issued in consideration of an unsecured or
non-recourse promissory note, the holding period does not commence until the
note is paid in full. The above is a brief summary of Rule 144 and is not
intended to be a complete description of the Rule.
The holders of all of the outstanding shares of Class B Common Stock
have agreed not to sell, assign or transfer any of their shares of Common Stock,
options or warrants until after February 28, 1997 without the prior consent of
D.H. Blair.
Pursuant to registration rights granted in connection with the Bridge
Financing, the Company, concurrently with the offering, is registering for
resale on behalf of the Selling Stockholders, the Selling Stockholder Securities
subject to the contractual restriction that the Selling Securityholders agreed
not to exercise the Selling Securityholder Warrants until after January 24,
1997. See "Concurrent Offering."
D.H. Blair also has demand and piggyback registration rights with
respect to the securities underlying the Unit Purchase Options.
No predictions can be made of the effect, if any, that sales of Common
Stock or the availability of Common Stock for sale will have on the market price
of such securities prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock or other securities of the Company in the
public market could adversely affect prevailing market prices.
62
<PAGE>
WARRANT SOLICITATION FEE
The Company has agreed not to solicit Warrant exercises other than
through D.H. Blair unless D.H. Blair declines to make such solicitation. Upon
exercise of the Warrants commencing January 24, 1997, the Company will pay D.H.
Blair a fee of 5% of the aggregate exercise price if (i) the market price of the
Company's Common Stock on the date the Warrant is exercised is greater than the
then exercise price of the Warrant; (ii) the exercise of the Warrant was
solicited by a member of the NASD; (iii) the warrantholder designates in writing
that the exercise of the Warrant was solicited by a member of the NASD and
designates in writing the broker-dealer to receive compensation for such
exercise; (iv) the Warrant is not held in a discretionary account; (v)
disclosure of compensation arrangements was made both at the time of the
offering and at the time of exercise of the Warrant; and (vi) the solicitation
of exercise of the Warrants was not in violation of Rule 10b-6 promulgated under
the 1934 Act or respective state blue sky laws. Any costs incurred by the
Company in connection with the exercising of the Warrants shall be borne by the
Company.
Rule 10b-6 may prohibit Blair & Co., Inc. ("Blair") a selling group
member which distributed substantially all of the Units offered in connection
with the Company's initial public offering, from engaging in any market making
activities with regard to the Company's securities for the period from nine
business days (or such other applicable period as Rule 10b-6 may provide) prior
to any solicitation by D.H. Blair of the exercise of Warrants until the later of
the termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that D.H. Blair may have to receive a fee for the
exercise of Warrants following such solicitation. As a result, Blair may be
unable to provide a market for the Company's securities during certain periods
while the Warrants are exercisable.
The Commission is conducting an investigation concerning various
business activities of D.H. Blair and Blair. The investigation appears to be
broad in scope, involving numerous aspects of D.H. Blair's and Blair's
compliance with the Federal securities laws and compliance with the Federal
securities laws by issuers whose securities were underwritten by D.H. Blair or
Blair or in which D.H. Blair or Blair made over-the-counter markets, persons
associated with D.H. Blair or Blair, such issuers and other persons. The Company
has been advised by D.H. Blair that the investigation has been ongoing since at
least 1989 and that it is cooperating with the investigation. D.H. Blair cannot
predict whether this investigation will ever result in any type of formal
enforcement action against D.H. Blair or Blair or, if so, whether any such
action might have an adverse effect on D.H. Blair or the securities offered
hereby. An unfavorable resolution of the Commission's investigation could have
the effect of limiting such firm's ability to make a market in the Company's
securities, which could affect the liquidity or price of such securities.
LEGAL MATTERS
The validity of the Securities offered hereby has been passed upon for
the Company by Conyers, Dill & Pearman, Bermuda counsel for the Company. Certain
legal matters have been passed upon for the Company by Parker Chapin Flattau &
Klimpl, LLP, New York, New York, United States counsel for the Company. A
partner of Parker Chapin Flattau & Klimpl, LLP owns shares of the Company's
Class B Common Stock. Certain other legal matters have been passed on by Webber
Wentzel Bowens, Johannesburg, South Africa, South African counsel for the
Company.
63
<PAGE>
EXPERTS
The Consolidated Balance Sheets of the Company at June 30, 1996 and
1995, the Consolidated Statements of Income and Cash Flows for the year ended
June 30, 1996, four months ended June 30, 1995 and the years ended February 28,
1995 and 1994, and the Consolidated Statements of Changes in Stockholders'
Investment for the period February 28, 1993 to June 30, 1996, appearing in this
Prospectus and Registration Statement have been audited by Price Waterhouse,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is organized under the laws of Bermuda. Certain of the
directors and officers of the Company, and the South African experts named
herein, are or may be residents of Bermuda or South Africa and all or a
substantial portion of the assets of the Company and such persons are or may be
located outside the United States. As a result, it may be difficult for
investors to effect service of process within the United States upon such
persons, or to enforce against them judgments obtained in United States courts,
including judgments predicated upon the civil liability provisions of the United
States federal securities laws. The Company understands that the United States
does not currently have a treaty providing for reciprocal recognition and
enforcement of judgments in civil and commercial matters with Bermuda or South
Africa and that there is doubt (i) whether a final judgment for the payment of
money rendered by a federal or state court in the United States based on civil
liability, whether or not predicated upon the civil liability provisions of the
United States federal securities laws, would be enforceable in Bermuda or South
Africa against the Company or certain of the Company's officers and directors,
and (ii) whether an action could be brought in Bermuda or South Africa against
the Company or certain of the Company's officers and directors in the first
instance on the basis of liability predicated solely upon the provisions of the
United States federal securities laws.
ADDITIONAL INFORMATION
The Company has filed with the Commission, Washington, D.C., a
Registration Statement on Form S-1 under the Securities Act of 1933, as
amended, with respect to the securities offered hereby. This Prospectus does not
contain all of the information set forth in such Registration Statement and the
exhibits thereto. For further information with respect to the Company and the
Units, reference is hereby made to the Registration Statement, and exhibits and
schedules thereto which may be inspected without charge at the public reference
facilities maintained at the principal office of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained upon written request from the Public
Reference Branch of the Commission, 450 Fifth Street, Room 1024, N.W,
Washington, D.C. 20549, at prescribed rates. Reference is made to the copies of
any contracts or other documents filed as exhibits to the Registration
Statement. Electronic registration statements made through the Electronic Data
Gathering Analysis and Retrieval System are publicly available through the
Commission's Web Site (http:\\www.sec.gov.).
64
<PAGE>
FIRST SOUTH AFRICA CORP., LTD.
INDEX TO FINANCIAL STATEMENTS
FIRST SOUTH AFRICA CORP., LTD.
Report of the independent auditors F-2
Consolidated Balance Sheets at June 30, 1996 and 1995 F-3
Consolidated Statements of Income for the year ended June
30, 1996, four months ended June 30, 1995 and the years
ended February 28, 1995 and 1994 F-5
Pro forma Consolidated Statements of Income for the years
ended June 30, 1996 and 1995 (Unaudited) F-6
Consolidated Statements of Cash Flows for the year ended
June 30, 1996, four months ended June 30, 1995 and the
years ended February 28, 1995 and 1994 F-7
Consolidated Statements of Changes in Stockholders'
Investment for the period February 28, 1993 to
June 30, 1996 F-8
Notes to the Consolidated Financial Statements for the year
ended June 30, 1996, four months ended June 30, 1995
and the years ended February 28, 1995 and 1994 F-9
F-1
<PAGE>
FIRST SOUTH AFRICAN CORP., LTD.
REPORT OF THE INDEPENDENT AUDITORS
To the Board of Directors
of First South Africa Corp., Ltd.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of cash flows and of changes in
stockholders' investment present fairly, in all material respects, the financial
position of First South Africa Corp., Ltd. and its subsidiaries at June 30, 1996
and 1995, and the results of their operations and their cash flows for the year
ended June 30, 1996, four months ended June 30, 1995 and the years ended
February 28, 1995 and 1994 in conformity with generally accepted accounting
principles in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse
Price Waterhouse
Sandton, South Africa
September 27, 1996
F-2
<PAGE>
FIRST SOUTH AFRICA CORP., LTD.
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, 1996 JUNE 30, 1995
----------- -----------
$ $
----------- -----------
CURRENT ASSETS
Cash on hand 4,682,035 744,251
Trade accounts receivable 5,833,542 2,287,572
Less: Allowances for bad debts (402,333) (232,442)
----------- -----------
5,431,209 2,055,130
Inventories (net) 2,510,868 1,232,728
Prepaid expenses and other current assets 451,551 188,937
----------- -----------
TOTAL CURRENT ASSETS 13,075,663 4,221,046
Property, plant and equipment 9,000,334 1,854,831
Less: Accumulated depreciation (2,119,912) (320,529)
----------- -----------
6,880,422 1,534,302
Goodwill 408,541 --
Recipes and other intellectual property 2,848,532 --
Other assets 318,286 16,224
Deferred income taxes 73,550 10,145
Loan to related company -- 145,823
----------- -----------
23,604,994 5,927,540
=========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Bank overdraft payable 745,724 270,822
Current portion of long term debt 2,101,799 147,126
Trade accounts payable 2,162,257 479,179
Other provisions and accruals 1,923,371 1,369,663
Income taxes payable 1,518,095 430,127
----------- -----------
TOTAL CURRENT LIABILITIES 8,451,246 2,696,917
Long term debt 2,361,372 954,717
Loan from related company -- 257,909
----------- -----------
TOTAL LIABILITIES 10,812,618 3,909,543
=========== ===========
F-3
<PAGE>
FIRST SOUTH AFRICA CORP., LTD.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS'S INVESTMENT (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
STOCKHOLDERS' INVESTMENT
CAPITAL STOCK:
FIRST SOUTH AFRICA CORP., LTD:
A CLASS COMMON STOCK, $0.01 PAR VALUE -
AUTHORIZED 23,000,000 SHARES; ISSUED AND
OUTSTANDING 2,200,000 22,000 --
B CLASS COMMON STOCK, $0.01 PAR VALUE-
AUTHORIZED 2,000,000 SHARES; ISSUED AND
OUTSTANDING 1,942,500 (SEE FOOTNOTE 24) 19,701 --
PREFERRED STOCK, $0.01 PAR VALUE-
AUTHORIZED 5,000,000 SHARES; ISSUED AND
OUTSTANDING NIL SHARES -- --
CAPITAL IN EXCESS OF PAR 18,518,986 --
LS PRESSINGS (PTY) LTD
COMMON STOCK, R1 PAR VALUE - AUTHORIZED, ISSUED
AND OUTSTANDING 3 MILLION SHARES IN 1995 -- 460,978
STARPAK (PTY) LTD
COMMON STOCK, R1 PAR VALUE - AUTHORIZED 4,000
SHARES; ISSUED AND OUTSTANDING 1,250 SHARES IN
1995 -- 1,010
CAPITAL IN EXCESS OF PAR -- 746,790
RETAINED EARNINGS (3,887,407) 1,850,153
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (1,888,211) (1,040,934)
INCOME RESTRICTED AS TO DISTRIBUTION 7,307 --
----------- -----------
23,604,994 5,927,540
=========== ===========
</TABLE>
F-4
<PAGE>
FIRST SOUTH AFRICA CORP., LTD.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 1, 1995 TO MARCH 1, TO FEBRUARY FEBRUARY
JUNE 30, 1996 JUNE 30, 1995 28, 1995 28, 1994
$ $ $ $
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues 14,911,097 3,297,507 8,826,856 6,851,457
----------- ----------- ----------- -----------
Operating expenses
Cost of sales 8,385,511 1,881,686 5,058,749 4,513,384
Selling, general and administrative
costs 5,134,431 1,081,120 3,120,334 1,900,760
Non cash compensation charge 6,314,000 -- -- --
----------- ----------- ----------- -----------
19,833,942 2,962,806 8,179,083 6,414,144
----------- ----------- ----------- -----------
Operating (loss)/income (4,922,845) 334,701 647,773 437,313
Other income 539,636 43,145 40,830 64,966
Interest expense (865,733) (18,801) (152,163) (180,960)
----------- ----------- ----------- -----------
(Loss)/income before income taxes (5,248,942) 359,045 536,440 321,319
Provision for taxes on income (488,618) (145,216) (222,558) (113,403)
----------- ----------- ----------- -----------
Net (loss)/income (5,737,560) 213,829 313,882 207,916
----------- ----------- ----------- -----------
Net loss per share ($3.03)
Weighted average number of shares 1,893,463
outstanding
</TABLE>
F-5
<PAGE>
FIRST SOUTH AFRICA CORP., LTD.
PROFORMA CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
YEARS ENDED JUNE 30
1996 1995
$ $
----------- -----------
Revenues 36,907,198 33,062,715
----------- -----------
Operating expenses
Cost of sales 19,555,997 17,983,400
Selling, general and administrative costs 13,670,868 12,110,748
Non cash compensation charge 6,314,000 --
----------- -----------
39,540,865 30,094,148
----------- -----------
Operating (loss)/income (2,633,667) 2,968,567
Other income 832,519 466,356
Interest expense (1,428,617) (768,413)
----------- -----------
(Loss)/income before income taxes (3,229,765) 2,666,510
Provision for taxes on income (1,293,084) (944,383)
----------- -----------
Net (loss)/income (4,522,849) 1,722,127
Net (loss)\profit per share ($ 1.34) $ 0.51
Weighted average number of shares
outstanding 3,374,079 3,374,079
The pro forma information has been prepared assuming that the
acquisitions prior to June 30, 1996 had taken place and that operations had
commenced on July 1, 1994.
The proforma information does not purport to be indicative of the
results that would have actually been obtained if the acquisitions prior to June
30, 1996 had occurred at the beginning of the period nor is it indicative of
future results.
F-6
<PAGE>
FIRST SOUTH AFRICA CORP., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 1, TO MARCH 1, TO FEBRUARY FEBRUARY
JUNE 30, 1996 JUNE 30, 1995 28, 1995 28, 1994
$ $ $ $
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss)/income (5,737,560) 213,829 313,882 207,916
Adjustments to reconcile net (loss)/income to net
cash provided by operating activities
Non-cash compensation charge 6,314,000 -- -- --
Depreciation 345,884 50,678 92,746 82,988
Amortization of other assets 49,873 -- -- --
Deferred income taxes (90,559) -- (69,295) 5,363
Net (gain)/loss on sale of assets (22,523) 1,320 19,636 3,526
Effect of changes in assets and liabilities 10,185 (94,090) (23,012) (65,840)
Assets acquired at a discount 7,307 -- -- --
---------- ---------- ---------- ----------
Net cash provided by operating activities 876,607 171,737 333,957 233,953
---------- ---------- ---------- ----------
Cash flows from investing activities:
Net additions to property, plant and equipment (453,768) (166,124) (327,039) (255,454)
Other assets (acquired)/disposed (704,117) (16,502) 22,053 (5,188)
Decrease/(increase) in loans to related companies 145,823 (280) 45,241 94,418
Acquisition of subsidiaries (net of cash of $4,746) (4,498,043) -- -- --
---------- ---------- ---------- ----------
Net cash used in investing activities (5,510,105) (182,906) (259,745) (166,224)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Net borrowings/(repayments) in bank overdraft 135,941 119,473 (26,269) (24,815)
Net (repayments)/borrowings of long term debt (1,525,613) 93,202 93,618 68,616
Net (repayments)/borrowings in loans from related
parties (880,034) -- 30,473 (66,408)
Net repayments of loans from stockholders 137,656 -- -- --
Net borrowings/(repayments) in short term debt 1,954,673 -- 81,972 (11,835)
Net proceeds on stock issues 9,197,446 -- -- --
---------- ---------- ---------- ----------
Net cash provided by financing activities 9,020,069 212,675 179,794 (34,442)
---------- ---------- ---------- ----------
Effect of exchange rate changes as cash (448,787) (9,783) (16,573) (31,301)
---------- ---------- ---------- ----------
Net increase in cash on hand 3,937,784 191,723 237,433 1,986
Cash on hand at beginning of period 744,251 552,528 315,095 313,109
---------- ---------- ---------- ----------
Cash on hand at end of period 4,682,035 744,251 552,528 315,095
========== ========== ========== ==========
</TABLE>
F-7
<PAGE>
FIRST SOUTH AFRICA CORP., LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
[PART 1 OF 2]
<TABLE>
<CAPTION>
Capital stock Capital Capital Capital in
First South Stock LS Stock excess of par
Africa Corp., Capital in Pressings Starpak (Pty) Starpak (Pty)
Ltd. excess of par (Pty) Ltd. Ltd. Ltd.
$ $ $ $ $
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at February 28, 1993 -- -- 460,978 1,010 746,790
Net income -- -- -- -- --
Translation adjustment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at February 28, 1994 -- -- 460,978 1,010 746,790
Net income -- -- -- -- --
Translation adjustment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at February 28, 1995 -- -- 460,978 1,010 746,790
Net income -- -- -- -- --
Translation adjustment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1995 -- -- 460,978 1,010 746,790
Issuance of stock to acquire predecessor,
Starpak and LS Pressings 150 1,208,628 (460,978) (1,010) (746,790)
Issuance of stock to acquire subsidiary
companies 98 1,840,365 -- -- --
Other stock issues 28 260,024 -- -- --
Proceeds on First South Africa Corp.,
Ltd. stock issues 41,425 9,896,646 -- -- --
Share issue expenses written off -- (1,000,677) -- -- --
Escrow stock released -- 6,314,000 -- -- --
Subsidiary assets acquired at a discount -- -- -- -- --
Net loss -- -- -- -- --
Translation adjustment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1996 41,701 18,518,986 -- -- --
=========== =========== =========== =========== ===========
</TABLE>
[PART 2 OF 2]
<TABLE>
<CAPTION>
Income Foreign
restricted as currency
Retained to translation
earnings distribution adjustments Total
$ $ $ $
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at February 28, 1993 1,114,526 -- (795,948) 1,527,356
Net income 207,916 -- -- 207,916
Translation adjustment -- -- (154,446) (154,446)
----------- ----------- ----------- -----------
Balance at February 28, 1994 1,322,442 -- (950,394) 1,580,826
Net income 313,882 -- -- 313,882
Translation adjustment -- -- (66,052) (66,052)
----------- ----------- ----------- -----------
Balance at February 28, 1995 1,636,324 -- (1,016,446) 1,828,656
Net income 213,829 -- -- 213,829
Translation adjustment -- -- (24,488) (24,488)
----------- ----------- ----------- -----------
Balance at June 30, 1995 1,850,153 -- (1,040,934) 2,017,997
Issuance of stock to acquire predecessor,
Starpak and LS Pressings -- -- -- --
Issuance of stock to acquire subsidiary
companies -- -- -- 1,840,463
Other stock issues -- -- -- 260,052
Proceeds on First South Africa Corp.,
Ltd. stock issues -- -- -- 9,938,071
Share issue expenses written off -- -- -- (1,000,677)
Escrow stock released -- -- -- 6,314,000
Subsidiary assets acquired at a discount -- 7,307 -- 7,307
Net loss (5,737,560) -- (5,737,560)
Translation adjustment -- -- (847,277) (847,277)
----------- ----------- ----------- -----------
Balance at June 30, 1996 (3,887,401) 7,307 (1,888,211) 12,792,376
=========== =========== =========== ===========
</TABLE>
F-8
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
1. ORGANIZATION
First South Africa Corp., Ltd. (the "Company") was founded on September 6, 1995.
The purpose of the Company is to make investments in South African companies.
The predecessor to the Company was the combined entity under common control,
Starpak (Proprietary) Limited and its subsidiary companies and LS Pressings
(Proprietary) Limited.
On January 24, 1996, subsequent to an initial public offering and in terms of an
agreement reached before the initial public offering, the Company acquired 100%
of the common stock of the business combination of Starpak (Proprietary) Limited
and its subsidiary companies and LS Pressings (Proprietary) Limited. The
acquisition was accounted for using the purchase method of accounting at net
book value at date of acquisition.
On January 24, 1996, also subsequent to the initial public offering and also in
terms of an agreement reached before the initial public offering, the Company
acquired 100% of the common stock of Europair Africa (Proprietary) Limited for
an aggregate net purchase price of $1,029,206. The acquisition was accounted for
using the purchase method of accounting. The assets and liabilities were taken
over at fair market value as determined by management.
EUROPAIR AFRICA (PTY) LTD.
$
---------
Acquisition costs
Stock issued in lieu of cash 399,638
Cash consideration 629,568
---------
Purchase price to be allocated 1,029,206
=========
Summary allocation of purchase price
Current assets 1,582,299
Property, plant and equipment 1,598,128
Deferred income taxes 21,398
Goodwill 91,150
---------
Total assets acquired 3,292,975
---------
Current liabilities 923,688
Long term debt 1,196,636
Loans from related parties 143,445
---------
Total liabilities assumed 2,263,769
---------
Excess of assets over liabilities assumed 1,029,206
=========
F-9
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
1. ORGANIZATION (CONTINUED)
On June 3, 1996 the Company acquired 100% of the common stock of the business
combination of Piemans Pantry (Proprietary) Limited and Surfs-Up Investments
Limited for an aggregate net purchase price of $5,314,045.
The acquisition was accounted for using the purchase method of accounting. The
assets and liabilities were taken over at fair market value as determined by
management.
PIEMANS PANTRY (PTY) LTD.
AND SURFS-UP INVESTMENTS (PTY) LTD.
$
---------
Acquisition costs
Stock issued in lieu of cash 1,440,825
Cash consideration 3,630,796
Other direct expenses 242,424
---------
Purchase price to be allocated 5,314,045
Summary allocation of purchase price
Current assets 2,594,124
Property, plant and equipment 3,988,033
Stockholders loans 137,656
Recipes and other intellectual property 2,829,299
Goodwill 12,483
---------
Total assets acquired 9,561,595
Current liabilities 1,984,686
Loans to related companies 478,680
Long term debt 1,735,632
Deferred income taxes 48,552
---------
Total liabilities assumed 4,247,550
Excess of assets over liabilities assumed 5,314,045
=========
2. PRINCIPLE ACTIVITIES OF THE GROUP
The principle activities of the group include the business of manufacturing,
servicing and selling packaging machines, receiving rental income, manufacture
of washers for use in the fastener industry, manufacture and supply of
air-conditioning products and the manufacture, sale and distribution of both
ready to eat and ready for bake off pastry related food products.
F-10
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
3. SUMMARY OF ACCOUNTING POLICIES
The consolidated and combined financial statements have been prepared in
accordance with US generally accepted accounting principles and incorporate the
following significant accounting policies.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company, First
South Africa Corp., Ltd. and its subsidiaries. All subsidiaries are wholly owned
and no minority interests exist. Material intercompany transactions have been
eliminated on consolidation.
The combined financial statements include the financial statements of Starpak
(Proprietary) Limited, its wholly owned subsidiaries, Levy & Smith Properties
(Proprietary) Limited and Michael Levy Family Holdings (Proprietary) Limited and
LS Pressings (Proprietary) Limited, as they are entities under common control.
All significant intercompany balances and transactions have been eliminated.
ACCOUNTING ESTIMATES
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities at the date of the
financial statements, disclosure of contingent liabilities at the financial
statement date and reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
EARNINGS PER SHARE
Earnings per share for the Company on common shares is based on net income and
reflects dilutive effects of any stock options which exists at year end.
INTANGIBLE ASSETS
Goodwill resulting from acquisitions, and recipes and other intellectual
property is being amortized on a straight line basis over a period of twenty to
twenty five years. If facts and circumstances were to indicate that the carrying
amount of goodwill, recipes and other intellectual property is impaired the
carrying amount would be reduced to an amount representing the discounted future
cash flows to be generated by the operation. Also included in intangible assets
are non-competition agreements relating to the Europair acquisition which are
being amortized on a straight line basis over a six year term of the agreements.
The company has adopted Statement of Financial Accounting Standards No. 121
("SFAS 121") Accounting for the impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". No impairments in long-lived assets has
taken place.
F-11
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
3. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
The functional currency of the underlying companies is that of South African
Rands. Accordingly, the following rates of exchange have been used for
translation purposes:
(a) Assets and liabilities are translated into United States Dollars
using the exchange rates at the balance sheet date.
(b) Common stock and capital in excess of par are translated into United
States Dollars using historical rates at date of issuance.
(c) Revenue, expenses, gains and losses are translated into United States
Dollars using the weighted average exchange rates for each year.
The resultant translation adjustments are reported in the component of
shareholders' investment designated as "Foreign currency translation
adjustment".
F-12
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
3. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to reduce its exposure to
fluctuations in foreign exchange rates by creating offsetting positions through
the use of derivative financial instruments. The market risk related to the
foreign exchange option is offset by changes in the valuation of the underlying
profits being hedged.
The option premium is accounted for on the accrual basis, and is amortized over
the option term. The notional amount of the option is the amount bought or sold
at maturity. Notional amounts are indicative of the extent of the Company's
involvement in the use of derivative financial instruments and are not a measure
of the company's exposure to credit or market risks through its use of
derivatives.
FOREIGN ASSETS AND LIABILITIES
Transactions in foreign currencies arise as a result of inventory purchases from
foreign countries and intercompany funding transactions between the subsidiaries
and First South Africa Corp., Ltd. Transactions in foreign currencies are
accounted for at the rates ruling on transaction dates. Exchange gains and
losses are charged to the income statement during the period in which they are
incurred. Foreign assets and liabilities of the group which are not denominated
in United States Dollars are converted into United States Dollars at the
exchange rates ruling at the financial year end or at the rates of forward cover
purchased. Forward cover is purchased to hedge the currency exposure on foreign
liabilities.
INVENTORIES
Inventories are valued at the lower of cost and net realizable value, using both
the first-in, first-out and the weighted average methods. The value of
work-in-progress and finished goods includes an appropriate portion of
manufacturing overheads.
PROPERTY, PLANT AND EQUIPMENT
Land is stated at cost and is not depreciated. Buildings are depreciated on the
straight line basis over estimated useful lives of 50 years.
Buildings, plant and equipment, and motor vehicles are written off over their
estimated useful lives to each asset's residual value.
The following rates are considered appropriate:
PERCENTAGE
Buildings 2%
Plant and equipment 10-33%
Motor vehicles 20%
F-13
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
3. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Income tax expense is based on reported earnings before income taxes. Deferred
income taxes represent the impact of temporary differences between the amounts
of assets and liabilities recognized for financial reporting purposes and such
amounts recognized for tax purposes. Deferred taxes are measured by applying
currently enacted tax laws.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As at June 30 1996, the carrying value of accounts receivable, accounts payable
and investments approximate their fair value.
REVENUES
Revenues comprise net invoiced sales of washers, manufactured packaging
machines, spares and service charges, food products, air conditioning systems,
fans and related accessories, and rental income. Combined revenues exclude sales
to group companies. The Company recognizes revenues on an accrual basis.
4. INVENTORIES
Inventories consists of the following:
JUNE 30, JUNE 30
1996 1995
$ $
---------- ----------
Finished goods 2,077,679 1,481,124
Work-in-progress 272,377 185,140
Raw materials 501,562 390,852
Supplies 93,055 --
---------- ----------
Inventories (gross) 2,944,673 2,057,116
Less: Valuation allowances (433,805) (824,388)
---------- ----------
Inventories (net) 2,510,868 1,232,728
========== ==========
F-14
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
ACCUMULATED NET BOOK NET BOOK
COST DEPRECIATION VALUE VALUE
JUNE 30 JUNE 30, JUNE 30, JUNE 30,
1996 1996 1996 1995
$ $ $ $
---------- ---------- ---------- ----------
Land and buildings 2,713,473 (17,147) 2,696,326 845,479
Plant and equipment 3,463,121 (1,415,524) 2,047,597 372,244
Vehicles 1,789,905 (687,241) 1,102,664 316,579
Capital work in progress 1,033,835 -- 1,033,835 --
---------- ---------- ---------- ----------
9,000,334 (2,119,912) 6,880,422 1,534,302
========== ========== ========== ==========
Depreciation 345,884 50,678
======= ======
Certain assets of the company are encumbered as security for the liabilities of
the group (Refer note 11)
6. GOODWILL
Goodwill consists of the following:
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
JUNE 30, JUNE 30, JUNE 30,
1996 1996 1996
$ $ $
------- ------- -------
Goodwill arising on acquisitions 414,610 (6,069) 408,541
======= ======= =======
7. RECIPES AND OTHER INTELLECTUAL PROPERTY
Recipes and other intellectual property consists of the following:
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
JUNE 30, JUNE 30, JUNE 30,
1996 1996 1996
$ $ $
------- ------- -------
Recipes and other intellectual property 2,858,011 (9,479) 2,848,532
========= ========= =========
F-15
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
8. OTHER ASSETS
Other assets consists of the following:
ACCUMULATED NET BOOK NET BOOK
COST AMORTIZATION VALUE VALUE
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1996 1996 1995
$ $ $ $
-------- -------- -------- --------
Loans to shareholder 84,768 -- 84,768 --
Non competition agreements 115,842 (8,992) 106,850 --
Derivative financial instruments 152,000 (25,332) 126,668 --
Other -- -- -- 16,224
-------- -------- -------- --------
352,610 34,324 318,286 16,224
======== ======== ======== ========
Derivative financial instruments consist of a purchased foreign currency option
with a notional amount of South African Rands (ZAR) 25,000,000 with a strike
price of ZAR5 to $1. The option term is twelve months and expires on May 2,
1997.
F-16
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
9. LOAN TO RELATED COMPANY
JUNE 30, 1996 JUNE 30, 1995
$ $
------- -------
Michael Levy Family Holdings (Proprietary) Limited -- 145,823
======= =======
The terms of this loan have changed with the closing of the initial public
offering. The loan has been revalued and disclosed as loans to shareholders, and
is unsecured, interest free and repayable on February 28, 1998.
10. BANK OVERDRAFT FACILITIES
The Company has general short term unsecured banking facilities, which are
renewable annually, of $2,460,437 available. These facilities bear interest at
prime lending rates, which is currently 19.5%, and are repayable on demand.
11. SHORT AND LONG TERM DEBT
JUNE 30, 1996 JUNE 30, 1995
$ $
---------- ----------
LONG TERM DEBT
Secured debt
Mortgage loans 1,508,870 561,301
Equipment notes 1,904,980 540,542
Unsecured debt
Unsecured notes 125,214 --
---------- ----------
3,539,064 1,101,843
Less: Current portion (1,177,692) (147,126)
---------- ----------
Total long term debt 2,361,372 954,717
========== ==========
SHORT TERM DEBT
Current portion of long term debt 1,177,692 147,126
Trade finance loan 924,107 --
---------- ----------
2,101,799 147,126
========== ==========
F-17
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
11. SHORT AND LONG TERM DEBT (CONTINUED)
MORTGAGE LOANS
Mortgage loans are secured by first and second mortgage bonds over property.
These loans are generally repayable in equal instalments of $27,568 over periods
ranging from five to twenty years and bear interest at rates ranging from 12% to
18.5%. Generally these interest rates are linked to the prime lending rate which
is currently at 19.5%.
EQUIPMENT NOTES
Equipment notes are secured over movable assets. These loans are generally
repayable in equal monthly instalments over a maximum period of five years.
These loans bear interest at rates ranging from 16.9% to 2% above the prime
lending rate, which is currently 19.5%.
UNSECURED NOTES
Unsecured notes bear interest at the prime lending rate, which is currently
19.5%, and have no fixed repayment terms. These notes have been included in the
current portion of long term liabilities.
TRADE FINANCE LOAN
The trade finance loan is denominated in United States Dollars and is repayable
within 90 days. This loan is covered forward by a forward exchange contract and
bears interest at 6.5625%. This facility is made available to the group by the
companies bankers as a significant part of the general short term banking
facilities. (see note 10)
The following is a schedule of repayments of long term liabilities by year of
repayment
YEAR ENDED JUNE 30, 1996 $
------------------------ -----------
1997 543,812
1998 537,723
1999 476,208
2000 274,749
Thereafter 528,880
---------
2,361,372
12. LOAN FROM RELATED COMPANY
JUNE 30, 1996 JUNE 30, 1995
$ $
------- -------
Trumetric Washers (Proprietary) Limited -- 257,909
======= =======
This loan was repaid from cash generated by operations. This loan was unsecured
and interest free.
F-18
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
13. INCOME RESTRICTED AS TO DISTRIBUTION
This represents the excess of assets acquired over liabilities assumed in the
purchase of the assets and liabilities of operating entities. This amount is not
distributable until such time as the assets so acquired are disposed. There are
no restrictions on the future income of the Company.
14. OPERATING LEASES
The group has several operating leases over land and buildings. These leases
generally expire within the next five years. These leases generally contain
renewal options at the fair market value at the date of renewal.
In most cases, management expects that in the normal course of business, leases
will be renewed or replaced by other leases.
The following is a schedule of future minimum rental payments required under
operating leases that have initial or remaining non-cancelable lease terms in
excess of one year as of June 30, 1996:
YEAR ENDED JUNE 30, 1996 $
- ------------------------ ---------
1997 337,690
1998 553,677
1999 431,237
2000 35,047
Thereafter 2,233
---------
1,359,884
The following schedule shows the composition of total rental expense for all
operating leases except those with terms of a month or less:
FOUR MONTHS YEAR ENDED YEAR ENDED
YEAR ENDED JUNE 30, FEBRUARY 28, FEBRUARY 28,
JUNE 30, 1996 1995 1995 1994
$ $ $ $
------- ------- ------- -------
Minimum rentals 415,815 25,562 78,730 98,135
======= ======= ======= =======
15. OTHER INCOME
Other income includes interest received, proceeds from insurance claims, bad
debts recovered, commissions received and profits on sale of assets.
F-19
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
16. INCOME TAXES
Income taxes are accounted for under Statement of Financial Standards No. 109
"Accounting for Income Tax" ("SFAS 109"), an asset and liability method. SFAS
109 requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the tax bases
and financial reporting bases of the Company's assets and liabilities. In
addition, SFAS 109 requires the recognition of future tax benefits such as net
operating loss carryforwards, to the extent realization of such benefit is more
likely than not.
The provision for income taxes charged to continuing operations was as follows:
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, FEBRUARY 28, FEBRUARY 28,
1996 1995 1995 1994
$ $ $ $
-------- -------- -------- --------
Current
South African normal 848,006 145,216 291,853 108,040
-------- -------- -------- --------
Total current taxes 848,006 145,216 291,853 108,040
-------- -------- -------- --------
Deferred
South African normal (359,388) -- (69,295) 5,363
-------- -------- -------- --------
Total deferred taxes (359,388) -- (69,295) 5,363
-------- -------- -------- --------
Provision for taxes on income 488,618 145,216 222,558 113,403
======== ======== ======== ========
Deferred tax asset at June 30, is comprised of the following:
JUNE 30, 1996 JUNE 30, 1995
$ $
-------- --------
Fixed assets 346,961 58,956
Prepaid expenditure 12,245 --
-------- --------
Gross deferred tax liabilities 359,206 58,956
-------- --------
Accruals (372,447) (69,101)
Deposits received on equipment sales (60,309) --
-------- --------
Gross deferred tax assets (432,756) (69,101)
-------- --------
Net deferred tax asset (73,550) (10,145)
======== ========
F-20
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
16. INCOME TAXES (CONTINUED)
The provision for taxes on income differs from the amount of income tax
determined by applying the applicable South African statutory income tax rate to
pre-tax income from continuing operations as a result of the following
differences:
The Company reflects a net loss position of $5,248,942 before taxation. However,
there is a recorded tax charge as $6,743,000 of the loss before taxation
consists of expenditure not allowable for tax purposes, including a charge of
$6,314,000 for the non cash compensation charge. The balance of the expenditure
not allowable for tax purposes is incurred mainly in Bermuda, where no taxation
laws are in existence. After eliminating non allowable expenditure, the tax rate
reconciliation is as follows:
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, FEBRUARY 28, FEBRUARY 28,
1996 1995 1995 1994
% % % %
-------- --------- --------- --------
<S> <C> <C> <C> <C>
South African Statutory tax rate 35 35 35 40
Capital allowances (2) -- -- --
Disallowable expenditure 1 5 1 2
Transitional levy -- -- 6 --
Tax rate adjustment -- -- (2) (3)
Non taxable income (1) -- -- --
Other -- -- 1 (4)
--- --- --- ---
Effective tax rate 33 40 41 35
=== === === ===
</TABLE>
F-21
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
17. CASH FLOWS
The changes in assets and liabilities consist of the following:
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, FEBRUARY 28, FEBRUARY 28,
1996 1995 1995 1994
$ $ $ $
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
(Increase)/decrease in trade accounts
receivable (756,684) 36,382 (989,374) (22,786)
Decrease/(increase) in inventories 146,179 (357,614) 13,759 (189,278)
(Increase)/decrease in prepaid
expenses and other current assets (134,650) (146,445) 15,906 5,453
Increase in trade accounts payable 360,265 91,094 97,479 49,638
(Decrease)/increase in other provisions
and accruals (38,785) 127,573 659,078 178,901
Decrease in dividends payable -- -- -- (90,242)
Increase in income taxes payable 433,860 154,920 180,140 2,474
-------- -------- -------- --------
10,185 (94,090) (23,012) (65,840)
======== ======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid 865,733 18,801 152,163 180,960
======== ======== ======== ========
</TABLE>
18. EMPLOYMENT BENEFITS
The Company participates in various retirement benefit funding plans and medical
aid plans for the benefit of its employees.
All of the retirement benefit funds are defined contribution plans and by nature
of the funds there can be no unfunded obligations or responsibility on the
employer. The only obligation of the Company is the contribution to these
schemes which generally ranges from 6% to 9% of the employees annual earnings.
Amounts charged to pension costs and contributed by the Company to the funds
were as follows:
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, FEBRUARY 28, FEBRUARY 28,
1996 1995 1995 1994
$ $ $ $
----------- --------- ---------- ---------
Pension costs 99,028 37,440 84,438 77,508
====== ====== ====== ======
F-22
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
18. EMPLOYMENT BENEFITS (CONTINUED)
The group and employees participate in various medical aid schemes which provide
medical cover for employees on an annual basis. Neither the medical aid nor the
group are liable for post retirement medical costs. The contributions to the
medical aid are borne equally by the employee and the group except for a few
salaried employees where the company is responsible for 100% of the
contribution. The Company has no liability for employees medical costs in excess
of the contributions to the medical fund.
Amounts charged to medical aid costs and contributed by the Company were as
follows:
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, FEBRUARY 28, FEBRUARY 28,
1996 1995 1995 1994
$ $ $ $
----------- --------- ---------- ---------
Medical aid costs 242,186 42,366 123,233 156,981
======= ====== ======= =======
19. PROFIT SHARE
Management receive an annual bonus, determined at the discretion of the board of
directors. The amounts paid to management were as follows:
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, FEBRUARY 28, FEBRUARY 28,
1996 1995 1995 1994
$ $ $ $
----------- --------- ---------- ---------
Medical aid costs 140,828 - 294,307 86,031
======= ======= ======= ======
F-23
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
20. EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with, the president and
chief executive officer of the Company. In terms of the agreement he receives an
annual salary of $180,000 and options to purchase 55,000 shares of common stock
at an exercise price of $5 per share. In addition he has been granted additional
options to purchase 150,000 shares of common stock of the Company at an exercise
price of $5 per share exercisable after the seventh anniversary of the grant
date, providing that the vesting of such options will be accelerated as follows:
i) 50,000 options will be exercisable on such earlier date that the Company
realizes earnings per share of $0.75 or more on a fiscal year basis, ii) an
additional 50,000 options will be exercisable on such earlier date that the
Company realizes earnings per share of $1.00 or more on a fiscal year basis and
iii) an additional 50,000 options will be exercisable on such earlier date that
the Company realizes earnings per share of $1.50 or more on a fiscal year basis.
The Company intends to pay an annual incentive bonus of five percent of the
Minimum pre-tax income above $4,000,000, as shall be reported in the Company's
audited financial statements for each fiscal year in which the president is
employed, exclusive of any extraordinary earnings or charges which would result
from the release of the earnout escrow shares.
The Company has entered into an employment agreement with the managing director
of the company. In terms of the agreement he receives an annual salary of
$150,000. He has been granted options to purchase 150,000 shares of First South
African Holdings (Proprietary) Limited class B common stock at an exercise price
of R13.05 per share exercisable after the fifth anniversary of the grant date,
providing that the vesting of such options will be accelerated as follows: i)
30,000 options will be exercisable on such earlier date that the Company
realizes earnings per share of $0.75 or more on a fiscal year basis, ii) an
additional 50,000 options will be exercisable on such earlier date that the
Company realizes earnings per share of $1.00 or more on a fiscal year basis and
iii) an additional 70,000 options will be exercisable on such earlier date that
the Company realizes earnings per share of $1.50 or more on a fiscal year basis.
The Company intends to pay an annual incentive bonus of four percent of the
Minimum pre-tax income above $5,000,000, as shall be reported in the Company's
audited financial statements for each fiscal year in which the managing director
is employed, exclusive of any extraordinary earnings or charges which would
result from the release of the earnout escrow shares.
F-24
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
21. STOCK OPTION PLAN
The board of directors have adopted the Company's 1995 Stock Option Plan. The
stock option plan provides for the grant of i) options that are intended to
qualify as incentive stock options (Incentive Stock Options) within the meaning
of Section 422 of the code to key employees and ii) options not so intended to
qualify ("Nonqualified Stock Options") to key employees (including directors and
officers who are employees of the Company, and to directors and consultants who
are not employees ). The total number of shares of common stock for which
options may be granted under the stock option plan is 350,000 shares.
The Stock Option Plan is to be administered by the Compensation Committee of the
Board of Directors. The committee shall determine the terms of the options
exercised, including the exercise price, the number of shares subject to the
option and the terms and conditions of exercise. No options granted under the
Stock Option Plan are transferable by the optionee other than by the will or the
laws of descent and distribution and each option is exercisable during the
lifetime of the optionee only by such optionee or his legal representatives.
The exercise price of Incentive Stock Options granted under the plan must be at
least equal to the fair market value of such shares on the date of the grant
(110% of fair market value in the case of an optionee who owns or is deemed to
own more than 10% of the voting rights of the outstanding capital stock of the
company or any of its subsidiaries). The maximum term for each Incentive Stock
Option granted is ten years (five years in the case of an optionee who owns or
is deemed to own more than 10% of the voting rights of the outstanding capital
stock of the company or any of its subsidiaries). Options shall be exercisable
at such times and in such instalments as the committee shall provide in the
terms of each individual option. The maximum number of shares for which options
may be granted to any individual in any fiscal year is 210,000.
The Stock Option Plan also contains an automatic option grant program for the
non-employee directors. Each non-employee director of the Company on January 24,
1996 (other than Graham B.R. Collis and Anthony D. Whaley) was granted an option
of 5,000 shares of common stock. Thereafter, each person who is a non-employee
director of the Company following an annual meeting of shareholders will
automatically be granted an option for an additional 5,000 shares of common
stock. Each grant will have an exercise price per share equal to the fair market
value of the common stock on the grant date and will have a term of five years
measured from the grant date, subject to earlier termination if an optionee's
service as a board member is terminated for cause.
The Company has granted options to purchase 75,000 shares of common stock under
the Plan as described below:
<TABLE>
<CAPTION>
OPTIONS PER SHARE
NAME GRANTED EXERCISE PRICE EXPIRATION DATE EXERCISABLE
- ---- ------- -------------- --------------- -----------
<S> <C> <C>
Stock options issued during 1996 75,000 $ 5.00 January 24, 2001 Immediately
</TABLE>
F-25
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
22. EARNOUT ESCROW SHARES
In terms of the underwriting agreement, the Company arranged with the president
and chief executive officer to contribute a total of 1,100,000 shares into
escrow in terms of the earnout escrow agreement. These shares were to be
released based on the attainment of a pre-set Net income before income taxes
target. If the targets were not attained the earnout escrow shares would have
been canceled. This target was attained based on the unaudited proforma profit
and loss resulting in the release of these shares from escrow and resulted in a
non-cash compensation charge to the profit and loss account for the period ended
June 30, 1996 of $6,314,000. This was a fourth quarter event after the
acquisition of the business combination of Piemans Pantry (Pty) Ltd and Surfs-Up
Investments (Pty) Ltd.
23. WARRANTS OUTSTANDING
In terms of the initial public offering, each unit issued consisted of one share
of common stock, one redeemable Class A warrant and one redeemable Class B
warrant. In addition, an additional 100,000 warrants were issued to the
underwriter in terms of the underwriting agreement. Concurrently with the
initial public offering the selling security holder offered 650,000 selling
security holder warrants, 650,000 selling security holder Class B warrants
issuable upon exercise of the selling security holder warrants and 1,300,000
shares of common stock issuable upon exercise of these selling security holder
warrants and selling security holder Class B warrants. These selling security
holder warrants are identical to the Class A warrants, except that there are
certain restrictions imposed upon the transferability of these warrants.
Warrants outstanding at June 30, 1996 were as follows:
<TABLE>
<CAPTION>
NUMBER OF
WARRANT WARRANTS EXERCISE PRICE EXPIRY DATE ENTITLEMENT
------- -------- -------------- ----------- -----------
<S> <C> <C>
Class A Redeemable January 24, 2001 One share of common stock
Warrants 2,300,000 $6.50 and one Class B warrant
Class B Redeemable One share of common stock
Warrants 2,300,000 $8.75 January 24, 2001
Selling Security Holder 650,000 $6.50 January 24, 2001 One share of common stock
Warrants and one Class B warrant
</TABLE>
The Class A warrants are redeemable beginning January 24, 1997, or earlier at
the option of the Company with the underwriter's consent, at a redemption price
of $0.05 per Class A Warrant, if the "closing price" of the Company's common
stock trades at an average price in excess of $9.10 per share for any
consecutive 30 trading day period, ending within 15 days of the notice of
redemption. All class A warrants are to be redeemed if any are to be redeemed.
The Class B warrants are redeemable beginning January 24, 1997, or earlier at
the option of the Company with the underwriters consent, at a redemption price
of $0.05 per Class B Warrant, if the "closing price" of the Company's common
stock trades at an average price in excess of $12.25 per share for any
consecutive 30 trading day period, ending within 15 days of the notice of
redemption. All Class B warrants are to be redeemed if any are to be redeemed.
F-26
<PAGE>
FIRST SOUTH AFRICA CORP., LTD. AND ITS SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED JUNE 30, 1996, FOUR MONTHS ENDED JUNE 30, 1995 AND
THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
24. FIRST SOUTH AFRICAN HOLDINGS ESCROW AGREEMENT
The First South African Holdings (FSAH) escrow agreement was executed prior to
the closing of the offering and provided for the concurrent issuance and
delivery of 729,979 shares of Class B common stock to the FSAH escrow agent. The
FSAH escrow agreement is intended to provide security for the holders of First
South African Holdings (Pty) Ltd Class B common stock, who are residents in
South Africa and are prohibited in terms of South African law from holding
shares in a foreign company. The FSAH escrow agreement provides that the parties
to this agreement that are holders of FSAH Class B common stock will not sell
such shares of stock, but may tender the shares to the FSAH escrow agent against
payment therefore by the escrow agent, which payment may consist of the proceeds
obtained from the sale of an equal number of Class B common stock of the
Company, provided that the proceeds of the sale will be delivered to the holder
of the Class B common stock in exchange for the shares in First South African
Holdings (Pty) Ltd. These shares will be tendered to the Company and they will
be immediately converted to FSAH Class A common stock.
Included in the First South Africa Corp., Ltd. Class B issued common stock is
1,061,558 First South Africa Holdings (Proprietary) Limited Class B common
stock, in terms of this escrow arrangement.
25. CONTINGENT LIABILITIES
South African Secondary Tax on Companies at 12.5 percent is payable on all
future dividends declared out of distributable reserves.
A contingent purchase consideration for the acquisition of Europair existed at
year end. This contingency was met and resulted in an additional payment to the
previous shareholders of approximately $80,861 which occurred subsequent to year
end.
A contingent purchase consideration for the acquisition of the Business
Combination of Piemans Pantry (Proprietary) Limited and Surf-Up Investments
(Proprietary) Limited, is payable based on the pre-tax profit of the Business
Combination as follows:
FIRST INSTALMENT
Four times pre-tax profit for the year ending February 28, 1997
multiplied by twenty percent, which is then increased by 18.75%, to
take into account the interest cost of the delayed payment.
SECOND INSTALMENT
Four times pre-tax profit for the year ending February 28, 1998
multiplied by twenty percent, which is then increased by 18.75%, to
take into account the interest cost of the delayed payment.
These instalments will be settled in part by the issue of First South African
Holdings (Proprietary) Limited Class B common stock and in part by a cash
consideration.
F-27
<PAGE>
====================================== ========================================
NO DEALER, SALESMAN OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF FIRST SOUTH AFRICA CORP., LTD.
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN 2,300,000 SHARES OF COMMON STOCK
OFFER TO BUY, ANY SECURITIES OFFERED 2,300,000 REDEEMABLE CLASS B WARRANTS
HEREBY BY ANYONE IN ANY JURISDICTION (UNDERLYING THE EXERCISE OF
IN WHICH SUCH OFFER OR SOLICITATION IS OUTSTANDING CLASS A WARRANTS)
NOT AUTHORIZED OR IN WHICH THE PERSON 4,600,000 SHARES OF COMMON STOCK
MAKING SUCH OFFER OR SOLICITATION IS (UNDERLYING THE EXERCISE OF
NOT QUALIFIED TO DO SO OR TO ANYONE TO OUTSTANDING CLASS B WARRANTS)
WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER, OR SOLICITATION.
-----------
TABLE OF CONTENTS
PAGE
Prospectus Summary...................3
Summary Financial Information........7
Cautionary Statement Regarding ----------------------------
Forward Looking Information.........8
Risk Factors.........................8
Use of Proceeds.....................15
Dividend Policy.....................15 PROSPECTUS
Capitalization......................16
Market For Registrant's Common
Equity and Related Stockholder
Matters............................17 ----------------------------
Dilution............................19
Selected Historical and Pro
Forma Condensed
Combined Financial Data............20
ProForma Financial Information......20
Management's Discussion and
Analysis of Financial Condition
and Results of Operations..........22
Business............................29
South Africa........................34
Management..........................37
Certain Transactions................43
Principal Shareholders..............47
Concurrent Offering.................48
Description of Securities...........49
Certain Tax Considerations..........55
Shares Eligible for Future Sale.....61
Warrant Solicitation Fee ..........63
Legal Matters.......................63 , 1996
Experts.............................64
Enforceability of Civil Liabilities.64
Additional Information..............64
Index to Consolidated Financial
Statements.........................F-1
-----------
====================================== ========================================
<PAGE>
================================================================================
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
================================================================================
[ALTERNATE PROSPECTUS PAGE]
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1996
PROSPECTUS
FIRST SOUTH AFRICA CORP., LTD.
650,000 Shares of Common Stock and
650,000 Class B Warrants Underlying the exercise of
Class A Warrants and 650,000
Shares of Common Stock underlying the
exercise of Class B Warrants
This Prospectus relates to 650,000 shares of Common Stock, $.01 par
value ("Common Stock") underlying the exercise of Class A Warrants (the "Selling
Securityholder Warrants" or the "Class A Warrants") of First South Africa Corp.,
Ltd., a Bermuda corporation (the "Company"), held by 40 holders (the "Selling
Securityholders"), 650,000 Class B Warrants ("Class B Warrants") underlying the
exercise of the Selling Securityholder Warrants, and 650,000 shares of Common
Stock underlying the exercise of such Class B Warrants. The Selling
Securityholder Warrants and the Class B Warrants are referred to herein
collectively as the "Warrants" and the securities issuable upon exercise of the
Selling Securityholder Warrants, together with the Selling Securityholder
Warrants, are sometimes collectively referred to herein as the "Selling
Securityholder Securities." The Selling Securityholder Warrants were issued to
the Selling Securityholders in exchange for warrants they received in a private
placement by the Company in November 1995 (the "Bridge Financing"). See "Selling
Securityholders" and "Plan of Distribution." Each Selling Securityholder Warrant
entitles the holder to purchase, at an exercise price of $6.50, subject to
adjustment, one share of Common Stock and one Class B Warrant, and each Class B
Warrant entitles the holder to purchase, at an exercise price of $8.75, subject
to adjustment, one share of Common Stock. The Warrants are exercisable through
January 24, 2001 provided that the Selling Securityholders have agreed not to
exercise the Selling Securityholder Warrants until January 24, 1997. Beginning
January 24, 1997 the Warrants are subject to redemption by the Company for $.05
per Warrant, upon 30 days' written notice, if the average closing bid price of
the Common Stock exceeds $9.10 per share with respect to the Class A Warrants
and $12.25 per share with respect to the Class B Warrants (subject to adjustment
in each case) for 30 consecutive business days ending within 15 days of the date
of the notice of redemption. See "Description of Securities."
The Common Stock and the Company's Class B Common Stock, $.01 par
value (the "Class B Common Stock") of the Company are essentially identical,
except that the Class B Common Stock has five votes per share and the Common
Stock has one vote per share on all matters upon which stockholders may vote.
The Class B Common Stock is convertible into Common Stock automatically upon any
sale or transfer, except to certain permitted transferees. See "Principal
Stockholders" and "Description of Securities."
The securities offered by the Selling Securityholders by this
Prospectus may be sold from time to time by the Selling Securityholders or by
their transferees. The distribution of the Class A Warrants, Common Stock and
the Class B Warrants offered hereby by the Selling Securityholders may be
effected in one or more transactions that may take place on the over-the-counter
market, including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Securityholders.
The Selling Securityholders, and intermediaries through whom such
securities are sold, may be deemed underwriters within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company has agreed to indemnify the
Selling Securityholders against certain liabilities, including liabilities under
the Securities Act.
The Company will not receive any of the proceeds from the sale of
securities by the Selling Securityholders. In the event the Class A Warrants and
Class B Warrants are exercised, the Company will receive gross proceeds of
$4,225,000 and $5,687,500, respectively. See "Selling Securityholders" and "Plan
of Distribution."
On the date of this Prospectus, a Post-Effective Amendment to the
Registration Statement under the Securities Act with respect to an offering by
the Company of 2,300,000 shares of Common Stock and 2,300,000 Class B Warrants
(underlying the exercise of outstanding Class A Warrants) and 4,600,000 shares
of Common Stock (underlying the exercise of Class B Warrants), was declared
effective by the Securities and Exchange Commission (the "Commission"). The
Company will receive approximately $14,147,500 in net proceeds from such
offering (assuming no exercise of the Class B Warrants) after payment of the
Warrant Solicitation Fee and estimated expenses of such offering.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE OF THIS PROSPECTUS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
SELLING SECURITYHOLDERS
An aggregate of up to 650,000 Shares of Common Stock underlying the
exercise of 650,000 Class A Warrants, 650,000 Class B Warrants underlying the
exercise of such Class A Warrants and 650,000 shares of Common Stock underlying
the exercise of such Class B Warrants may be offered for resale by investors who
received their Class A Warrants in exchange for warrants received in the Bridge
Financing.
The following table sets forth certain information with respect to
each Selling Securityholder for whom the Company is registering the Selling
Securityholder Securities for exercise and/or resale to the public. The Company
will not receive any of the proceeds from the sale of such securities. To the
Company's knowledge, there are no material relationships between any of the
Selling Securityholders and the Company, nor have any such material
relationships existed within the past three years.
<TABLE>
<CAPTION>
NUMBER OF CLASS A NUMBER OF CLASS A
WARRANTS BENEFICIALLY WARRANTS BENEFICIALLY
OWNED AND MAXIMUM OWNED AND MAXIMUM
NUMBER TO BE SOLD NUMBER TO BE SOLD
SELLING SECURITYHOLDERS AND/OR EXERCISED (1) SELLING SECURITYHOLDERS AND/OR EXERCISED (1)
----------------------- -------------------- ----------------------- --------------------
<S> <C> <C>
Eric C. Appolonia 12,500 Charles McManus 12,500
Howard Berg 12,500 Grace and Ruby O'Steen 12,500
Robert Burke 12,500 Orion Research 6,250
C.A. Simmons Assoc. 6,250 Anthony Pace 12,500
Nathan and Rose Eisen 25,000 Poseidon Capital Pension 12,500
Arnold D. Flam DDS and 12,500 and Profit Sharing Plan
Harvey Glicker DDS Profit Pierre and Claire Pype 6,250
Sharing Plan Marc Roberts and 50,000
Goldstein Family Loving 25,000 Ron Cantor
Trust
Morton Goulder 25,000 Jesse Roggen 12,500
Harold Greenberg 12,500 Jack and Fred Rosen 12,500
Stuart Gruber 12,500 The Rubin Family 12,500
Jerome Grushkin, P.C. 25,000 Foundation, Inc.
Defined Benefit Plan Alan Rubin 25,000
Gulfstream Asset 12,500 August Saccoccio 12,500
Management
Corp. Retirement Trust Abraham Schreiber 12,500
Robert and Carole Juranek 12,500 Richard Schreiber 6,250
Maureen Kassel 25,000 E. Donald Shapiro 25,000
Regina Lehrer 12,500 Harold Singer 12,500
George Lionikis, Sr. 12,500 Leonard Solomon 6,250
Ronald Manzo 6,250 Carl and Beverly Weinman 12,500
William and Rose 25,000 Joel Wolff 50,000
Marginson
Marque of Distinction, Inc. 12,500 Herman L. Zeller Living 12,500
Trust
Retirement Trust Seymour Zisook 25,000
---------
Total: 650,000
</TABLE>
- -----------
(1) Does not include shares of Common Stock issuable upon exercise of the
Class A Warrants and issuable upon exercise of the Class B Warrants
issuable upon exercise of the Class A Warrants. The Selling
Securityholders have agreed not to exercise the Class A Warrants
being offered hereby for a period of one year from the date hereof.
None of the Selling Securityholders beneficially own in excess of 1%
of the outstanding shares of Common Stock after the Offering.
A-2
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
PLAN OF DISTRIBUTION
The sale of the securities by the Selling Securityholders may be
effected from time to time in transactions (which may include block transactions
by or for the amount of the Selling Securityholders) in the over-the-counter
market or in negotiated transactions, through the writing of options on the
securities, a combination of such methods of sale or otherwise. Sales may be
made at fixed prices which may be changed, at market prices prevailing at the
time of sale, or at negotiated prices.
The Selling Securityholders may effect such transactions by selling
their securities directly to purchasers, through broker-dealers acting as agents
for the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
Each Selling Securityholder has agreed not to exercise the Selling
Securityholder Warrants for a period of one year ending January 24, 1997.
Purchasers of the Selling Securityholder Warrants will not be subject to such
restrictions.
Under applicable rules and regulations under the Securities Exchange
Act of 1934 ("Exchange Act"), any person engaged in the distribution of the
Selling Securityholder Warrants may not simultaneously engage in market making
activities with respect to any securities of the Company for a period of at
least two (and possibly nine) business days prior to the commencement of such
distribution. Accordingly, in the event that D.H. Blair, the underwriter of the
Company's initial public offering, or D.H. Blair & Co., Inc., a selling group
member which distributed substantially all of the Units offered in connection
with the Company's initial public offering ("Blair"), is engaged in a
distribution of the Selling Securityholder Warrants, neither of such firms will
be able to make a market in the Company's securities during the applicable
restrictive period. However, neither D.H. Blair nor Blair have agreed to nor are
either of them obliged to act as broker/dealer in the sale of the Selling
Securityholder Warrants and the Selling Securityholders may be required, and in
the event Blair is a market maker, will likely be required, to sell such
securities through another broker/dealer. In addition, each Selling
Securityholder desiring to sell Warrants will be subject to the applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of the purchases and sales of shares of the Company's securities by
such Selling Securityholders.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
A-3
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Post-Effective Amendment to the
Registration Statement under the Securities Act with respect to an offering by
the Company of 2,300,000 shares of Common Stock and 2,300,000 Class B Warrants
(underlying the exercise of outstanding Class A Warrants) and 4,600,000 shares
of Common Stock (underlying the exercise of Class B Warrants), was declared
effective by the Commission. The Company will receive approximately $14,147,500
in net proceeds from such offering (assuming no exercise of the Class B
Warrants) after payment of the Warrant Solicitation Fee and estimated expenses
of such offering.
A-4
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
====================================== ========================================
NO DEALER, SALESMAN OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE 650,000 SHARES OF COMMON STOCK AND
COMPANY OR BY THE UNDERWRITER. THIS 650,000 CLASS B WARRANTS
PROSPECTUS DOES NOT CONSTITUTE AN EXERCISE OF THE UNDERLYING
OFFER TO SELL, OR A SOLICITATION OF AN CLASS A WARRANTS AND 650,000 SHARES OF
OFFER TO BUY, ANY SECURITIES OFFERED COMMON STOCK UNDERLYING THE EXERCISE OF
HEREBY BY ANYONE IN ANY JURISDICTION CLASS B WARRANTS
IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER, OR SOLICITATION.
----------- -----------
TABLE OF CONTENTS PROSPECTUS
PAGE -----------
----
Prospectus Summary..................
Summary Financial Information.......
Risk Factors........................
Use of Proceeds.....................
Dividend Policy.....................
Capitalization......................
Selected Historical and Pro Forma
Condensed Combined Financial Data..
ProForma Financial Information......
Management's Discussion and Analysis
of Financial Condition and Results
of Operations......................
Business............................
South Africa........................
Management..........................
Certain Transactions................
Principal Shareholders.............. , 1996
Selling Securityholders.............
Plan of Distribution................
Concurrent Public Offering..........
Description of Securities...........
Certain Tax Considerations..........
Shares Eligible for Future Sale.....
Underwriting........................
Legal Matters.......................
Experts.............................
Enforceability of Civil Liabilities.
Additional Information..............
Index to Consolidated Financial
Statements......................F-1
-----------
====================================== ========================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
It is estimated that the following expenses will be incurred in
connection with the proposed offering hereunder. All of such expenses will be
borne by the registrant.
Registration fee - Securities and Exchange Commission......... $ 0
NASD filing fee............................................... 0
Legal fees and expenses....................................... 25,000.00
Accounting fees and expenses.................................. 15,000.00
Blue sky fees and expense (including counsel fees)............ 5,000.00
Printing expenses............................................. 5,000.00
Miscellaneous................................................. 5,000.00
----------
Total............................................ $55,000.00
==========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Bermuda law and the registrant's Memorandum of Association and
bye-laws, the directors, officers, liquidators and auditors of the registrant
and their heirs, executors and administrators are indemnified and held harmless
out of the assets of the Company from and against all actions, costs, charges,
losses and expenses which they or any of them, their heirs, executors or
administrators, shall or may incur or sustain by or by reason of any act done,
concurred in or omitted in or about the execution of their duty, or supposed
duty, or in their respective offices or trusts, and none of them shall be
answerable for the acts, receipts, neglects or defaults of the others of them or
for joining in any receipts for the sake of conformity or for any loss,
misfortune or damage which may happen in the execution of their respective
offices or trusts, or in relation thereto, provided that they are not entitled
to indemnification in respect of any willful negligence, willful default, fraud
or dishonesty which may attach to them.
For information concerning indemnification provisions between the
registrant and the underwriter, reference is made to Section 7 of the
Underwriting Agreement filed as Exhibit 1.1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) In September, 1995, the registrant issued 1,212,521 shares of
Class B Common Stock to Clive Kabatznik in consideration of a set-off against
$12,125.21 of organizational expenses with respect to the Company incurred by
Mr. Kabatznik. The registrant believes that such transaction is exempt from
registration provisions of the Securities Act of 1933, as amended (the "Act") in
reliance upon Section 4(2) of the Act.
(b) In November 1995, the registrant completed the Bridge Financing
of $1,300,000 principal amount of Notes and 650,000 Bridge Warrants. The
registrant believes that such Bridge Financing is exempt from the registration
provisions of the Act in reliance upon Regulation D promulgated under Section
4(2) of the Act. D.H. Blair Investment Banking Corp. earned a commission equal
to $130,000 and a non-accountable expense allowance of $39,000.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
1.1 Form of Underwriting Agreement
1.2 Form of Custody Agreement
3.1 Memorandum of Association of the Registrant
3.2 Bye-Laws of the Registrant
4.1 Form of Bridge Note
4.2 Form of Warrant Agreement
4.3 Form of Unit Purchase Option
5.1 Opinion of Conyers, Dill & Pearman
8.1 Tax Opinion of Webber Wentzel Bowens
10.1 Starpak Acquisition Agreements
10.2 Starpak Escrow Agreement
10.3 L.S. Pressings Acquisition Agreements
10.4 L.S. Pressings Escrow Agreement
10.5 Europair Acquisition Agreements
10.6 Europair Escrow Agreement
10.7 Form of Escrow Agreement regarding the Earnout Escrow
Shares
10.8 Form of FSAH Escrow Agreement
10.9 Form of Employment Agreement of Clive Kabatznik
10.10 Form of FSAM Management Agreement
10.11 Form of Consulting Agreement with Michael Levy
10.12 Form of Consulting Agreement with Global Capital Limited
10.13 1995 Stock Option Plan
10.14 Form of Addendum to Starpak Acquisition Agreement
10.15 Form of Addendum to L.S. Pressings Acquisition Agreement
10.16 Form of Addendum to Europair Acquisition Agreement
10.17* Form of Piemans Pantry Acquisition Agreement
10.18* Form of Piemans FSAH Escrow Agreements
10.19* Astoria Acquisition Agreement
21.1 Subsidiaries of the Registrant
23.1* Consent of Price Waterhouse
23.2* Consent of Conyers, Dill & Pearman
23.3* Consent of Parker Chapin Flattau & Klimpl, LLP
23.4* Consent of Webber Wentzel Bowens
24.1 Power of Attorney of certain officers and directors of the
Company
- -----------
* Filed herewith.
All other Exhibits have been previously filed.
(b) Financial Statement Schedules
Pro Forma Financial Statement Schedules included as applicable
related to consolidated financial statements of the registrant.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information, set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to provide to the
underwriter, at the closing specified in the underwriting agreement included in
Exhibit 1.01 hereto, certificates in such denominations and registered in such
names as required by the Underwriters to permit delivery to each purchaser.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 14
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes that:
II-3
<PAGE>
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(f) The registrant hereby undertakes to furnish to the Securities and
Exchange Commission, upon request, all constituent instruments defining the
rights of holders of long-term debt of the registrant and its consolidated
subsidiaries not filed herewith. Such instruments have not been filed since none
are, nor are being, registered under Section 12 of the Securities Exchange Act
of 1934 and the total amount of securities authorized under any such instruments
does not exceed 10% of the total assets of the registrant and its subsidiaries
on a consolidated basis.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Coconut Grove, State of Florida, on the 12th day of November, 1996.
FIRST SOUTH AFRICA CORP., LTD.
By: /S/ CLIVE KABATZNIK
-------------------------------
Clive Kabatznik
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
* Chairman of the Board of
- ------------------------ Directors November 12, 1996
Michael Levy President, Vice Chairman, Chief
/S/ CLIVE KABATZNIK Executive Officer, Chief Financial
- ------------------------ Officer, Director and Controller November 12, 1996
Clive Kabatznik
* Director November 12, 1996
- ------------------------
Charles S. Goodwin
* Director November 12, 1996
- ------------------------
John Mackey
* By: /S/ CLIVE KABATZNIK
-------------------------
Clive Kabatznik
Attorney in Fact
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
1.1 Form of Underwriting Agreement
1.2 Form of Custody Agreement
3.1 Memorandum of Association of the Registrant
3.2 Bye-Laws of the Registrant
4.1 Form of Bridge Note
4.2 Form of Warrant Agreement
4.3 Form of Unit Purchase Option
5.1 Opinion of Conyers, Dill & Pearman
8.1 Tax Opinion of Webber Wentzel Bowens
10.1 Starpak Acquisition Agreements
10.2 Starpak Escrow Agreement
10.3 L.S. Pressings Acquisition Agreements
10.4 L.S. Pressings Escrow Agreement
10.5 Europair Acquisition Agreements
10.6 Europair Escrow Agreement
10.7 Form of Escrow Agreement regarding the Earnout Escrow
Shares
10.8 Form of FSAH Escrow Agreement
10.9 Form of Employment Agreement of Clive Kabatznik
10.10 Form of FSAM Management Agreement
10.11 Form of Consulting Agreement with Michael Levy
10.12 Form of Consulting Agreement with Global Capital Limited
10.13 1995 Stock Option Plan
10.14 Form of Addendum to Starpak Acquisition Agreement
10.15 Form of Addendum to L.S. Pressings Acquisition Agreement
10.16 Form of Addendum to Europair Acquisition Agreement
10.17* Form of Piemans Pantry Acquisition Agreement
10.18* Form of Piemans FSAH Escrow Agreements
10.19* Astoria Acquisition Agreement
21.1 Subsidiaries of the Registrant
23.1* Consent of Price Waterhouse
23.2* Consent of Conyers, Dill & Pearman
23.3* Consent of Parker Chapin Flattau & Klimpl, LLP
23.4* Consent of Webber Wentzel Bowens
24.1 Power of Attorney of certain officers and directors of the
Company
- -----------
*Filed herewith.
All other Exhibits have been previously filed.
SALE OF SHARES AGREEMENT
among
JOHN WELCH
("WELCH")
and
HEINZ ANDREAS
("ANDREAS")
and
MICHAEL MORGAN
("MORGAN")
(collectively "THE SELLERS")
and
FIRST SOUTH AFRICAN HOLDINGS (PROPRIETARY) LIMITED
(Registration No. 95/03959/07)
("THE PURCHASER")
and
FIRST SOUTH AFRICA CORP., LTD
("FSAC")
- --------------------------------------------------------------------------------
<PAGE>
in respect of the entire issued share capital of
PIEMANS PANTRY (PROPRIETARY) LIMITED
(Registration No. 95/02034/07)
("THE COMPANY")
and
SURFS-UP INVESTMENTS (PROPRIETARY) LIMITED
(Registration No. 95/02046/07)
("PROPCO")
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
1. Introduction
2. Status of this agreement
3. Suspensive conditions
4. Preparation of the February 1996 accounts
5. Sale of the shares
6. Risk in the shares
7. Purchase price
8. Adjustments to and manner of payment of the first instalment
9. Delivery of the shares and other documents
10. Calculation, time and manner of payment of the second instalment
11. Calculation, time and manner of payment of the third instalment
12. Restrictions on disposal of FSAH "B" shares
13. Put option
14. Warranty by the purchaser
15. Escrow of sale shares
16. Confidentiality
17. Warranties
17.1 warranty regarding registration
17.2 warranties regarding capital structure and the shares
17.3 warranties regarding financial position, assets and liabilities
17.3.1 auditing and returns
17.3.2 change in financial position
17.3.3 capital expenditure
17.3.4 dividends
17.3.5 liabilities
17.3.6 assets
17.3.7 debtors
17.4 warranty regarding suretyships
17.5 warranties regarding the business of the Company
17.5.1 manner of carrying on business
<PAGE>
17.5.2 goodwill and scope of business
17.5.3 contracts
17.5.4 intellectual property rights
17.5.5 laws, regulations, consents, licences and permits
17.5.6 labour laws, regulations, determinations, agreements and
disputes
17.5.7 insurance
17.5.8 employment, leave, remuneration and pension
17.5.9 restraint of trade
17.5.10 resolutions
17.6 warranty regarding litigation
17.7 warranties regarding statutory requirements
17.8 warranties regarding books of account and minutes
17.9 warranties regarding taxation
17.9.1 definition
17.9.2 administration
17.9.3 balance sheet
17.9.4 deductible payments
17.9.5 stamp duty
17.9.6 tax avoidance and donations
17.10 environmental warranties
17.11 disclosure
18. Sale of business
19. Breach
20. Miscellaneous matters
20.1 postal address
20.2 address for service of legal documents
20.3 entire contract
20.4 no representations
20.5 variation, cancellation and waiver
20.6 cession
20.7 applicable law
<PAGE>
20.8 jurisdiction
20.9 costs
20.10 indulgences
Schedule 1 - Heads of Agreement
Schedule 2 - Management agreement
Schedule 3 - Disclosure Schedule
<PAGE>
1. INTRODUCTION
1.1 The Company and Propco are private companies registered and
incorporated according to the laws of the Republic of South
Africa.
1.2 The sellers own all of the issued shares of the Company and
Propco and have claims on loan account against the Company and
Propco. The Company carries on business as a manufacturer,
distributor and retailer of frozen and chilled food. Propco is
the registered owner of Erven 160 and 161 Boltonia Ext 1
Krugersdorp, from which the business of the Company is
conducted.
1.3 The purchaser is a South African company and is a subsidiary
of FSAC, a Bermuda company the shares of which are listed on
NASDAQ.
1.4 The parties entered into binding heads of agreement on 22
February 1996, a copy of which is annexed as Schedule 1, ("THE
HEADS"), pursuant to which the sellers have agreed to sell and
the purchaser has agreed to purchase the entire issued share
capital of the Company and Propco.
1.5 The heads provide that they shall be amplified into a full
legal agreement on terms and conditions normal in the context
of a sale of shares, and the parties accordingly wish to
expand the heads into a full legal agreement on the terms and
conditions set out below.
2. STATUS OF THIS AGREEMENT
This agreement supersedes the heads with effect from its date of
signature by the last-signing of the parties, ("THE SIGNATURE DATE").
<PAGE>
3. SUSPENSIVE CONDITIONS
3.1 This rights and obligations of the parties, (other than those
contained in this clause and in clauses 4, 16, 20 and 21) are
subject to the fulfilment of the following suspensive
conditions ("THE CONDITIONS") by no later than 31 May 1996 or
such other date as may be determined pursuant to 3.3, ("THE
FULFILMENT DATE"):
3.1.1 a due diligence investigation to be conducted by
the purchaser into the affairs of the Company and
Propco yielding results reasonably satisfactory to
the purchaser. Without limitation the purchaser shall
not be obliged to declare itself satisfied with the
results of the due diligence investigation if it is
dissatisfied with the nature and extent of
encumbrances on assets of the Company or Propco or
with the accrued leave entitlements of employees of
the Company;
3.1.2 completion of the audit and the preparation of the
audited financial statements of the Company for the
year ended 29 February 1996 ("THE FEBRUARY 1996
ACCOUNTS") in accordance with clause4;
3.1.3 the consent of the Industrial Development Corporation
to the transactions contemplated in this agreement,
in a form and substance reasonably satisfactory to
the purchaser and
3.1.4 the conclusion of a management agreement between
Messrs. Welch, Morgan, the purchaser and the Company
substantially in the form of the draft attached as
Schedule 2.
3.2 Each of the parties shall use its reasonable endeavours to
procure fulfilment of the conditions.
<PAGE>
3.3 The conditions are for the benefit of the purchaser. The
purchaser may, by written notice to the sellers given no later
than 31 May 1996, be entitled to waive, or extend the period
for, the fulfilment of any of the conditions, provided that
the period shall not, save by agreement, be extended beyond
30June 1996.
3.4 If any of the conditions fail (and fulfilment thereof is not
waived in terms of 3.3), the rights and obligations of the
parties, save for those contained in this clause and in
clauses 4, 16, 20 and 21, shall cease to be of any further
force and effect and the parties shall be restored as nearly
as may be possible to the positions in which they would have
been had this agreement not been entered into. No party shall
have any claim against any other as a result of the failure of
the conditions, except for such claims, if any, as may result
from a breach of the provisions of this clause.
3.5 The condition set out in 3.1.1 shall be deemed to be fulfilled
unless the due diligence investigation reveals factors or
circumstances not disclosed to the purchaser in writing as at
the signature date, and which in the purchaser's reasonable
opinion materially affect the value of the Company.
4. PREPARATION OF THE FEBRUARY 1996 ACCOUNTS
The sellers warrant that:-
4.1 the February 1996 accounts shall be prepared and audited by
Price Waterhouse:-
4.1.1 on a basis consistent with all prior years;
<PAGE>
4.1.2 in accordance with generally accepted accounting
practice and the Companies Act 61 of 1973, as
amended;
4.1.3 in such a way as to fairly and accurately present the
results of operations of the business of the Company
for the period 1 March 1995 to 29 February 1996; and
4.2 the February 1996 accounts shall not be qualified in any way
by Price Waterhouse.
5. SALE OF THE SHARES
5.1 The sellers sell and assign and the purchaser purchases and
takes assignment, with effect from 1 March 1996, ("THE
EFFECTIVE DATE"), of:-
5.1.1 the entire issued share capital of the Company,
comprising 100 ordinary par value shares of R1,00
each, ("THE PIEMAN'S SALE SHARES");
5.1.2 the claims of the sellers on loan account against the
Company, ("THE PIEMAN'S CLAIMS");
broken down by seller as follows:-
Seller No. of Pieman's sale shares
Welch 45
Andreas 45
Morgan 10
5.1.3 the entire issued share capital of Propco, comprising
100 ordinary par value shares of R1,00 each, ("THE
PROPCO SALE SHARES"); and
<PAGE>
5.1.4 the claims of the sellers on loan account against
Propco;
broken down by seller as follows: -
Seller No. of Propco sale shares
Welch 45
Andreas 45
Morgan 10
5.2 Notwithstanding the date on which this agreement is signed,
the sale will be deemed to have taken effect on, and to have
been with effect from, the effective date.
5.3 All monies payable to the sellers pursuant to this agreement
shall be paid to the sellers in the ratio that the numbers of
their sale shares bear to each other, as set out above. All
loan accounts shall be purchased at their face value plus
accumulated unpaid interest. The balance of the purchase price
shall be allocated to the Pieman's sale shares and the Propco
sale shares in the discretion of the purchaser.
5.4 The sellers shall not, from the signature date, withdraw any
amounts from their loan accounts with either the Company or
Propco unless they simultaneously notify the purchaser in
writing of the amount so withdrawn. Any amount so withdrawn
and not repaid together with interest at 14% per annum, shall
be deducted from the cash portion of the first instalment of
the purchase price.
<PAGE>
6. RISK IN THE SHARES
The risk in and benefit of the Pieman's sale shares, the Propco sale
shares, the Propco claims and the Pieman's claims will be deemed to
have passed to the purchaser on the effective date.
7. PURCHASE PRICE
7.1 The purchase price of the Pieman's sale shares, the Propco
sale shares, the Propco claims and the Pieman's claims shall
be the aggregate of the following instalments, as adjusted
pursuant to 8, 10 and 11-
7.1.1 an initial instalment of R24645000, payable on the
closing date (as defined in 9) in accordance with 8,
("THE FIRST INSTALMENT");
7.1.2 a second instalment, payable in accordance with 10,
determined in accordance with the formula
P2 = (4 x PTZ97 x 20%) x 1,01875
where
P2 is the value of the second instalment;
PTZ97 is the pre-tax profit of the Company for its
financial year ended 28 February 1997 as specified in
the audited financial statements of the Company for
that financial year, ("THE FEBRUARY 1997 ACCOUNTS");
("THE SECOND INSTALMENT");
<PAGE>
7.1.3 a third instalment, payable in accordance with 11,
determined in accordance with the formula
P3 = (4 x PTZ98 x 20%) x 1,01875
where
P3 is the value of the third instalment;
PTZ98 is the pre-tax profit of the Company for its
financial year ended 28 February 1998 as specified in
the audited financial statements of the Company for
that financial year, ("THE FEBRUARY 1998 ACCOUNTS"),
as adjusted pursuant to 11.4;
("THE THIRD INSTALMENT").
8. ADJUSTMENTS TO AND MANNER OF PAYMENT OF THE FIRST INSTALMENT
8.1 The sellers warrant to the purchaser that:-
8.1.1 the February 1996 accounts will reflect a pre-tax
profit for that financial year of not less than
R8000000; and
8.1.2 the net asset value of the Company derived from the
February 1996 accounts will exceed the net asset
value of the Company as at 28 February 1995, derived
from the audited financial statements of the Company
for the year ended 28 February 1995, ("THE FEBRUARY
1995 ACCOUNTS") by not less than R4940000.
<PAGE>
8.2 For the purposes of this agreement "net asset value" shall
mean total tangible assets (excluding revaluations) less total
liabilities.
8.3 In the event that the February 1996 accounts reflect a pre-tax
profit for that financial year of less than R7600000 the value
of the Company on which the first instalment is calculated
will be reduced by R4,15 for every R1,00 by which the actual
pre-tax profit of the Company, as derived from the February
1996 accounts, falls short of R8000000. There shall be no
reduction if the pre-tax profit falls between R7600000 and
R8000000.
8.4 In the event of a breach of the warranty set out in 8.1.2, the
positive difference between R4940000 and the actual increase
in the net asset value of the Company between 28 February 1995
and 29 February 1996, as derived from the February 1995
accounts and the February 1996 accounts, shall be deducted on
a Rand for Rand basis from the value of the first instalment,
as reduced, (if at all) pursuant to 8.3, and shall be set off
against the cash portion of that instalment referred to in
8.5.
8.5 The first instalment shall be paid on the closing date, (as
defined in 9) as follows:-
8.5.1 the purchaser will issue to the sellers 331579 "B"
ordinary shares ("FSAH "B" SHARES") valued at $5,00
per share, converted into Rand for the purposes of
this agreement at a fixed exchange rate of R3,80 per
US Dollar, giving a Rand value of R6300001;
<PAGE>
8.5.2 the balance of the first instalment, reduced as
contemplated in this clause8, in cash, provided that
if the value of the first instalment after reductions
effected pursuant to 8.3 and 8.4 is less than
R6300001 the number of FSAH "B" shares to be issued
to the seller will be reduced by one for every R19,00
or part thereof by which the value of the first
instalment falls short of R6300001.
9. DELIVERY OF THE SHARES AND OTHER DOCUMENTS
9.1 On the 3 June 1996, ("THE CLOSING DATE") representatives of
each of the ---------------- sellers and the purchaser will
meet at the offices of Price Waterhouse, 90 Rivonia Road,
Sandton, and:
9.1.1 the sellers will deliver to the purchaser:
9.1.1.1 share certificates in respect of the Piemans
sale shares and the Propco sale shares,
accompanied by share transfer forms signed
and dated that day by the registered
shareholders and blank as to transferee;
9.1.1.2 certified copies of such shareholders'
and/or directors' resolutions, and such
other documents, as may be necessary -
9.1.1.2.1 to sanction the sale and transfer of the
Piemans sale shares and the Propco sale
shares to the purchaser;
9.1.1.2.2 to appoint Mr Clive Kabatznik as a director
of the Company;
<PAGE>
9.1.1.2.3 to waive any pre-emptive or other rights
which any person may have in relation to the
Piemans sale shares and the Propco sale
shares;
9.1.1.2.4 to amend the articles of association of the
Company to allow Mr Kabatznik and other
directors of the Company appointed by the
purchaser from time to time as many votes,
at each directors' meeting, as all of the
other directors of the Company together,
plus one vote; and
9.1.2 the purchaser will pay the first instalment of the
purchase price to the seller in accordance with 8.
9.2 In the event that the purchaser fails to pay the cash portion
of the first instalment on the closing date, the cash portion
of the first instalment shall bear interest from 4 June 1996
to date of payment, (which shall be no later than 3 July
1996), both days inclusive.
9.3 On the closing date and at the premises the sellers shall also
place the purchaser in possession of all books and records of
the Company, including, without limitation, the memorandum and
articles of association of the Company, its certificate of
incorporation, its certificate to commence business and all
contracts, documents, books, tax records and any other
relevant records of the Company.
10. CALCULATION, TIME AND MANNER OF PAYMENT OF THE SECOND INSTALMENT
10.1 The second instalment will be paid as to 62,5% in cash and as
to 37,5% by the issue by the purchaser to the sellers of FSAH
"B" shares.
<PAGE>
10.2 The aggregate number of FSAH "B" shares to be issued by the
purchaser to the sellers pursuant to 10.1 shall be determined
by dividing 37,5% of the value of the second instalment by the
price of the FSAH "B" shares which shall be determined as
follows:-
10.2.1 if profit before taxation of the Company for the year
ended 28 February 1997, as determined by reference to
the February 1997 accounts ("THE FEBRUARY 1997
PROFIT") exceeds R10000000 the FSAH "B" shares will
be allotted and issued at the lower of:-
10.2.1.1 R19,00 per share; and
10.2.1.2 a Rand price determined by multiplying the
US Dollar-denominated quoted price of the
NASDAQ listed shares of FSAC at close of
business on 28 February 1997 by an exchange
rate of US$1,00 = R3,80;
10.2.2 if the February 1997 profit is less than R10000000
the number of FSAH "B" shares to be issued by the
purchaser to the sellers shall be determined by
reference to the price of the FSAH "B" shares which
for the purposes of this sub-clause shall be the
greater of:-
10.2.2.1 R19,00 per share; and
<PAGE>
10.2.2.2 a Rand price determined by multiplying the US Dollar
denominated price of the NASDAQ listed shares of FSAC
at close of business on 28 February 1997 by the
average between the spot buy and sell rates of Rand
for US Dollars quoted by the Standard Bank of South
Africa on 28 February 1997. In the event of any
dispute about these rates a certificate of any branch
or more senior manager of The Standard Bank, whose
designation it shall not be necessary to prove shall
be proof of the rates until the contrary is proved.
10.3 For purposes of determining the price at which the FSAH "B"
shares are to be issued pursuant to 10.2, the February 1997
profit shall be augmented by up to R400000 by any profit for
the financial year ended 29 February 1996, in excess of
R8000000.
10.4 Payment of the second instalment shall be made on 31 May 1997
or within 14 days of the finalisation of the February 1997
accounts and their signature by the directors of the Company,
(whichever date is the later), by paying the cash portion in
cash and delivering to the sellers share certificates
evidencing the "B" shares to be issued to them. The parties
shall use all reasonable endeavours to ensure that such
accounts are finalised and signed by the directors of the
Company by no later than 17 May 1997.
10.5 Should payment of the second instalment of the purchase price
be delayed beyond 31 May 1997, the cash portion of the second
instalment shall bear interest from 1 June 1997 to date of
payment, both days inclusive, at the call rate quoted by The
Standard Bank of South Africa Limited on amounts equal to the
cash portion of the
<PAGE>
purchase price, as certified by any manager of that bank whose
designation it shall not be necessary to prove and whose
determination of the rate shall be proof thereof until the
contrary is proved.
11. CALCULATION, TIME AND MANNER OF PAYMENT OF THE THIRD INSTALMENT
11.1 The third instalment will be paid as to 62,5% in cash and as
to 37,5% by the issue by the purchaser to the sellers of FSAH
"B" ordinary shares.
11.2 The number of FSAH "B" ordinary shares to be issued by the
purchaser to the sellers pursuant to 11.1 shall be determined
by dividing 37,5% of the value of the third instalment by the
price of the FSAH "B" shares which shall be determined as
follows:-
11.2.1 if profit before taxation of the Company for the year
ended 28 February 1998, as determined by reference to
the February 1998 accounts, ("THE FEBRUARY 1998
PROFIT"), exceeds the February 1997 profit by at
least 20%, the FSAH "B" shares will be allotted and
issued at the lower of:-
11.2.1.1 R19,00 per share; and
11.2.1.2 a Rand price determined by multiplying the
US Dollar denominated quoted price of the
NASDAQ listed shares of FSAC at close of
business on 28 February 1998 by an exchange
rate of US$1,00 = R3,80;
11.2.2 if the February 1998 profits exceed the February 1997
profits by more than 10% but less than 20%, the FSAH
"B" shares will be allotted and issued at a price
equal to the greater of:-
<PAGE>
11.2.2.1 R19,00 per share; and
11.2.2.2 a Rand price determined by multiplying the
US Dollar denominated price of the NASDAQ
listed shares of FSAC at close of business
on 28 February 1998 by the average between
the spot buy and sell rates of Rand for US
Dollars quoted by the Standard Bank of South
Africa on 28 February 1998, less a discount
equal to the percentage growth in the
February 1998 profits over the February 1997
profits. In the event of any dispute about
the exchange rates a certificate of any
branch or more senior manager of The
Standard Bank, whose designation it shall
not be necessary to prove shall be proof of
the rates until the contrary is proved;
11.2.3 if the February 1998 profits exceed the February 1997
profits by 10% or less, the FSAH "B" shares will be
allotted and issued at a price equal to the greater
of:
11.2.3.1 R19,00 per share; and
11.2.3.2 a Rand price determined by multiplying the
US Dollar denominated price of the NASDAQ
listed shares of FSAC at close of business
on 28 February 1998 by the average between
the spot buy and sell rates of Rand for US
Dollars quoted by the Standard Bank of South
Africa on 28 February 1998. In the event of
any dispute about the exchange rates a
certificate of any branch or more senior
manager of The Standard Bank, whose
designation it shall not be necessary to
prove, shall be proof of the rates until the
contrary is proved.
<PAGE>
11.3 Payment of the third instalment shall be made on 31 May 1998,
or within 14 days of the finalisation of the February 1998
accounts and their signature by the directors of the Company,
(whichever is the later), by paying the cash portion in cash
and delivering to the sellers share certificates evidencing
the FSAH "B" shares to be issued. The parties shall use all
reasonable endeavours to ensure that such accounts are
finalised and signed by the directors of the Company by no
later than 17 May 1998.
11.4 Notwithstanding the provisions of this clause 11, the pre-tax
profit on which the third instalment is based shall be reduced
if the managing director designate to be employed by the
Company pursuant to clause 4 of the management agreement is
not employed prior to 1 March 1997. The reduction shall be an
amount equal to the additional costs that the Company would
have incurred in remunerating the managing director designate
had he been employed for the full 12 month period ending on 28
February 1998. In addition, and for the purposes of
determining the price at which the FSAH "B" shares are to be
issued pursuant to 11.2, the February 1998 profit shall be
augmented by any profit for the financial year ended
28February1997 in excess of R10000000.
11.5 Should payment of the third instalment of the purchase price
be delayed beyond 31 May 1998, the cash portion of the third
instalment shall bear interest from 1 June 1998 to date of
payment, both days inclusive, at the call rate quoted by The
Standard Bank of South Africa Limited on amounts equal to the
cash portion of the purchase price, as certified by any
manager of that bank whose designation it shall not be
necessary to prove and whose determination of the rate shall
be proof thereof until the contrary is proved.
<PAGE>
12. RESTRICTIONS ON DISPOSAL OF FSAH "B" SHARES
12.1 The sellers undertake that they shall not dispose of or
attempt to dispose of, or cede, pledge, assign or otherwise
encumber any of the FSAH "B" shares forming part of the
purchase price prior to 30 June 1998, provided that, with the
prior written consent of the purchaser (which shall not be
unreasonably withheld) the sellers may transfer, at cost
price, certain of their shares to other senior managers of the
Company. Any such transferee shall also be bound by the
restrictions in the first sentence of this 12.1 and in the
balance of this clause 12.
12.2 In addition, the sellers undertake that they shall not dispose
of or attempt to dispose of, or cede, pledge, assign or
otherwise encumber any of the FSAH "B" shares allotted and
issued to them at a discount to market value, within 1 year
from their date of issue. For the purposes of this sub-clause
"market value" shall mean the the US Dollar denominated price
of the NASDAQ listed shares of FSAC at close of business on
the last day in February of the year in which the shares were
allotted and issued, converted into Rand by multiplying the
dollar price by the average between the spot buy and sell
rates of Rand for US Dollars quoted by the Standard Bank of
South Africa on the applicable last day of February. In the
event of any dispute about the exchange rates a certificate of
any branch or more senior manager of The Standard Bank, whose
designation it shall not be necessary to prove shall be proof
of the rates until the contrary is proved.
12.3 Any sale in contravention of this clause shall be void and the
directors of the purchaser shall not enter the name of the
transferee in the share register of the purchaser or otherwise
recognise any title of the purported purchaser of the shares.
In addition FSAC shall be entitled to purchase the affected
FSAH "B" shares from the defaulting seller at par.
<PAGE>
The rights conferred on FSAC and the obligations imposed on
the sellers shall not prejudice any other rights available to
the Company, FSAC, or the purchaser arising from such breach.
13. PUT OPTION
13.1 FSAC undertakes to procure that a non-resident third party,
("THE OPTION GRANTOR"), will undertake to purchase from the
sellers all of the FSAH "B" shares to be issued by the
purchaser to the sellers pursuant to this agreement, ("THE PUT
OPTION").
13.2 The material terms of the put option will be the following:-
13.2.1 it will only be exercisable when the sellers become
entitled to sell the FSAH "B" shares, determined in
accordance with 12;
13.2.2 the price at which the put option may be exercised
shall be the net price received by the option grantor
from the sale on the open market in the United States
of an equivalent number of shares of FSAC. For this
purpose "net price" shall mean the price for which
the FSAC shares are sold less all costs associated
with the sale, including any broker's commission;
13.2.3 although the put option may be exercised in tranches
each tranche shall comprise a minimum of 100 shares;
13.2.4 for so long as South African exchange control
regulations prescribe that South African residents
shall repatriate foreign currency to South Africa,
the proceeds from any sale of the option shares shall
be payable to the sellers in South Africa.
<PAGE>
14. WARRANTY BY THE PURCHASER
14.1 The purchaser warrants to the sellers that should the sellers
validly exercise the put option prior to 30 September 1998 in
respect of any FSAH "B" shares issued by the purchaser to the
seller in part payment of the first instalment, the gross Rand
value of each FSAH "B" share so sold shall be not less than
R19,00. For this purpose "gross Rand value" shall mean the
actual US Dollar denominated price received by the option
grantor from the sale of the equivalent number of FSAC shares
pursuant to 13.2.2, converted into Rand by multiplying it by
the average between the spot buy and sell rates of Rand for US
Dollars quoted by The Standard Bank of South Africa on that
date. In the event of any dispute about the exchange rates a
certificate of any branch or more senior manager of The
Standard Bank, whose designation it shall not be necessary to
prove, shall be proof of the rates until the contrary is
proved.
14.2 Should the gross Rand value per share of each FSAH "B" share
sold in the circumstances prescribed in 14.1 be less than
R19,00 the cash portion of the first instalment of the
purchase price shall be deemed to have been increased by the
difference between R19,00 and the gross Rand value per share
actually received, multiplied by the number of FSAH "B" shares
sold pursuant to the put option. FSAH shall pay this amount to
the sellers in cash in Rand on demand.
15. ESCROW OF SALE SHARES
15.1 As security only for the payment of the second and third
instalments, the purchaser shall deliver to Webber Wentzel
Bowens, to hold in escrow, the share certificates to be issued
by the Company to the purchaser pursuant to registration of
transfer of the Pieman's sale
<PAGE>
shares and the Propco sale shares into the name of the
purchaser, accompanied by share transfer forms signed by the
purchaser, and blank as to date and transferee, ("THE ESCROW
SHARES").
15.2 The sellers and the purchaser shall procure that they and
Webber Wentzel Bowens shall enter into an escrow agreement in
respect of the escrow shares, the material terms of which will
be the following:-
15.2.1 Webber Wentzel Bowens shall hold the escrow shares in
accordance with the escrow agreement until it
receives written notice signed by the sellers and the
purchaser specifying how the escrow shares are to be
dealt with, and shall deal with the escrow shares in
accordance with such notice;
15.2.2 such notice shall be given by no later than 31 July
1998 if the purchaser pays the second and third
instalments. In these circumstances the notice shall
specify that the escrow shares shall be delivered to
the purchaser;
15.2.3 if the purchaser fails to pay the second instalment
or the third instalment, the notice shall instruct
Webber Wentzel Bowens to deliver the escrow shares to
the sellers and the escrow shares shall be forfeited
to the sellers;
15.2.4 in the event of either party refusing to sign a
notice because of a dispute the dispute shall be
referred to arbitration pursuant to 20 and the
decision of the arbitrator shall be final and binding
on the parties and the notice shall be prepared and
signed in accordance with such decision;
<PAGE>
15.2.5 dividends declared in respect of the escrow shares
shall not be subject to the escrow agreement but
shall be paid directly to the purchaser, but any
further shares issued by the Company to the purchaser
shall be subject to the escrow agreement, as will any
shares arising on a sub-division, consolidation or
other restructure of the share capital of the
Company;
15.2.6 upon delivery of the escrow shares to the sellers
pursuant to a notice in accordance with 15.2.3 the
sellers shall become the owners of the escrow shares
and shall be entitled to procure the re-registration
of the escrow shares into their names; and
15.2.7 the escrow agreement shall contain customary
protections for the escrow agent.
15.3 Should the escrow shares be forfeited to the sellers pursuant
to the provisions of the escrow agreement encompassing the
matters referred to in 15.2.3, this agreement shall be deemed
to have been terminated due to a material unremedied breach by
the purchaser and the sellers shall (in addition to the
forfeiture referred to in 15.2.3), be entitled to retain, as a
genuine pre-estimate of liquidated damages, all cash and FSAH
"B" shares paid to the sellers on account of the purchase
price, but shall have no other claim against the purchaser
arising from such breach or termination. For the avoidance of
doubt it is recorded that the forfeiture of the escrow shares
shall apply only if the second or third instalment is not
paid.
15.4 The provisions of this clause 15 shall not preclude the
Company from borrowing against the assets of the Company, or
from selling, refinancing or otherwise restructuring its
business, or preclude the purchaser from disposing of its
investment in the Company.
<PAGE>
16. CONFIDENTIALITY
16.1 The parties to this agreement acknowledge that each of them
wishes to retain strict confidentiality regarding the
negotiations and the subject matter and contents of this
agreement.
16.2 Each party therefore undertakes to the other party to treat
all negotiations, the content and subject of this agreement
and any other matters relating to this agreement in strict
confidence and not to disclose any provisions of this
agreement to any third party without the prior consent of the
other parties, (which shall not be unreasonably withheld),
except where it is necessary to do so to enforce the
provisions of this agreement.
17. WARRANTIES
The following warranties are, unless otherwise stated in respect of any
warranty, (in which case the specified period shall apply), given as at
the signature date, as at the fulfilment date and for the period
between those dates. The sellers accordingly warrant to the purchaser,
that except as disclosed to the purchaser in Schedule 3 to this
agreement:-
17.1 WARRANTY REGARDING REGISTRATION
17.1.1 Each of the Company and Propco is a private company,
duly registered in accordance with the provisions of
the Companies Act, 1973.
<PAGE>
17.1.2 No steps have been taken or are contemplated in
respect of the Company or Propco in terms of
section73 of the Companies Act 1973 or any
corresponding provision of any legislation in any
other territory.
17.2 WARRANTIES REGARDING CAPITAL STRUCTURE AND THE SHARES
17.2.1 The authorised share capital of each of the Company
and Propco is R1000 divided into 1000 ordinary shares
of R1,00 each.
17.2.2 The issued share capital of each of the Company and
Propco is R100 divided into 100 ordinary shares of
R1,00 each and all such shares of the Company and
Propco are fully paid and rank pari passu in every
respect with all the other shares of the relevant
company , and the sellers are the sole registered and
beneficial owners of all such shares in the numbers
set out in clause5 and are reflected in the register
of members of the Company and Propco as the sole
owners of such shares.
17.2.3 Neither the Company nor its directors nor Propco or
its directors have issued or agreed to issue any
further shares (including bonus and capitalisation
shares) in the capital of the Company or Propco, nor
have they passed or agreed to pass any resolution for
the increase or reduction of the Company's or
Propco's capital, or for the creation or issue of any
debentures or securities, or for the alteration of
the memorandum or articles of association of the
Company or Propco.
17.2.4 The Company's and Propco's share premium accounts, if
any, have not been reduced in any manner and neither
the Company
<PAGE>
nor Propco has transferred any amount from their reserves
(including their share premium accounts) or undistributed
profits to their share capital or their share premium
accounts.
17.2.5 No person has any right or option or right of first
refusal to acquire any shares in the Company or
Propco, nor to subscribe for or take up any of the
unissued shares in the Company or Propco, nor are any
of the shares of the Company or Propco subject to any
lien or other preferential right. In particular, the
sellers warrant that they are entitled to sell the
Pieman's sale shares and the Propco sale shares to
the purchaser and that upon such sale the purchaser
will be the beneficial owner of those shares to the
exclusion of all others.
17.2.6 No person has any right to obtain an order for the
rectification of the register of members of the
Company or Propco.
17.3 WARRANTIES REGARDING FINANCIAL POSITION, ASSETS AND LIABILITIES
17.3.1 AUDITING AND RETURNS
No work remains to be performed, and no expense
remains to be incurred in connection with-
17.3.1.1 the completion and auditing of the Company's
or Propco's financial statements (other than
the accounts for the year ended 29February
1996) in respect of any of their financial
years ended prior to the fulfilment date;
17.3.1.2 the submission of the Company's and Propco's
income tax returns in respect of any of
their financial years ended prior to the
fulfilment date; and
<PAGE>
17.3.1.3 the submission of any other return required
by law to have been submitted by the Company
or Propco to any competent authority prior
to the fulfilment date.
17.3.2 CHANGE IN FINANCIAL POSITION
Between the signature date and the fulfilment date
there will be no material adverse change in the
financial position of the Company or Propco from that
prevailing on the signature date and such change as
there may be will have arisen in the ordinary, normal
and regular course of the Company's or Propco's
business, as the case may be.
17.3.3 CAPITAL EXPENDITURE
neither the Company nor Propco has authorised or
incurred any capital expenditure otherwise than in
the ordinary, normal and regular course of its
business;
17.3.4 DIVIDENDS
17.3.4.1 Neither the Company nor Propco has declared
or paid any dividends in respect of any
period of trading prior to the signature
date which have not been paid in full and
neither company will declare or pay any
dividends prior to the fulfilment date.
17.3.4.2 No person will be entitled to participate in
or to receive a commission on the profits or
dividends of the Company or Propco except as
a shareholder thereof.
<PAGE>
17.3.5 LIABILITIES
At the fulfilment date the Company and Propco will
not have any liabilities of any nature whatsoever,
actual or contingent, other than those incurred in
the normal and regular course of their businesses.
17.3.6 ASSETS
17.3.6.1 The Company and Propco own the assets
necessary for the conduct of their
businesses and have good and marketable
title thereto, and that except for
agreements entered into in the ordinary
course of business no other person has any
rights to or in respect of such assets.
17.3.6.2 The Company's and Propco's assets are in
good order and condition and fully
operational apart from breakdowns (in the
ordinary course) and any loss or damage to
or destruction of such assets beyond the
control of the Company and Propco; provided
that any such loss, damage or destruction
will have been fully insured for the benefit
of the Company or Propco, as the case may
be.
17.3.6.3 None of the assets of the Company or Propco
is subject to any option or right of first
refusal in favour of any person.
<PAGE>
17.3.7 DEBTORS
17.3.7.1 All amounts owing to the Company by its
debtors at the fulfilment date (save for
debtors totalling in aggregate R90000, being
the amount of the Company's normal bad debt
provision will be recovered by the Company
from those debtors in full by no later than
31 August 1996; and, in the event of any
amounts owing by those debtors not being
recovered by such date, those amounts shall
be recoverable from the sellers by the
Company, provided that the purchaser shall
procure that the Company shall cede to the
sellers or their nominees the claims against
the debtors in question. If bad debts are
less than R90 000 the balance shall
contribute to profit.
17.3.7.2 Propco has no debtors other than the Company.
17.4 WARRANTY REGARDING SURETYSHIPS
Neither the Company nor Propco is bound by any suretyship for
the obligations of any person, or by any other guarantee or
indemnity;
17.5 WARRANTIES REGARDING THE BUSINESS OF THE COMPANY AND PROPCO
17.5.1 MANNER OF CARRYING ON BUSINESS
Between the signature date and the fulfilment date-
17.5.1.1 the Company and Propco have continued to
operate in the normal and regular course of
their businesses, and such businesses have
been carried on in a proper and regular
manner;
<PAGE>
17.5.1.2 neither the Company nor Propco has changed
its normal manner and method of carrying on
business;
17.5.1.3 no assets have been acquired or sold
otherwise than in the ordinary, normal and
regular course of the Company's or Propco's
business and without the written consent of
the purchaser.
17.5.2 GOODWILL AND SCOPE OF BUSINESS
At the fulfilment date the Company and Propco will
not have done or omitted to do anything which has or
will-
17.5.2.1 materially prejudice the continued goodwill
of the Company or Propco;
17.5.2.2 reduce the scope of the Company's or
Propco's business;
17.5.2.3 result in any business associate or customer
of the Company or Propco ceasing to transact
business with the Company or Propco or vary
the terms upon which it transacts business
with the Company or Propco.
17.5.3 CONTRACTS
17.5.3.1 All contracts entered into by the Company
and Propco have been entered into under
normal credit terms and are subject to
payment in accordance with those terms.
17.5.3.2 There is no single material contract with a
customer or supplier which is of longer
duration than 6months, and
<PAGE>
the Company and Propco are not party to any
unusual agreement.
17.5.3.3 Neither the Company nor Propco is party to
any contract with any of its directors or
employees requiring more than one month's
notice of termination, or entitling any of
them to compensation on termination of
employment, or to participation in or
entitlement to a commission on profit.
17.5.3.4 Neither the Company nor Propco are party to
any agreement which has not been entered
into on an arms-length basis and on terms
which are normal having regard to the nature
of its business.
17.5.3.5 Copies of all contracts and other documents
submitted to the purchaser in connection
with this agreement, (whether during the
course of the due diligence investigation or
otherwise) fully and correctly reflect all
the terms and conditions thereof, are not
subject to any claim for rectification, and
have not been amended in any respect.
17.5.3.6 Neither the Company nor Propco is in breach
of any agreement entered into between it and
any other person and each of them has
complied in all material respects with its
obligations under such agreements.
17.5.3.7 Neither the Company nor Propco is party to
any agreement requiring the payment of
royalties, or any
<PAGE>
agreement which in any way restricts the
trading or other activities of the Company
or Propco within the Republic of South
Africa.
17.5.3.8 The sellers are not aware of any facts,
matters or circumstances which may give rise
to the cancellation of any of the contracts
to which the Company or Propco is bound as a
result of any breach thereof by the Company
or Propco.
17.5.3.9 The transaction provided for in this
agreement does not constitute a breach of
any of the Company's or Propco's contractual
obligations nor will it entitle any person
to terminate any contract to which the
Company or Propco is a party.
17.5.4 INTELLECTUAL PROPERTY RIGHTS
17.5.4.1 The businesses conducted by the Company and
Propco do not infringe any patent,
copyright, trade mark or other industrial
property rights and no person is entitled to
an order requiring the Company or Propco to
change its name or its trading style, or any
of the marks and designs applied by it to
its products.
17.5.4.2 The trading methods and style used by the
Company and Propco, including any designs,
marks and the like applied in connection
with their businesses, do not constitute an
infringement of the rights of any other
person.
<PAGE>
17.5.4.3 No person is entitled to an order requiring
the Company or Propco to change its name,
its trading style or any of the marks and
designs used by them in their business.
17.5.4.4 The Company and Propco are the owners of the
registered trademarks "Piemans Pantry" and
"Surfs-Up" used by them in their businesses
and have paid all renewals for such
trademarks when due and have not done or
omitted to do anything which may entitle any
third party to bring proceedings for the
expungement of such marks.
17.5.5 LAWS, REGULATIONS, CONSENTS, LICENCES AND PERMITS
17.5.5.1 The Company and Propco have complied with
all laws and regulations affecting their
affairs and businesses, except only to the
extent that any infringement of those laws
and regulations can readily be rectified.
17.5.5.2 The Company and Propco are in possession of
all consents, permits and licences necessary
for the conduct of their businesses and
affairs, and the sellers are not aware of
any facts which may give rise to the
cancellation of, or failure to renew, any
such licences, permits or consents or to
their only being renewed subject to the
imposition of onerous conditions not
presently applicable thereto.
<PAGE>
17.5.6 LABOUR LAWS, REGULATIONS, DETERMINATIONS, AGREEMENTS
AND DISPUTES
17.5.6.1 The Company and Propco have complied with
all wage determinations and industrial
conciliation agreements which apply to them,
their businesses and their employees.
17.5.6.2 The Company and Propco have complied with
the grievance procedures agreed to by them
with regard to grievances of and relations
with their employees.
17.5.6.3 Neither the Company nor Propco has entered
into any recognition agreement with any
labour union.
17.5.6.4 Neither the Company nor Propco is party to
any labour disputes and neither is not
obliged by law, agreement, judgment or order
of court, to reinstate employees that have
been dismissed or will be dismissed.
17.5.7 INSURANCE
17.5.7.1 The Company carries insurance cover against
loss arising from accident, fire,
earthquake, flood, burglary, theft,
employer's liability, workmen's
compensation, public liability, storm
damage, civil commotion, riot or political
risk and loss of profits, and such insurance
will continue to be effective after the
effective date; all premiums due in respect
of such insurance have been paid and the
<PAGE>
Company has complied with all of the
conditions to which the liability of the
insurers under the policies of insurance
will be subject.
17.5.7.2 Propco carries insurance against fire,
earthquake, flood and storm and such
insurance will continue to be effective
after the effective date; all premiums due
in respect of such insurance have been paid
and Propco has complied with all of the
conditions to which the liability of the
issuers under the policy of insurance will
be subject.
17.5.7.3 The sellers are not aware of any facts,
matters or circumstances which may give rise
to the cancellation of the policies of
insurance referred to in clause 17.5.7.1 and
17.5.7.2 or the repudiation of any claims
thereunder or to such policies not being
renewed in the future or only being renewed
subject to the imposition of onerous
conditions not presently applicable.
17.5.8 EMPLOYMENT, LEAVE, REMUNERATION AND PENSION
17.5.8.1 No employee or official of the Company or
Propco is entitled to any exceptional leave
privileges, accumulated leave, pension or
the like.
17.5.8.2 On the fulfilment date neither the Company
nor Propco will in any material respect have
improved the terms of employment of or
remuneration payable to any of their
employees from that prevailing at the
signature date.
<PAGE>
17.5.8.4 There is no unfunded deficit in respect of
any future liability of any pension fund of
which any of the Company's or Propco's
employees are members; provided that if
there is any such deficit in respect of
services of any such employees, as certified
by any actuary for the time being of the
pension fund, whether the Company or Propco
has any liability in respect thereof or not,
then without prejudice to the purchaser's
right as a result of the breach of this
warranty the purchaser will be entitled to
claim payment from the sellers of an amount
equal to the amount of such unfunded
deficit.
17.5.9 RESTRAINT OF TRADE
Neither the Company nor Propco is bound by any
restraint of trade agreement.
17.5.10 RESOLUTIONS
No resolutions have been passed by the members or
directors of the Company or Propco, save for:
17.5.10.1 such resolutions as may be necessary to give
effect to this agreement;
17.5.10.2 such resolutions as have been passed in the
ordinary course of business or as shall be
approved by the purchaser in writing, which
approval may not be unreasonably withheld;
<PAGE>
17.6 WARRANTY REGARDING LITIGATION
Neither the Company nor Propco is party to any legal
proceedings, or labour disputes, including wage disputes, or
statutory enquiries or investigations, other than normal debt
collections, and the sellers are not aware of any legal
proceedings threatened or instituted against the Company or
Propco or of any facts which are likely to give rise to those
proceedings.
17.7 WARRANTIES REGARDING STATUTORY REQUIREMENTS
17.7.1 The Company and Propco have complied with all the
provisions of the Companies Act, the laws relating to
taxation and all other laws and bylaws which affect
them and their property.
17.7.2 All statutory requirements of the Receiver of
Revenue, the Registrar of Companies and all other
authorities, governmental, municipal or otherwise
have been complied with, and there are no matters
outstanding in connection with the rendering of
returns and the payment of dues and levies.
17.8 WARRANTIES REGARDING BOOKS OF ACCOUNT AND MINUTES
17.8.1 The books and records of the Company and Propco are
up-to-date and have been properly kept according to
law and will be capable of being written up within a
reasonable time so as to record all of the
transactions of the Company or Propco, as the case
may be.
17.8.2 The minute books of the Company and Propco contain
all of the resolutions passed by the directors and
the members of the Company and Propco.
<PAGE>
17.9 WARRANTIES REGARDING TAXATION
17.9.1 DEFINITION
For the purpose of the warranties set out below, the
word "tax" shall, unless the context indicates the
contrary, mean any tax including, but not limited to,
income tax, general sales tax, Regional Service
Council levies, value-added tax ("VAT") and any duty
or levy (including any penalty or interest) imposed
by any law administered by the Commissioner for
Inland Revenue or his lawful representative or any
other authority entitled to administer taxes in the
Republic of South Africa.
17.9.2 ADMINISTRATION
17.9.2.1 The records of the Company and Propco
include all of the resolutions passed by
their directors and shareholders;
17.9.2.2 neither the Company nor Propco is party to
any tax objection or appeal nor are any such
proceedings threatened against or likely to
be instituted by or against the Company or
Propco, nor are the sellers aware of any
circumstances which may give rise to the
institution of any such proceedings;
17.9.2.3 no queries have been addressed to the
Company or Propco or to any of their
representatives by any official
administering any tax nor have any
objections with regard to any tax been
lodged by the Company or Propco which have
not been fully disposed of;
<PAGE>
17.9.2.4 each of the Company and Propco has paid or
will, prior to the fulfilment date, pay all
tax where the due date for payment of the
tax arises on or before the fulfilment date;
in respect of any tax which is due for
payment after the fulfilment date, adequate
provision or reserves for the payment of
that tax will have been made;
17.9.2.5 neither the Company nor Propco is liable to
pay any penalty or interest in connection
with any claim for tax;
17.9.2.6 neither the Company nor Propco is subject to
any liability as a result of the re-opening
of any tax assessment;
17.9.2.7 all necessary information, notices and
returns (all of which are true and accurate
and none of which is disputed by the
Commissioner for Inland Revenue or other
appropriate authority) have been properly
and timeously submitted by the Company and
Propco and there is no reason to suppose
that any such information or return will not
in due course be accepted as true and
accurate by the Commissioner for Inland
Revenue or other appropriate authorities;
17..9.2.8 the Company has properly operated the PAYE
system, has deducted tax as required from
all payments made to or treated as made to
employees or former employees of the
Company, or any other payment from which tax
is required to be deducted in terms of the
fourth schedule of the Income Tax Act and
has accounted to the Commissioner for Inland
Revenue or other appropriate authority for
all tax so deducted;
<PAGE>
17.9.2.9 each of the Company and Propco has withheld
all taxes which it is liable to withhold and
has paid such taxes to the Commissioner for
Inland Revenue or other appropriate
authorities;
17.9.2.10 no notice has been served on the Company or
Propco in terms of which the Company or
Propco has been appointed as a
representative taxpayer;
17.9.2.11 each of the Company and Propco has timeously
lodged a claim for any refund of tax to
which it is or may be entitled;
17.9.2.12 neither the sellers nor the Company nor
Propco is a party to any agreement with the
Commissioner for Inland Revenue bearing upon
or relating to the manner or circumstances
in which tax will or might be levied on the
Company or Propco nor has the Commissioner
granted the Company or Propco any allowance
in terms of sections24 or 24C of the Income
Tax Act;
17.9.2.13 each of the Company and Propco is registered
as a VAT vendor in terms of the Value-Added
Tax Act, 1991, and has fully and completely
complied with all of its obligations in
terms of the VAT Act, and has paid all VAT
that it is obliged to pay.
17.9.3 BALANCE SHEET
17.9.3.1 neither the Company nor Propco has acquired
from any other companies under any scheme of
arrangement or
<PAGE>
reconstruction of any companies or its
affairs (including any scheme for the
amalgamation of two or more companies and
any other scheme) which is sanctioned by any
order of court on or after 1April 1971, any
asset which is, in terms of section 22A of
the Income Tax Act, deemed to be trading
stock of the Company or Propco;
17.9.3.2 neither the Company nor Propco is party to
any agreement with the Commissioner for
Inland Revenue of the nature referred to in
section24A of the Income Tax Act;
17.9.4 DEDUCTIBLE PAYMENTS
no rents, interest, annual payments or other similar
expenditure incurred by the Company will be
disallowed as a deduction wholly or in part from the
income of the Company or Propco.
17.9.5 STAMP DUTY
each of the Company and Propco has paid all stamp
duty for which it is or may be liable and there is no
liability for any penalty in respect of such duty nor
are there any circumstances or transactions to which
the Company or Propco is or has been a party which
may result in the Company or Propco becoming liable
for any such duty or penalty.
17.9.6 TAX AVOIDANCE AND DONATIONS
17.9.6.1 neither the Company nor Propco is party to
any transaction, operation or scheme of the
nature referred
<PAGE>
to in section 103(1) of the Income Tax Act
or section73 of the VAT Act;
17.9.6.2 there are no circumstances affecting the
Company or Propco under which the provisions
of section7(7) of the Income Tax Act can
operate;
17.9.6.3 neither the Company nor Propco has made or
received any donation on which donations tax
can be levied nor has it made any donation
at the instance of a third party;
17.10 ENVIRONMENTAL WARRANTIES
17.10.1 each of the Company and Propco complies with
all conditions, limitations, obligations,
prohibitions and requirements contained in
any environmental legislation or
regulations, by-laws, or ordinances
("ENVIRONMENTAL ------------- LEGISLATION")
and the sellers are not aware of any facts
or ----------- circumstances which may lead
to any breach of any environmental
legislation including without limitation the
Environmental Conservation Act and the Water
Act;
17.10.2 no poisonous, noxious, hazardous, polluting,
dangerous or environmentally harmful
substances or articles have been produced,
treated, kept at or deposited at the
premises where the Company or Propco carries
on business, or have been released or
discharged from such premises and in
particular no matter or thing been
discharged into any public sewer or into any
drain or sewer connecting the public sewer
and has not contaminated the land
surrounding the premises or any water;
<PAGE>
17.10.3 there are no deficiencies in the waste
disposal arrangements carried on at or in
respect of the premises which may lead to a
failure by the Company or Propco to comply
with any existing environmental legislation,
including without limitation, the
Environmental Conservation Act and the Water
Act or which will harm the environment;
17.10.4 there have been no disputes claims or
investigations or other proceedings pending
or threatened regarding the use of the
Company's or Propco's premises, or the
release of any substances from such
premises;
17.10.5 there are no environmental claims,
investigations or other proceedings pending
or threatened against the sellers or the
Company or Propco in respect of the business
of the Company or Propco and there is no
actual or contingent liability of either the
sellers or the Company or Propco to make
good, repair, reinstate or clean up any
property;
17.10.6 no water, whether surface or ground water,
has been contaminated, polluted or the
quality thereof altered in such a way that
the provisions of any water law whether
common law or statutory law will have been
breached.
17.11 DISCLOSURE
All facts and circumstances material to this transaction and
not known to the purchaser, or which would be material or
would be reasonably likely to be material to a purchaser of
the sale shares and to the purchase price thereof have been
disclosed to the purchaser.
<PAGE>
17.12 The liability of the sellers under the warranties is joint and
several.
17.13 Each of the warranties set out above is without prejudice to
any other warranty and shall not be limited by any other
clause of this agreement.
17.14 Each warranty shall be deemed to be material and to be a
material representation inducing the purchaser to enter into
this agreement.
17.15 The fact that the sellers have given the purchaser the express
warranties listed above shall not in any way be construed as
relieving the sellers from any liability which they may have
at common law arising out of a failure to disclose any fact in
relation to the Company or Propco or their businesses or
affecting this agreement.
17.16 The sellers jointly and severally indemnify and hold the
purchaser harmless from and against any loss, damages, claims,
actions or expenses of any nature whatsoever and howsoever
incurred, which are suffered or sustained by the purchaser
pursuant to any breach by the sellers of any of the warranties
contained in this agreement.
18. SALE OF BUSINESS
18.1 At the election of the purchaser the transaction contemplated
in this agreement shall be converted into a purchase by the
purchaser or a wholly-owned subsidiary of the purchaser, of
the businesses of the Company and Propco as going concerns.
Such election shall be exercised on or before the fulfilment
date.
18.2 Should the purchaser elect to convert this transaction into a
sale of business the material commercial terms of this
agreement (including without limitation the quantum of the
purchase price and the manner
<PAGE>
of payment of the purchase price) shall not be affected and
the purchaser shall gross up the purchase price to compensate
the sellers for any STC payable on liquidation or
deregistration of the Company and Propco, and pay the costs of
liquidation or deregistration of the Company and Propco.
18.3 This agreement will terminate with effect from the date of
signature of any agreement giving effect to a sale of the
Company's and Propco's businesses as contemplated in this
clause.
19. BREACH
19.1 If the sellers (which for the purposes of this clause shall be
deemed to be one party and shall exercise the remedies
conferred on them by this clause jointly) or the purchaser, as
the case may be, breach any provision of this agreement and
remain in breach for 30days after receipt of written notice
from the aggrieved party requiring it to rectify the breach,
the aggrieved party shall be entitled at its option (and
without prejudice to any other rights that it may have at law)
-
19.1.1 to sue for specific performance of the defaulting
party's obligations under this agreement; or
19.1.2 (either as an alternative to a claim in terms of
19.1.1 or upon the abandonment of such a claim) to
cancel the sale by notice in writing to the
defaulting party and the other parties to this
agreement and to sue for such damages as that party
may have suffered as a result of the cancellation;
provided that if the breach is covered by 15.3 the remedy of
the sellers shall be limited to the remedy prescribed by that
clause.
<PAGE>
19.2 Neither the seller nor the purchaser shall be entitled to
cancel this agreement on the grounds of a breach of a term or
warranty contained in this agreement unless it is a material
breach of a material term or warranty which has not been
remedied by the party in breach after being given notice to
remedy in terms of 19.1.
20. ARBITRATION
20.1 DISPUTES SUBJECT TO ARBITRATION
Any dispute arising out of or in connection with this
agreement or the subject matter of this agreement shall be
decided by arbitration in terms of this clause,
notwithstanding that the rest of the agreement may be void or
voidable or may have terminated or been cancelled, this clause
being a separate, divisible agreement. Claims in delict or
based on unjust enrichment or for rectification of the
agreement are included.
20.2 NOTICE TO STATE WHETHER CLAIM IS DISPUTED
A party may call on the other party in writing to state in
writing whether a claim is disputed or not. If the other party
fails to do so within 7 days the first party may proceed by
way of litigation, and if the other party then defends such
litigation the first party may elect to continue with the
litigation or to refer the matter to arbitration. In the
latter event the other party shall immediately pay the costs
incurred by the first party in the litigation on an attorney
and own client basis and shall not be entitled to recover that
party's own costs from the first party.
<PAGE>
20.3 APPOINTMENT OF ARBITRATOR
The arbitrator shall be an attorney or advocate nominated at
the request of either party by the president for the time
being of the Law Society of the Transvaal.
20.4 VENUE AND PERIOD FOR COMPLETION OF ARBITRATION
The arbitration shall be held in Johannesburg and the parties
shall endeavour to ensure that it is completed within 90 days
after notice requiring the claim to be referred to arbitration
is given.
20.5 ARBITRATION ACT
The arbitration shall be governed by the Arbitration Act 1965
or any replacement Act.
20.6 PROCEDURE
The procedure to be followed in the arbitration shall be
determined by the arbitrator, with due regard to 20.4=REF1, at
the request of either party.
20.7 PROCEDURE
The procedure to be followed in the arbitration shall be that
laid down in the Rules for the Conduct of Arbitrations
published by the Association of Arbitrators, current at the
date the arbitrator is nominated, provided that the arbitrator
may vary the procedure, or substitute a different procedure,
in his discretion.
<PAGE>
20.8 ARBITRATOR'S POWERS
The arbitrator shall have full and unrestricted powers in
relation to the arbitration. In particular, but without
limitation, the arbitrator:
20.8.1 shall have the powers set out in section
21(1) of the Arbitration Act 1965;
20.8.2 need not strictly observe the rules of
evidence;
20.9 need not strictly observe the principles of law and
may decide the matters submitted to him according to
what he considers equitable in the circumstances;
20.9.1 may have regard to his personal knowledge of
the facts, and any expert knowledge he may
have, relating to the issues in dispute, but
is to afford the parties an opportunity of
challenging the knowledge he claims to have;
20.9.2 may make such award or awards, whether
interim, provisional or final, as he may
consider appropriate, including without
limitation ex parte awards, declaratory
orders, interdicts, and awards for specific
performance, restitution, damages,
penalties, interest and security for costs
or restitution.
20.10 REASONS FOR AWARD
The arbitrator shall give his reasons for his award, if so
requested by either party.
<PAGE>
20.11 COSTS
20.11.1 If the arbitrator's charges and any other
costs have to be paid before the arbitrator
has made his award in respect of costs, the
parties shall pay the costs in equal shares,
and if a party fails to pay that party's
share the arbitrator may make his award in
respect of the claim and costs in the
absence of that party.
20.11.2 It is recorded that the parties intend that
the substantially successful party should be
awarded a full indemnity for all the costs
reasonably incurred by that party and not
merely the costs on the supreme court or any
other scale.
21. MISCELLANEOUS MATTERS
21.1 POSTAL ADDRESS
21.1.1 Any written notice in connection with this agreement
may be addressed:
21.1.1.1 in the case of Welch to:
address : PO Box 2835
Krugersdorp
1740
telefax no : 953 1283
and shall be marked for the attention of
John Welch
<PAGE>
21.1.1.2 in the case of Andreas to:
address : 6 Third Street
Krugersdorp North
1741
telefax no : 953 1283
and shall be marked for the attention of
Heinz Andreas
21.1.1.3 in the case of Morgan to:
address : PO Box 2835
Krugersdorp
1740
telefax no : 953 1283
and shall be marked for the attention of
Michael Morgan
21.1.1.4 in the case of FSAC and the purchaser to:
address : c/o Price Waterhouse
PO Box 783027
Sandton
2146
telefax no : 780 2095
and shall be marked for the attention of
Charles Boles;
<PAGE>
21.1.1.5 in the case of the Company and Propco to:
address : PO Box 2835
Krugersdorp
1740
telefax no : 953 1283
and shall be marked for the attention of
John Welch;
21.1.2 The notice shall be deemed to have been duly given:
21.1.2.1 14 days after posting, if posted by
registered post to the party's address in
terms of this sub-clause;
21.1.2.2 on delivery, if delivered to the party's
physical address in terms of either this
sub-clause or the next sub-clause dealing
with service of legal documents;
21.1.2.3 on dispatch, if sent to the party's then
telefax or telex number and confirmed by
registered letter posted no later than the
next business day.
21.1.3 A party may change that party's address for this
purpose, by notice in writing to the other party.
21.2 ADDRESS FOR SERVICE OF LEGAL DOCUMENTS
21.2.1 The parties choose the following physical addresses
at which documents in legal proceedings in connection
with this agreement may be served (ie their domicilia
citandi et executandi):
<PAGE>
21.2.1.1 Welch:
401 Anne Road
Ruimsig
Roodepoort
1724
21.2.1.2 Andreas:
6 Third Street
Krugersdorp North
1740
21.2.1.3 Morgan:
3 Harebell Street
Randpark Ridge
2194
21.2.1.4 the purchaser and FSAC:
90 Rivonia Rd
Sandton
2146
21.2.1.5 the Company and Propco:
Cnr Anvil and Screw Streets
Boltonia
21.2.2 A party may change that party's address for this
purpose to another physical address by notice in
writing to the other party.
21.3 ENTIRE CONTRACT
This agreement contains all the express provisions agreed on
by the parties with regard to the subject matter of the
agreement and the parties waive the right to rely on any
alleged express provision not contained in the agreement.
<PAGE>
21.4 NO REPRESENTATIONS
No party may rely on any representation which allegedly
induced that party to enter into this agreement, unless the
representation is recorded in this agreement.
21.5 VARIATION, CANCELLATION AND WAIVER
No contract varying, adding to, deleting from or cancelling
this agreement, and no waiver of any right under this
agreement, shall be effective unless reduced to writing and
signed by or on behalf of the parties.
21.6 CESSION
No party may cede that party's rights nor delegate that
party's obligations without the prior written consent of the
other parties.
21.7 APPLICABLE LAW
This agreement shall be interpreted and implemented in
accordance with the law of the Republic of South Africa.
21.8 JURISDICTION
Each of the parties submits itself to and consents to the
non-exclusive jurisdiction of the Witwatersrand Local Division
of the Supreme Court of South Africa.
21.9 COSTS
<PAGE>
21.9.1 Each party shall bear that party's own legal costs of
and incidental to the negotiation, preparation,
settling, signing and implementation of this
agreement. The stamp duty, if any, on this agreement
shall be borne by the parties in equal shares. The
stamp duty payable in respect of the registration of
the transfer of the shares into the name of the the
purchaser shall be borne by the purchaser.
21.9.2 Any costs, including attorney and own client costs,
incurred by a party arising out of the breach by any
other party of any of the provisions of this
agreement shall be borne by the party in breach.
21.10 INDULGENCES
If a party at any time breaches any of that party's
obligations under this agreement, any of the other parties:
21.10.1 may at any time after that breach exercise any right
that became exercisable directly or indirectly as a
result of the breach, unless the aggrieved party has
expressly elected in writing not to exercise the
right;
21.10.2 shall not be estopped (ie precluded) from exercising
the aggrieved party's rights arising out of that
breach, despite the fact that the aggrieved party may
have elected or agreed on one or more previous
occasions not to exercise the rights arising out of
any similar breach or breaches.
<PAGE>
Signed at on 1996.
AS WITNESS:
.............................. .................................
John Welch
Signed at on 1996.
AS WITNESS:
.............................. .................................
H Andreas
Signed at on 1996.
AS WITNESS:
.............................. .................................
M Morgan
<PAGE>
Signed at on 1996.
AS WITNESS:
................................ ................................
For First South African Holdings
(Proprietary) Limited
Signed at on 1996.
AS WITNESS:
................................ ................................
For Piemans Pantry (Proprietary)
Limited
Signed at on 1996.
AS WITNESS:
................................ ................................
For Surfs-Up Investments
(Proprietary) Limited
ESCROW AGREEMENT
1. PARTIES
The parties to this agreement are:
1.1 American Stock Transfer and Trust Company
a New York corporation
("ESCROW AGENT")
1.2 First South Africa Corp., Ltd
a Bermuda company
("PARENT")
1.3 First South African Holdings (Pty) Limited
a South African company
("FSAH")
1.4 Heinz Andreas
("SUBSCRIBER")
(hereinafter referred to as "the parties").
2. RECITAL
2.1 The authorised share capital of FSAH comprises 30 000 000 "A"
class ordinary shares of R0,0001 each and 10 000 000 "B" class
ordinary shares of R0,0001 each ("FSAH B CLASS SHARES").
2.2 All of the issued A class ordinary shares in FSAH are owned by
the Parent.
<PAGE>
2.3 The rights and obligations attached to the FSAH B class shares
are recorded in the quotation from the articles of association
of FSAH recorded on Schedule "1" hereto.
2.4 The Parent has an authorised share capital comprising of
Common Stock, registered with the Securities and Exchange
Commission and listed for trading on NASDAQ in compliance with
all applicable laws, and Class B Common Stock ("PARENT CLASS B
STOCK") which is not so registered and listed.
2.5 FSAH has agreed to allot and issue and the Subscriber has
agreed to subscribe for 149 210 FSAH B class shares
("SUBSCRIPTION SHARES") and the Parent has agreed to
simultaneously allot and issue to the Escrow agent which has
agreed to subscribe for 149 210 Parent B class stock ("ESCROW
STOCK").
2.6 Insofar as prevailing circumstances and laws allow and subject
to the restrictions recorded herein the Parent and FSAH wish,
by the conclusion and implementation of this agreement, to
enable the Subscriber to trade in the subscription shares for
value and in circumstances which are pari passu with the
trading of the Parent class B stock.
2.7 In consideration of the mutual covenants and promises herein
contained and other good and valuable consideration the
adequacy of which is hereby acknowledged, the parties have
reached the agreement recorded herein.
3. APPOINTMENT OF ESCROW AGENT
<PAGE>
3.1 The Parent hereby appoints the Escrow agent to receive, hold
and dispose of the Escrow stock in accordance with the
provisions of this agreement.
3.2 The Escrow agent by its execution and delivery of this
agreement accepts its appointment as Escrow agent upon and
subject to the terms and conditions of this agreement.
3.3 The appointment of the Escrow agent will become effective
against delivery of the Escrow stock to the Escrow agent and
will continue in effect until the Escrow stock, all dividends
or other benefits accruing thereto and all proceeds derived
from the sale or other disposition thereof has been
distributed in accordance with this agreement ("ESCROW
PERIOD").
4. ISSUE OF SHARES AND STOCK
4.1 Against the allotment and issue to the Subscriber of the
subscription shares the Parent will allot and issue the Escrow
stock to the Escrow agent for a consideration of US$.01 per
share payable to the parent on behalf of the Escrow agent by
Michael Levy who will thereby acquire no claim against the
Escrow agent.
4.2 Against receipt of the Escrow stock the Escrow agent will
confirm in writing delivered to the Subscriber that the Escrow
stock has been delivered to it unconditionally, in negotiable
form subject only to the restrictions contemplated by this
agreement.
4.3 For the duration of the Escrow period the Escrow agent will
retain possession of and control over the Escrow shares and
will at the request of the Subscriber inform the remaining
parties of the physical
<PAGE>
location of all documents and records evidencing the Escrow
stock and requisite to trading therein.
4.4 Insofar as circumstances and the law allow the Escrow agent
will retain the Escrow stock in negotiable and freely
tradeable form throughout the Escrow period, subject only to
the restrictions recorded in this agreement.
5. ESCROW PROPERTY
During the Escrow period the Escrow agent will receive all money,
securities, rights or property distributed in respect of the Escrow
stock including any such property distributed as dividends or pursuant
to any stock split, merger, recapitalisation, dissolution, total or
partial liquidation of the Parent (excluding only dividends paid to the
Escrow agent by the Parent to the extent that the Subscriber has in
relation to the same period been paid dividends on the Subscription
shares): all such property to be held and distributed as herein
provided and hereinafter referred to collectively as "Escrow property".
Reference herein to Escrow stock will be deemed to include the Escrow
property deposited in escrow pursuant thereto.
6. ESCROW STOCK - RIGHTS, OBLIGATIONS AND RESTRICTIONS
6.1 Except for transfers to permitted transferees (as defined in
Section 1(p) of the bye-laws of the Parent) if any of the
Escrow stock is sold by the Escrow agent pursuant to this
agreement it will automatically convert into a share of common
stock in the parent.
6.2 None of the Escrow stock may be sold in contravention of the
restrictions set out in clause 12 of the sale of shares
agreement entered into among John Welch, Heinz Andreas,
Michael Morgan, Parent and FSAH, ("THE SALE AGREEMENT") on 11
March 1996. ------------------
<PAGE>
6.3 Subject to 6.2, the Escrow stock may only be sold and
transferred in compliance with this agreement and the
Securities Act of 1933 as amended and the rules and
regulations promulgated thereunder.
6.4 For the duration of the Escrow period Michael Levy will have
the sole power to vote the Escrow stock and any securities
held in escrow as part of the Escrow property to which end the
Escrow agent hereby irrevocably appoints Michael Levy as its
proxy to vote the Escrow stock on its behalf at any meeting of
the shareholders of the Parent and at any adjournment thereof
which shall take place during the Escrow period. The Escrow
agent undertakes that it will execute and deliver to Levy a
separate voting proxy in the aforegoing terms referring
specifically to the Escrow stock and any securities comprising
the Escrow property against demand by Levy following delivery
of the Escrow stock or other securities as the case may be.
6.5 Each certificate evidencing the Escrow stock will bear the
following legends in addition to any others required by law:
"The sale, transfer, hypothecation, negotiation,
pledge, assignment, encumbrance or other disposition
of the shares evidenced by this certificate are
restricted by and are subject to all of the terms,
conditions and provisions of an escrow agreement
entered into amongst First South Africa Corp., Ltd,
First South African Holdings (Proprietary) Limited,
American Stock Transfer & Trust Company and Heinz
Andreas, a copy of which may be obtained from the
secretary of First South Africa Corp., Ltd. No
transfer, sale or other disposition of these shares
may be made unless the specific conditions of such
agreement are satisfied."
<PAGE>
"The shares evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended. No transfer, sale or other disposition of
these shares may be made unless a registration
statement with respect to these shares has become
effective under the said Act or First South Africa
Corp., Ltd is furnished with an opinion of Counsel
satisfactory in form and substance to it that such
registration is not required."
7. PUT OPTION AND RELATED TRANSACTIONS
7.1 At any time during the Escrow period and provided that the
Escrow stock is capable of being sold in accordance with the
provisions of this agreement and the Securities Act of 1933,
as amended, and the rules and regulations promulgated
thereunder, the Subscriber will be entitled, on delivery to
the Escrow agent or its agent in the Republic of South Africa,
Webber Wentzel Bowens or its principal successor-in-practice,
of written notice accompanied by the original share
certificate/s evidencing the put shares together with
securities transfer form/s relating thereto signed and
completed in negotiable form according to law ("PUT NOTICE")
to require and oblige the Escrow agent to purchase the
subscription shares or any part thereof but no fewer than 100
subscription shares (or such lesser number as constitutes all
of the remaining subscription shares held by the Subscriber)
in relation to any single put notice, for the consideration
and upon the terms and conditions hereinafter recorded.
7.2 Against delivery of the put notice the Escrow agent will, in
compliance with applicable securities laws, use every
reasonable effort to sell as expeditiously as possible, at the
best possible price and on the best available terms so much of
the Escrow stock as is equal to the subscription shares put to
the Escrow agent in terms of the put notice
<PAGE>
and to implement and enforce its rights and obligations
arising from such sale.
7.3 The put notice will be unconditional and unqualified save only
that the Subscriber will be entitled to stipulate a minimum
price ("PRESCRIBED PRICE") expressed in US dollars per share
at which he is willing to sell the relevant subscription
shares put to the Escrow agent in terms of the put notice
("PUT SHARES"). If the put notice contains a prescribed price:
7.3.1 the Escrow agent will not be entitled to sell the equivalent
number of Escrow stock pursuant to 7.2 above for a price less
than the prescribed price;
7.3.2 if the Escrow agent is unable to sell the equivalent number of
Escrow stock for a price at least equal to the prescribed
price within thirty days from delivery of the relevant put
notice then the put notice will automatically lapse and be of
no further force or effect;
7.3.3 the Escrow agent will, notwithstanding the prescribed price,
seek to achieve the best possible price for the Escrow stock
as expeditiously as possible pursuant to 7.2 above;
7.3.4 if the Escrow agent cannot achieve the sale of the relevant
Escrow stock for a price equal to or more than the prescribed
price it will inform the Subscriber of its inability and of
the best price at which it is able to sell the relevant Escrow
stock.
7.4 Against the sale by the Escrow agent of the relevant number of
Escrow stock the Escrow agent will be deemed to have purchased
the subscription shares recorded in the relevant put notice
("PUT SHARES") upon and subject to the following terms and
conditions:
<PAGE>
7.4.1 the price payable for the put shares will be equal to the
price payable for the equivalent Escrow stock sold less any
applicable brokerage fees, securities tax, duty or charge
properly incurred;
7.4.2 the price for the put shares will be payable by the Escrow
agent to the Subscriber against receipt by the Escrow agent of
the price payable for the relevant Escrow stock sold;
7.4.3 as security for the payment of the price for the put shares
the Escrow agent will be deemed to have ceded, assigned and
made over unto and in favour of the Subscriber all of the
Escrow agent's right, title and interest in and to its claims
for payment of the price payable for the relevant Escrow stock
sold.
7.5 The Subscriber will not be entitled to deliver more than four
put notices.
7.6 Payment of any amount due to the Subscriber upon the sale of
subscription shares pursuant hereto will be made to the
subscriber at the domicilium chosen in terms of paragraph 12
below provided that such place will be in the Republic of
South Africa unless the Subscriber is entitled, according to
South African law, to receive such payment outside the
Republic of South Africa.
7.7 The Subscriber will not sell or otherwise transfer or dispose
of the subscription shares during the Escrow period except by
the delivery of put notices in accordance with the provisions
of this agreement.
7.8 Unless a put notice has been delivered the Escrow agent will
not be entitled to sell, offer to sell or otherwise dispose of
the Escrow stock or any part thereof.
<PAGE>
7.9 The Escrow agent will not be entitled to encumber the Escrow
stock nor expose it to any risk of attachment, forced sale,
realisation or other threat, direct or indirect in relation to
the obligations of the Escrow agent or any other person or by
virtue of any judicial, quasi judicial, bankruptcy or similar
legal process.
8. RIGHTS AND OBLIGATIONS OF ESCROW AGENT
8.1 The Escrow agent is not and will not be deemed to be a trustee
for any party for any purpose and is merely acting hereunder
with the limited duties herein prescribed.
8.2 The Escrow agent does not have and will not be deemed to have
any responsibility in respect of any instruction, certificate
or notice delivered to it or in respect of the Escrow stock or
any Escrow property other than faithfully to carry out the
obligations undertaken in this agreement and to follow the
directions or instructions recorded in any notice delivered
pursuant to this agreement.
8.3 The Escrow agent is not and will not be deemed to be liable
for any action taken or omitted by it in good faith and may
rely upon and act in accordance with the advice of its counsel
without liability on its part for any action taken or omitted
in accordance with such advice. In any event the Escrow
agent's liability hereunder will be limited to liability for
gross negligence, wilful misconduct or bad faith on its part,
8.4 The Escrow agent may conclusively rely upon and act in
accordance with any certificate, instruction, notice, letter,
telegram, cablegram or other written instrument believed by it
to be genuine and to have been signed by the proper party or
parties.
8.5 The Parent agrees:
<PAGE>
8.5.1 to pay the Escrow agent's reasonable fees and to reimburse it
for its reasonable expenses including attorneys fees incurred
in connection with its duties hereunder expeditiously so as
not to impair or delay the timeous implementation of this
agreement and put notice delivered pursuant hereto;
8.5.2 to save harmless, indemnify and defend the Escrow agent for,
from and against any loss, damage, liability, judgment, cost
and expense whatsoever, including reasonable counsel fees,
suffered or incurred by it by reason of or on account of any
misrepresentation made to it or its status or actions as
Escrow agent under this agreement except for any loss, damage,
liability, judgment, cost or expense resulting from gross
negligence, wilful misconduct or bad faith on the part of the
Escrow agent. The obligation of the Escrow agent to sell or
deliver the Escrow stock pursuant to this agreement will be
subject to the prior satisfaction upon written demand from the
Escrow agent of the Parent's obligations to save harmless,
indemnify and defend the Escrow agent and to reimburse the
Escrow agent or otherwise pay its reasonable fees and expenses
hereunder.
8.6 The Escrow agent will not be required to defend any legal
proceedings which may be instituted against it in respect of
the subject matter of this agreement unless requested to do so
by the Subscriber, the Parent or FSAH and indemnified to the
Escrow agent's satisfaction against the cost and expense of
such defence by the party requesting such defence. If any such
legal proceeding is instituted against it the Escrow agent
agrees promptly to give notice of such proceedings to the
remaining parties. The Escrow agent will not be obliged to
institute legal proceedings of any kind.
8.7 The Escrow agent will not by act, delay, omission or otherwise
be deemed to have waived any right or remedy it may have under
this
<PAGE>
agreement or generally, unless such waiver be in writing, and
no waiver will be valid unless it is in writing, signed by the
Escrow agent and only to the extent expressly therein set
forth. A waiver by the Escrow agent under the terms of this
agreement will not be construed as a bar to or waiver of the
same or any other right or remedy which it would otherwise
have on other occasions.
8.8 The Escrow agent may resign as such hereunder by giving thirty
days written notice thereof to the remaining parties. Within
twenty days after receipt of such notice the remaining parties
will deliver to the Escrow agent written instructions for the
release of the Escrow stock and any Escrow property to a
substitute Escrow agent which whether designated by written
instructions from the remaining parties or in the absence
thereof by instructions from a court of competent jurisdiction
to the Escrow agent, will be a bank or trust company organised
and doing business under the laws of the United States or any
state thereof. Such substitute Escrow agent will thereafter
hold any Escrow stock and any Escrow property received by it
pursuant to the terms of this agreement and otherwise act
hereunder as if it were the Escrow agent originally named
herein. The Escrow agent's duties and responsibilities
hereunder will terminate upon the release of all Escrow stock
and Escrow property then held in escrow according to such
written instruction or upon such delivery as herein provided.
This agreement will not otherwise be assignable by the Escrow
agent without the prior written consent of the remaining
parties.
9. NON-WAIVER
No relaxation or indulgence which any of the parties may
afford to the other/s shall in any way prejudice or be deemed
to be a waiver of the rights of the indulgent party and shall
not preclude or stop the indulgent party from exercising all
or any of its rights hereunder and in particular
<PAGE>
but without limiting or derogating from the aforegoing, any
cancellation hereof or accrued right of cancellation hereof.
10. NON-VARIATION
10.1 No variation or amendment of this agreement will be of any
force or effect unless reduced to writing and signed by all
the parties hereto.
10.2 No consensual termination of this agreement will be of any
force or effect unless reduced to writing and signed by all
the parties hereto.
10.3 No waiver or abandonment of any party's rights arising from
this agreement, accrued or otherwise, will be of any force or
effect as against such party unless such such waiver or
abandonment is reduced to writing and signed by the party
waiving and abandoning such rights.
10.4 No oral statements and no conduct by a party relating to any
purported variation, amendment, cancellation, waiver or
abandonment will estop a party from relying upon the
formalities prescribed in the preceding sub-paragraphs of this
paragraph.
11. WHOLE AGREEMENT
11.1 This agreement constitutes the whole agreement between the
parties with regard to the subject matter hereof and no
representations, or warranties, by commission or omission
which are not recorded herein shall be of any force or effect.
11.2 The parties acknowledge that they have not been induced or
coerced to enter into this contract by virtue of any
representations, statements, understandings, omissions or
warranties made by the other party hereto or any persons
acting on their behalf which are not included herein.
<PAGE>
12. MISCELLANEOUS MATTERS
12.1 ADDRESS
12.1.1 Any written notice in connection with this agreement may be
addressed :
12.1.1.1 Escrow agent : address : c/o American Stock Transfer & Trust
Company 40 Wall Street New York NY 10005
and shall be marked for the attention of Mr Herb Lemmer.
12.1.1.2 Parent/FSAH :
address : 2665 South Bayshore Suite 606 Coconut
Grove Florida 33133
telefax no : 091 305 856 4057;
and shall be marked for the attention of Clive Kabatznik;
copy to: Parker Chapin Flattau & Klimpl, LLP 1211
Avenue of the Americas New York, NY
10036-8735
Attention: Henry L Rothman.
<PAGE>
12.1.1.3 Subscriber :
address :
and shall be marked for the attention of the Subscriber
12.2 Any notice or payment sent to a party's domicilium citandi et
executandi as selected above by prepaid registered post shall
be presumed, subject to proof to the contrary, to have been
received by such party on the 7th (seventh) day after the
posting of same, or if delivered by hand, on the day of such
delivery by hand, or it transmitted by telex or telefax, on
the day of such delivery by hand, or if transmitted by telex
or telefax, on the day of transmitting same unless it is not a
business day in which event such telex or telefax shall be
deemed to have been received on the following business day.
12.3 Any party shall be entitled to alter his domicilium citandi et
executandi in terms hereof by furnishing to the others of them
written notice of such alteration provided that such
alteration shall only be effective 7 (seven) days after
receipt by the other party of such notice.
13. GOVERNING LAW
This agreement will be governed by and construed in accordance with the
laws of New York and will be binding upon and enure to the benefit of
all the parties hereto and their respective successors-in-interest and
assigns.
<PAGE>
14. SIGNATURE IN COUNTERPART
This agreement may be executed in several counterparts which taken
together will constitute a single instrument.
Signed at on 1996.
AS WITNESS: for AMERICAN STOCK TRANSFER AND TRUST COMPANY
....................................... .......................................
Signed at on 1996.
AS WITNESS: for FIRST SOUTH AFRICA CORP., LTD
........................................ ......................................
Signed at on 1996.
AS WITNESS: for FIRST SOUTH AFRICAN HOLDINGS
........................................ ......................................
Signed at on 1996.
AS WITNESS: for FIRST SOUTH AFRICAN HOLDINGS
........................................ ......................................
Heinz Andreas
ESCROW AGREEMENT
1. PARTIES
The parties to this agreement are:
1.1 American Stock Transfer and Trust Company
a New York corporation
("ESCROW AGENT")
1.2 First South Africa Corp., Ltd
a Bermuda company
("PARENT")
1.3 First South African Holdings (Pty) Limited
a South African company
("FSAH")
1.4 Michael Morgan
("SUBSCRIBER")
(hereinafter referred to as "the parties").
2. RECITAL
2.1 The authorised share capital of FSAH comprises 30 000 000 "A"
class ordinary shares of R0,0001 each and 10 000 000 "B" class
ordinary shares of R0,0001 each ("FSAH B CLASS SHARES").
2.2 All of the issued A class ordinary shares in FSAH are owned by
the Parent.
<PAGE>
2.3 The rights and obligations attached to the FSAH B class shares
are recorded in the quotation from the articles of association
of FSAH recorded on Schedule "1" hereto.
2.4 The Parent has an authorised share capital comprising of
Common Stock, registered with the Securities and Exchange
Commission and listed for trading on NASDAQ in compliance with
all applicable laws, and Class B Common Stock ("PARENT CLASS B
STOCK") which is not so registered and listed.
2.5 FSAH has agreed to allot and issue and the Subscriber has
agreed to subscribe for 33 159 FSAH B class shares
("SUBSCRIPTION SHARES") and the Parent has agreed to
simultaneously allot and issue to the Escrow agent which has
agreed to subscribe for 33 159 Parent B class stock ("ESCROW
STOCK").
2.6 Insofar as prevailing circumstances and laws allow and subject
to the restrictions recorded herein the Parent and FSAH wish,
by the conclusion and implementation of this agreement, to
enable the Subscriber to trade in the subscription shares for
value and in circumstances which are pari passu with the
trading of the Parent class B stock.
2.7 In consideration of the mutual covenants and promises herein
contained and other good and valuable consideration the
adequacy of which is hereby acknowledged, the parties have
reached the agreement recorded herein.
3. APPOINTMENT OF ESCROW AGENT
3.1 The Parent hereby appoints the Escrow agent to receive, hold
and dispose of the Escrow stock in accordance with the
provisions of this agreement.
3.2 The Escrow agent by its execution and delivery of this
agreement accepts its appointment as Escrow agent upon and
subject to the terms and conditions of this agreement.
<PAGE>
3.3 The appointment of the Escrow agent will become effective
against delivery of the Escrow stock to the Escrow agent and
will continue in effect until the Escrow stock, all dividends
or other benefits accruing thereto and all proceeds derived
from the sale or other disposition thereof has been
distributed in accordance with this agreement ("ESCROW
PERIOD").
4. ISSUE OF SHARES AND STOCK
4.1 Against the allotment and issue to the Subscriber of the
subscription shares the Parent will allot and issue the Escrow
stock to the Escrow agent for a consideration of US$.01 per
share payable to the parent on behalf of the Escrow agent by
Michael Levy who will thereby acquire no claim against the
Escrow agent.
4.2 Against receipt of the Escrow stock the Escrow agent will
confirm in writing delivered to the Subscriber that the Escrow
stock has been delivered to it unconditionally, in negotiable
form subject only to the restrictions contemplated by this
agreement.
4.3 For the duration of the Escrow period the Escrow agent will
retain possession of and control over the Escrow shares and
will at the request of the Subscriber inform the remaining
parties of the physical location of all documents and records
evidencing the Escrow stock and requisite to trading therein.
4.4 Insofar as circumstances and the law allow the Escrow agent
will retain the Escrow stock in negotiable and freely
tradeable form throughout the Escrow period, subject only to
the restrictions recorded in this agreement.
5. ESCROW PROPERTY
During the Escrow period the Escrow agent will receive all money,
securities, rights or property distributed in respect of the Escrow
stock including any such property distributed as dividends or pursuant
to any stock split, merger, recapitalisation, dissolution, total or
partial liquidation of the Parent (excluding only dividends paid to the
Escrow agent by the
<PAGE>
Parent to the extent that the Subscriber has in relation to the same
period been paid dividends on the Subscription shares): all such
property to be held and distributed as herein provided and hereinafter
referred to collectively as "Escrow property". Reference herein to
Escrow stock will be deemed to include the Escrow property deposited in
escrow pursuant thereto.
6. ESCROW STOCK - RIGHTS, OBLIGATIONS AND RESTRICTIONS
6.1 Except for transfers to permitted transferees (as defined in
Section 1(p) of the bye-laws of the Parent) if any of the
Escrow stock is sold by the Escrow agent pursuant to this
agreement it will automatically convert into a share of common
stock in the parent.
6.2 None of the Escrow stock may be sold in contravention of the
restrictions set out in clause 12 of the sale of shares
agreement entered into among John Welch, Heinz Andreas,
Michael Morgan, Parent and FSAH, ("THE SALE AGREEMENT") on 11
March ------------------ 1996.
6.3 Subject to 6.2, the Escrow stock may only be sold and
transferred in compliance with this agreement and the
Securities Act of 1933 as amended and the rules and
regulations promulgated thereunder.
6.4 For the duration of the Escrow period Michael Levy will have
the sole power to vote the Escrow stock and any securities
held in escrow as part of the Escrow property to which end the
Escrow agent hereby irrevocably appoints Michael Levy as its
proxy to vote the Escrow stock on its behalf at any meeting of
the shareholders of the Parent and at any adjournment thereof
which shall take place during the Escrow period. The Escrow
agent undertakes that it will execute and deliver to Levy a
separate voting proxy in the aforegoing terms referring
specifically to the Escrow stock and any securities comprising
the Escrow property against demand by Levy following delivery
of the Escrow stock or other securities as the case may be.
<PAGE>
6.5 Each certificate evidencing the Escrow stock will bear the
following legends in addition to any others required by law:
"The sale, transfer, hypothecation, negotiation,
pledge, assignment, encumbrance or other disposition
of the shares evidenced by this certificate are
restricted by and are subject to all of the terms,
conditions and provisions of an escrow agreement
entered into amongst First South Africa Corp., Ltd,
First South African Holdings (Proprietary) Limited,
American Stock Transfer & Trust Company and Michael
Morgan a copy of which may be obtained from the
secretary of First South Africa Corp., Ltd. No
transfer, sale or other disposition of these shares
may be made unless the specific conditions of such
agreement are satisfied."
"The shares evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended. No transfer, sale or other disposition of
these shares may be made unless a registration
statement with respect to these shares has become
effective under the said Act or First South Africa
Corp., Ltd is furnished with an opinion of Counsel
satisfactory in form and substance to it that such
registration is not required."
7. PUT OPTION AND RELATED TRANSACTIONS
7.1 At any time during the Escrow period and provided that the
Escrow stock is capable of being sold in accordance with the
provisions of this agreement and the Securities Act of 1933,
as amended, and the rules and regulations promulgated
thereunder, the Subscriber will be entitled, on delivery to
the Escrow agent or its agent in the Republic of South Africa,
Webber Wentzel Bowens or its principal successor-in-practice,
of written notice accompanied by the original share
certificate/s evidencing the put shares together with
securities transfer form/s relating thereto signed and
completed in negotiable form according to law ("PUT NOTICE")
to require and oblige the Escrow agent to purchase the
subscription shares or any part thereof but no fewer than 100
subscription shares (or such lesser number as constitutes all
of the remaining
<PAGE>
subscription shares held by the Subscriber) in relation to any
single put notice, for the consideration and upon the terms
and conditions hereinafter recorded.
7.2 Against delivery of the put notice the Escrow agent will, in
compliance with applicable securities laws, use every
reasonable effort to sell as expeditiously as possible, at the
best possible price and on the best available terms so much of
the Escrow stock as is equal to the subscription shares put to
the Escrow agent in terms of the put notice and to implement
and enforce its rights and obligations arising from such sale.
7.3 The put notice will be unconditional and unqualified save only
that the Subscriber will be entitled to stipulate a minimum
price ("PRESCRIBED PRICE") expressed in US dollars per share
at which he is willing to sell the relevant subscription
shares put to the Escrow agent in terms of the put notice
("PUT SHARES"). If the put notice contains a prescribed price:
7.3.1 the Escrow agent will not be entitled to sell the
equivalent number of Escrow stock pursuant to 7.2
above for a price less than the prescribed price;
7.3.2 if the Escrow agent is unable to sell the equivalent
number of Escrow stock for a price at least equal to
the prescribed price within thirty days from delivery
of the relevant put notice then the put notice will
automatically lapse and be of no further force or
effect;
7.3.3 the Escrow agent will, notwithstanding the prescribed
price, seek to achieve the best possible price for
the Escrow stock as expeditiously as possible
pursuant to 7.2 above;
7.3.4 if the Escrow agent cannot achieve the sale of the
relevant Escrow stock for a price equal to or more
than the prescribed price it will inform the
Subscriber of its inability and of the best price at
which it is able to sell the relevant Escrow stock.
<PAGE>
7.4 Against the sale by the Escrow agent of the relevant number of
Escrow stock the Escrow agent will be deemed to have purchased
the subscription shares recorded in the relevant put notice
("PUT SHARES") upon and subject to the following terms and
conditions:
7.4.1 the price payable for the put shares will be equal to
the price payable for the equivalent Escrow stock
sold less any applicable brokerage fees, securities
tax, duty or charge properly incurred;
7.4.2 the price for the put shares will be payable by the
Escrow agent to the Subscriber against receipt by the
Escrow agent of the price payable for the relevant
Escrow stock sold;
7.4.3 as security for the payment of the price for the put
shares the Escrow agent will be deemed to have ceded,
assigned and made over unto and in favour of the
Subscriber all of the Escrow agent's right, title and
interest in and to its claims for payment of the
price payable for the relevant Escrow stock sold.
7.5 The Subscriber will not be entitled to deliver more than four
put notices.
7.6 Payment of any amount due to the Subscriber upon the sale of
subscription shares pursuant hereto will be made to the
subscriber at the domicilium chosen in terms of paragraph 12
below provided that such place will be in the Republic of
South Africa unless the Subscriber is entitled, according to
South African law, to receive such payment outside the
Republic of South Africa.
7.7 The Subscriber will not sell or otherwise transfer or dispose
of the subscription shares during the Escrow period except by
the delivery of put notices in accordance with the provisions
of this agreement.
7.8 Unless a put notice has been delivered the Escrow agent will
not be entitled to sell, offer to sell or otherwise dispose of
the Escrow stock or any part thereof.
<PAGE>
7.9 The Escrow agent will not be entitled to encumber the Escrow
stock nor expose it to any risk of attachment, forced sale,
realisation or other threat, direct or indirect in relation to
the obligations of the Escrow agent or any other person or by
virtue of any judicial, quasi judicial, bankruptcy or similar
legal process.
8. RIGHTS AND OBLIGATIONS OF ESCROW AGENT
8.1 The Escrow agent is not and will not be deemed to be a trustee
for any party for any purpose and is merely acting hereunder
with the limited duties herein prescribed.
8.2 The Escrow agent does not have and will not be deemed to have
any responsibility in respect of any instruction, certificate
or notice delivered to it or in respect of the Escrow stock or
any Escrow property other than faithfully to carry out the
obligations undertaken in this agreement and to follow the
directions or instructions recorded in any notice delivered
pursuant to this agreement.
8.3 The Escrow agent is not and will not be deemed to be liable
for any action taken or omitted by it in good faith and may
rely upon and act in accordance with the advice of its counsel
without liability on its part for any action taken or omitted
in accordance with such advice. In any event the Escrow
agent's liability hereunder will be limited to liability for
gross negligence, wilful misconduct or bad faith on its part,
8.4 The Escrow agent may conclusively rely upon and act in
accordance with any certificate, instruction, notice, letter,
telegram, cablegram or other written instrument believed by it
to be genuine and to have been signed by the proper party or
parties.
8.5 The Parent agrees:
8.5.1 to pay the Escrow agent's reasonable fees and to
reimburse it for its reasonable expenses including
attorneys fees incurred in connection with its
duties hereunder expeditiously so as not to impair
or delay the timeous implementation of this
agreement and put notice delivered pursuant hereto;
<PAGE>
8.5.2 to save harmless, indemnify and defend the Escrow
agent for, from and against any loss, damage,
liability, judgment, cost and expense whatsoever,
including reasonable counsel fees, suffered or
incurred by it by reason of or on account of any
misrepresentation made to it or its status or
actions as Escrow agent under this agreement except
for any loss, damage, liability, judgment, cost or
expense resulting from gross negligence, wilful
misconduct or bad faith on the part of the Escrow
agent. The obligation of the Escrow agent to sell or
deliver the Escrow stock pursuant to this agreement
will be subject to the prior satisfaction upon
written demand from the Escrow agent of the Parent's
obligations to save harmless, indemnify and defend
the Escrow agent and to reimburse the Escrow agent
or otherwise pay its reasonable fees and expenses
hereunder.
8.6 The Escrow agent will not be required to defend any legal
proceedings which may be instituted against it in respect of
the subject matter of this agreement unless requested to do so
by the Subscriber, the Parent or FSAH and indemnified to the
Escrow agent's satisfaction against the cost and expense of
such defence by the party requesting such defence. If any such
legal proceeding is instituted against it the Escrow agent
agrees promptly to give notice of such proceedings to the
remaining parties. The Escrow agent will not be obliged to
institute legal proceedings of any kind.
8.7 The Escrow agent will not by act, delay, omission or otherwise
be deemed to have waived any right or remedy it may have under
this agreement or generally, unless such waiver be in writing,
and no waiver will be valid unless it is in writing, signed by
the Escrow agent and only to the extent expressly therein set
forth. A waiver by the Escrow agent under the terms of this
agreement will not be construed as a bar to or waiver of the
same or any other right or remedy which it would otherwise
have on other occasions.
8.8 The Escrow agent may resign as such hereunder by giving thirty
days written notice thereof to the remaining parties. Within
twenty days after receipt of such notice the
<PAGE>
remaining parties will deliver to the Escrow agent written
instructions for the release of the Escrow stock and any
Escrow property to a substitute Escrow agent which whether
designated by written instructions from the remaining parties
or in the absence thereof by instructions from a court of
competent jurisdiction to the Escrow agent, will be a bank or
trust company organised and doing business under the laws of
the United States or any state thereof. Such substitute Escrow
agent will thereafter hold any Escrow stock and any Escrow
property received by it pursuant to the terms of this
agreement and otherwise act hereunder as if it were the Escrow
agent originally named herein. The Escrow agent's duties and
responsibilities hereunder will terminate upon the release of
all Escrow stock and Escrow property then held in escrow
according to such written instruction or upon such delivery as
herein provided. This agreement will not otherwise be
assignable by the Escrow agent without the prior written
consent of the remaining parties.
9. NON-WAIVER
No relaxation or indulgence which any of the parties may afford to the
other/s shall in any way prejudice or be deemed to be a waiver of the
rights of the indulgent party and shall not preclude or stop the
indulgent party from exercising all or any of its rights hereunder and
in particular but without limiting or derogating from the aforegoing,
any cancellation hereof or accrued right of cancellation hereof.
10. NON-VARIATION
10.1 No variation or amendment of this agreement will be of any
force or effect unless reduced to writing and signed by all
the parties hereto.
10.2 No consensual termination of this agreement will be of any
force or effect unless reduced to writing and signed by all
the parties hereto.
10.3 No waiver or abandonment of any party's rights arising from
this agreement, accrued or otherwise, will be of any force or
effect as against such party unless such such
<PAGE>
waiver or abandonment is reduced to writing and signed by the
party waiving and abandoning such rights.
10.4 No oral statements and no conduct by a party relating to any
purported variation, amendment, cancellation, waiver or
abandonment will estop a party from relying upon the
formalities prescribed in the preceding sub-paragraphs of this
paragraph.
11. WHOLE AGREEMENT
11.1 This agreement constitutes the whole agreement between the
parties with regard to the subject matter hereof and no
representations, or warranties, by commission or omission
which are not recorded herein shall be of any force or effect.
11.2 The parties acknowledge that they have not been induced or
coerced to enter into this contract by virtue of any
representations, statements, understandings, omissions or
warranties made by the other party hereto or any persons
acting on their behalf which are not included herein.
12. MISCELLANEOUS MATTERS
12.1 ADDRESS
12.1.1 Any written notice in connection with this agreement may be
addressed :
12.1.1.1 Escrow agent :
address : c/o American Stock Transfer & Trust Company
40 Wall Street
New York NY 10005
and shall be marked for the attention of Mr Herb Lemmer.
<PAGE>
12.1.1.2 Parent/FSAH :
address : 2665 South Bayshore
Suite 606
Coconut Grove
Florida 33133
telefax no: 091 305 856 4057;
and shall be marked for the attention of Clive Kabatznik;
copy to: Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
Attention: Henry L Rothman.
12.1.1.3 Subscriber :
address :
and shall be marked for the attention of the Subscriber
12.2 Any notice or payment sent to a party's domicilium citandi et
executandi as selected above by prepaid registered post shall
be presumed, subject to proof to the contrary, to have been
received by such party on the 7th (seventh) day after the
posting of same, or if delivered by hand, on the day of such
delivery by hand, or it transmitted by telex or telefax, on
the day of such delivery by hand, or if transmitted by telex
or telefax, on the day of transmitting same unless it is not a
business day in which event such telex or telefax shall be
deemed to have been received on the following business day.
<PAGE>
12.3 Any party shall be entitled to alter his domicilium citandi et
executandi in terms hereof by furnishing to the others of them
written notice of such alteration provided that
<PAGE>
such alteration shall only be effective 7 (seven) days after
receipt by the other party of such notice.
13. GOVERNING LAW
This agreement will be governed by and construed in accordance with the
laws of New York and will be binding upon and enure to the benefit of
all the parties hereto and their respective successors-in-interest and
assigns.
14. SIGNATURE IN COUNTERPART
This agreement may be executed in several counterparts which taken
together will constitute a single instrument.
Signed at on 1996.
WITNESS: for AMERICAN STOCK TRANSFER AND TRUST COMPANY
................................... ...........................................
Signed at on 1996.
WITNESS: for FIRST SOUTH AFRICA CORP., LTD
................................... ...........................................
<PAGE>
Signed at on 1996.
WITNESS: for FIRST SOUTH AFRICAN HOLDINGS (PTY) LTD
................................... ...........................................
Signed at on 1996.
WITNESS: for MICHAEL MORGAN
................................... ...........................................
ESCROW AGREEMENT
1. PARTIES
The parties to this agreement are:
1.1 American Stock Transfer and Trust Company
a New York corporation
("ESCROW AGENT")
1.2 First South Africa Corp., Ltd
a Bermuda company
("PARENT")
1.3 First South African Holdings (Pty) Limited
a South African company
("FSAH")
1.4 John Welch
("SUBSCRIBER")
(hereinafter referred to as "the parties").
2. RECITAL
2.1 The authorised share capital of FSAH comprises 30 000 000 "A"
class ordinary shares of R0,0001 each and 10 000 000 "B" class
ordinary shares of R0,0001 each ("FSAH B CLASS SHARES").
<PAGE>
2.2 All of the issued A class ordinary shares in FSAH are owned by
the Parent.
2.3 The rights and obligations attached to the FSAH B class shares
are recorded in the quotation from the articles of association
of FSAH recorded on Schedule "1" hereto.
2.4 The Parent has an authorised share capital comprising of
Common Stock, registered with the Securities and Exchange
Commission and listed for trading on NASDAQ in compliance with
all applicable laws, and Class B Common Stock ("PARENT CLASS B
STOCK") which is not so registered and listed.
2.5 FSAH has agreed to allot and issue and the Subscriber has
agreed to subscribe for 149 210 FSAH B class shares
("SUBSCRIPTION SHARES") and the Parent has agreed to
simultaneously allot and issue to the Escrow agent which has
agreed to subscribe for 149 210 Parent B class stock ("ESCROW
STOCK").
2.6 Insofar as prevailing circumstances and laws allow and subject
to the restrictions recorded herein the Parent and FSAH wish,
by the conclusion and implementation of this agreement, to
enable the Subscriber to trade in the subscription shares for
value and in circumstances which are pari passu with the
trading of the Parent class B stock.
2.7 In consideration of the mutual covenants and promises herein
contained and other good and valuable consideration the
adequacy of which is hereby acknowledged, the parties have
reached the agreement recorded herein.
3. APPOINTMENT OF ESCROW AGENT
<PAGE>
3.1 The Parent hereby appoints the Escrow agent to receive, hold
and dispose of the Escrow stock in accordance with the
provisions of this agreement.
3.2 The Escrow agent by its execution and delivery of this
agreement accepts its appointment as Escrow agent upon and
subject to the terms and conditions of this agreement.
3.3 The appointment of the Escrow agent will become effective
against delivery of the Escrow stock to the Escrow agent and
will continue in effect until the Escrow stock, all dividends
or other benefits accruing thereto and all proceeds derived
from the sale or other disposition thereof has been
distributed in accordance with this agreement ("ESCROW
PERIOD").
4. ISSUE OF SHARES AND STOCK
4.1 Against the allotment and issue to the Subscriber of the
subscription shares the Parent will allot and issue the Escrow
stock to the Escrow agent for a consideration of US$.01 per
share payable to the parent on behalf of the Escrow agent by
Michael Levy who will thereby acquire no claim against the
Escrow agent.
4.2 Against receipt of the Escrow stock the Escrow agent will
confirm in writing delivered to the Subscriber that the Escrow
stock has been delivered to it unconditionally, in negotiable
form subject only to the restrictions contemplated by this
agreement.
4.3 For the duration of the Escrow period the Escrow agent will
retain possession of and control over the Escrow shares and
will at the request of the Subscriber inform the remaining
parties of the physical
<PAGE>
location of all documents and records evidencing the Escrow
stock and requisite to trading therein.
4.4 Insofar as circumstances and the law allow the Escrow agent
will retain the Escrow stock in negotiable and freely
tradeable form throughout the Escrow period, subject only to
the restrictions recorded in this agreement.
5. ESCROW PROPERTY
During the Escrow period the Escrow agent will receive all
money, securities, rights or property distributed in respect of the
Escrow stock including any such property distributed as dividends or
pursuant to any stock split, merger, recapitalisation, dissolution,
total or partial liquidation of the Parent (excluding only dividends
paid to the Escrow agent by the Parent to the extent that the
Subscriber has in relation to the same period been paid dividends on
the Subscription shares): all such property to be held and distributed
as herein provided and hereinafter referred to collectively as "Escrow
property". Reference herein to Escrow stock will be deemed to include
the Escrow property deposited in escrow pursuant thereto.
6. ESCROW STOCK - RIGHTS, OBLIGATIONS AND RESTRICTIONS
6.1 Except for transfers to permitted transferees (as defined in
Section 1(p) of the bye-laws of the Parent) if any of the
Escrow stock is sold by the Escrow agent pursuant to this
agreement it will automatically convert into a share of common
stock in the parent.
6.2 None of the Escrow stock may be sold in contravention of the
restrictions set out in clause 12 of the sale of shares
agreement entered
<PAGE>
into among John Welch, Heinz Andreas, Michael Morgan, Parent
and FSAH, ("THE SALE AGREEMENT") on 11 March 1996.
6.3 Subject to 6.2, the Escrow stock may only be sold and
transferred in compliance with this agreement and the
Securities Act of 1933 as amended and the rules and
regulations promulgated thereunder.
6.4 For the duration of the Escrow period Michael Levy will have
the sole power to vote the Escrow stock and any securities
held in escrow as part of the Escrow property to which end the
Escrow agent hereby irrevocably appoints Michael Levy as its
proxy to vote the Escrow stock on its behalf at any meeting of
the shareholders of the Parent and at any adjournment thereof
which shall take place during the Escrow period. The Escrow
agent undertakes that it will execute and deliver to Levy a
separate voting proxy in the aforegoing terms referring
specifically to the Escrow stock and any securities comprising
the Escrow property against demand by Levy following delivery
of the Escrow stock or other securities as the case may be.
6.5 Each certificate evidencing the Escrow stock will bear the
following legends in addition to any others required by law:
"The sale, transfer, hypothecation, negotiation,
pledge, assignment, encumbrance or other disposition
of the shares evidenced by this certificate are
restricted by and are subject to all of the terms,
conditions and provisions of an escrow agreement
entered into amongst First South Africa Corp., Ltd,
First South African Holdings (Proprietary) Limited,
American Stock Transfer & Trust Company and John
Welch, a copy of which may be obtained from the
secretary of First South Africa Corp., Ltd. No
transfer, sale or other disposition of these shares
may be made unless the specific conditions of such
agreement are satisfied."
<PAGE>
"The shares evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended. No transfer, sale or other disposition of
these shares may be made unless a registration
statement with respect to these shares has become
effective under the said Act or First South Africa
Corp., Ltd is furnished with an opinion of Counsel
satisfactory in form and substance to it that such
registration is not required."
7. PUT OPTION AND RELATED TRANSACTIONS
7.1 At any time during the Escrow period and provided that the
Escrow stock is capable of being sold in accordance with the
provisions of this agreement and the Securities Act of 1933,
as amended, and the rules and regulations promulgated
thereunder, the Subscriber will be entitled, on delivery to
the Escrow agent or its agent in the Republic of South Africa,
Webber Wentzel Bowens or its principal successor-in-practice,
of written notice accompanied by the original share
certificate/s evidencing the put shares together with
securities transfer form/s relating thereto signed and
completed in negotiable form according to law ("PUT NOTICE")
to require and oblige the Escrow agent to purchase the
subscription shares or any part thereof but no fewer than 100
subscription shares (or such lesser number as constitutes all
of the remaining subscription shares held by the Subscriber)
in relation to any single put notice, for the consideration
and upon the terms and conditions hereinafter recorded.
7.2 Against delivery of the put notice the Escrow agent will, in
compliance with applicable securities laws, use every
reasonable effort to sell as expeditiously as possible, at the
best possible price and on the best
<PAGE>
available terms so much of the Escrow stock as is equal to the
subscription shares put to the Escrow agent in terms of the
put notice and to implement and enforce its rights and
obligations arising from such sale.
7.3 The put notice will be unconditional and unqualified save only
that the Subscriber will be entitled to stipulate a minimum
price ("PRESCRIBED PRICE") expressed in US dollars per share
at which he is willing to sell the relevant subscription
shares put to the Escrow agent in terms of the put notice
("PUT SHARES"). If the put notice contains a prescribed price:
7.3.1 the Escrow agent will not be entitled to sell the equivalent
number of Escrow stock pursuant to 7.2 above for a price less
than the prescribed price;
7.3.2 if the Escrow agent is unable to sell the equivalent number of
Escrow stock for a price at least equal to the prescribed
price within thirty days from delivery of the relevant put
notice then the put notice will automatically lapse and be of
no further force or effect;
7.3.3 the Escrow agent will, notwithstanding the prescribed price,
seek to achieve the best possible price for the Escrow stock
as expeditiously as possible pursuant to 7.2 above;
7.3.4 if the Escrow agent cannot achieve the sale of the relevant
Escrow stock for a price equal to or more than the prescribed
price it will inform the Subscriber of its inability and of
the best price at which it is able to sell the relevant Escrow
stock.
7.4 Against the sale by the Escrow agent of the relevant number of
Escrow stock the Escrow agent will be deemed to have purchased
the
<PAGE>
subscription shares recorded in the relevant put notice ("PUT
SHARES") upon and subject to the following terms and
conditions:
7.4.1 the price payable for the put shares will be equal to the
price payable for the equivalent Escrow stock sold less any
applicable brokerage fees, securities tax, duty or charge
properly incurred;
7.4.2 the price for the put shares will be payable by the Escrow
agent to the Subscriber against receipt by the Escrow agent of
the price payable for the relevant Escrow stock sold;
7.4.3 as security for the payment of the price for the put shares
the Escrow agent will be deemed to have ceded, assigned and
made over unto and in favour of the Subscriber all of the
Escrow agent's right, title and interest in and to its claims
for payment of the price payable for the relevant Escrow stock
sold.
7.5 The Subscriber will not be entitled to deliver more than
four put notices.
7.6 Payment of any amount due to the Subscriber upon the sale of
subscription shares pursuant hereto will be made to the
subscriber at the domicilium chosen in terms of paragraph 12
below provided that such place will be in the Republic of
South Africa unless the Subscriber is entitled, according to
South African law, to receive such payment outside the
Republic of South Africa.
7.7 The Subscriber will not sell or otherwise transfer or dispose
of the subscription shares during the Escrow period except by
the delivery of put notices in accordance with the provisions
of this agreement.
<PAGE>
7.8 Unless a put notice has been delivered the Escrow agent will
not be entitled to sell, offer to sell or otherwise dispose of
the Escrow stock or any part thereof.
7.9 The Escrow agent will not be entitled to encumber the Escrow
stock nor expose it to any risk of attachment, forced sale,
realisation or other threat, direct or indirect in relation to
the obligations of the Escrow agent or any other person or by
virtue of any judicial, quasi judicial, bankruptcy or similar
legal process.
8. RIGHTS AND OBLIGATIONS OF ESCROW AGENT
8.1 The Escrow agent is not and will not be deemed to be a trustee
for any party for any purpose and is merely acting hereunder
with the limited duties herein prescribed.
8.2 The Escrow agent does not have and will not be deemed to have
any responsibility in respect of any instruction, certificate
or notice delivered to it or in respect of the Escrow stock or
any Escrow property other than faithfully to carry out the
obligations undertaken in this agreement and to follow the
directions or instructions recorded in any notice delivered
pursuant to this agreement.
8.3 The Escrow agent is not and will not be deemed to be liable
for any action taken or omitted by it in good faith and may
rely upon and act in accordance with the advice of its counsel
without liability on its part for any action taken or omitted
in accordance with such advice. In any event the Escrow
agent's liability hereunder will be limited to liability for
gross negligence, wilful misconduct or bad faith on its part,
8.4 The Escrow agent may conclusively rely upon and act in
accordance with any certificate, instruction, notice, letter,
telegram, cablegram or
<PAGE>
other written instrument believed by it to be genuine and to
have been signed by the proper party or parties.
8.5 The Parent agrees:
8.5.1 to pay the Escrow agent's reasonable fees and to reimburse it
for its reasonable expenses including attorneys fees incurred
in connection with its duties hereunder expeditiously so as
not to impair or delay the timeous implementation of this
agreement and put notice delivered pursuant hereto;
8.5.2 to save harmless, indemnify and defend the Escrow agent for,
from and against any loss, damage, liability, judgment, cost
and expense whatsoever, including reasonable counsel fees,
suffered or incurred by it by reason of or on account of any
misrepresentation made to it or its status or actions as
Escrow agent under this agreement except for any loss, damage,
liability, judgment, cost or expense resulting from gross
negligence, wilful misconduct or bad faith on the part of the
Escrow agent. The obligation of the Escrow agent to sell or
deliver the Escrow stock pursuant to this agreement will be
subject to the prior satisfaction upon written demand from the
Escrow agent of the Parent's obligations to save harmless,
indemnify and defend the Escrow agent and to reimburse the
Escrow agent or otherwise pay its reasonable fees and expenses
hereunder.
8.6 The Escrow agent will not be required to defend any legal
proceedings which may be instituted against it in respect of
the subject matter of this agreement unless requested to do so
by the Subscriber, the Parent or FSAH and indemnified to the
Escrow agent's satisfaction against the cost and expense of
such defence by the party requesting such defence. If any such
legal proceeding is instituted against it the Escrow agent
agrees promptly to give notice of such proceedings to the
<PAGE>
remaining parties. The Escrow agent will not be obliged to
institute legal proceedings of any kind.
8.7 The Escrow agent will not by act, delay, omission or otherwise
be deemed to have waived any right or remedy it may have under
this agreement or generally, unless such waiver be in writing,
and no waiver will be valid unless it is in writing, signed by
the Escrow agent and only to the extent expressly therein set
forth. A waiver by the Escrow agent under the terms of this
agreement will not be construed as a bar to or waiver of the
same or any other right or remedy which it would otherwise
have on other occasions.
8.8 The Escrow agent may resign as such hereunder by giving thirty
days written notice thereof to the remaining parties. Within
twenty days after receipt of such notice the remaining parties
will deliver to the Escrow agent written instructions for the
release of the Escrow stock and any Escrow property to a
substitute Escrow agent which whether designated by written
instructions from the remaining parties or in the absence
thereof by instructions from a court of competent jurisdiction
to the Escrow agent, will be a bank or trust company organised
and doing business under the laws of the United States or any
state thereof. Such substitute Escrow agent will thereafter
hold any Escrow stock and any Escrow property received by it
pursuant to the terms of this agreement and otherwise act
hereunder as if it were the Escrow agent originally named
herein. The Escrow agent's duties and responsibilities
hereunder will terminate upon the release of all Escrow stock
and Escrow property then held in escrow according to such
written instruction or upon such delivery as herein provided.
This agreement will not otherwise be assignable by the Escrow
agent without the prior written consent of the remaining
parties.
<PAGE>
9. NON-WAIVER
No relaxation or indulgence which any of the parties may
afford to the other/s shall in any way prejudice or be deemed
to be a waiver of the rights of the indulgent party and shall
not preclude or stop the indulgent party from exercising all
or any of its rights hereunder and in particular but without
limiting or derogating from the aforegoing, any cancellation
hereof or accrued right of cancellation hereof.
10. NON-VARIATION
10.1 No variation or amendment of this agreement will be of any
force or effect unless reduced to writing and signed by all
the parties hereto.
10.2 No consensual termination of this agreement will be of any
force or effect unless reduced to writing and signed by all
the parties hereto.
10.3 No waiver or abandonment of any party's rights arising from
this agreement, accrued or otherwise, will be of any force or
effect as against such party unless such such waiver or
abandonment is reduced to writing and signed by the party
waiving and abandoning such rights.
10.4 No oral statements and no conduct by a party relating to any
purported variation, amendment, cancellation, waiver or
abandonment will estop a party from relying upon the
formalities prescribed in the preceding sub-paragraphs of this
paragraph.
11. WHOLE AGREEMENT
11.1 This agreement constitutes the whole agreement between the
parties with regard to the subject matter hereof and no
representations, or
<PAGE>
warranties, by commission or omission which are not recorded
herein shall be of any force or effect.
<PAGE>
11.2 The parties acknowledge that they have not been induced or
coerced to enter into this contract by virtue of any
representations, statements,
<PAGE>
understandings, omissions or warranties made by the other
party hereto or any persons acting on their behalf which are
not included herein.
12. MISCELLANEOUS MATTERS
12.1 ADDRESS
12.1.1 Any written notice in connection with this agreement may be
addressed :
12.1.1.1 Escrow agent : address : c/o American Stock Transfer & Trust
Company 40 Wall Street New York NY 10005
and shall be marked for the attention of Mr Herb Lemmer.
12.1.1.2 Parent/FSAH : address : 2665 South Bayshore Suite 606 Coconut
Grove Florida 33133 telefax no : 091 305 856 4057;
and shall be marked for the attention of Clive Kabatznik;
copy to: Parker Chapin Flattau & Klimpl, LLP 1211
Avenue of the Americas New York, NY
10036-8735 Attention: Henry L Rothman.
<PAGE>
12.1.1.3 Subscriber : address :
and shall be marked for the attention of the Subscriber
12.2 Any notice or payment sent to a party's domicilium citandi et
executandi as selected above by prepaid registered post shall
be presumed, subject to proof to the contrary, to have been
received by such party on the 7th (seventh) day after the
posting of same, or if delivered by hand, on the day of such
delivery by hand, or it transmitted by telex or telefax, on
the day of such delivery by hand, or if transmitted by telex
or telefax, on the day of transmitting same unless it is not a
business day in which event such telex or telefax shall be
deemed to have been received on the following business day.
12.3 Any party shall be entitled to alter his domicilium citandi et
executandi in terms hereof by furnishing to the others of them
written notice of such alteration provided that such
alteration shall only be effective 7 (seven) days after
receipt by the other party of such notice.
13. GOVERNING LAW
This agreement will be governed by and construed in accordance
with the laws of New York and will be binding upon and enure
to the benefit of all the parties hereto and their respective
successors-in-interest and assigns.
<PAGE>
14. SIGNATURE IN COUNTERPART
This agreement may be executed in several counterparts which
taken together will constitute a single instrument.
Signed at on 1996.
AS WITNESS: For American Stock Transfer and Trust
Company
........................................... ...................................
Signed at on 1996.
AS WITNESS: First South Africa Corp Ltd
........................................... ...................................
Signed at on 1996.
AS WITNESS:
........................................... ...................................
John Welch
SALE OF BUSINESS AGREEMENT
between
ASTORIA BAKERY CC
and
WOLFGANG BURRE
and
ASTORIA BAKERY (PROPRIETARY) LIMITED
and
FIRST SOUTH AFRICAN HOLDINGS (PROPRIETARY) LIMITED
and
FIRST SOUTH AFRICA CORP., LTD
Webber Wentzel Bowens
<PAGE>
TABLE OF CONTENTS
1. Introduction
2. Definitions and interpretation
3. Suspensive conditions
4. Preparation of the seller's 1996 financial statements
and the ABL 1996 financial statements
5. The sale
6. Risk
7. Purchase price
8. Adjustments to and manner of payment of the first instalment
<PAGE>
9. Adjustments to and manner of payment of the second,
third and fourth instalments
10. Restrictions on disposal of FSAH "B" shares
11. Put option
12. Security for payment of the purchase price
13. Set-off of damages against instalments of the purchase price
14. Completion
15. Contracts and unfulfilled orders
16. Insolvency Act - section 34
17. Employees
18. Pension fund
19. Guarantees, suretyships and indemnities
20. Warranties
20.1.1 assets
20.1.2 manner of carrying on business
20.1.3 goodwill and scope of business
20.1.4 contracts
20.1.5 intellectual property rights
20.1.6 laws, regulations, consents, licences and
permits
20.1.7 labour laws, regulations, determinations,
agreements and disputes
20.1.8 insurance
20.1.9 employment, leave, remuneration and pension
20.1.10 restraint of trade
20.1.11 warranties regarding books of account
20.1.12 environmental warranties
20.2.1 warranties relating to the business of ABL
20.2.2 assets of ABL
20.2.3 warranty regarding registration
20.2.4 warranties regarding capital structure and the
shares
20.2.5 warranties regarding statutory requirements
20.2.6 warranties regarding books of account and
minutes
20.2.7 warranties regarding taxation
20.2.7.1 administration
20.2.7.2 deductible payments
20.3 disclosure
21. Confidentiality
22. Restraints
23. Value-added tax
24. Breach
25. Mediation and arbitration
26. Costs
27. Miscellaneous matters
27.1 postal addresses
27.2 addresses for service of legal documents
27.3 entire contract
27.4 no representations
27.5 variation, cancellation, waiver
27.6 indulgences
27.7 cession
27.8 applicable law
27.9 jurisdiction
<PAGE>
1. INTRODUCTION
1.1 The seller carries on the business, as defined. The business
is a going concern.
1.2 The seller wishes to sell and the purchaser wishes to purchase
the business as a going concern on the terms and conditions
set out below. The purchaser also requires warranties and a
restraint of trade from the warrantor and the seller, which
these persons are prepared to give.
1.3 The parties accordingly wish to enter into an agreement on the
terms and conditions set out below.
2. DEFINITIONS AND INTERPRETATION
2.1 In this agreement, unless inconsistent with the context, words
referring to:
2.1.1 one gender include a reference to the other genders;
2.1.2 the singular include the plural and vice versa;
2.1.3 natural persons include artificial persons and vice
versa.
2.2 Whenever a number of days is prescribed in this agreement,
such number shall be calculated excluding the first and
including the last day, unless the last day falls on a
Saturday, Sunday or official public holiday, in which case the
last day shall be the next day which is not a Saturday, Sunday
or official public holiday.
2.3 Any appendices to this agreement shall be deemed to form part
of this agreement.
2.4 The following expressions shall, unless otherwise
<PAGE>
stated or inconsistent with the context in which they appear,
bear the following meanings and cognate expressions shall bear
corresponding meanings:
2.4.1 "ABL"-Astoria Bakery Lesotho (Proprietary) Limited,
registration no. //, a company incorporated under the
laws of Lesotho;
2.4.2 "THE ABL 1996 FINANCIAL STATEMENTS" - the audited
financial statements of ABL for the period ending 29
February 1996;
2.4.3 "THE BUSINESS"-means the business of the seller
conducted under the name "Astoria Bakeries" using the
sale assets and involving the manufacture of breads,
confectioneries, and other pastry-related products;
2.4.4 "THE COMPLETION DATE"-the seventh day after the
fulfilment of the last-outstanding of the suspensive
conditions;
2.4.5 "THE CONTRACTS"-those contracts of the seller
relating to the business, all as identified in
Appendix 1 to this agreement;
2.4.6 "THE CREDITORS"-all trade creditors of the seller as
at the effective date;
2.4.7 "DEBTS"-all of the claims of the seller against the
debtors of the business as at the effective date;
2.4.8 "THE EFFECTIVE DATE"-1 July 1996;
<PAGE>
2.4.9 "THE EMPLOYEES"-those individuals employed by the
seller to work in the business and listed in Appendix
2;
2.4.10 "THE EMPLOYMENT AGREEMENTS" - employment agreements
to be entered into between the purchaser and each of
Hanne Hoffman, Wilfried Wesslau and Dagmar Blankner
in a form acceptable to the purchaser;
2.4.11 "FIXED ASSETS" - those fixed assets used by the
seller in the conduct of the business and listed and
identified in Appendix 3;
2.4.12 "THE FIRST INSTALMENT"-the first instalment of the
purchase price specified in 7.1.1;
2.4.13 "THE FOURTH INSTALMENT"-the fourth instalment of the
purchase price specified in 7.1.4;
2.4.14 "FSAC" - First South Africa Corp., Ltd, registration
number , a company incorporated under the laws of
Bermuda, certain of the shares of which are quoted on
NASDAQ;
2.4.15 "FSAH" - First South African Holdings (Proprietary)
Limited, registration number 95/03959/07, a private
company incorporated according to the laws of the
Republic of South Africa, the "A" shares of which are
owned by FSAC;
2.4.16 "FSAH "B" SHARES" - "B" shares in the capital of
FSAH;
<PAGE>
2.4.17 "THE INTELLECTUAL PROPERTY AGREEMENT" - the agreement
to be entered into relating to the sale of the
intellectual property in the recipes utilised by the
seller in the business, substantially in the form of
Appendix 4;
2.4.18 "THE LANDLORD" - ;
2.4.19 "THE LESOTHO SHARES" -the shares of ABL, formerly
owned by the warrantor and sold by the warrantor to
the seller;
2.4.20 "THE MANAGEMENT AGREEMENT" - the management agreement
to be concluded between FSAH, the purchaser and the
warrantor, substantially in the form of Appendix 5;
2.4.21 "THE PREMISES" - the premises from which the seller
conducts the business;
2.4.22 "THE PURCHASER" - Astoria Bakery (Proprietary)
Limited, registration number 96/10419/07, a private
company incorporated according to the laws of the
Republic of South Africa;
2.4.23 "THE RETAINED LIABILITIES"-all the liabilities of the
business as at the effective date, whether actual or
contingent, other than the sale liabilities;
2.4.24 "THE SALE ASSETS" - the aggregate of:-
2.4.24.1 the fixed assets;
2.4.24.2 the stock;
<PAGE>
2.4.24.3 the debts;
2.4.24.4 the Lesotho shares;
2.4.24.5 the trademarks;
2.4.24.6 the rights of the seller arising on or after
the effective date under the contracts;
2.4.25 "THE SALE LIABILITIES"-the aggregate of:
2.4.25.1 the creditors;
2.4.25.2 the obligations of the seller under the
shareholder's loan; and
2.4.25.3 the obligations of the seller arising on or
after the effective date under the
contracts;
2.4.26 "THE SECOND INSTALMENT"-the second instalment of the
purchase price specified in 7.1.2;
2.4.27 "THE SELLER" - Astoria Bakery CC, registration number
, a close corporation incorporated according to the
laws of the Republic of South Africa;
2.4.28 "THE SELLER'S 1996 FINANCIAL STATEMENTS" - the
audited financial statements of the seller for the
period ending 29February 1996, to be prepared in
accordance with clause 4;
2.4.29 "THE SHAREHOLDER'S LOAN"-the loan by the warrantor to
the seller, which the seller warrants will be not
less than R300000;
2.4.30 "SIGNATURE DATE" - the date on which this agreement
is signed by the last party to do so;
<PAGE>
2.4.31 "THE STOCK" - means the stocks of ingredients,
work-in-progress and finished baked goods intended
for resale by the seller, on hand at the commencement
of business on the effective date;
2.4.32 "THE SUSPENSIVE CONDITIONS" - the suspensive
conditions set out in clause 3;
2.4.33 "THE TRADEMARKS" - the unregistered trademark
"Astoria" and the wheat sheaf logo used by the seller
in its business;
2.4.34 "THIS AGREEMENT" - this agreement, and all the
appendices to this agreement;
2.4.35 "THE THIRD INSTALMENT"-the third instalment of the
purchase price specified in 7.1.3;
2.4.36 "THE WARRANTOR" - Wolfgang Burre, the sole member of
the seller.
3. SUSPENSIVE CONDITIONS
3.1 This rights and obligations of the parties under this
agreement (other than those set out in this clause 3 and
clauses 4, 21, 24, 25 and 26) are subject to and conditional
upon the fulfilment of the following suspensive conditions on
or before 30 September 1996, or such later date as may be
determined pursuant to clause 3.3:
3.1.1 the conclusion of written agreements of lease between
the purchaser and each of Strydom Park Property CC
and Ferndale Property CC in respect of the premises
for a period of 5 years, renewable at the option of
the purchaser for a further period of 5 years, on
market-related terms and conditions reasonably
acceptable to the purchaser;
<PAGE>
3.1.2 the conclusion of the management agreement, the
intellectual property agreement and the employment
agreements, and the fulfilment of all conditions to
which those agreements are subject other than any
condition relating to the conclusion of this
agreement and its becoming unconditional;
3.1.3 the approval of the boards of directors of the
purchaser, FSAH and FSAC;
3.1.4 the completion by the purchaser or its agents of a
due diligence investigation into the affairs and
financial position of the seller yielding results
satisfactory to the purchaser, FSAH and FSAC. The
costs of this investigation shall be borne by the
purchaser; and
3.1.5 the preparation, completion and audit of the seller's
1996 financial statements and the ABL 1996 financial
statements in accordance with clause 4.
3.2 Each of the parties shall use its best endeavours to procure
fulfilment of the suspensive conditions. In particular, but
without limitation, the seller and the warrantor undertake to
make available all information requested by the purchaser, and
to answer all questions and deal with all queries posed by the
purchaser in the course of the due diligence investigation
referred to in 3.1.5.
3.3 The suspensive conditions are for the benefit of the purchaser
which may by written notice given to the seller prior to 30
September 1996, waive, or extend the period for, the
fulfilment of any condition.
3.4 If any of the suspensive conditions fail (and fulfilment
thereof is not waived in terms of 3.3), this agreement, (save
for the provisions of this clause and clauses 4, 21, 24, 25
and 26) shall cease to be of any further force and effect and
the parties shall be restored as nearly as may be possible to
the positions in which they would have been had this agreement
not been entered into. No party shall have any claim against
any other as a result of the failure of the conditions, except
for such claims, if any, as may result from a breach of the
provisions of this clause.
<PAGE>
4. PREPARATION OF THE SELLER'S 1996 FINANCIAL STATEMENTS AND THE ABL 1996
FINANCIAL STATEMENTS
The seller's 1996 financial statements and the ABL 1996 financial
statements shall be prepared by the seller and ABL respectively and
audited by Messrs Kana & Associates. The seller and the warrantor
warrant that the seller's 1996 financial statements and the ABL 1996
financial statements:-
4.1 will, in the case of the seller, be prepared in accordance
with the Companies Act 61 of 1973 and with South African
generally accepted accounting practice, and in the case of the
ABL 1996 financial statements, will be prepared in accordance
with applicable Lesotho legislation and generally accepted
accounting practice;
4.2 will be prepared on the same basis and applying the same
accounting policies as for all prior years;
4.3 will not reflect any revaluation of assets;
4.4 will fairly present the financial position and state of
affairs of the seller or ABL, as applicable, at 29 February
1996 and the results of operations of the seller or ABL, as
applicable, for the period ended 29 February 1996; and
4.5 will be reported on without qualification by the seller's or
ABL's auditors, as the case may be.
5. THE SALE
5.1 With effect from the effective date the seller sells and the
purchaser purchases the business as a going concern. Such sale
encompasses inter alia the acquisition by the purchaser of the
sale assets and the assumption by the purchaser of the sale
liabilities.
5.2 The sale will be deemed to have taken effect on the effective
date, notwithstanding the date on which this agreement is
signed.
5.3 Nothing contained in this agreement will operate to transfer
to the purchaser any asset or liability other than the sale
assets and the sale
<PAGE>
liabilities. In particular the sale excludes the retained
liabilities.
5.4 The seller shall discharge the retained liabilities and all
other debts, liabilities and obligations in connection with
the business not expressly assumed by the purchaser under this
agreement and shall indemnify the purchaser against all costs,
claims, demands and liabilities in respect of any of those
obligations or any failure of the seller to discharge them.
5.5 The parties agree that:-
5.5.1 the sale of the business comprises the sale of the
seller's business as a going concern;
5.5.2 the business was an income-earning activity on the
effective date and will be an income-earning activity
on the completion date;
5.5.3 the sale encompasses the sale of all assets necessary
for the conduct of the business.
6. RISK
The risk in and the benefit of the business will be deemed to have
passed to the purchaser on the effective date. Between the effective
date and the completion date the seller shall conduct the business as
agent of and for the account of the purchaser.
7. PURCHASE PRICE
7.1 The purchase price of the business shall, (subject to a
minimum of R16000000), be the aggregate of the following
instalments as adjusted pursuant to clauses 8 or 9, as the
case may be-
7.1.1 a first instalment of R10000000 payable on the
completion date as to R6000000 in cash and as to
R4000000 by the issue of 186047 FSAH "B" shares,
valued at US$5,00 per share converted into Rand at a
fixed exchange rate of R4,30 to the dollar;
7.1.2 a second instalment equal to 4 times the consolidated
pre-tax profits of the purchaser for the year ended
30 June 1997,
<PAGE>
multiplied by 25%, payable as to 60% in cash and as
to the balance by the issue to the seller of FSAH "B"
shares. The FSAH "B" shares shall be issued at a
price equal to the US Dollar denominated closing
price of the ordinary NASDAQ listed shares of FSAC on
30 June 1997, converted into Rand at the spot rate of
exchange of US Dollars for South African Rand quoted
by Nedbank at close of business on 30 June 1997. This
rate shall be established, in the event of a dispute,
by a certificate given by any manager of Nedbank
whose designation it shall not be necessary to prove
and whose determination shall be proof of the rate
until the contrary is proved;
7.1.3 a third instalment equal to 4 times the consolidated
pre-tax profits of the purchaser for the year ended
30 June 1998, multiplied by 25% and payable as to 60%
in cash and as to the balance by the issue to the
seller of FSAH "B" shares. The FSAH "B" shares shall
be issued at a price equal to the US Dollar
denominated closing price of the ordinary NASDAQ
listed shares of FSAC on 30 June 1998, converted into
Rand at the spot rate of exchange of US Dollars for
South African Rand quoted by Nedbank at close of
business on 30 June 1998. This rate shall be
established, in the event of a dispute, by a
certificate given by any manager of Nedbank whose
designation it shall not be necessary to prove and
whose determination shall be proof of the rate until
the contrary is proved;
7.1.4 a fourth instalment, determined in accordance with
the formula:-
F = [25% x (4 x P)] - M
where
F is the value of the fourth instalment to
be determined;
P is the consolidated pre-tax profits of the
purchaser for the year ended 30 June 1999;
and M is the lesser of the Rand values of
the second and third instalments;
<PAGE>
payable as to 60% in cash and as to the balance by
the issue to the seller of FSAH "B" shares. The FSAH
"B" shares shall be issued at a price equal to the US
Dollar denominated closing price of the ordinary
NASDAQ listed shares of FSAC on 30 June 1999,
converted into Rand at the spot rate of exchange of
US Dollars for South African Rand quoted by Nedbank
at close of business on 30 June 1999. This rate shall
be established, in the event of a dispute, by a
certificate given by any manager of Nedbank whose
designation it shall not be necessary to prove and
whose determination shall be proof of the rate until
the contrary is proved.
7.2 Notwithstanding the preceding sub-clauses of this clause, the
purchase price shall not exceed R24000000 in total. In
calculating this amount appreciation or depreciation of the
FSAH "B" shares shall be excluded.
7.3 FSAH shall, if a disposal by the purchaser of all the FSAH "B"
shares comprised in the first instalment of the purchase price
realises less than R4000000, pay the difference between
R4000000 and the price realised by the seller to the seller on
demand, it being intended that the value of the first
instalment shall, provided that 8.1.1 and 8.1.2 are complied
with, be not less than R10000000. This sub-clause shall apply
only to disposals prior to 31March1999 (after which FSAH will
have no liability under this sub-clause) and provided that
8.1.1 and 8.1.2 are complied with.
7.4 The purchase price shall be allocated as follows: -
7.4.1 to the debts, their face value;
7.4.2 to the stock, its face value;
7.4.3 to the Lesotho shares, R;
7.4.4 to the trademarks, R;
7.4.5 to the fixed assets, R; and
<PAGE>
7.4.6 the balance as to goodwill.
No value is attributed to the contracts.
7.5 The purchaser indemnifies the seller against any additional
tax the seller may incur as a result of any recoupment arising
pursuant to any allocation referred to in 7.4.4 or 7.4.5.
8. ADJUSTMENTS TO AND MANNER OF PAYMENT OF THE FIRST INSTALMENT
8.1 The first instalment shall be reduced on a Rand for Rand basis
by the amount of:-
8.1.1 any distribution of after tax profit by the seller or
ABL in the nature of a dividend between 29 February
1996 and the completion date; and
8.1.2 any amount paid by the seller to the warrantor in
breach of the warranty set out in 20.1.9.1 or which
is otherwise outside his normal remuneration.
8.2 The first instalment will be paid on the completion date.
9. ADJUSTMENTS TO AND MANNER OF PAYMENT OF THE SECOND, THIRD AND FOURTH
INSTALMENTS
9.1 Each of the second, third and fourth instalments will be paid
within 14 days of the finalisation of the consolidated audited
accounts of the purchaser for the year concerned. The
purchaser and FSAH undertake to use all reasonable endeavours
to ensure that each such audit is finalised by no later than
30 September of the relevant year.
9.2 In determining the pre-tax profit of the purchaser on which
each of the second, third and fourth instalments will be
based, no account shall be taken of interest incurred on
borrowings to finance any such instalment. Any such interest
shall, for the sole purpose of quantifying the relevant
instalment, be added back to the profit reflected in the
financial statements for the year concerned.
<PAGE>
9.3 In the event of any unresolved dispute between the seller and
the purchaser as to the profit figure on which any of the
second, third or fourth instalments is based, the dispute
shall be resolved by the auditors of the purchaser, whose
determination shall be final and binding on the parties.
10. RESTRICTIONS ON DISPOSAL OF FSAH "B" SHARES
10.1 Notwithstanding 7.3, the seller and the warrantor undertake
that they shall not dispose of or attempt to dispose of, or
cede, pledge, assign or otherwise encumber any of the FSAH "B"
shares forming part of any instalment of the purchase price
prior to 30 September 1998, provided that this clause shall
not prevent a disposal of the shares by the seller to the
warrantor.
10.2 Any sale in contravention of 10.1 shall be void and the
directors of FSAH shall not enter the name of the transferee
in the share register of FSAH or otherwise recognise any title
of the purported purchaser of the shares. In addition FSAC
shall be entitled to purchase the affected FSAH "B" shares
from the defaulting holder of FSAH "B" shares at par. The
rights conferred on FSAC and the obligations imposed on the
seller shall not prejudice any other rights available to the
purchaser FSAC or FSAH arising from such breach.
11. PUT OPTION
11.1 FSAC undertakes to procure that a non-resident third party,
("THE OPTION GRANTOR"), will undertake to purchase from the
seller and/or the warrantor and/or their nominee or
successor-in-title all of the FSAH "B" shares to be issued by
the purchaser to the seller pursuant to this agreement, ("THE
PUT OPTION").
11.1 The material terms of the put option will be the following:-
11.1.1 it will only be exercisable when the seller or the
warrantor become entitled to sell the FSAH "B"
shares, determined in accordance with 10;
11.1.2 the price at which the put option may be exercised
shall be the net price received by
<PAGE>
the option grantor from the sale on the open market
in the United States of an equivalent number of
shares of FSAC. For this purpose "net price" shall
mean the price for which the FSAC shares are sold
less all costs associated with the sale, including
any broker's commission;
11.1.3 although the put option may be exercised in tranches
each tranche shall comprise a minimum of 100 shares;
11.1.4 for so long as South African exchange control
regulations prescribe that South African residents
shall repatriate foreign currency to South Africa,
the seller acknowledges that any proceeds from any
sale of the option shares shall be repatriated to
South Africa.
12. SECURITY FOR PAYMENT OF THE PURCHASE PRICE
12.1 As security for payment of the purchase price by the purchaser
and for the obligations of FSAH imposed by 7.3, FSAH shall
deliver to Webber Wentzel Bowens, to hold in escrow, share
certificates evidencing 50% of the issued shares of the
purchaser together with blank signed transfer forms in respect
of those shares, ("THE SECURITY DOCUMENTATION").
12.2 The parties shall procure that Webber Wentzel Bowens shall
hold the security documentation and deal with it as follows:-
12.2.1 if the purchase price is paid in full in accordance
with this agreement Webber Wentzel Bowens shall, on
receipt of written notice from the purchaser and the
seller that the purchase price has been paid in full,
deliver the security documentation to FSAH;
12.2.2 if the purchaser breaches its obligations to pay any
instalment of the purchase price in accordance with
this agreement, and fails to remedy such breach in
accordance with this agreement, Webber Wentzel Bowens
shall, upon receipt of either:-
12.2.2.1 written notice signed by the seller and the
purchaser that the shares are to be
delivered to the seller; or
<PAGE>
12.2.2.2 written notice signed by the seller and
accompanied by a copy of any judgement or
arbitral award finding in the purchaser's
favour that the purchase price has not been
paid in full;
deliver the security documentation to the seller.
13. SET-OFF OF DAMAGES AGAINST INSTALMENTS OF THE PURCHASE PRICE
13.1 Should the seller or the warrantor breach any provision of
this agreement the purchaser shall be entitled to deduct from
the next instalment of the purchase price the amount of any
loss or damages suffered by the purchaser arising from that
breach. Should the damages exceed the amount of the next
instalment the excess may, at the purchaser's discretion, be
carried forward and be deducted from future instalments of the
purchase price until satisfaction.
13.2 The provisions of this clause shall be without prejudice to
any other right of the purchaser arising from a breach of this
agreement. In particular, the purchaser shall not be obliged
to wait until the date of payment of the next instalment to
recover its damages.
13.3 In the event of a dispute over whether the purchaser has
suffered any loss or damages arising from a breach of this
agreement, or in respect of the quantum of such damages, the
purchaser shall pay the full amount of the cash portion of the
following instalment to Webber Wentzel Bowens to invest in an
interest-bearing trust account in accordance with the
provisions of section 78(2A) of the Attorneys Act No 53 of
1979. Upon determination of the amount of the loss or damages
in accordance with this agreement the difference, if any,
between the amount paid into trust and the amount of the
damages, together with a pro rata portion of interest earned
on the trust deposit, shall be paid to the seller and the
balance refunded to the purchaser.
<PAGE>
14. COMPLETION
14.1 Completion shall take place at the premises of the seller at
13h00 on the completion date.
14.2 On the completion date:
14.2.1 the seller shall deliver the business to the
purchaser by placing the purchaser in possession of
the business, and grant the purchaser occupation of
the premises;
14.2.2 the seller shall deliver to the purchaser a certified
copy of the s228 resolution referred to in 3.1.1;
14.2.3 the seller shall deliver to the purchaser such
documents, duly completed, as may be necessary to -
14.2.3.1 cede the contracts to the purchaser; and
14.2.3.2 transfer ownership of the other sale assets
to the seller, including all necessary
consents of third parties;
14.2.4 the seller shall deliver to the purchaser
comprehensive lists of its suppliers and customers
and of the prices and other material terms agreed to
with its customers, and all records of the business,
excluding books of account;
14.2.5 the seller shall perform all such other acts as may
be necessary or required by the purchaser to
facilitate completion.
14.3 Subject to the performance by the seller of its obligations
under clause 14.2 the purchaser shall pay the first instalment
of the purchase price to the seller by paying the cash portion
in cash and delivering to the seller share certificates in
respect of the FSAH "B" shares comprised in the first
instalment.
14.4 If for any reason the provisions of clause 14.2 or 14.3 are
not fully complied with on the completion date either the
seller or the purchaser may elect (in addition to and without
prejudice to all other rights or remedies available to it) to
rescind this agreement or to agree a new date for completion.
<PAGE>
15. CONTRACTS AND UNFULFILLED ORDERS
15.1 From the completion date the purchaser shall:
15.1.1 be entitled to the benefit of the contracts;
15.1.2 carry out, perform and complete all the obligations
and liabilities to be discharged under the contracts
and which arise on or after the effective date; and
15.1.3 indemnify the seller against all actions,
proceedings, costs, damages, claims and demands in
respect of any failure on the part of the purchaser
to carry out, perform and complete those obligations
and liabilities.
15.2 Nothing in this agreement shall:
15.2.1 require the purchaser to perform any obligation
falling due for performance or which should have been
performed before the completion date; or
15.2.2 make the purchaser liable for any act, neglect,
default or omission in respect of any of the
contracts prior to the completion date or for any
claim, expense, loss or damage arising from any
failure to obtain the consent or agreement of any
third party to the entry into of this agreement or
from any breach of any of the contracts caused by
this agreement or completion.
15.3 The seller shall indemnify the purchaser against all actions,
proceedings, costs, damages, claims and demands in respect of
any act or omission on the part of the seller in relation to
the contracts on or before the completion date.
15.4 Insofar as the benefit or burden of any of the contracts
cannot effectively be assigned to the purchaser except with
the consent to the assignment from the person, firm or company
concerned then:
15.4.1 the seller shall use all reasonable endeavours to
procure the consent to assignment;
<PAGE>
15.4.2 until the contract is assigned the purchaser shall,
as the seller's sub-contractor, perform all the
obligations of the seller under the contract to be
discharged after the completion date and shall
indemnify the seller against all actions,
proceedings, costs, damages, claims and demands in
respect of any failure on the part of the purchaser
to perform those obligations; and
15.4.3 until the contract is assigned the seller shall (so
far as it lawfully may) give all reasonable
assistance to the purchaser to enable the purchaser
to enforce its rights under the contract.
15.5 The purchaser shall execute for its own benefit any
unfulfilled order accepted by the seller in the ordinary
course of business prior to the effective date.
16. INSOLVENCY ACT - SECTION 34
16.1 The sale of the business will not be published in terms of
section 34(1) of the Insolvency Act, 1936.
16.2 The seller indemnifies the purchaser against any loss or
damage which the purchaser may suffer as a result of notice of
this transaction not being published in terms of the
Insolvency Act.
16.3 The purchaser shall have no duty to resist any proceedings to
attach or to take possession of any of the assets by any
persons against whom this transaction is void in terms of the
Insolvency Act as a consequence of notice of this transaction
not being published as aforesaid; provided that the purchaser
shall be obliged to give written notice to the seller as soon
as it becomes aware of any such proceedings.
16.4 Should the purchaser give notice to the seller in terms of
16.3, and should the seller fail within 7 days of receipt by
it of such notice to procure that the assets concerned are
released from attachment or are returned to the purchaser, as
the case may be, then the purchaser shall be entitled to
settle the liability and recover the amount thereof from the
seller or, at the purchaser's discretion, to exercise the
remedies conferred on the purchaser by clause 24.
<PAGE>
17. EMPLOYEES
17.1 The purchaser undertakes to offer to employ all the employees
on the basis that:
17.1.1 the employment of all employees who accept the
purchaser's offer will be deemed to have commenced on
the effective date; and
17.1.2 any offer made by the purchaser will be on terms and
conditions which are no less favourable overall than
those enjoyed by the employees immediately prior to
the effective date.
17.2 All obligations of the seller to the employees up to the
effective date, including all payments due in respect of
accrued leave and bonuses shall be borne by the seller. All
obligations to the employees who accept employment with the
purchaser arising on or after the effective date shall be
borne by the purchaser.
17.3 The purchaser shall not be responsible for any costs of any
nature, including retrenchment costs, incurred by the seller
in connection with any employee who does not accept the offer
referred to in 17.1. The seller hereby irrevocably and
unconditionally agrees to indemnify the purchaser against all
loss, liability, damage or expense which the purchaser may
suffer or sustain as a result of or which may be attributable
to any act or omission by the seller in relation to the
employees of the seller or any of them or any other event,
matter or circumstances occurring or having its origin prior
to the completion date which relates to any of those
employees, whether as a consequence of the purchase and sale
of the business or otherwise, it being recorded, without
limiting the provisions of this clause, that the purchaser
shall not be responsible for the payment of any compensation
payable to any employee as a consequence of his retrenchment
or redundancy.
17.4 The purchaser and the seller shall jointly consult with the
employees and/or their representatives prior to the completion
date in accordance with generally accepted industrial
relations practice.
<PAGE>
The purchaser and the seller will agree in advance the form
that such consultation will take and in the absence of
agreement the form of consultation will be determined by the
seller.
17.5 The purchaser, FSAC and FSAH undertake to procure that the
warrantor is appointed as a director of the purchaser.
18. PENSION FUND
[INSTRUCTIONS REQUIRED].
19. GUARANTEES, SURETYSHIPS AND INDEMNITIES
19.1 The purchaser undertakes to procure that the seller will be
released from any guarantees and suretyships given by the
seller in respect of the business, within 60 days of the
completion date. The seller undertakes to give the purchaser
all necessary co-operation to assist the purchaser in
procuring the seller's release by such date.
19.2 If the purchaser is not able to obtain the release from the
guarantees and suretyships referred to in 19.1 or has not done
so at the time a claim is made against the seller under any
such guarantee or suretyship, the purchaser will indemnify the
seller and hold the seller harmless against any claim made
against the seller under the guarantee or suretyship concerned
and against all reasonable costs incurred by the seller in
obtaining its release from the guarantees. In the event that
such a claim is made the seller shall forthwith notify the
purchaser of the fact that the claim has been made and of full
particulars thereof and the purchaser shall place the seller
in funds to enable the seller to discharge its liability under
the suretyship or guarantee.
20. WARRANTIES
20.1 The following warranties are, unless otherwise stated in
respect of any warranty, (in which case the specified period
shall apply), given as at the effective date, the completion
date and for the entire period between those dates in respect
of the business of the seller. Each of the seller and the
warrantor accordingly warrants to the purchaser that except as
disclosed in writing to the purchaser prior to the date of
signature of this agreement:
<PAGE>
20.1.1 ASSETS
20.1.1.1 The seller owns the sale assets and has good
and marketable title thereto, and except for
agreements entered into in the ordinary
course of business, no other person has any
rights to or in respect of the sale assets.
20.1.1.2 The fixed assets are in good order and
condition and fully operational apart from
breakdowns (in the ordinary course) on the
basis that:
20.1.1.2.1 the purchaser shall be entitled
to have the same use and enjoyment
of such assets as that which the
seller had prior to the date of
signature of this agreement;
20.1.1.2.2 the seller is unaware of any
defects therein or any facts or
circumstances which may cause any
of such assets to break down after
the date of signature of this
agreement.
20.1.1.3 The seller has maintained a register of the
fixed assets in accordance with generally
accepted and sound accounting practice.
20.1.1.4 None of the sale assets are subject to any
mortgage, debenture or notarial bond,
cession or pledge or any other encumbrance,
or have been purchased under any
hire-purchase or suspensive sale agreement
or are subject to any lease.
20.1.1.5 None of the sale assets is subject to any
option or right of first refusal of any
person.
20.1.2 MANNER OF CARRYING ON BUSINESS
Between 29 February 1996 and the completion date-
20.1.2.1 the seller has continued to carry on the
business in the ordinary and regular course;
<PAGE>
20.1.2.2 the seller has not changed its normal manner
and method of carrying on business;
20.1.2.3 there has been no material adverse change in
the financial position of the business;
20.1.2.4 no assets have been acquired or sold
otherwise than in the ordinary, normal and
regular course of the business and without
the written consent of the purchaser;
20.1.2.5 the seller has not incurred or become
committed to incur any capital expenditure
in respect of the business;
20.1.2.6 the seller has not entered into any
transaction save in the ordinary and regular
course of conduct of its business;
20.1.3 GOODWILL AND SCOPE OF BUSINESS
Between 29 February 1996 and the completion date the
seller will not have done or omitted to do anything
which has or will-
20.1.3.1 materially prejudice the goodwill; or
20.1.3.2 reduce the scope of the business; or
20.1.3.3 result in any customer or supplier of the
seller ceasing to business with, or varying
the terms on which it does business with,
the business.
20.1.4 CONTRACTS
20.1.4.1 All the contracts have been entered into
under normal credit terms and are subject to
payment in accordance with those terms.
20.1.4.2 There is no single contract with a customer
or supplier which is of longer duration than
6months, and the seller is not party to any
unusual agreement.
20.1.4.3 The seller is not party to any contract with
any of its directors or employees requiring
more than one month's notice of termination,
or entitling any of them to compensation on
termination of employment, or to
participation in or entitlement to a
commission on profit.
<PAGE>
20.1.4.4 The seller is not party to any agreement
which has not been entered into on an
arms-length basis and on terms which are
normal having regard to the nature of its
business.
20.1.4.5 Copies of all contracts and other documents
submitted to the purchaser in connection
with this agreement fully and correctly
reflect all the terms and conditions
thereof, are not subject to any claim for
rectification, and have not been amended in
any respect.
20.1.4.6 The contracts are in full force and effect
and the seller is not in breach of any
contract entered into between it and any
other person and has complied in all
material respects with its obligations under
such contract.
20.1.4.7 The seller and the warrantor are not aware
of any facts, matters or circumstances which
may give rise to the cancellation of any of
the contracts as a result of any breach
thereof by the seller.
20.1.4.8 The transaction provided for in this
agreement does not constitute a breach of
any of the seller's contractual obligations
in respect of the business nor will it
entitle any person to terminate any contract
to which the seller is a party in respect of
the business.
20.1.5 INTELLECTUAL PROPERTY RIGHTS
20.1.5.1 The business conducted by the seller does
not infringe any patent, copyright,
trademark or other industrial property
rights or any other rights of any other
person and no person is entitled to an order
requiring the seller to change its name or
its trading style, or any of the marks and
designs applied by it to its products;
20.1.5.2 the seller is the owner of the trademarks;
<PAGE>
20.1.5.3 no person has any option or right of first
refusal to purchase any of the trademarks
and no person other than ABL has been
granted any right to use any of the
trademarks.
20.1.6 LAWS, REGULATIONS, CONSENTS, LICENCES AND PERMITS
20.1.6.1 The condition of the premises from which the
business is conducted satisfies the
requirements of all relevant authorities for
the grant of the same trade licences as are
presently held by the seller in respect of
the business on terms at least as favourable
as those which apply to the seller.
20.1.6.2 All instructions which have, from time to
time, been issued by any inspector appointed
in terms of the Factories Act have been
carried out in respect of the premises.
20.1.6.3 The seller has complied with all laws and
regulations affecting its affairs and
business.
20.1.6.4 The seller is in possession of all consents,
permits and licences necessary for the
conduct of its business and affairs, and the
seller and the warrantor are not aware of
any facts which may give rise to the
cancellation of, or failure to renew, any
such licences, permits or consents or to
their only being renewed subject to the
imposition of onerous conditions not
presently applicable thereto.
20.1.7 LABOUR LAWS, REGULATIONS, DETERMINATIONS, AGREEMENTS
AND DISPUTES
20.1.7.1 The seller has complied with all wage
determinations and industrial conciliation
agreements which apply to it, its business
and its employees.
20.1.7.2 The seller has complied with the grievance
procedures agreed to by it with regard to
grievances of and relations with its
employees.
<PAGE>
20.1.7.3 The seller has complied with the labour
union recognition agreement (if any) to
which it is a party.
20.1.7.4 The seller is not party to any labour
disputes and is not obliged by law,
agreement, judgment or order of court, to
reinstate employees that have been dismissed
or will be dismissed.
20.1.8 INSURANCE
20.1.8.1 The seller carries insurance cover in
respect of the business and the sale assets
against loss arising from accident, fire,
earthquake, flood, burglary, theft,
employer's liability, workmen's
compensation, public liability, storm
damage, civil commotion, riot or political
risk and loss of profits, and such insurance
will continue to be effective for a period
terminating not earlier than thirty days
after the effective date; all premiums due
in respect of such insurance have been paid
and the seller has complied with all of the
conditions to which the liability of the
insurers under the policies of insurance
will be subject.
20.1.8.2 Neither the seller nor the warrantor is
aware of any facts, matters or circumstances
which may give rise to the cancellation of
the policies of insurance referred to in
clause 20.1.8.1 or the repudiation of any
claims thereunder or to such policies not
being renewed in the future or only being
renewed subject to the imposition of onerous
conditions not presently applicable.
20.1.9 EMPLOYMENT, LEAVE, REMUNERATION AND PENSION
20.1.9.1 No employee or official of the seller is
entitled to any exceptional leave
privileges, accumulated leave, payment in
lieu of leave, pension or the like and none
of the terms on which any employee of the
business is employed (including without
limitation any terms relating to
compensation or benefits payable to that
employee upon his retrenchment or
<PAGE>
redundancy) will have been changed since 29
February 1996.
20.1.9.2 On the completion date the seller will not
in any material respect have improved the
terms of employment of or remuneration
payable to any of its employees from that
prevailing at the date of signature of this
agreement.
20.1.10 RESTRAINT OF TRADE
The seller is not bound by any restraint of trade
agreement.
20.1.11 WARRANTIES REGARDING BOOKS OF ACCOUNT
The books and records of the business are are
up-to-date and have been properly kept according to
law and will be capable of being written up within a
reasonable time.
20.1.12 ENVIRONMENTAL WARRANTIES
20.1.12.1 The seller complies with all conditions,
limitations, obligations, prohibitions and
requirements contained in any environmental
legislation or regulations, by-laws, or
ordinances ("ENVIRONMENTAL LEGISLATION") and
the warrantors are not aware of any facts or
circumstances which may lead to any breach
of any environmental legislation;
20.1.12.2 no poisonous, noxious, hazardous,
polluting, dangerous or environmentally
harmful substances or articles have been
produced, treated, kept at or deposited at
the premises where the seller carries on
business, or have been released or
discharged from such premises and in
particular no matter or thing been
discharged into any public sewer or into any
drain or sewer connecting the public sewer
and has not contaminated the land
surrounding the premises or any water;
20.1.12.3 there are no deficiencies in the waste
disposal arrangements carried on at or in
respect of the premises which may lead to
<PAGE>
a failure by the seller to comply with any
existing environmental legislation or which
will harm the environment;
20.1.12.4 there have been no disputes claims or
investigations or other proceedings pending
or threatened regarding the use of the
seller's premises, or the release of any
substances from such premises;
20.1.12.5 there are no environmental claims,
investigations or other proceedings pending
or threatened against the seller in respect
of the business and there is no actual or
contingent liability of either the seller or
the warrantor to make good, repair,
reinstate or clean up any property;
20.1.12.6 no water, whether surface or ground water,
has been contaminated, polluted or the
quality thereof altered in such a way that
the provisions of any water law whether
common law or statutory law will have been
breached.
20.2 The following warranties are, unless otherwise stated in
respect of any warranty, (in which case the specified period
shall apply), given as at the effective date, the completion
date and for the entire period between those dates in relation
to ABL and its business. Each of the seller and the warrantor
accordingly warrants to the purchaser that except as disclosed
in writing to the purchaser prior to the date of signature of
this agreement:-
20.2.1 WARRANTIES RELATING TO THE BUSINESS OF ABL
The seller and the warrantor give to the purchaser,
in relation to the business of ABL, the same
warranties, mutatis mutandis, as are contained in
20.1, other than the warranties set out in 20.1.1. In
interpreting such warranties, references to South
African legislation shall be deemed to be references
to equivalent Lesotho legislation, and references to
"the seller" shall, unless intended clearly to refer
to the seller, be deemed to refer to ABL;
<PAGE>
20.2.2 ASSETS OF ABL
20.2.2.1 ABL owns all of the assets reflected in the
ABL 1996 financial statements and has good
and marketable title thereto, and except for
agreements entered into in the ordinary
course of business, no other person has any
rights to or in respect of such assets.
20.2.2.2 The fixed assets of ABL are in good order
and condition and fully operational apart
from breakdowns (in the ordinary course) and
the seller and the warrantor are unaware of
any defects therein or any facts or
circumstances which may cause any of such
assets to break down after the date of
signature of this agreement.
20.2.2.3 ABL has maintained a register of the fixed
assets in accordance with generally accepted
and sound accounting practice.
20.2.2.4 None of the assets of ABL are subject to any
mortgage, debenture or notarial bond,
cession or pledge or any other encumbrance,
or have been purchased under any
hire-purchase or suspensive sale agreement
or are subject to any lease.
20.2.2.5 None of the assets of ABL are subject to any
option or right of first refusal of any
person.
20.2.3 WARRANTY REGARDING REGISTRATION
20.2.3.1 ABL is a private company, duly registered in
accordance with the provisions of the
Lesotho Companies Act.
20.2.3.2 No steps have been taken or are contemplated
to deregister ABL.
20.2.4 WARRANTIES REGARDING CAPITAL STRUCTURE AND THE SHARES
20.2.4.1 The authorised share capital of ABL is
M100,000 divided into 100,000 ordinary
shares of M1 each.
20.2.4.2 The issued share capital of ABL is M100
<PAGE>
divided into 100 ordinary shares of M1 each,
fully paid and ranking pari passu in every
respect, and the seller is the sole
beneficial owner of such shares.
20.2.4.3 Neither ABL nor its directors, have issued
or agreed to issue any further shares
(including bonus and capitalisation shares)
in the capital of ABL, nor have they passed
or agreed to pass any resolution for the
increase or reduction of ABL's capital, or
for the creation or issue of any debentures
or securities, or for the alteration of the
memorandum or articles of association of
ABL.
20.2.4.4 ABL's share premium account, if any, has not
been reduced in any manner and ABL has not
transferred any amount from its reserves
(including its share premium account) or
undistributed profits to its share capital
or its share premium account.
20.2.4.5 No person has any right or option or right
of first refusal to acquire any shares in
ABL, nor to subscribe for or take up any of
the unissued shares in ABL, nor are any of
the shares of ABL subject to any lien or
other preferential right. In particular, the
seller and the warrantor warrant that the
seller is entitled to dispose of the ABL
shares to the purchaser and that upon
delivery the purchaser will be the
beneficial owner of the ABL shares to the
exclusion of all others.
20.2.4.6 No person has any right to obtain an order
for the rectification of the register of
members of ABL.
20.2.5 WARRANTIES REGARDING STATUTORY REQUIREMENTS
20.2.5.1 ABL has complied with all the provisions of
the Lesotho Companies Act, the laws relating
to taxation and all other laws and bylaws
which affect it and its property.
20.2.5.2 All statutory requirements of the Lesotho
company and taxation authorities and all
other authorities, governmental, municipal
<PAGE>
or otherwise have been complied with, and
there are no matters outstanding in
connection with the rendering of returns and
the payment of dues and levies.
20.2.6 WARRANTIES REGARDING BOOKS OF ACCOUNT AND MINUTES
20.2.6.1 The books and records of ABL are up-to-date
and have been properly kept according to law
and will be capable of being written up
within a reasonable time so as to record all
of the transactions of ABL.
20.2.6.2 The minute books of ABL contain all of the
resolutions passed by the directors and the
members of ABL.
20.2.7 WARRANTIES REGARDING TAXATION
20.2.7.1 ADMINISTRATION
20.2.7.1.1 The records of ABL include all of
the resolutions passed by the
directors and shareholders of ABL;
20.2.7.1.2 ABL is not a party to any tax
objection or appeal nor are any
such proceedings threatened against
or likely to be instituted by or
against ABL, nor are the seller or
the warrantor aware of any
circumstances which may give rise
to the institution of any such
proceedings;
20.2.7.1.3 no queries have been addressed to
ABL or to any of its
representatives by any official
administering any tax nor have any
objections with regard to any tax
been lodged by ABL which have not
been fully disposed of;
20.2.7.1.4 ABL has paid or will, prior to
the completion date, pay all tax
where the due date for payment of
the tax arises on or before the
completion; in respect of any tax
which is due for payment after the
completion date, adequate provision
or reserves for the payment of that
tax will have been made;
<PAGE>
20.2.7.1.5 ABL is not liable to pay any
penalty or interest in connection
with any claim for tax;
20.2.7.1.6 ABL is not subject to any
liability as a result of the
re-opening of any tax assessment;
20.2.7.1.7 all necessary information,
notices and returns (all of which
are true and accurate and none of
which has been disputed) have been
properly and timeously submitted by
ABL and there is no reason to
suppose that any such information
or return will not in due course be
accepted as true and accurate by
the taxation authorities of
Lesotho;
20.2.7.1.8 ABL has deducted or withheld all
tax which it is required by law to
deduct from any payment to any
person and has accounted to tax
authorities for all tax so
deducted;
20.2.7.1.9 ABL has timeously lodged a claim
for any refund of tax to which ABL
is or may be entitled;
20.2.7.2 DEDUCTIBLE PAYMENTS
no rents, interest, annual payments or other
similar expenditure incurred by ABL will be
disallowed as a deduction wholly or in part
from the income of ABL.
20.3 DISCLOSURE
All facts and circumstances material to this transaction and
not known to the purchaser, or which would be material or
would be reasonably likely to be material to a purchaser of
the business, including the Lesotho shares and to the purchase
price thereof have been disclosed to the purchaser.
20.4 The liability of the warrantor and the seller under the
warranties is joint and several.
20.5 Each of the warranties set out above is without prejudice to
any other warranty and shall not be limited by any other
clause of this agreement.
<PAGE>
20.6 Each warranty shall be deemed to be material and to be a
material representation inducing the purchaser to enter into
this agreement.
20.7 The fact that the seller and the warrantor have given the
purchaser the express warranties set out above shall not in
any way be construed as relieving the seller and the warrantor
in any way from any liability which they may have at common
law arising out of a failure to disclose any fact in relation
to the business or affecting this agreement.
20.8 The warrantor and the seller jointly and severally indemnify
and hold the purchaser harmless from and against any loss,
damages, claims, actions, liabilities, costs or expenses of
any nature whatsoever and howsoever incurred, which are
suffered or sustained by the purchaser pursuant to any breach
by the seller or the warrantor of any of the warranties
contained in this agreement.
20.9 The rights and remedies of the purchaser in respect of any
breach of the warranties shall not be affected by completion
or by the purchaser failing to exercise or delaying the
exercise of any right or remedy, except a specific and due
authorised written waiver or release, and no single or partial
exercise of any right or remedy shall preclude any further or
other exercise.
21. CONFIDENTIALITY
21.1 Without the prior written consent of the other parties, each
party will keep confidential and will not disclose to any
person -
21.1.1 the details of this agreement, the details of the
negotiations leading to this agreement, and the
information handed over to such party during the
course of negotiations, as well as the details of all
the transactions or agreements contemplated in this
agreement; and
21.1.2 all information relating to the business or the
operations and affairs of the parties (together
"CONFIDENTIAL INFORMATION").
<PAGE>
21.2 The parties agree to keep all confidential information
confidential and to disclose it only to their officers,
directors, employees, consultants and professional advisers
who:
21.2.1 have a need to know (and then only to the extent that
each such person has a need to know);
21.2.2 are aware that the confidential information should be
kept confidential;
21.2.3 are aware of the disclosing party's undertaking in
relation to such information in terms of this
agreement; and
21.2.4 have been directed by the disclosing party to keep
the confidential information confidential and have
undertaken to keep the confidential information
confidential.
21.3 The obligations of the parties in relation to the maintenance
and non-disclosure of confidential information in terms of
this agreement do not extend to information that:
21.3.1 is disclosed to the receiving party in terms of this
agreement but at the time of such disclosure such
information is known to be in the lawful possession
or control of that party and not subject to an
obligation of confidentiality;
21.3.2 is or becomes public knowledge, otherwise than
pursuant to a breach of this agreement by the party
who disclosed such confidential information;
21.3.3 is required by the provisions of any law, statute or
regulation, or during any court proceedings, or by
the rules or regulations of any recognised stock
exchange to be disclosed and subject to the
provisions of clause 21.4, the party required to make
the disclosure has taken all reasonable steps to
oppose or prevent the disclosure of and to limit, as
far as reasonably possible, the extent of such
disclosure and has consulted with the other parties
prior to making such disclosure.
<PAGE>
21.4 Before any announcement or statement is made as required by
any law, statute or regulation, or the rules or regulations of
any recognised stock exchange, the parties shall use their
best endeavours to provide the other parties with a written
draft of the proposed announcement at least 48 hours before
the proposed time of the announcement and the participants
shall also use their best endeavours to agree the wording and
timing of all public announcements and statements relating to
confidential information. If a written draft of the proposed
announcement cannot be provided to the other parties or
agreement cannot be reached, by the time that any such
announcement or statement must be made, the party in question
shall be free to make the relevant announcement or statement
notwithstanding that such agreement has not been reached, but
in so doing it shall not disclose more than the minimum
information that it is compelled to disclose. Copies of any
public announcement or statement shall be given to each other
party in the most expeditious manner reasonably available.
22. RESTRAINTS
22.1 The seller and the warrantor undertake to the purchaser that
for a period commencing on the effective date and terminating
on 30 June 2002 they will not, whether directly or indirectly,
compete with the purchaser or be interested in any business
which trades in any field of activity which is similar to any
of the fields of activity referred to in 22.2 and within any
of the areas of restraint set out in 22.3.
22.2 The fields of activity is respect of which the restraint
applies will be -
22.2.1 each and every activity conducted by the seller and
ABL on the completion date or the preceding 12 month
period;
22.2.2 any activity which is similar to an activity
contemplated in clause 22.2.1;
22.2.3 any new activity which is planned to be undertaken by
the seller or ABL as at the completion date.
<PAGE>
22.3 The areas of restraint referred to in 22.1 shall be South
Africa, Lesotho, Swaziland, Mozambique, Zimbabwe, Botswana,
Namibia and the Indian Ocean Islands.
22.4 For purposes of this clause, the seller and the warrantor
shall be deemed to be so "INTERESTED IN A BUSINESS", or
"COMPETING WITH THE PURCHASER" if either of them becomes
engaged or interested, whether directly or indirectly, and
whether as proprietor, partner, shareholder, agent,
consultant, financier or otherwise, in any company, firm,
business or undertaking which carries on business in any of
the fields referred to in 22.2 or in any of the areas referred
to in 22.3.
22.5 The seller and the warrantor acknowledge that:
22.5.1 the clients of the purchaser are or could be drawn
from all of the areas in which the restraints are to
be operative;
22.5.2 the purchaser would suffer substantial damage if the
seller or the warrantor were to operate a business
similar to that carried on by the purchaser within
the area to which, and during the time in which, the
restraints are to apply; and
22.5.3 the restraints are the minimum restraint required by
the purchaser to provide protection against unfair
competition. Should the reasonableness of any
provision contained in this clause be disputed, the
onus of providing that the provision is unreasonable
will rest on the party alleging that the provision is
unreasonable.
22.6 Each and every restraint contained in this clause is separate
and divisible from every other restraint in this clause and
from any other restraint so that if any one of the restraints
is or becomes unenforceable for any reason that restraint will
be severable and will not affect the validity of any other
restraint contained in this clause.
<PAGE>
23. VALUE-ADDED TAX
23.1 The parties record their understanding that the sale of the
business falls within the ambit of section 11(1)(e) of the
Value Added Tax Act, 89 of 1991, as amended, and accordingly
value-added tax is payable on the sale at the rate of zero
percent.
23.2 However, it is recorded that if the sale of the business in
terms of this agreement is subject to value-added tax, the
purchaser will pay to the seller value-added tax at the
prescribed rate on the purchase price against presentation of
the relevant tax invoice.
24. BREACH
24.1 If a party breaches any provision of this agreement and
remains in breach for 14 days after written notice to that
party requiring that party to rectify that breach, the
aggrieved party shall be entitled, at its option:
24.1.1 to sue for immediate specific performance of any of
the defaulting party's obligations under this
agreement, whether or not such obligation is then due
and to require the defaulting party to provide
security to the satisfaction of the aggrieved party
for the defaulting party's obligations; or
24.1.2 to cancel this agreement, in which case written
notice of the cancellation shall be given to the
defaulting party, and the cancellation shall take
effect on the giving of the notice. Neither party
shall be entitled to cancel this agreement unless the
breach is a breach of a term which goes to the root
of this agreement, and the remedy of specific
performance or damages would not adequately prevent
the aggrieved party from being materially prejudiced.
24.2 If the breach is a breach of warranty as at a particular date,
notice to remedy such breach shall be given and the breach
shall be deemed to have been remedied if:
24.2.1 the defaulting party is able, within the period of
the notice, to prevent the aggrieved party from being
prejudiced or to make good any prejudice suffered,
and does so; or
<PAGE>
24.2.2 the defaulting party is able, but not within the
period of the notice, to prevent the aggrieved party
from being prejudiced or to make good any prejudice
suffered within the period of the notice, and
undertakes to do so and furnishes such security in
support of the undertaking as the aggrieved party may
require.
24.3 If the defaulting party is the purchaser or FSAH, and the
breach is the non-payment of any instalment of the purchase
price or a failure to comply with clause 7.3, and if the
purchaser fails to remedy such breach after having been given
notice to do so in accordance with this clause, the seller
shall be entitled to cancel this agreement and if the seller
does so the seller shall be entitled to have the intellectual
property which is the subject of the intellectual property
agreement assigned to the seller for no consideration. The
seller shall, in the event of cancellation, deliver to FSAH,
for no consideration, the FSAH "B" shares forming part of the
purchase price together with blank signed transfer forms and
shall be entitled to a penalty as follows:-
24.3.1 FSAH shall forfeit to the seller all of the issued
shares of the purchaser and shall deliver to the
seller the share certificates in respect of such
shares, together with blank signed transfer forms and
letters of resignation of the directors of the
purchaser; and
24.3.2 the seller shall retain all cash paid by the
purchaser on account of the purchase price.
Alternatively, and at the election of the seller, the
seller may claim damages.
24.4 The aggrieved party's remedies in terms of this clause are
without prejudice to any other remedies to which the aggrieved
party may be entitled in law.
25. MEDIATION AND ARBITRATION
<PAGE>
25.1 Should any disputes or differences whatsoever arise at any
time between the parties concerning this agreement or its
construction or effect or as to the rights, duties and/or
liabilities of the parties or either of them under or by
virtue of this agreement or otherwise or as to any other
matter in any way arising out of the subject matter of this
agreement then either party:
25.1.1 may declare a dispute by delivering the details of
the dispute to the other party, and
25.1.2 request that the dispute be referred by the parties,
without legal representation, to mediation by a
single mediator at a place and time to be determined
by him.
25.2 If, within 30 days of the delivery of the declaration of a
dispute, the parties have not agreed to accept mediation then
the dispute shall be determined by arbitration as prescribed
below.
25.3 If the parties agree to mediation then the mediator shall be:
25.3.1 selected by agreement between the parties, or,
failing agreement,
25.3.2 nominated on the application of either party by the
president for the time being of the Law Society of
Transvaal, or its principal successor in title.
25.4 The mediator shall, at his entire discretion, determine
whether the reference to him shall be made in the form of
written and/or oral representations providing that, in making
this determination, he shall consult the disputing parties and
be guided by their desires of the form in which the
representations are to be made.
25.5 The mediator shall, within a reasonable period after receiving
the representations, express in writing an opinion on the
matter and shall include his detailed reasons leading to the
opinion.
25.6 The mediator shall deliver a copy of his opinion to each
party.
<PAGE>
25.7 The opinion so expressed by the mediator shall be final and
binding on the parties unless either party within 30 days of
the delivery of the opinion, notifies the other party of the
first party's unwillingness to accept the opinion.
25.8 The costs of mediation shall be determined by the mediator and
shall comprise:
25.8.1 the mediator's expenses, and
25.8.2 a fee which shall have been previously agreed by the
parties.
The costs shall be borne equally by the 2 parties and
shall be due and payable to the mediator on
presentation to them of his written account.
25.9 Each party shall bear the costs of any legal advice that party
may have obtained in connection with the mediation.
25.10 The expressed opinion of the mediator shall not prejudice the
rights of the parties in any manner whatsoever in the event of
their proceeding to arbitration.
25.11 Any decision given by any representative of the parties in
accordance with any provision of this agreement prior to or
during the mediation shall not disqualify him from being
called as a witness and giving evidence before the arbitrator
on any matter whatsoever relevant to the dispute or difference
so referred to the arbitrator as provided in this clause.
25.12 If either party to this agreement be unwilling to accept
mediation or be unwilling to accept the opinion expressed by
the mediator then either party may, by written notice
delivered to the other, within 30 days of the declaration of
the dispute if there be no mediation or within 30 days of the
issue of the mediator's opinion if mediation takes place,
require that the dispute be referred to arbitration.
25.13 Such arbitration shall be by a single arbitrator who shall be:
25.13.1 selected by agreement between the parties or, failing
such agreement;
<PAGE>
25.13.2 nominated on the application of either party by the
chairman for the time being of the Association of
Arbitrators.
25.14 The arbitrator shall have power to open up, review and revise
any certificate, opinion, decision, requisition or notice
relating to all matters in dispute submitted to him and to
determine all such matters in the same manner as if no such
certificate, opinion, decision, requisition or notice had been
issued.
25.15 Upon every or any such reference, the costs of and incidental
to the reference and award shall be in the discretion of the
arbitrator, who may determine the amount of the costs, or
direct them to be taxed as between attorney and client or as
between party and party and shall direct by whom and to whom
and in what manner they shall be borne and paid.
25.16 The award of the arbitrator shall be final and binding on the
parties.
25.17 In all respects the arbitration shall be conducted in
accordance with the Rules for the Conduct of Arbitrations
published by the Association of Arbitrators and current at the
date the arbitrator is appointed or nominated.
26. COSTS
26.1 Each party will bear its own costs of and incidental to the
negotiation, preparation and implementation of this agreement.
26.2 Any costs, including attorney and own client costs, incurred
by a party arising out of the breach by any other party of any
of the provisions of this agreement shall be borne by the
party in breach.
27. MISCELLANEOUS MATTERS
27.1 POSTAL ADDRESSES
27.1.1 Any written notice in connection with this agreement
may be addressed:
<PAGE>
27.1.1.1 in the case of the seller and the warrantor
to:
address :
telefax no :
and shall be marked for the attention of [];
27.1.1.2 in the case of the purchaser, FSAH and FSAC
to:
address : P O Box 4001
Kempton Park
1620
telefax no : 974-7251
and shall be marked for the attention of
Corrie Roodt;
27.1.2 The notice shall be deemed to have been duly given:
27.1.2.1 14 days after posting, if posted by
registered post to the party's address in
terms of this sub-clause;
27.1.2.2 on delivery, if delivered to the party's
physical address in terms of either this
sub-clause or the next sub-clause dealing
with service of legal documents;
27.1.2.3 on despatch, if sent to the party's then
telefax or telex number and confirmed by
registered letter posted no later than the
next business day.
27.1.3 A party may change that party's address for this
purpose, by notice in writing to the other party. No
notice shall be necessary in respect of a new or
changed telefax or telex number.
27.2 ADDRESSES FOR SERVICE OF LEGAL DOCUMENTS
27.2.1 The parties choose the following physical addresses
at which documents in legal
<PAGE>
proceedings in connection with this agreement may be
served (ie their domicilia citandi et executandi):
27.2.1.1 the seller and the warrantor:
27.2.1.2 the purchaser, FSAH and FSAC:
27.2.2 A party may change that party's address for this
purpose to another physical address in the Republic
of South Africa, by notice in writing to the other
party.
27.3 ENTIRE CONTRACT
This agreement contains all the express provisions agreed on
by the parties with regard to the subject matter of the
agreement and the parties waive the right to rely on any
alleged express provision not contained in the agreement.
27.4 NO REPRESENTATIONS
No party may rely on any representation which allegedly
induced that party to enter into this agreement, unless the
representation is recorded in this agreement.
27.5 VARIATION, CANCELLATION AND WAIVER
No contract varying, adding to, deleting from or cancelling
this agreement, and no waiver of any right under this
agreement, shall be effective unless reduced to writing and
signed by or on behalf of the parties.
27.6 INDULGENCES
If any party at any time breaches any of that
<PAGE>
party's obligations under this agreement, the other party
("THE AGGRIEVED PARTY"):
27.6.1 may at any time after that breach exercise any right
that became exercisable directly or indirectly as a
result of the breach, unless the aggrieved party has
expressly elected in writing or by clear and
unambiguous conduct, amounting to more than mere
delay, not to exercise the right. (If the aggrieved
party is willing to relinquish that right the
aggrieved party will on request do so in writing.) In
particular, acceptance of late performance shall for
a reasonable period after performance be provisional
only, and the aggrieved party may still exercise that
right during that period;
27.6.2 shall not be estopped (ie precluded) from exercising
the aggrieved party's rights arising out of that
breach, despite the fact that the aggrieved party may
have elected or agreed on one or more previous
occasions not to exercise the rights arising out of
any similar breach or breaches.
27.7 CESSION
No party may cede that party's rights or delegate that party's
obligations without the prior written consent of the other
parties, which shall not be unreasonably withheld.
27.8 APPLICABLE LAW
This agreement shall be interpreted and implemented in
accordance with the law of the Republic of South Africa.
27.9 JURISDICTION
The parties consent to the non-exclusive jurisdiction of the
Witwatersrand Local Division of the Supreme Court.
Signed at Randburg on 20th September 1996.
AS WITNESS: for ASTORIA BAKERIES CC
/s/ Bob Lillico /s/ Wolfgang Burre
- -------------------------- --------------------------
who warrants that he
is duly authorised
Signed at Randburg on 20th September 1996.
AS WITNESS: WOLFGANG BURRE
/s/ Bob Lillico /s/ Wolfgang Burre
- -------------------------- --------------------------
Signed at Randburg on 20th September 1996.
AS WITNESS: for Astoria (PROPRIETARY) LIMITED
/s/ Bob Lillico /s/ Wolfgang Burre
- -------------------------- --------------------------
who warrants that he
is duly authorised
<PAGE>
Signed at Randburg on 20th September 1996.
AS WITNESS: for FIRST SOUTH
AFRICAN HOLDINGS
(PROPRIETARY) LIMITED
/s/ Bob Lillico /s/ Cornelius Roodt
- -------------------------- --------------------------
who warrants that he
is duly authorised
Signed at Randburg on 20th September 1996.
AS WITNESS: for FIRST SOUTH AFRICA
CORP., LTD
/s/ Bob Lillico /s/ Clive Kabatznik
- -------------------------- --------------------------
who warrants that he
is duly authorised
<PAGE>
Appendix 1
CONTRACTS
<PAGE>
Appendix 2
EMPLOYEES
<PAGE>
Appendix 3
FIXED ASSETS
<PAGE>
Appendix 4
INTELLECTUAL PROPERTY AGREEMENT
<PAGE>
Appendix 5
MANAGEMENT AGREEMENT
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated September 27, 1996, in Post-Effective Amendment No. 1 to
the Registration Statement (Form S-1 No. 33-99180) of First South Africa Corp.,
Ltd. and the related Prospectuses contained therein.
/S/ PRICE WATERHOUSE
Price Waterhouse
PRICE WATERHOUSE
SANDTON, SOUTH AFRICA
November 12, 1996
8 November 1996
First South Africa Corp., Ltd.
P.O. Box HM 666
Clarendon House
Church Street
Hamilton HM CX
Dear Sirs
We have acted as special legal counsel to First South Africa Corp., Ltd., in
connection with its filing of a Post-Effective Amendment No. 1 to its
Registration Statement on Form S-1 (File No. 33-99180, the "Registration
Statement").
We hereby consent to the reference made to us under the caption "Legal Matters"
in the prospectuses contained in the Registration Statement.
Yours faithfully,
/S/CONYERS DILL & PEARMAN
- -------------------------
Conyers Dill & Pearman
November 12, 1996
First South Africa Corp., Ltd.
Clarendon House
Church Street
Hamilton HM C11, Bermuda
Re: FIRST SOUTH AFRICA CORP., LTD. - REGISTRATION STATEMENT
NO. 33-99180
Gentlemen:
We hereby consent to the reference made to us under the caption
"Legal Matters" in the prospectuses constituting part of Post Effective
Amendment No. 1 to the above Registration Statement on Form S-1 of First South
Africa Corp., Ltd.
Very truly yours,
/S/ PARKER CHAPIN FLATTAU & KLIMPL, LLP
Parker Chapin Flattau & Klimpl, LLP
First South Africa Corp., Ltd.
Clarendon House
Church Street
Hamilton HM C11
Bermuda
Dear Sirs:
First South Africa Corp., Ltd - Registration Statement No. 33-99180
We hereby consent to the reference made to us under the caption "Legal Matters"
in the prospectuses constituting part of Post Effective Amendment No. 1 to the
above Registration Statement on Form S-1 of First South Africa Corp., Ltd.
Yours faithfully,
/S/J. BELLEW
- --------------------------
Webber Wentzel Bowens
