<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996
REGISTRATION NO. 333-3458
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
------------------------
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PERRY'S MAJESTIC BEER, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2082 11-3314168
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION) CLASSIFICATION CODE NO.)
</TABLE>
------------------------
134 MORGAN AVENUE
BROOKLYN, NEW YORK 11237
(718) 894-4300
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE
OF BUSINESS)
------------------------
ROBERT SIPPER
CHIEF EXECUTIVE OFFICER
134 MORGAN AVENUE
BROOKLYN, NEW YORK 11237
(718) 894-4300
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Copies to:
STEVEN F. WASSERMAN, ESQ. MICHAEL F. MULPETER, ESQ.
BERNSTEIN & WASSERMAN, LLP COHN & BIRNBAUM P.C.
950 THIRD AVENUE 100 PEARL STREET
NEW YORK, NY 10022 HARTFORD, CT 06103
(212) 826-0730 (203) 493-2200
(212) 371-4730 (FAX) (203) 727-0361 (FAX)
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as reasonably
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/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITY TO BE REGISTERED REGISTERED(1) PER SECURITY(2) OFFERING PRICE REGISTRATION FEE
------------------------------------------------ ------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, par value $.0001, per share............... 583,335 $ 6.00 $ 3,500,000 $ 1,206.80
Underwriter's Share Purchase Option..................... 58,333 $ .001 $ 58.33 $ 0.02
Common Stock, par value $.0001, per share, underlying
Underwriter's Share Purchase Option(3)................ 58,333 -- -- --
Selling Securityholders.................................
Common Stock, par value $.0001 per share(4)............. 2,500,000 $ 6.00 $ 15,000,000 $ 5,172.45
TOTAL................................................... $ 6,379.27
Amount previously paid.................................. -- -- -- $ 5,241.30
Amount owed............................................. -- -- -- $ 1,137.91
</TABLE>
- ------------------
(1) Pursuant to Rule 416 under the Securities Act of 1933 (the 'Act'), this
Registration Statement covers such additional indeterminate number of shares
of Common Stock as may be issued by reason of adjustments in the number of
shares of Common Stock pursuant to anti-dilution provisions contained in the
Representative's Option. Because such additional shares of Common Stock
will, if issued, be issued for no additional consideration, no registration
fee is required.
(2) Estimated solely for purposes of calculating registration fee.
(3) The Representative's share purchase option entitles the Representative to
purchase up to 58,333 shares at 120% of the offering price (the
'Representative's Share Purchase Option').
(4) Shares of Common Stock held by certain Selling Securityholders.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PERRY'S MAJESTIC BEER, INC.
CROSS REFERENCE SHEET
(SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS 1 THROUGH 23, PART I, OF FORM SB-2)
<TABLE>
<CAPTION>
ITEM IN FORM SB-2 PROSPECTUS CAPTION
----------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus................................ Facing Page of Registration Statement; Outside Front
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page of Prospectus; Outside Back
Cover Page of Prospectus
3. Summary Information and Risk Factors................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page of Prospectus; Underwriting;
Risk Factors
6. Dilution............................................. Dilution; Risk Factors
7. Selling Securityholders.............................. Description of Securities; Selling Securityholders
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus; Risk Factors;
Underwriting
9. Legal Proceedings.................................... Business--Litigation
10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Stockholders
12. Description of Securities............................ Description of Securities; Underwriting
13. Interest of Named Experts and Counsel................ Experts; Legal Matters
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Underwriting; Certain Transactions
15. Organization Within Last 5 Years..................... Prospectus Summary; The Company; Business
16. Description of Business.............................. Business; Risk Factors
17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property.............................. Business--Facilities
19. Certain Relationships and Related Transactions....... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters............................................ Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of Securities; Underwriting
21. Executive Compensation............................... Management--Executive Compensation
22. Financial Statements................................. Selected Financial Data; Financial Statements
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures............... *
</TABLE>
- ------------------
* Omitted because Item is not applicable.
i
<PAGE>
EXPLANATORY NOTE
This registration statement covers the primary offering ('Offering') of
Shares of Common Stock by Perry's Majestic Beer, Inc. (the 'Company') and the
concurrent offering of securities by certain selling securityholders ('Selling
Securityholders'). The Company is registering, under the primary prospectus
('Primary Prospectus'), 583,335 shares. The Company is registering on behalf of
the Selling Securityholders, under an alternate prospectus ('Alternate
Prospectus'), 2,500,000 shares of Common Stock. The Alternate Prospectus pages,
which follow the Primary Prospectus, are to be combined with all of the sections
contained in the Primary Prospectus, with the following exceptions: the front
and back cover pages and the sections entitled 'Concurrent Sales,' 'Selling
Securityholders,' and 'Plan of Distribution.' Such sections from the Alternate
Prospectus pages will be added to the Primary Prospectus. The 'Underwriting'
section contained in the Primary Prospectus will not be included in the
Alternate Prospectus. Furthermore, all references contained in the Alternate
Prospectus to 'the Offering' or 'this Offering' shall refer to the Company's
Offering under the Primary Prospectus.
ii
<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 AN OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION, DATED JULY 26, 1996
PROSPECTUS
PERRY'S MAJESTIC BEER, INC.
583,335 SHARES OF COMMON STOCK,
PAR VALUE $.0001 PER SHARE, AND
OFFERING PRICE PER SHARE--$6.00
------------------------
Perry's Majestic Beer, Inc., a Delaware corporation (the 'Company' or
'Perry's') is offering 583,335 shares of Common Stock ('Common Stock'), par
value $.0001 per share (the 'Shares'). See 'Risk Factors' and 'Description of
Securities.' The Risk Factor section begins on page 7 of this Prospectus.
------------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
OFFERED HEREBY AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE 'DILUTION'
AND 'RISK FACTORS.'
------------------------
The Company has applied for inclusion of the Common Stock on the OTC
Bulletin Board, although there can be no assurances that an active trading
market will develop even if the securities are accepted for quotation. While the
Company applied for inclusion of its Common Stock on the NASDAQ SmallCap Market
on April 13, 1996, the application was denied by the NASDAQ staff. The Company
has appealed the NASDAQ staff decision. See 'Risk Factors--Lack of Prior Market
for Common Stock; No Assurance of Public Trading Market' and 'Penny Stock
Regulations May Impose Certain Restrictions on Marketability of Securities.' THE
COMPANY ANTICIPATES THAT THE SECURITIES OFFERED HEREBY WILL BE QUALIFIED FOR
SALE BY THE COMPANY IN A LIMITED NUMBER OF STATES. SEE 'RISK FACTORS--CURRENT
PROSPECTUS AND STATE BLUE SKY REGISTRATION IN CONNECTION WITH THE SALE OF
SHARES.'
Prior to this Offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price will
be $6.00 per Share. The price of the Shares has been determined by negotiations
between the Company and VTR Capital, Inc., the representative (the
"Representative") of the underwriters of this Offering (the 'Underwriters'),
and does not necessarily bear any relationship to the Company's assets, book
value, net worth or results of operations or any other established criteria of
value. For additional information regarding the factors considered in
determining the initial public offering price of the Shares, see 'Risk
Factors--No Prior Public Market; Possible Volatility of Stock Price,'
'Description of Securities' and 'Underwriting.'
The registration statement of which this Prospectus forms a part also covers
the sale of 2,500,000 shares of Common Stock. These securities may be sold from
time to time directly by the Selling Securityholders or, alternatively, through
underwriters, dealers or agents. The distribution of securities by the Selling
Securityholders may be effected in one or more transactions that take place in
the over-the-counter market, including ordinary broker's transactions, privately
negotiated transactions or through sales to one or more broker-dealers for
resale of such shares as principals, at prices prevailing at the time of such
sales, at prices related to such prevailing market price or at negotiated
prices. The Company will not receive any of the proceeds on the sale of the
securities by the Selling Securityholders. The resale of the securities of the
Selling Securityholders are subject to Prospectus delivery and other
requirements of the Securities Act of 1933, as amended (the 'Act'). Sales of
such securities or the potential of such sales at any time may have an adverse
effect on the market prices of the securities offered hereby. See 'Selling
Securityholders' and 'Risk Factors--Shares Eligible for Future Sale May
Adversely Affect the Market.'
------------------------
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.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
--------- ---------------------- -----------
<S> <C> <C> <C>
Per Share......................................... $6.00 $0.60 $5.40
Total............................................. $3,500,010 $350,001 $3,150,009
</TABLE>
(1) Does not reflect additional compensation to be received by the Underwriters
in the form of: (i) a non-accountable expense allowance of $105,000, (ii) a
two (2) year financial advisory and investment banking agreement providing
for fees of $3,000 per month payable in advance at the closing of this
Offering, and (iii) an option to purchase 58,333 Shares at $7.20 per Share
(the 'Representative's Share Purchase Option'), exercisable for a period of
four (4) years, commencing one (1) year from the effective date of this
Offering. The Company and the Representative have agreed to indemnify each
other against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the 'Act'). The Company has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is therefore unenforceable. See
'Underwriting.'
(2) Before deducting expenses of the Offering payable by the Company estimated
at $602,000, including the Representative's non-accountable expense
allowance and the financial advisory fee referred to in Footnote (1),
registration fees, transfer agent fees, NASD fees, Blue Sky filing fees and
expenses, legal fees and expenses, and accounting fees and expenses. See
'Use of Proceeds' and 'Underwriting.'
------------------------
The Shares are offered by the Representative on a 'firm commitment' basis,
when, as and if delivered to and accepted by the Representative, and subject to
prior sale, allotment and withdrawal, modification of the offer with notice,
receipt and acceptance by the Representative named herein and subject to its
right to reject orders in whole or in part and to certain other conditions. It
is expected that the delivery of the certificates representing the securities
and payment therefor will be made at the offices of the Representative on or
about , 1996.
VTR CAPITAL, INC.
INVESTMENT BANKERS
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
AVAILABLE INFORMATION
The Company does not presently file reports and other information with the
Securities and Exchange Commission (the 'Commission'). However, following
completion of this Offering, the Company intends to furnish its stockholders
with annual reports containing audited financial statements examined and
reported upon by its independent public accounting firm and such interim
reports, in each case as it may determine to furnish or as may be required by
law. After the effective date of this Offering, the Company will be subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the 'Exchange Act') and in accordance therewith will file reports, proxy
statements and other information with the Commission.
Reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained at the Commission at Room
1024, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site on the Internet (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission through the
Electronic Data Gathering, Analysis, and Retrieval System (EDGAR). The Company
has filed with the Commission a registration statement on Form SB-2 (herein
together with all amendments and exhibits referred to as the 'Registration
Statement') under the Act of which this Prospectus forms a part. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information reference is made to the
Registration Statement.
IN CONNECTION WITH THIS OFFERING, THE REPRESENTATIVE MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE OTC BULLETIN BOARD OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
A SIGNIFICANT AMOUNT OF THE SHARES TO BE SOLD IN THIS OFFERING (WHICH
AMOUNT MAY BE ALL, OR SUBSTANTIALLY ALL, OF THE SHARES) MAY BE SOLD TO CUSTOMERS
OF THE UNDERWRITERS. THIS MAY AFFECT THE MARKET FOR AND LIQUIDITY OF THE
COMPANY'S SECURITIES IN THE EVENT THAT ADDITIONAL BROKER-DEALERS DO NOT MAKE A
MARKET IN THE COMPANY'S SECURITIES, OF WHICH THERE CAN NO ASSURANCE. SUCH
CUSTOMERS SUBSEQUENTLY MAY ENGAGE IN TRANSACTIONS FOR THE SALE OR PURCHASE OF
THE COMMON STOCK THROUGH AND/OR WITH THE UNDERWRITERS.
ALTHOUGH IT HAS NO OBLIGATION TO DO SO, THE REPRESENTATIVE MAY FROM TIME TO
TIME ACT AS A MARKET MAKER AND OTHERWISE EFFECT TRANSACTIONS IN THE COMPANY'S
SECURITIES. THE REPRESENTATIVE, IF IT PARTICIPATES IN THE MARKET, MAY BECOME A
DOMINATING INFLUENCE IN THE MARKET FOR THE COMMON STOCK. HOWEVER, THERE IS NO
ASSURANCE THAT THE REPRESENTATIVE WILL OR WILL NOT CONTINUE TO BE A DOMINATING
INFLUENCE. THE PRICES AND LIQUIDITY OF THE SECURITIES OFFERED HEREUNDER MAY BE
SIGNIFICANTLY AFFECTED BY THE DEGREE, IF ANY, OF THE REPRESENTATIVE'S
PARTICIPATION IN SUCH MARKET. SEE 'RISK FACTORS--LACK OF PRIOR MARKET FOR
COMMON STOCK; NO ASSURANCE OF PUBLIC TRADING MARKET.' THE REPRESENTATIVE
MAY DISCONTINUE SUCH ACTIVITIES AT ANY TIME OR FROM TIME TO TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information (including financial
statements and notes thereto) contained in this Prospectus and is qualified in
its entirety by the more detailed information appearing elsewhere herein. In
addition, unless otherwise indicated to the contrary, all information appearing
herein (i) does not give effect to (a) 58,333 shares of Common Stock issuable
upon exercise of the Representative's Share Purchase Option; and (b) employee
stock options. See 'Description of Securities,' 'Certain Transactions,'
'Underwriting,' and 'Management--Stock Option Plans and Agreements.' Each
prospective investor is urged to read this Prospectus in its entirety.
THE COMPANY
Perry's Majestic Beer, Inc., a Delaware corporation (the 'Company'), was
formed in December, 1995. On March 29, 1996, the Company entered into an
agreement to acquire Riverosa Company, Inc. ('Riverosa'), a New York corporation
which was formed in November 1993. (References to the Company includes the
operations of Riverosa). The Company is engaged in the marketing and sale of
microbrewed beers and ales. Since June 1993, the Company has sold and marketed
its flagship brand, Perry's Majestic Beer ('Perry's'), which is distinguished by
its use of organically grown barley and hops. The Company's business strategy is
to establish presence in the craft-brewed beer market by creating and offering
high quality full-flavored all organic beers and other beers and/or ales.
Presently, the Company's products are produced under contract with Hoboken
Brewing Company, a brewery located in Hoboken, New Jersey, which produces,
bottles and labels Perry's using the Company's name and logo. The Company's
products are distributed in the New York metropolitan area under an exclusive
distribution agreement with Mootch & Muck, Inc. ('Mootch & Muck'), a subsidiary
of the Company's parent company, Bev-Tyme, Inc. ('Bev-Tyme'), a distributor of
various beverages, beers and related products. Perry's is presently distributed
to distributors in ten (10) states and sold in restaurants, supermarkets, beer
and soda stores and retail outlets.
On October 26, 1995, Bev-Tyme, Inc. entered into a letter of intent to
acquire Riverosa for the sum of $250,000. The letter of intent followed several
months of preliminary discussions between Mark Butler, President of Riverosa and
Robert Sipper, President of Bev-Tyme, in the course of which terms were agreed
upon which were incorporated in the letter of intent. In January 1996, Bev-Tyme,
Inc. assigned its rights under the letter of intent to the Company, which
entered into a definitive agreement with Riverosa on March 29, 1996, pursuant to
which the Company agreed to pay the sum of $250,000 to acquire Riverosa. An
initial payment of $150,000 was made by the Company on March 21, 1996, with the
balance payable pursuant to the terms of a promissory note issued March 29, 1996
and payable upon the earlier of (i) one year or (ii) the closing of this
offering. As of April 4, 1996, the Company entered into a three (3) year
employment agreement with Mark Butler, pursuant to which Mr. Butler serves as
President of the Company and will receive an annual salary of $25,000 per year,
to be increased to $50,000 per year upon completion of the Company's initial
public offering. The $150,000 utilized for this acquisition was obtained by the
Company as a result of capital contributions by the shareholders and the March
1996 Bridge Loans. (See 'Certain Transactions'.) The Agreement provides further
that, as additional consideration, on each of March 31, 1997, March 31, 1998 and
March 31, 1999, the Company shall deliver to Mr. Butler options to purchase
100,000 shares of the Company's Common Stock at fair market value on the date of
issuance. Further, the agreement provides that the Company will pay Butler an
additional annual bonus at the sole discretion of the Board of Directors.
Perry's Majestic Beer is brewed with organically grown barley imported from
Canada and organically grown hops imported from Germany. It is a Vienna style
lager beer whose characteristics showcase the quality aspects of superior barley
flavor, distinguished by deep copper color and a malt flavor. In keeping with
its organic character, Perry's utilizes a 10-12 week brewing process that
introduces no herbicides, chemical pesticides or inorganic fertilizers in the
growing of the barley or hops. No additives, artificial ingredients or
preservatives are added during the brewing or bottling stages.
3
<PAGE>
The Company anticipates that it will utilize proceeds from this offering to
expand the market for Perry's, develop new beers and ales and to establish and
operate a brewpub/restaurant and microbrewery in the New York metropolitan area.
The Company maintains its executive offices at 134 Morgan Avenue, Brooklyn,
New York 11237 telephone number (718) 894-4300.
SEE 'RISK FACTORS' FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered by the Company......... 583,335 Shares at a price of $6.00 per Share. See 'Description of
Securities.' Concurrently with this Offering, the Company is
registering 2,500,000 shares of Common Stock on behalf of certain
Selling Securityholders. See 'Selling Securityholders' and 'Certain
Transactions.'
Securities Outstanding Prior
to the Offering:
Common Stock............................ 2,500,000 Shares
Series A Preferred Stock................ 500,000 Shares
Series B Preferred Stock................ 7,000,000 Shares
Securities Outstanding Subsequent
to the Offering:
Common Stock............................ 3,083,335 Shares
Series A Preferred Stock................ 500,000 Shares
Series B Preferred Stock................ 7,000,000 Shares
Use of Proceeds........................... The net proceeds to the Company from the sale of the 583,335 Shares
offered hereby, after deducting Offering expenses (including the
$72,000 financial advisory fee), are estimated to be $2,548,009. The
net proceeds are expected to be applied for the following purposes:
repayment of certain indebtedness, establishment and operation of
brewpub/restaurant and microbrewery, expansion of the Company's
product development, distribution, marketing and advertising efforts
and working capital. See 'Use of Proceeds.'
Risk Factors.............................. Limited Operating History and Going Concern Report; Establishment of
Company's Operations; Dependence on Offering Proceeds; Possible Need
for Additional Financing; Competition; Product Concentration;
Dependence on Recent Product Introductions; Dependence Upon Single
Product; Dependence on Distributors; Consumer Concentration; Control
by Bev-Tyme, Inc.; Development of New Products; Need to Manage
Product Introductions; Construction of Brewpub/Restaurant; Dependence
on Certain Suppliers; Trends in Consumer Preferences and Spending;
Protection of Trademarks, Copyrights and Other Proprietary
Information; Risk of Third Party Claims of Infringement; Government
Regulation; Public Attitudes Toward Alcohol Consumption; Growth of
the Microbrewery Industry; Lack of Demand for Microbrewed Beer;
Dependence on Contract Beer; Absence of Manufacturing Facilities;
Product Liability; Shortages of Supply; Seasonality; Dependence on
Bev-Tyme, Inc. and Mootch & Muck; Dependence on Key Personnel;
Limited Personnel; Broad Discretion in Application of Proceeds; No
Prior Public Market;
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Possible Volatility of Stock Price; Lack of Prior Market for Common
Stock; No Assurance of Public Trading Market; Nasdaq Requirements;
Penny Stock; Additional Requirements on Broker-Dealer Sales of
Securities; Current Prospectus and State Blue Sky Registration in
connection with the sale of Shares; Representative's Share Purchase
Option; Possible Adverse Effects of Ownership of Preferred Stock by
Bev-Tyme, Inc.; 'Penny' Stock Regulations May Impose Certain
Restrictions on Marketability of Securities; Dilution; Equity
Securities Sold Previously at Below Offering Price; Bridge Loans; No
Dividends; Shares Eligible for Future Sale May Adversely Affect the
Market; Federal Income Tax Consequences; Conflicts of Interest,
Anti-Takeover Effect of General Corporation Law of Delaware. An
investment in the securities offered hereby involves a high degree of
risk and immediate substantial dilution of the book value of the
Common Stock and should be considered only by persons who can afford
the loss of their entire investment. See 'Dilution' and 'Risk
Factors.'
Proposed OTC Bulletin
Board Symbol............................ Common Stock--PYMB
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The selected historical balance sheet data presented below are derived from
financial statements of the Company, which have been audited by Moore Stephens,
P.C. independent accountants, whose reports are included elsewhere herein. There
have been no revenue or expense activities through March 31, 1996. The data set
forth below should be read in conjunction with and is qualified in its entirety
by the Company's financial statements, related notes and Management's Discussion
and Analysis of Financial Condition and Results of Operations. See 'Financial
Statements,' and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations.' The following summary balance sheet data has been
summarized from the Company's financial statements included elsewhere in this
Prospectus. The information should be read in conjunction with the financial
statements and the related notes thereto. See 'Financial Statements.'
SUMMARY BALANCE SHEET DATA
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------
HISTORICAL(1)(2)(3) PRO FORMA(4)
------------------- ------------
<S> <C> <C>
Working Capital (Deficit)......................................................... $ (50,000) 2,498,009
Total Assets...................................................................... $ 2,450,000 4,748,009
Total Liabilities................................................................. $ 250,000 --
Retained Earnings................................................................. -- --
Stockholders' Equity.............................................................. $ 2,200,000 4,748,009
</TABLE>
- ------------------
(1) Does not include the sale of 583,335 shares of Common Stock, offered hereby.
(2) Gives effect to issuance of 7,500,000 shares of Series B Preferred Stock
(including 500,000 shares of Series A Preferred Stock and 7,000,000 shares
of Series B Preferred Stock) to Bev-Tyme, Inc. ('BevTyme') in exchange for
400,000 shares of Preferred Stock of Bev-Tyme and $150,000.
(3) Gives effect to the bridge loan of $150,000 in March, 1996.
(4) Reflects approximate net proceeds of the 583,335 shares of Common Stock
offered hereby of $2,548,009 at the assumed initial public offering price of
$6.00 and the repayment of indebtedness totaling $250,000.
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE AND INVOLVES
A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION AND SHOULD ONLY BE PURCHASED BY
INVESTORS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. Prospective
purchasers, prior to making an investment, should carefully consider the
following risks and speculative factors, as well as other information set forth
elsewhere in this Prospectus, associated with this Offering, including the
information contained in the Financial Statements herein.
1. Limited Operating History and Going Concern Report. As a result of the
Company's current financial condition, the Company's independent auditors have
issued a going concern report on the Company's financial statement for the
period December 1995 (inception) to March 31, 1996. The Company's ability to
continue in the normal course of business is dependent upon successful
completion of its planned public offering of securities to raise capital and the
success of future operations. These uncertainties raise substantial doubt about
its ability to continue as a going concern. There can be no assurance that the
Company will not incur net losses in the future. The Company was organized in
December of 1995 and on March 25, 1996 entered into a contract to acquire
Riverosa. Riverosa has marketed Perry's Majestic Beer since July 1993. The
Company's prospects must be considered in light of the risks, expenses, and
difficulties frequently encountered by a small business in a highly competitive
industry. As of March 31, 1996, the Company had a working capital deficit of
$(50,000). In addition, the sales for Riverosa for the years ended December 31,
1994 and 1995 were $195,095 and $81,185, respectively representing a decrease of
$113,214. Sales for the three months ended March 31, 1996 and 1995 were $24,136
and $19,430 respectively. Like any relatively new business enterprise operating
in a specialized and intensely competitive market, the Company is subject to
many business risks which include, but are not limited to, unforeseen marketing
and promotional expenses, unforeseen negative publicity, competition, product
liability and lack of operating experience. Many of the risks may be
unforeseeable or beyond the control of the Company. There can be no assurance
that the Company will successfully implement its business plan in a timely or
effective manner, or that management of the Company will be able to market and
sell enough beer to generate sufficient revenues and continue as a going
concern. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations,' 'Business,' 'Use of Proceeds,' 'Certain Transactions'
and 'Financial Statements.'
2. Establishment of Company's Operations. The Company has devoted
substantially all its efforts since inception to establishing its business and
has generated minimal revenues. The Company is dependent upon the proceeds of
this Offering in order for it to expand its operations and establish its own
brewing facility. The likelihood of success must be considered in light of the
problems, experiences, difficulties, complications and delays frequently
encountered in various degrees in connection with the operation and development
of new businesses. The Company has one product which has achieved only limited
sales and must surmount a number of hurdles before it can expand its operations.
The most significant of these are obtaining financing, which is expected to be
satisfied through the Offering, identifying a location for its
brewpub/restaurant, establishing and equipping the brewpub, establishing a
market for its products, implementing the Company's advertising and marketing
campaigns and repaying indebtedness owed to the Bridge Lenders. See 'Use of
Proceeds.' The Company must also develop and implement systems, standards and
procedures for every aspect of its operation. There can be no assurance that the
Company will be able to complete all of these items in a timely manner, or at
all, in order to allow the Company to commence operations. See 'Business.'
3. Dependence on Offering Proceeds; Possible Need for Additional
Financing. The Company is dependent on the proceeds from this Offering to
generate cash for the establishment of a brewpub/restaurant, which is estimated
to be approximately $1,000,000 and expansion of its product lines and marketing
efforts, which is estimated to be approximately $600,000. The Company
anticipates, based on its currently proposed plans, that the proceeds of this
Offering, together with funds generated from operations, will be sufficient to
satisfy its anticipated cash requirements for approximately twelve (12) months
following the consummation of this Offering. In the event that these plans
change, or the costs of development of operations prove greater than
anticipated, the Company could be required to modify its operations, curtail its
expansion or seek additional financing sooner than currently anticipated. The
Company has no current arrangements with respect to such additional financing
and there can be no assurance that such additional financing, if available, will
be on terms acceptable to the Company. See 'Use of Proceeds.'
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4. Shares Eligible for Immediate Sale May Adversely Affect the Market; Lack
of any Restrictions on Sale of Company's Outstanding Common Stock. All of the
Company's currently outstanding shares of Common Stock are being registered
concurrently under the Registration Statement of which this Prospectus forms a
part. Immediately prior to the Effective Date, the Company will have 2,500,000
shares of its Common Stock issued and outstanding, and 500,000 shares of Common
Stock issuable upon conversion of the Series A Preferred Stock of which
2,500,000 shares are being registered under the Registration Statement of which
this Prospectus forms a part. The Shares being registered are not subject to any
restriction on resale by the Company or the Representative. As a result, those
shares may be sold immediately after the public offering. The Company has been
advised by the Selling Securityholders that they have no present intentions
regarding the timing and amount of sales of these shares. However, prospective
investors should be aware that the possibility of sales may, in the future, have
a depressive effect on the price of the Company's Common Stock in any market
which may develop, and therefore, the ability of any investor to market his
shares may be dependent directly upon the number of shares that are offered and
sold. Affiliates of the Company may sell their shares during a favorable
movement in the market price of the Company's Common Stock which may have a
depressive effect on its price per share. See 'Description of Securities.'
5. Competition. The beer industry, in general, and the craft brewing
segment of the beer industry, in particular, is highly competitive. The Company
expects competition and the number of competitors in the craft brewing segment
to increase. The principal competitive factors affecting the market for the
Company's beers include product quality and taste, packaging, brand recognition,
price and distribution capabilities. There can be no assurance that the Company
will be able to compete successfully against current and future competitors
based on these and other factors. The Company competes with a variety of
domestic and international brewers, many of whom have substantially greater
financial, production, distribution and marketing resources and have achieved a
higher level of brand recognition than the Company. The Company anticipates
increased competition in the specialty beer segment from the major domestic
brewers such as Anheuser-Busch Companies, Inc., Miller Brewing Co. and Adolph
Coors Co., each of whom has introduced and is marketing fuller flavored beers
designed to compete directly in the specialty beer segment. These large domestic
brewers dominate the overall domestic beer market and the Company expects that
certain of these companies, with their superior financial resources and
established distribution networks, will seek further participation in the
speciality beer segment through the acquisition of equity positions in, or the
formation of distribution alliances with, small specialty brewers. The Company
also faces and will continue to face increasing competition from import
specialty beer companies such as Bass PLC, Cerveceria Modelo, S.A. (brewer of
Corona Extra), Guinness PLC, Cerveceria Moctezuma, S.A. (brewer of Dos Equis)
and Heineken N.V. and existing domestic specialty brewers such as The Boston
Beer Company, Inc., Redhook Ale Brewery, Incorporated, Sierra Nevada Brewing
Co. and Anchor Brewing Co. Recent growth in the sales of specialty beers is
expected to result in increased competition in the segment, including a
continuing proliferation of microbrewers and efforts by micro and regional
brewers to expand their production capacity. Increased competition could result
in price reductions, reduced profit margins and loss of market share, all of
which would have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's products also compete
generally with other alcoholic beverages, including products offered in other
segments of the beer industry and low alcohol products. The Company competes
with other beer and beverage companies not only for consumer acceptance and
loyalty but also for shelf and tap space in retail establishments and for
marketing focus by the Company's distributors and their customers, all of which
also distribute and sell other beers and alcoholic beverage products. Finally,
there can be no assurance that the recent growth in consumer demand for
speciality beers will continue, or even if such growth continues, that consumers
will choose the Company's beer. See 'Business--Competition.'
6. Product Concentration; Dependence on Recent Product Introductions;
Dependence Upon Single Product. The sale of Perry's Majestic Beer has accounted
for all of the Company's sales since inception. The Company believes that the
sale of Perry's Majestic Beer will continue to account for most sales for the
foreseeable future. Therefore, the Company's future operating results,
particularly in the near term, are significantly dependent upon the continued
market acceptance of Perry's Majestic Beer. There can be no assurance that
Perry's Majestic Beer or other beers developed by the Company will achieve
market acceptance. The Company has not test marketed any new products so it is
unable to anticipate any level of public acceptance.
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Initial sales for a new beer may be caused by the interest of distributors and
retailers to have the latest product on hand for potential future sale to
consumers. As a result, initial stocking orders for, or sales of, a newly
introduced beer may not be indicative of market acceptance and long term
consumer demand. A decline in the demand for any of the Company's beers as a
result of competition, changes in consumer tastes and preferences, government
regulation or other factors would have a material adverse effect on the
Company's business, operating results and financial condition. In addition,
there can be no assurance that the Company will be successful in developing,
introducing and marketing additional new beers that will sustain sales growth in
the future. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' and 'Business.'
7. Dependence on Distributors; Consumer Concentration. The Company
distributes its products primarily through wholesale distributors, including
Mootch & Muck, for resale to retailers. Accordingly, the Company is dependent
upon these distributors to sell the Company's products and to assist the Company
in promoting market acceptance of, and creating demand for, the Company's
products. There can be no assurance that the Company's distributors will devote
the resources necessary to provide effective sales and promotion support to the
Company. The Company believes that its future growth and success will continue
to depend in large part upon its ability to expand distribution and enter into
distribution agreements. If any of the Company's distributors were to
discontinue selling, or decrease the level of orders for, the Company's
products, the Company's business would be adversely affected in the areas
serviced by such distributors until the Company retained replacements. There
can be no assurance, however, that the Company would be able to replace a
significant distributor in a timely manner or at all in the event it were to
discontinue selling the Company's products. In addition, there is always a risk
that the Company's distributors will give higher priority to the products of
other beverage companies, including products directly competitive with the
Company's beers, thus reducing their efforts to sell the Company's products. If
any of the Company's significant distributors were to experience financial
difficulties, or otherwise become unable or unwilling to promote or sell the
Company's beers, the Company's results of operations would be adversely
affected. In addition, in some states, the Company's relationship with its
distributors may be affected by laws that restrict enforceability of some
contract terms, especially those related to the Company's right to terminate the
services of its distributors. Accordingly, the Company's ability to change
distributors in certain states may be adversely impacted by such laws. See
'Business--Sales, Distribution and Marketing.'
8. Control by Bev-Tyme, Inc. Prior to this Offering, Bev-Tyme, Inc. owned
500,000 shares of the Company's issued and outstanding Convertible Series A
Preferred Stock and 7,000,000 shares of the Company's Non-Convertible Series B
Preferred Stock, representing 75% of the Company's outstanding securities. Each
share of Series A Preferred Stock may be convertible by the holder into one (1)
share of Common Stock. Each share of Series A Preferred Stock and Series B
Preferred Stock possesses one vote on all matters submitted to the Company's
shareholders for their vote. After this offering, Bev-Tyme, Inc. will own 100%
of the outstanding preferred stock. See 'Principal Stockholders.' Since holders
of Common Stock do not have any cumulative voting rights and directors are
elected by a majority vote, Bev-Tyme, Inc. is in a position to control the
election of directors as well as the affairs of the Company. In the event
Bev-Tyme, Inc. were to convert and sell all of its shares of the Company's
Series A Preferred Stock, Bev-Tyme would continue to own one hundred (100%)
percent of the Series B Preferred Stock, representing 66% of the voting shares
of the Company, and would thereby be in a position to continue to control the
election of directors and officers of the Company. Consequently, Bev-Tyme could
affect the ability of the Company to sell assets, engage in a merger or business
combination or enter into other transactions without the approval of minority
shareholders. In addition, Robert Sipper, one of the Company's Board of
Directors, is also a member of Bev-Tyme's Board of Directors. Such control could
also preclude an unsolicited acquisition of the Company and consequently,
adversely affect the market price of the Common Stock. See 'Description of
Securities.'
9. Development of New Products; Need to Manage Product Introductions. The
specialty beer market is highly competitive and characterized by changing
consumer preferences and continuous introduction of new products. The Company's
goal is to introduce new products on a timely and regular basis to maintain
distributor and retailer interest and to appeal to varying consumer preferences.
The Company believes that its future growth will depend, in part, on its ability
to anticipate changes in consumer preferences and develop and introduce, in a
timely manner, new beers that adequately address such changes. There can be no
assurance that the Company will be successful in developing, introducing and
marketing new products on a timely and regular basis. If the
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Company is unable to introduce new products or if the Company's new products are
not successful, the Company's sales may be adversely affected as consumers seek
competitive products. In addition, the introduction or announcement of new beers
by the Company could result in reduction of sales of the Company's existing
beers, requiring the Company to manage carefully product introductions in order
to minimize disruption in sales of existing beers. There can be no assurance
that the introduction of new product offerings by the Company will not cause
distributors, retailers and consumers to reduce purchases or consumption of
existing Company products. Such reduction of purchases or consumption could have
a material adverse effect on the Company's business, operating results and
financial condition. See 'Business.'
10. Construction of Brewpub/Restaurant. The Company intends to use a
substantial portion of the proceeds of this offering to construct a
brewpub/restaurant in the New York metropolitan area. The Company has never
constructed or operated its own brewery or brewpub and will face various
organizational challenges typically associated with commissioning a new brewery
and initiating production. The construction of a new brewery could place
significant strain on the Company's management, operations and resources and
result in diversion of management attention from the day to day operation of the
Company's business. The successful construction of such a brewery will require
careful management of various factors associated with the construction of a new
brewery, including site selection, zoning, environmental uncertainties,
receiving governmental permits, possible cost estimation errors or overruns,
construction delays, equipment delays or shortages, production start-up
problems and other factors, many of which are beyond the Company's control.
Furthermore, the Company's construction of its own brewery will result in new
fixed and operating expenses. If revenue levels do not increase sufficiently, or
if sufficient transportation and other cost savings do not result to offset
these new expenses, the Company's operating results will be materially adversely
impacted in future periods. There can be no assurance that the Company will not
encounter unforeseen difficulties as construction and production begin at the
brewpub facility, which could have a material adverse effect on the Company's
business, operating results and financial condition. See 'Business--Brewpub.'
11. Dependence upon Certain Suppliers. Under the Company's custom brewing
contract with Hoboken Brewing Company, the Company relies upon Hoboken Brewing
Company to source and purchase the ingredients and raw materials used to make
and package the Company's beers. Although to date adequate supplies of these
ingredients and materials have been available, delays or reductions in product
shipments could occur which would have a material adverse effect on the
Company's business, financial condition and results of operations. As with most
agricultural products, the supply and price of raw materials used to produce the
Company's beers can be affected by a number of factors beyond the control of the
Company, such as frosts, droughts, other weather conditions, economic factors
affecting growing decisions, import tariffs, various plant diseases, pests and
acts of God. To the extent that any of the foregoing affects the ingredients
used to produce the Company's beers, the Company's results of operations would
be materially and adversely affected. In addition, the Company's results of
operations are dependent upon its ability to accurately forecast its need for
ingredients which may be perishable. Any failure by the Company to accurately
forecast its requirements of raw materials could result in the Company either
being unable to meet higher than anticipated demand for its products or
producing excess inventory, either of which may adversely affect the Company's
results of operations. See 'Business--Custom Brewing.'
12. Trends in Consumer Preferences and Spending. The speciality beer
segment of the domestic beer market has grown dramatically over the past decade.
The Company believes that one factor in such growth has been consumer demand for
more flavorful beers offered in a wider variety of styles. No assurance can be
given however that consumer demand for specialty beers will continue in the
future. The Company's success also depends upon a number of factors related to
the level of discretionary consumer spending, including the general state of the
economy, federal and state tax laws and consumer confidence in future economic
conditions. Changes in consumer spending can affect both the quantity and the
price of the Company's products and may therefore affect the Company's operating
results. For example, reduced consumer confidence and spending may result in
reduced demand for the Company's products, limitations on its ability to
increase or maintain prices and increases in required levels of selling,
advertising and promotional expenses.
13. Protection of Trademarks, Copyrights and Other Proprietary Information;
Risk of Third Party Claims of Infringement. The Company considers its
trademarks, particularly the "Perry's Majestic" brand name, beer recipes and
product package, advertising and promotion design and artwork to be of
considerable value and
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critical to its business. The Company relies on a combination of trade secret,
copyright and trademark laws and nondisclosure and other arrangements to protect
its proprietary rights. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy or obtain and use information
that the Company regards as proprietary. There can be no assurance that the
steps taken by the Company to protect its proprietary information will prevent
misappropriation of such information and such protections may not preclude
competitors from developing confusing similar brand names or promotional
materials or developing products with taste and other qualities similar to the
Company's beers. While the Company believes that its trademarks, copyrights and
recipes do not infringe upon the proprietary rights of third parties, there can
be no assurance that the Company will not receive future communications from
third parties asserting that the Company's trademarks, copyrights and recipes
infringe, or may infringe, the proprietary rights of third parties. The
potential for such claims will increase as the Company introduces new beers or
increases distribution in recently entered geographic areas. Any such claims,
with or without merit, could be time-consuming, result in costly litigation and
diversion of management personnel, cause product distribution delays or require
the Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company or at all. In the event of a successful claim of infringement
against the Company and failure or inability of the Company to license the
infringed or similar proprietary information, the Company's business, operating
results and financial condition could be materially adversely affected. See
'Business--Trademarks.'
14. Government Regulation. The Company's business is highly regulated by
federal, state and local laws and regulations. The Company must comply with
extensive laws and regulations regarding such matters as state and regulatory
approval and licensing requirements, trade and pricing practices, permitted and
required labeling, advertising, promotion and marketing practices, relationships
with distributors and related matters. For example, federal and state regulators
require warning labels and signage on the Company's products. The Company
believes that it has obtained all regulatory permits and licenses necessary to
operate its business in states where the Company's products are currently being
distributed. Riverosa maintains a Federal Basic Wholesalers Permit with the U.S.
Bureau of Alcohol, Tobacco and Firearms. The Company has made application to
assume such permit in the Company's name. Failure on the part of the Company to
comply with federal, state or local regulations could result in the loss or
revocation or suspension of the Company's licenses, permits or approvals and
accordingly could have a material adverse effect on the Company's business. In
addition, changes to federal and state excise taxes on beer production, federal
and state environmental regulations, including laws relating to packaging and
waste discharge, or any other laws or results of operations. The federal
government and each of the states levy excise taxes on alcoholic beverages,
including beer. The federal government currently imposes an excise tax of $18.00
per barrel on every barrel of beer produced for consumption in the United
States. There is, however, a small brewers excise tax credit that grants each
brewing company with annual production under 2,000,000 barrels an $11.00 credit
per barrel on its first 60,000 barrels produced annually. The Company has not
yet applied for the required state permits, licenses and bonds to operate the
proposed brewpub/restaurant. The Company does not intend to apply for these
necessary licenses and permits until after the completion of the facility (of
which there can be no assurance). Although the Company does not expect to
encounter any difficulties in obtaining the necessary permits, licenses and
bonds, the application and approval process to obtain these items will not
commence until after the facility is operational (of which there can be no
assurance). Failure to obtain such permits, licenses and bonds would prevent the
Company from engaging in any brewing operations. In addition, there can be no
assurance that the Company's future brewery operations will not become subject
to more restrictive regulation or increased taxation by Federal or state
agencies, which may adversely affect the future operations, revenues and
potential profitability of the Company. Additionally, from time to time,
Congress and many state legislatures may consider proposals to impose additional
excise taxes on the production and sale of alcoholic beverages, including beer.
Any increase in the taxes imposed upon beer can be expected to have an adverse
impact on overall sales of such products. See 'Business--Governmental
Regulation.'
15. Public Attitudes Toward Alcohol Consumption. In recent years, there
has been an increase in the level of health-consciousness in the United States
and considerable debate has occurred concerning alcohol related social problems,
such as alcoholism and drunk driving. In addition, a number of anti-alcohol
groups are advocating increased governmental action on a variety of fronts
unfavorable to the beer industry, including the legislation of new labeling or
packaging requirements and restrictions on advertising and promotion that could
adversely affect the sale of the Company's products. Restrictions on the sale
and consumption of beer or increases in the retail cost of beer due to increased
government regulations, taxes or otherwise, could materially
11
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adversely affect the Company's business, financial condition and results of
operations. Congress and many state legislatures are considering various
proposals to impose additional excise taxes on the production and sale of
alcoholic beverages, including beer. Some of the excise tax rates being
considered are substantial. Any increase in the taxes imposed on beer can be
expected to have an adverse impact on overall sales of such products, and may
materially adversely affect the Company's result of operations. See
'Business--Governmental Regulation.'
16. Growth of the Microbrewery Industry; Lack of Demand for Microbrewed
Beer. There can be no assurance that the demand for microbrewed beer will
continue to grow at the present rate or at all. To meet the increasing demand
for microbrewed beer, new microbreweries, like the Company, are being developed
and existing microbreweries are significantly increasing their production
capacities. If the demand for microbrewed beer does not keep up with increases
in supply, the Company will face heightened competition. See 'Business--
Industry Overview.'
17. Dependence on Contract Beer; Absence of Manufacturing Facilities. The
Company anticipates having its products produced by a contract brewery for the
foreseeable future and will continue to utilize a contract brewery after the
Company's brewpub becomes operational. Although the Company's beer is presently
brewed at Hoboken Brewing Company ('Hoboken'), there can be no assurance that
this brewery will continue to provide services to the Company. The Company
entered into a one (1) year written agreement with Hoboken on July 15, 1996
pursuant to which Hoboken brews Perry's Majestic Beer. The Hoboken agreement
provides, in pertinent part, that the customer will provide certain ingredients
and labels and Hoboken will provide brewing, filling and packaging services,
together with certain necessary ingredients. The agreement runs on a year to
year basis, and may be terminated by either party on six (6) months written
notice after the first year of production. In the event the Company is unable to
continue its relationship with Hoboken for any reason, the Company would have to
enter into a relationship with another brewery which is able to produce organic
beer to the Company's standards. See 'Business--Contract Brewing.'
18. Product Liability. The Company's future brewing and brewpub/restaurant
operations could subject the Company to the risk of product liability claims.
The Company currently does not have product liability insurance. There can be no
assurance that the Company will be able to obtain product liability insurance on
terms acceptable to the Company or at all and once obtained there can be no
assurance that the Company will be able maintain such insurance coverage.
Moreover, the amount and scope of any coverage may be inadequate to protect the
Company in the event that a product liability claim is successfully asserted
against the Company. See 'Business.'
19. Shortages of Supply. Shortages or increased costs of fuel, water, raw
materials (certain of which will be obtained from foreign suppliers) or power,
or allocations by suppliers or governmental authorities could restrict the
operations of the Company's proposed brewpub, or otherwise materially and
adversely affect the ability of the Company to produce and market its proposed
beer products. The Company does not anticipate entering into any long-term
contracts for its suppliers of foreign malt. See 'Business.'
20. Seasonality. Sales of beer in general are seasonal in nature and are
at their highest level in the second and third calendar quarters and at their
lowest in the first and fourth calendar quarters. This seasonality is expected
to have a significant impact on the Company's operations on a quarter to quarter
basis, particularly if delays in the Offering or construction of the proposed
brewpub result in delays to brewery operations. See 'Business--Sales and
Distribution.'
21. Dependence on Bev-Tyme, Inc. and Mootch & Muck. The Company is
dependent upon its parent, Bev-Tyme, Inc., and Mootch & Muck for distribution of
the Company's beers in the New York metropolitan area. Distribution by Mootch &
Muck presently accounts for approximately three and seven tenths percent (3.7%)
of the Company's revenues. Historically, Mootch & Muck has been responsible for
approximately three to four percent (3% to 4%) of Riverosa's revenues. Although
the Company believes that other avenues of distribution will be available, there
can be no assurance that the Company would be able to obtain new suppliers in
the event that Mootch & Muck was no longer able to distribute products for the
Company. Even if the Company is able to develop alternative distribution
sources, there can be no assurance that it can do so without material delay or
on a cost effective basis at prices similar to those paid to Mootch & Muck. As a
result, any interruption or
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discontinuance of distribution by Mootch & Muck could result in considerable
expense, delay the Company's operations and ability to deliver products, and
have a material adverse effect on the Company.
22. Dependence on Key Personnel; Lack of Experience. The Company is
substantially dependent on the continued services of Robert Sipper, the
Company's Chief Executive Officer, and Mark Butler, the Company's President.
None of the Company's current management has experience in brewery construction
and operation or in the launching and operation of retail eating and drinking
facilities. Therefore, there can be no assurances that the Company will be
successful in the construction and operation of the brewpub. The Company has
entered into a three (3) year employment agreement with Mr. Sipper and a three
(3) year employment agreement with Mr. Butler. Mr. Sipper will devote such time
as is necessary to the discharge of his responsibilities to the Company,
consistent with his continuing obligations to Bev-Tyme. Mr. Butler will devote
his full time to the business of the Company. Should Mr. Sipper and Mr. Butler
not be able to continue as officers of the Company, its prospects could be
adversely affected and, as a result, the loss of either Mr. Sipper or Mr. Butler
could materially adversely affect the Company's operations. The Company
currently does not maintain key personnel life insurance for any of its
employees. See 'Management.'
23. Limited Personnel. At present the Company employs only two (2) full
time personnel. There can be no assurance that the Company will be able to
identify suitable additional employees, or do so in a timely economically
acceptable basis in the future.
24. Investment in Bev-Tyme Preferred Stock. The Company's assets include
400,000 shares of Series C Preferred Stock of Bev-Tyme Inc. owned by the Company
and valued by the Company's auditors at $2,000,000. The Bev-Tyme shares were
received by the Company as partial consideration for Bev-Tyme's acquisition of
an equity interest in the Company. The Company has obtained a resolution from
the board of directors of Bev-Tyme to register the shares as soon as reasonably
possible, without any restriction upon their sale. In addition, the Company's
Board of Directors has resolved to the sell the shares following such
registration and thereby generate additional cash for the Company. During the
past year, Bev-Tyme Class C Preferred Stock has traded consistently at prices
ranging from approximately $4.00 to $8.00 per share, with volume that the
Company believes would support the Company's ability to liquidate the shares
over a reasonably short period of time. Recently, the Bev-Tyme Class C Preferred
Stock has had a fair market value of approximately $4.75 per share.
Nevertheless, there can be no assurance that the Company will be able to sell
the Bev-Tyme Preferred Stock in the foreseeable future and its value is highly
dependent upon the factors not within the control of the Company.
25. Broad Discretion in Application of Proceeds. While the Company
presently intends to use the net proceeds of this Offering as described in the
'Use of Proceeds' section of this Prospectus, management of the Company has
broad discretion to adjust the application and allocation of the net proceeds of
this Offering in order to address changed circumstances and opportunities. As
reflected in the 'Use of Proceeds' section approximately $1,000,000 or 39.2% of
the net proceeds will be allocated to construction of the Company's brewpub,
$613,000 or 24.1% will be allocated to marketing or advertising, $250,000 or
9.8% will be used to repay certain indebtedness and the balance for working
capital. These expenditures are subject to reallocation at the discretion of the
Company's Board of Directors. As a result of the foregoing, the success of the
Company will be substantially dependent upon the discretion and judgment of the
management of the Company with respect to the application and allocation of the
net proceeds hereof. Pending use of such proceeds, the net proceeds of this
Offering will be invested by the Company in short-term, low risk marketable
securities. See 'Use of Proceeds.'
26. No Prior Public Market; Possible Volatility of Stock Price. Prior to
this Offering, there has been no public market for the Common Stock. The initial
public offering price of the Common Stock was determined by negotiation between
the Company and the representatives of the Representative, and may not be
indicative of the market price for such securities in the future, and does not
necessarily bear any relationship to the Company's assets, book value, net worth
or results of operations of the Company or any other established criteria of
value. Among the factors considered in determining the price of the Common Stock
were the history of and prospects for the industry in which the Company
competes, estimates of the business potential of the Company, the present state
of the development of the Company's business, the Company's financial condition,
an assessment of the Company's management, the general condition of the
securities markets at the time of this Offering, and the demand for similar
securities of comparable companies. There is, however, no relationship
whatsoever between the offering price of the Common Stock and the Company's net
worth, projected earnings, book value, or any
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other objective criteria of value on the other. See 'Underwriting' for a
discussion of the factors considered in determining the initial public offering
price. See 'Underwriting--Determination of Public Offering Price,' 'Description
of Securities' and 'Financial Statements.'
27. Lack of Prior Market for Common Stock; No Assurance of Public Trading
Market. Prior to this Offering, no public trading market existed for the Common
Stock. There can be no assurances that a public trading market for the Common
Stock will develop or that a public trading market, if developed, will be
sustained. Although the Company anticipates that upon completion of this
Offering, the Common Stock will be eligible for inclusion on The OTC Bulletin
Board, no assurance can be given that the Common Stock will be listed on The OTC
Bulletin Board as of the Effective Date. Consequently, there can be no assurance
that a regular trading market for the Common Stock, other than the pink sheets,
will develop after the completion of this Offering. If a trading market does in
fact develop for the Common Stock offered hereby, there can be no assurance that
it will be maintained. If for any reason the Common Stock is not listed on The
OTC Bulletin Board or a public trading market does not develop, purchasers of
the Common Stock may have difficulty in selling their securities should they
desire to do so. In any event, because certain restrictions may be placed upon
the sale of securities at prices under $5.00, unless such securities qualify for
an exemption from the 'penny stock' rules, such as a listing on The Nasdaq Small
Cap Market, some brokerage firms will not effect transactions in the Company's
securities and it is unlikely that any bank or financial institution will accept
such securities as collateral, which could have an adverse effect in developing
or sustaining any market for the Common Stock. See 'Risk Factors--Penny Stock
Regulations May Impose Certain Restrictions on Marketability of Securities.'
Although it has no legal obligation to do so, the Representative from time
to time may act as a market maker and may otherwise effect and influence
transactions in the Company's securities. However, there is no assurance that
the Representative will continue to effect and influence transactions in the
Company's securities. The prices and liquidity of the Company's securities may
be significantly affected by the degree, if any, of the Representative's
participation in the market. The Representative may voluntarily discontinue such
participation at any time. Further, the market for, and liquidity of, the
Company's securities may be adversely affected by the fact that a significant
amount of the Common Stock may be sold to customers of the Representative.
Pursuant to an alternate prospectus certain Selling Shareholders may offer
for sale 2,500,000 shares of Common Stock. (See 'Selling Stockholders'). None of
these securities are subject to any lockup or restriction upon their sale after
registration. Consequently, such securities may be sold by the holders thereof
at any time subsequent to their registration pursuant to a then current
prospectus.
28. Nasdaq Requirements; Penny Stock; Additional Requirements on
Broker-Dealer Sales of Securities. The Company's Common Stock is not presently
included for trading on the Nasdaq system, and there can be no assurances that
the Company will ultimately qualify for inclusion within that system. In order
for an issuer to be included in the Nasdaq system, it is required to have total
assets of at least $4,000,000, capital and surplus of at least $2,000,000, a
minimum price per share of not less than $3.00, have publicly-held shares with a
market value of at least $1,000,000 as well as certain other criteria. In
addition to quantitative standards the staff of Nasdaq may also consider other
factors including but not limited to the nature and scope of a company's
operations in conjunction with any and all conditions and/or circumstances
surrounding an entity's operations. The Company's initial application for
inclusion in the Nasdaq system was denied. While the Company met the
quantitative criteria described above for inclusion on the Nasdaq system, the
Company's application for listing on the Nasdaq Small Capital Market was denied
based upon the staff's concerns relating to the nature of the Company's assets
and its Bridge Financing. The Staff considered the offered financing costs and
the investment in the Bev-Tyme Preferred Stock to be restricted in nature and
not contributing to the future operations of the Company. The Company has
appealed from that decision. No assurance can be given that the Common Stock of
the Company will ever qualify for inclusion on the Nasdaq system and
qualification for inclusion is not a prerequisite to proceeding with the
Offering. Until the Company's shares qualify for inclusion in the Nasdaq system,
the Company's securities will be traded in the over-the-counter markets through
the 'pink sheets' or on the OTC Bulletin Board. The Securities and Exchange
Commission has adopted regulations which generally define 'penny stock' to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price less than $5.00 per share, subject to certain
exceptions. During such periods when the Company's Common Stock does not qualify
for inclusion on the Nasdaq Small-Cap Market, the Common Stock may become
subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to
14
<PAGE>
persons other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse). For transactions covered by the rule, the broker-dealer must
make a special suitability determination for the purchaser and receive the
purchaser's written agreement to the transaction prior to the sale.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a disclosure schedule
prepared by the Securities and Exchange Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. In addition, certain broker-dealers are
precluded from acting as market makers for non NASDAQ securities and these
securities may be ineligible for margin loans. Consequently, the rule may affect
the ability of broker-dealers to sell the Company's securities and may also
affect the ability of shareholders to sell the securities in the secondary
market.
29. Current Prospectus and State Blue Sky Registration in Connection with
Sale of Shares. The Company will be able to issue the securities offered hereby
and shares of its Common Stock upon the exercise of the Representative's Share
Purchase Option only if (i) there is a current prospectus relating to the Common
Stock issuable upon the exercise of the Share Purchase Option under an effective
registration statement filed with the Securities and Exchange Commission, and
(ii) such Common Stock is then qualified for sale or exempt therefrom under
applicable state securities laws of the jurisdictions in which the various
holders of the Share Purchase Option reside. There can be no assurance, however,
that the Company will be successful in maintaining a current registration
statement. After a registration statement becomes effective, it may require
updating by the filing of a post-effective amendment. A post-effective amendment
is required (i) anytime after nine (9) months subsequent to the Effective Date
when any information contained in the prospectus is over sixteen (16) months
old, (ii) when facts or events have occurred which represent a fundamental
change in the information contained in the registration statement, or (iii) when
any material change occurs in the information relating to the plan or
distribution of the securities registered by such registration statement. The
Company anticipates that this Registration Statement will remain effective for
at least nine (9) months following the date of this Prospectus or until
, 1996, assuming a post-effective amendment is not filed by the
Company. The Company intends to qualify the sale of shares in a limited number
of states. The Company anticipates that the securities offered hereby will be
qualified for sale by the Company, as of the effective date, in the states of
New York, Colorado, Connecticut, Delaware, District of Columbia, Florida,
Georgia, Hawaii, Illinois, Louisiana, Maryland, Rhode Island and Utah. See
'Description of Securities.'
30. Representative's Share Purchase Option. In connection with this
Offering, the Company will sell to the Representative, for nominal
consideration, an option to purchase an aggregate of 58,333 shares (the
'Representative's
Share Purchase Option'). The Representative's Share Purchase Option will
be exercisable commencing one year from the Effective Date of this Offering
and ending four (4) years from such date, at an exercise price of $7.20 per
Representative's Share (the 'Representative's Shares'). The holders of the
Representative's Share Purchase Option will have the opportunity to profit from
a rise in the market price of the Common Stock, if any, without assuming the
risk of ownership. The Company may find it more difficult to raise additional
equity capital if it should be needed for the business of the Company while the
Representative's Share Purchase Option is outstanding. At any time when the
holders thereof might be expected to exercise them, the Company would probably
be able to obtain additional capital on terms more favorable than those provided
by the Representative's Share Purchase Option. See 'Dilution' and
'Underwriting.'
31. Possible Adverse Effects of Ownership of Preferred Stock by Bev-Tyme.
The Company's Certificate of Incorporation, as amended, authorizes the issuance
of a maximum of 10,000,000 shares of Preferred Stock on terms that may be fixed
by the Company's Board of Directors without further stockholder action. 500,000
shares of Class A Preferred Stock and 7,000,000 shares of Class B Preferred
Stock have been issued by the Company to Bev-Tyme. Pursuant to the Certificate
of Designation, each share of preferred stock possesses one vote on all matters
upon which common shareholders are entitled to vote. Although the Preferred
Stock does not possess any dividend rights, ownership of the Preferred Stock
will continue to afford Bev-Tyme voting control over the affairs of the Company
since Bev-Tyme will hold a majority of all outstanding voting shares of the
Company.
15
<PAGE>
Any transfer of the Preferred Stock by Bev-Tyme could result in a change of
control of the Company. See 'Description of Securities--Preferred Stock.'
32. 'Penny Stock' Regulations May Impose Certain Restrictions on
Marketability of Securities. The Securities and Exchange Commission (the
'Commission') has adopted regulations which generally define 'penny stock' to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Since the securities offered hereby will be offered at a market
price of $6.00 per share, such securities will initially be exempt from the
definition of 'penny stock.' If the securities offered hereby become offered at
a market price of less than $5.00 per share, and do not qualify for another
exemption from the Penny Stock regulations, the Company's securities may become
subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the Commission relating to the penny stock
market. The broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the 'penny stock' rules may
restrict the ability of broker-dealers to sell the Company's securities and may
affect the ability of purchasers in this Offering to sell the Company's
securities in the secondary market and the price at which such purchasers can
sell any such securities.
33. Dilution; Equity Securities Sold Previously at Below Offering Price;
Bridge Loans. Upon completion of this Offering, without giving effect to the
exercise of the Representative's Share Purchase Option, the net tangible book
value per share of the Company's Common Stock will be $1.54. At the initial
public offering price of $6.00 per share, investors in this Offering will
experience an immediate dilution of approximately $4.46 or 74% in net tangible
book value per share and existing investors will experience an increase of
approximately $.66 per share. The present stockholders of the Company have
acquired their respective equity interest at costs substantially below the
public offering price. Accordingly, to the extent that the Company incurs
losses, the public investors will bear a disproportionate risk of such losses.
In March, 1996, the Company borrowed an aggregate of $150,000 from seven (7)
unaffiliated lenders (the 'Bridge Lenders'). In exchange for making loans to the
Company, each Bridge Lender received a promissory note (the 'Bridge Note'). Each
of the Bridge Notes bears interest at the rate of eight percent (8%) per annum.
The Bridge Notes are due and payable upon the earlier of (i) July 31, 1996 or
(ii) the closing of an initial underwritten public offering of the Company's
securities. The Company intends to use a portion of the proceeds of this
Offering to repay the Bridge Lenders. See 'Use of Proceeds.' The Company entered
into the bridge financing transactions because it required additional financing
and no other sources of financing were available to the Company at that time.
See 'Bridge Financing' and 'Underwriting.'
34. No Dividends. The Company has never paid any dividends on its Common
Stock since its inception and does not intend to pay dividends on its Common
Stock in the foreseeable future. Any earnings which the Company may realize in
the foreseeable future will be retained to finance the growth of the Company.
See 'Dividend Policy.'
35. Federal Income Tax Consequences. The Company has obtained no ruling
from the Internal Revenue Service and no opinion of counsel with respect to the
federal income tax consequences of this offering. Consequently, investors must
evaluate for themselves the income tax implications which attach to their
purchase and subsequent sale of the securities offered hereunder.
16
<PAGE>
36. Conflicts of Interest. After this Offering, Bev-Tyme will continue to
own 100% of the outstanding Preferred Stock. In addition, at present, Bev-Tyme
distributes the Company's products. It is anticipated that Bev-Tyme will
continue to distribute a significant percentage of the Company's products, at or
near present levels as well as provide administrative and support services, and
that the Company will continue to operate its executive offices and distribution
at facilities leased and managed by Bev-Tyme. In addition, Bev-Tyme's director
and President, Robert Sipper, is a member of the Company's Board of Directors
and Chief Executive Officer of the Company. Because of Bev-Tyme's ownership
interest in the Company, the identity of certain management and Bev-Tyme's role
as a significant distributor for the Company, certain conflicts of interest may
occur between the Company and Bev-Tyme. In such instances, members of the Board
of Directors who are also members of the Bev-Tyme Board of Directors, or the
entire Bev-Tyme Board of Directors, may be precluded from participating in
corporate decisions. Although the Board of Directors of the Company has not
adopted any written policy on this matter, the Delaware Corporation Law contains
specific provisions governing such conflicts.
37. Anti-Takeover Effect of General Corporation Law of Delaware. The
Company is governed by the provisions of Section 203 of the General Corporation
Law of Delaware, an anti-takeover law enacted in 1988. As a result of Section
203, potential acquirors of the company may be discouraged from attempting to
effect acquisition transactions with the Company, thereby possibly depriving
holders of the Company's securities of certain opportunities to sell or
otherwise dispose of such securities at above-market prices pursuant to such
transactions. See 'Description of Securities.'
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 583,335 shares offered
hereby, are estimated to be $2,548,009 (after deducting approximately $350,000
in underwriting discounts, other expenses of this Offering estimated to be
$602,000, which includes the Representative's non-accountable expense
allowance of $105,000 and a $72,000 financial consulting fee payable to the
Representative at the closing) (but not considering any exercise of the
Over-Allotment Option, or the Representative's share Purchase Option). The
Company, based upon all currently available information, intends to utilize
such proceeds approximately as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
AMOUNT PERCENTAGE(%)
OF NET OF NET
PROCEEDS PROCEEDS
----------- -------------
<S> <C> <C>
Construction of Brewpub(1)................................................ $1,000,000 39.2%
Marketing and Advertising(2).............................................. 613,000 24.1%
Repayment of Certain Indebtedness(3)...................................... 250,000 9.8%
Working Capital(4)........................................................ 685,009 26.9%
----------- -----
Total..................................................................... $2,548,009 100%
----------- -----
----------- -----
</TABLE>
- ------------------
(1) The Company will lease and build-out suitable space in the New York
metropolitan area to be developed and operated as a brewpub/restaurant and
microbrewery.
(2) New marketing and advertising materials and a marketing campaign will be
created to promote the Company's products.
(3) Represents the repayment of Bridge Loans in the aggregate principal amount
of $150,000 and the payment of the promissory note in the principal amount
of $100,000 to Riverosa. The Bridge Loans were made by seven
(Footnotes continued on next page)
17
<PAGE>
(Footnotes continued from previous page)
(7) unaffiliated parties. The Bridge Loans are due and payable upon the
earlier of July 31, 1996 or the closing of the Company's initial public
offering and bear interest at the rate of 8% per annum. The proceeds of the
Bridge Loans were used for working capital and as a source of funds to pay
expenses associated with this Offering. See 'Bridge Financing.' See 'Certain
Transactions.'
(4) To be used for general operating and overhead expenses and the funding of
inventory.
THE COMPANY IS UNABLE TO FURTHER ITEMIZE THE USE OF PROCEEDS AT THIS TIME
SINCE THE ALLOCATION OF EXPENSES TO CONSTRUCTION OF THE BREWPUB WILL DEPEND
PRINCIPALLY ON THE LOCATION OF THE FACILITY, THE SQUARE FOOTAGE OF THE LEASED
PREMISES, THE ALLOCATION OF SPACE BETWEEN THE RESTAURANT AND BREWERY, THE NATURE
OF THE RESTAURANT FACILITY AND THE SPACE ALLOCATED TO THE BREWERY. SIMILARLY,
THE COMPANY HAS NOT AT THIS TIME SPECIFIED THE ADVERTISING AND MARKETING
RESOURCES THAT WILL BE UTILIZED.
The amounts set forth above are estimates. Should a reapportionment or
redirection of funds be determined to be in the best interests of the Company,
the actual amount expended to finance any category of expenses may be increased
or decreased by the Company's Board of Directors, at its discretion. Although
the Company does not intend to utilize any portion of the proceeds for payment
of officers' salaries, it is possible that portions of working capital may be
utilized for that purpose dependent upon revenues.
The Company believes that the proceeds of this Offering will enable the
Company to increase its annual revenues through the expansion of its business
and development of product lines. As a result, the Company believes that the net
proceeds of this Offering, together with increased revenues generated from
operations, will be sufficient to conduct the Company's operations for at least
twelve (12) months. The terms of the underwriting agreement between the Company
and the Representative restrict the Company from entering into any acquisition
or merger of the Company or obtaining additional capital financing without the
prior approval of the Representative, for the issuance of additional equity
securities for a period of one (1) year, in either public or private offerings,
which approval may not be unreasonably withheld. The underwriting agreement does
not prevent the Company from seeking bank financing, although there can be no
assurance that such financing will be available on commercially reasonable
terms. See 'Risk Factors--Dependence on Offering Proceeds; Possible Need for
Additional Financing.'
To the extent that the Company's expenditures are less than projected the
resulting balances will be retained and used for general working capital
purposes. Conversely, to the extent that such expenditures require the
utilization of funds in excess of the amounts anticipated, additional financing
may be sought from other sources, such as debt financing from financial
institutions, although there can be no assurance that such additional financing,
if available, will be on terms acceptable to the Company. See 'Risk
Factors--Dependence on Offering Proceeds; Possible Need For Additional
Financing.' The net proceeds of this Offering that are not expended immediately
may be deposited in interest-bearing accounts or invested in government
obligations or certificates of deposit.
18
<PAGE>
DILUTION
At March 31, 1996, the Company had outstanding an aggregate of 2,500,000
shares of Common Stock having an aggregate net tangible book value of $2,200,000
or $.88 per share, giving effect to the issuance of 7,500,000 Preferred Shares
for $2,150,000. Net tangible book value per share consists of total assets less
intangible assets and liabilities, divided by the total number of shares of
Common Stock outstanding. The shares of capital stock described above do not
include any securities subject to any outstanding warrants or options.
After giving effect to the sale of 583,335 shares of Common Stock by the
Company with net proceeds of $2,548,009, the pro forma net tangible book value
of the Common Stock would have been $4,748,009 or approximately $1.54 per share.
This represents an immediate increase in pro forma net tangible book value of
$.66 per share to the present stockholders and an immediate dilution of $4.46
per share (74%) to the public purchasers. The following table illustrates the
dilution which investors participating in this Offering will incur and the
benefit to current stockholders as a result of this Offering:
<TABLE>
<S> <C> <C>
Public offering price of Shares of Common Stock
offered hereby(1).......................................................... $6.00
Net tangible value per share............................................... $ .88
Increase per share attributable to Shares offered hereby................... $ .66
Pro Forma net tangible book value per share after Offering................. $1.54
Dilution of net tangible book value per share to purchasers
in this Offering(2)..................................................... $4.46
</TABLE>
- ------------------
(1) Before deduction of underwriting discounts, commissions, fees and Offering
expenses.
(2) Assuming no exercise of the Representative's Share Purchase Option.
See 'Underwriting' and 'Description of Securities.'
The following table shows the number and percentage of shares of Common
Stock purchased and acquired, and the amount and percentage of consideration and
average price per share paid, by existing stockholders as of March 31, 1996 and
to be paid by purchasers pursuant to this Offering (based upon the anticipated
public offering price of $6.00 per Share before deducting underwriting discounts
and commissions and estimated Offering expenses).
<TABLE>
<CAPTION>
SHARES OF AGGREGATE
COMMON PERCENT CASH PERCENT OF AVERAGE
STOCK OF EQUITY CONSIDERATION TOTAL CASH PRICE PER
PURCHASED OWNED PAID CONSIDERATION SHARE
--------- --------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
New Stockholders....................... 583,335 19% $ 3,500,010 99% $6.00
Existing Stockholders.................. 2,500,000 81% $ 50,000 1% .02
--------- --- ------------- --- ---------
Total.................................. 3,083,335 100% $ 3,550,010 100% $1.15
--------- --- ------------- --- ---------
--------- --- ------------- --- ---------
</TABLE>
The foregoing table gives effect to the sale of the Common Stock offered
hereby but without giving effect to the exercise of the Representative's Share
Purchase Option, or any securities issuable upon the exercise of any outstanding
options.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996 and as adjusted gives effect to the sale of 583,335 shares of
Common Stock offered hereby and the application of net proceeds therefrom. The
table is not adjusted to give effect to the exercise of the Representative's
Share Purchase Option or any other outstanding options. This table should be
read in conjunction with the Financial Statements of the Company, including
the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTED(1)
---------- -----------
<S> <C> <C>
Bridge and Notes Payable.............................................................. $ 250,000 $ --
---------- -----------
Stockholders' Equity:
Common Stock, $.0001 par value per share,
25,000,000 shares authorized, 2,500,000 issued and outstanding
and (3,083,335 shares outstanding as adjusted)................................... 250 308
Additional paid in capital common................................................... 49,750 2,597,701
Preferred Stock, $.0001 par value per share, 15,000,000 shares authorized, 7,500,000
issued and outstanding(2)........................................................ 7,500 7,500
Additional paid-in capital preferred(2)............................................. 2,142,500 2,142,500
Retained Earnings................................................................... -- (--)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY............................................................ 2,200,000 4,748,009
---------- -----------
TOTAL CAPITALIZATION.................................................................. $2,450,000 $ 4,748,009
---------- -----------
---------- -----------
</TABLE>
- ------------------
(1) As Adjusted balance sheet reflects the sale of 583,335 shares of Common
Stock offered hereby and the anticipated application of the net proceeds of
$2,548,009 therefrom, after deducting estimated Offering expenses of
$602,000 and the repayment of the Riverosa acquisition note of $100,000 and
the bridge notes of $150,000 payable with the proceeds of the Offering.
(2) The Bev-Tyme preferred stock was received as partial consideration for
Bev-Tyme's acquisition of an equity interest in the Company. The Company
valued the 400,000 shares of Series C Preferred Stock of Bev-Tyme, Inc. at
its fair value of $2,000,000 or $5.00 per share, which was based upon market
value. The 500,000 shares of convertible Class A preferred stock and the
7,000,000 shares of non-convertible Class B preferred stock issued by the
Company was based upon this valuation of $2,000,000 utilized for the
preferred stock received from Bev-Tyme, Inc.
20
<PAGE>
DIVIDEND POLICY
Holders of the Company's Preferred Stock or Common Stock are entitled to
dividends when, as and if declared by the Board of Directors out of funds
legally available therefore. The Company has not in the past and does not
currently anticipate the declaration or payment of any dividends in the
foreseeable future. The Company intends to retain earnings, if any, to finance
the development and expansion of its business. Future dividend policy will be
subject to the discretion of the Board of Directors and will be contingent upon
future earnings, if any, the Company's financial condition, capital
requirements, general business conditions and other factors, such as general
economic conditions. Therefore, there can be no assurance that any dividends of
any kind will ever be paid.
BRIDGE FINANCING
In March 1996, the Company borrowed an aggregate of $150,000 from seven (7)
unaffiliated lenders (the 'Bridge Lenders'); Ulster Investments, Ltd.; First
National Fund Corp., Michael Yordy, Harold Yordy, Dune Holdings, Inc., MD
Funding, Inc. and John Pasquale. In exchange for making loans to the Company,
each Bridge Lender received a promissory note (the 'Bridge Notes') in the amount
of the loan. Each of the Bridge Notes bears interest at the rate of eight
percent (8%) per annum. The Bridge Notes are due and payable upon the earlier of
(i) July 31, 1996 or (ii) the closing of an initial underwritten public offering
of the Company's securities. The Company intends to use a portion of the
proceeds of this Offering to repay the Bridge Lenders. See 'Use of Proceeds.' In
addition, the Bridge Lenders were granted the right to receive an aggregate of
3,000,000 Class A Warrants. The Bridge Lenders subsequently waived the right to
receive the Class A Warrants. The Company entered into the bridge financing
transactions because it required additional financing and no other sources of
financing were available to the Company at that time. There are no arrangements,
agreements or undertakings between Bridge Lenders and management under which the
Bridge Lenders may directly or indirectly participate in or influence the
management of the Company's affairs. See 'Certain Transactions' and
'Underwriting.'
21
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected historical balance sheet data presented below are derived from
financial statements of the Company, which have been audited by Moore Stephens,
P.C. independent accountants, whose reports are included elsewhere herein. There
have been no revenue or expense activities through March 31, 1996. The data set
forth below should be read in conjunction with, and is qualified in its entirety
by, the Company's financial statements, related notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations. See
'Financial Statements' and 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.' The following summary balance sheet data
has been summarized from the Company's financial statements included elsewhere
in this Prospectus. The information should be read in conjunction with the
financial statements and the related notes thereto. See 'Financial Statements.'
SUMMARY BALANCE SHEET DATA
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------
HISTORICAL(1)(2)(3) PRO FORMA(4)
------------------- ------------
<S> <C> <C>
Working Capital (Deficit)..................................... $ (50,000) 2,498,009
Total Assets.................................................. $ 2,450,000 4,748,009
Total Liabilities............................................. $ 250,000 --
Retained Earnings............................................. -- (1,500,000)
Stockholders' Equity.......................................... $ 2,200,000 4,748,009
</TABLE>
- ------------------
(1) Does not include the sale of 583,335 shares of Common Stock offered hereby.
(2) Gives effect to issuance of 7,500,000 shares of Series B Preferred Stock
(including 500,000 shares of Series A Preferred Stock and 7,000,000 shares
of Series B Preferred Stock) to Bev Tyme, Inc. ('Bev Tyme') in exchange for
400,000 shares of Preferred Stock of Bev Tyme.
(3) Gives effect to the bridge loan of $150,000 in March 1996.
(4) Reflects approximate net proceeds of the 583,335 shares offered hereby of
$2,548,009 at the assumed initial public offering price of $6.00 per Share
and the repayment of indebtedness totaling $250,000.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Perry's Majestic Beer, Inc. [the 'Company' or 'Perry's'] was formed in
December of 1995. There have been no operations prior to the formation of
Perry's for the period December 1995 to March 1996 nor any revenue or expense
activities for Perry's through March 31, 1996. The primary activities for
Perry's prior to the acquisition of Riverosa Company, Inc. ['Riverosa'] have
been investing and financing activities [See 'Liquidity and Capital Resources'].
In March of 1996, the Company entered into an agreement to acquire Riverosa,
which was formed in November of 1993. Riverosa is engaged in the manufacture and
distribution of microbrewed beers and ales. Management of Riverosa consisted of
Mark Butler and Ron Zagha. Mark Butler is the Vice President of the Company and
Robert J. Sipper is the President of the Company and will be responsible for the
management functions of the Company.
Bev Tyme, who is the Company's controlling shareholder and parent, through
its wholly owned subsidiary, shall be the distributor of Perry's Majestic Beer,
in New York City. Besides Robert J. Sipper, who is the President and Chief
Executive Officer of Bev Tyme, Inc. and the Company, and Robert Forst, the Chief
Financial Officer of Bev Tyme, it is not anticipated that any other employees of
Bev Tyme or its subsidiaries will be involved with the Company's operations. It
is anticipated that the two companies will be run independently of each other.
The Board of Directors of Perry's consist of three people, two of whom have
no interest (not an employee, officer or director) in Bev Tyme. Accordingly all
potential conflicts of interest shall be decided by an impartial Board.
PERRY'S MAJESTIC BEER, INC.
Perry's had a working capital deficit at March 31, 1996 of $50,000. Perry's
had no operations prior to the formation of Perry's for the period December 1995
to March 1996 nor any revenue or expense activities for Perry's through March
31, 1996. Therefore, no cash was generated or utilized for operating activities.
The Company utilized $150,000 in investing activities for the acquisition of
Riverosa as of March 31, 1996 and will expend another $100,000 in the next few
months for the balance owed on the note resulting from the acquisition. The
Company generated $210,000 in cash from financing activities for the period
ended March 31, 1996 resulting from the sale of preferred stock to Bev-Tyme,
Inc. with cash proceeds of $75,000 [balance of $75,000 received in April of
1996], the sale of common stock with cash proceeds of $45,200 [balance of $4,800
received in April of 1996] and proceeds from bridge loans of $90,000 [the
balance of $60,000 received in April of 1996]. The $150,000 bridge loans from
the seven unaffiliated lenders have an interest rate of 8% per annum. These
loans are to be repaid the earlier of July 31, 1996 or the close of the proposed
public offering. The cash balance at March 31, 1996 was $60,200.
The Company anticipates that the net proceeds from the proposed public
offering will generate approximately $2,548,009. The Company anticipates that
along with cash generated from Riverosa's operating activities, the net proceeds
from the proposed public offering will be sufficient to satisfy its cash
requirements for the next twelve [12] months and enable it to market and
advertise its products, expand the market as well as to develop a
brewpub/restaurant and microbrewery in the New York metropolitan area [See 'Use
of Proceeds'].
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PERRY'S MAJESTIC BEER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RIVEROSA COMPANY, INC.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1995
Riverosa had a net [loss] of $(7,351) for the three months ended March 31,
1996 as compared to net income of $138 for the three months ended March 31,
1995. This is primarily the result of an increase in selling, general and
administrative expenses.
Riverosa's sales increased for the three months ended March 31, 1996 to
$24,136 as compared to sales of $19,430 for the three months ended March 31,
1995. This increase of $4,706, or 24%, represents the effect of the Company's
1995 efforts to expand its distribution base.
Riverosa's gross profit as an overall percentage of sales, however,
decreased for the three months ended March 31, 1996 to $4,746 or 20% from
$4,484 or 23% for the three months ended March 31, 1995. This is primarily
attributable to the increase in the pricing of the cost of ingredients to
manufacture the products and not being able to buy the ingredients at bulk
prices.
Selling, general and administrative expenses for the three months ended
March 31, 1996 and 1995 were $11,347 and $2,535, respectively. This represents
an increase of approximately $9,000 which is primarily attributable to the sales
incentive contest, beer festivals and trade shows, and the design incentive
programs incurred in 1996 in an attempt to increase sales.
The operating ratios of Riverosa may not be indicative of results in the
future. The Company intends to engage in various activities such as public
relations, advertising, aggressive promotions and the hiring of account managers
which Riverosa did not have. All of these activities may favorably affect the
gross profit percentage and general and administrative percentages.
FOR THE THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1995
Interest expense on the officers' loan payable decreased from $2,320 to
$750 for the three months ended March 31, 1996 compared to the three months
ended March 31, 1995 as a result of the pay down of the officers loans by
approximately $72,000 in 1995. No payments have been made in 1996 on these loans
with a balance of $29,634.
FOR THE YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31,
1994
Riverosa had a net [loss] of $(4,724) for the year ended December 31, 1995
as compared to a net income of $14,861 for the year ended December 31, 1994.
This is primarily the result of a decrease in sales and gross profit in 1995.
The sales for Riverosa Company, Inc. for the years ended December 31, 1995
and 1994 were $81,185 and $195,095, respectively, a decrease of approximately
$114,000 or 58% in 1995. During 1993 and the early part of 1994, Riverosa had an
intensive marketing campaign to enter the marketplace for acceptance of its
products. Despite such efforts, sales decreased in 1994 and again in 1995
because the marketing efforts had not yet achieved the hoped for results within
that time period. The Company does not anticipate this trend in decreasing sales
to continue because it believes its marketing efforts have now enabled the
Company's product to achieve greater recognition and acceptance, and its
customers base is increasing in 1996. The Company intends to introduce at least
one new style beer within the next twelve months and explore changing the label
of the bottle. Emphasis will be placed on building businesses in bars and
restaurants as well as retail and supermarket outlets. The Company will attempt
to increase its distribution base by adding new distributors and design
incentive and price promotion programs.
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Riverosa experienced a decline in the gross profit from 31% to 25% for 1995
from 1994. The reason for this decrease of 6% in gross profit is primarily the
result of an increase in the costs of the ingredients to manufacture the
products and the Company's inability to purchase ingredients at bulk prices. The
Company believes it will not be able to improve its gross profit until
sufficient working capital is available. When the company has improved working
capital it will be in a position to purchase products more competitively, with
cheaper pricing and therefore take advantage of payment discounts, and this
should improve its gross profit.
Riverosa's selling, general and administrative expenses for the years ended
December 31, 1995 and 1994 were approximately $17,500 and $31,400, respectively,
a decrease of approximately $14,000 or 44%. The reason for the decrease in these
expenses was that 1994 included start up costs of approximately $12,000 for the
marketing and distributing campaign of its products which were not repeated in
1995. The Company plans on hiring an advertising public relations firm in 1996
to build upon the uniqueness of an organic beer.
Riverosa's interest expense for the years ended December 31, 1995 and 1994
were approximately $8,500 and $10,200, respectively. The decrease of $1,700 in
interest expense was attributable to the repayment of officers loans during the
year ended December 31, 1995 of approximately $72,000.
LIQUIDITY AND CAPITAL RESOURCES
FOR THE THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1995
At March 31, 1996, Riverosa had working capital of approximately $3,000.
This represents a decrease of approximately $7,000 in working capital from
December of 1995. This is primarily attributable to the net loss of $7,351 and
cash of $5,213 used for operations for the three months ended March 31, 1996.
Riverosa's cash balance at March 31, 1996 was approximately $44,000.
At March 31, 1995, Riverosa had cash of approximately $52,000 after
generating approximately $10,000 from operations and utilizing $15,500 in
repayment of officers loans.
It is anticipated that the Registrant will not rely upon Bev Tyme as a
capital source nor will Bev Tyme rely on the Company as a capital source.
FOR THE YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31,
1994
The Riverosa Company, Inc. at December 31, 1995 had working capital of
approximately $15,000. During the years ended December 31, 1995 and 1994, the
Company generated cash of approximately $52,000 and $29,000, respectively, from
operations. During the year ended December 31, 1995, the Company repaid
officers' loans of approximately $72,000. The two officers of Riverosa, Ronald
Zagha and Marc Butler, each contributed in 1993 approximately $51,000 to be
utilized for working capital purposes. These monies were evidenced by notes with
interest of 10% per annum. The balance of these notes at December 31, 1995 and
March 31, 1996 were $29,634. At December 31, 1995, Riverosa's cash balance was
$38,782.
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BUSINESS
GENERAL
Perry's Majestic Beer, Inc., a Delaware corporation (the 'Company'), was
formed in December, 1995. On March 29, 1996, the Company entered into an
agreement to acquire Riverosa Company, Inc. ('Riverosa'), a New York
corporation, which was formed in November 1993. (References to the Company
includes the operations of Riverosa). See 'Certain Transactions.' The Company is
engaged in the marketing and sale of microbrewed beers and ales. Since June
1993, the Company has sold and marketed its flagship brand, Perry's Majestic
Beer ('Perry's'), which is distinguished by its use of organically grown barley
and hops. The Company's business strategy is to establish presence in the
craft-brewed beer market by creating and offering high quality full-flavored all
organic beers and other beers and/or ales. Presently, the Company's products are
produced under contract with Hoboken Brewing Company, a brewery located in
Hoboken, New Jersey, which produces, bottles and labels Perry's using the
Company's name and logo. The Company's products are distributed in the New York
metropolitan area under an exclusive distribution agreement with Mootch & Muck,
Inc. ('Mootch & Muck'), a subsidiary of the Company's parent company, Bev-Tyme,
Inc. ('Bev-Tyme'), a distributor of various beverages, beers and related
products. Perry's is presently distributed to retailers in ten stores and sold
in restaurants, supermarkets, beer and soda sales and retail outlets.
Perry's Majestic Beer is brewed with organically grown barley imported from
Canada and organically grown hops imported from Germany. It is a Vienna style
lager beer whose characteristics showcase the quality aspects of superior barley
flavor, distinguished by deep copper color and a big malt palette. In keeping
with its organic character, Perry's utilizes a 10-12 week brewing process that
introduces no herbicides, chemical pesticides or inorganic fertilizers in the
growing of the barley or hops. No additives, artificial ingredients or
preservatives are added during the brewing or bottling stages.
The Company anticipates that it will utilize proceeds from this offering to
expand the market for Perry's, develop new beers and ales and to establish and
operate a brewpub/ restaurant and microbrewery in the New York metropolitan
area.
INDUSTRY OVERVIEW
According to the Institute for Brewery Studies ('IBS'), total beer
consumption in the United States in 1994 was approximately 6.2 billion gallons.
The production and sale of beer in the United States is dominated by major
domestic breweries, such as Adolph Coors Co., Anheuser-Busch, Inc. and Miller
Brewing Co. The major domestic breweries accounted for approximately 94% of the
beer consumed in the United States in 1994, imported beer accounted for
approximately 5% of consumption with domestic craft breweries (including
regional specialty breweries, contract brewing companies, microbreweries and
brewpubs) accounting for approximately 1%.
The Company participates in the specialty beer segment of the $50 billion
domestic beer market. Specialty beers are generally brewed according to
traditional German or English recipes and tend to be more full-bodied and more
bitter or tart in taste than mass-produced domestic beers. As a result, these
amber lagers and ales, stouts, porters, bocks, German recipe wheat beers and
seasonal brews tend to be more flavorful and fresher tasting. The domestic
specialty beer segment grew at a compound annual rate of approximately 37% in
the five years ended December 31, 1994, while volume in the overall domestic
beer market has remained relatively flat. The Company believes that this growth
in the specialty beer segment has resulted from several factors. Specialty beer
'made in small batches' from 'all natural ingredients' is better than mass
produced domestic and imported products, particularly powerful in light of the
trend among large brewers to minimize costs through the use of lower cost
adjuncts. The increased consumer demand for specialty beers allows for a price
premium relative to mass produced beers. This price premium results in high
profit margins throughout the distribution channel motivating distributors and
retailers to carry and promote products of the specialty beer segments.
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THE MICROBREWERY INDUSTRY
The revival of small local breweries, commonly known as microbreweries,
began in the late 1970s and early 1980s. Several national trends have combined
to create favorable conditions permitting the microbrewery industry to emerge
and grow. First, domestic breweries consolidated into the remaining industrial
breweries which resulted in a narrowing of the types of domestically-produced
beer available to consumers. This trend has benefited the microbrewery industry
which produces many different types of beer representing an expansion of beer
choices. Second, consumers have placed increasing emphasis on health and
nutrition as a principal element of contemporary lifestyle and have become more
focused on the health concerns and abuse relating to the consumption of alcohol.
As a result, consumers are reducing their level of consumption of alcoholic
beverages but are increasing the quality of alcoholic beverages they consume.
Due in part to its growth, the microbrewing industry has undergone
significant change and is now more accurately referred to as the 'craft beer'
industry. The craft beer industry has been broken into four industry
subgroups--regional specialty breweries, contract brewing companies,
microbreweries and brewpubs. Together there four subgroups comprise what was
previously described as the microbrewing industry. The IBS defines each of these
subgroups as follows:
Regional Specialty Brewery. A brewery which produces between 15,000 and
1,000,000 barrels of beer per year.
Contract Brewing Company. A business that does not brew its own beer, but
markets and sells beer brewed to its specifications by an existing brewery.
Microbrewery. A brewery that produces less than 15,000 barrels of
hand-crafted beer per year principally for distribution to restaurants, taverns
and retail stores, and in some cases for direct sale to consumers for on-site
consumption or take-out in small containers.
Brewpub. A restaurant/brewery that sells at least 50% of its beer
production to consumers for on-site consumption or take-out in small containers.
The microbrewing industry is currently experiencing growth. According to
the IBS, the amount of beer produced by microbreweries in the United States in
1994 grew by 50% from the amount produced in 1993 for a total of 2.5 million
barrel sales. Microbrewed beers' share of the total United States beer market
increased from approximately 0.9% in 1993 to approximately 1.3% in 1994.
PRODUCT DIVERSITY AND QUALITY
The Company intends to continue to expand its product line with additional
beers designed to appeal to varying consumer preferences. The Company currently
markets its organically brewed Perry's Majestic Beer. The Company intends to
establish a selection of year-round and seasonal beers that will attract
consumers to specialty beers and allow them to explore new tastes. In this
regard, the Company intends to introduce an ale and/or non-alcoholic beer within
one year after the completion of this offering. In the future the Company may
also explore the development of non-organic beers. Perry's Majestic Beer is
brewed for the Company, under contract with a non-affiliated third party, using
organic ingredients, and uses no additives, adjuncts or preservatives in the
brewing process. Perry's Majestic Beer presently utilizes organic barley
imported from Canada and organic hops from Germany. The Organic Growers and
Buyers Association and Organic Crop Improvement Association regularly inspect
and certify growers, storage silos, transport companies, malting houses, and
breweries to assure purity of ingredients. Before farms are certified as organic
they must not have used any herbicides or pesticides for three years.
BREWPUB
The Company has initiated efforts to identify a suitable location for its
brewpub in the City of New York. The Company has been reviewing various sites
looking for a suitable location. The Company's efforts are focused at present in
Manhattan, although no specific location has yet been identified. The Company
believes that the site must be located in an area which attracts people seeking
nighttime entertainment. In addition, the Company will evaluate the lease terms
of the potential sites and the amount of construction costs which may be
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paid by the landlord. The size of that facility will depend in significant part
upon its location, the proposed lease terms and the nature of the restaurant
facility which it will include. Once a specific location is identified the
Company will be able to project the brewing capacity of that location as well as
itemized costs. The Company has not begun the design of its brewery facility and
has not entered into any contract or commitment in connection with its
construction. The Company anticipates that the brewpub will utilize up-to-date
brewery and packaging technology. The Company's cost estimate for acquiring and
equiping the brewpub is based upon a budget of $500,000 for brewing equipment,
$150,000 for restaurant equipment and $350,000 for construction. The Company
believes it will open the brewpub within twelve (12) months of the date of this
prospectus.
COMPETITION
The beer industry is highly competitive and the Company expects competition
in the craft beer segment of the industry to increase. The Company will compete
with large domestic and foreign industrial breweries, as well as microbreweries
and brewpubs that produce high quality ale and lager beers. All industrial
breweries and many microbreweries have significantly greater resources than the
Company.
Domestic beer production is dominated by large American industrial
breweries, such as Anheuser-Busch, Inc., Miller Brewing Company, Stroh Brewery
Co., G. Heilman Brewing Co., Pabst Brewing Co. and Adolph Coors Co. all of which
have greater financial, production, distribution and marketing resources than
the Company. The major domestic breweries accounted for approximately 94% of the
beer produced in the United States in 1994. The large domestic beer producers
generally offer a homogeneous selection of beers designed for mass appeal. These
beers, principally light-bodied lagers and pilsners, are brewed using low cost
mass production techniques, lower cost adjuncts, such as rice and corn, and
relatively less hops. In contrast to the substantial growth in the specialty
beer segment in recent years, over the last ten (10) years, overall growth in
the domestic beer market has been relatively low, with volume growing at an
annual rate of less than 1% since 1984. Adult per capita annual beer consumption
in the United States has declined from 36 gallons in 1978 to 32 gallons in 1994.
The Company believes that this low growth rate and reduced beer consumption can
be attributed to a variety of factors, including increased concern about health
consequences of consuming alcoholic beverages; safety consciousness and concerns
about drinking and driving; a trend toward a diet including lighter, lower
caloric beverages such as diet soft drinks, juices and sparkling water products;
the increased activity of anti-alcohol consumer protection groups; an increase
in the minimum drinking age from 18 to 21 years in all states; the general aging
of the population; and increased federal and state excise taxes. The growing
consumer trend towards moderation in alcohol consumption has benefitted
specialty beers by resulting in beer drinkers' selective consumption of one or
two better tasting beers per sitting.
In response to the recent significant growth in the craft-beer industry,
several domestic industrial breweries are currently producing products to
compete with microbrewery products, such as Anheuser-Busch Elk Mountain and Red
Wolf beers and Miller--Red Dog beer and Miller Reserve Amber Ale 100% Barley
Draft. The Company believes that consumers will be attracted to locally produced
craft beers more so than industrial beers 'dressed-up' to look like local
craft-beers, because 'imitation' craft-beers generally lack the freshness and a
distinctive taste of a craft-beer.
Within the microbrewing industry, the Company believes that its principal
competitors will be microbreweries located in the Northeast Region of the United
States, such as Boston Beer Company, the producer of Samuel Adams Beers, and
brewpubs that produce high quality products. According to the IBS, there are at
least seven (7) brewpubs in the New York, New Jersey, Connecticut Tri-State area
and approximately forty (40) microbreweries in the Northeast Region (including
fifteen (15) which commenced operations in 1994), all of which will be in
competition with the Company.
The terms craft brewer and micro-brewer are usually used interchangeably by
consumers and within the industry to mean a small, independent brewer whose
predominant product is brewed with only traditional brewing processes and
ingredients. Craft brewers include contract brewers, small regional brewers and
brewpubs. Craft beers are full-flavored beers brewed with quality hops, malted
barley, yeast and water without adjuncts such as rice, corn or stabilizers or
water dilution used to lighten beer for mass production and consumption. In
response to increased consumer demand for more flavorful beers, the number of
craft brewed beers has increased dramatically. Currently there are more than 500
craft brewers. In addition to the many independent brewers and
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contract brewers, the three major brewers (Anheuser-Busch, Incorporated, Miller
Brewing Co. and Coors Brewing Co.) have all entered this fast-growing market,
either through developing their own specialty beers or by acquiring or forming
partnerships with existing craft brewers.
The Company competes directly with regional craft brewers such as The
Boston Beer Company, Sierra Nevada Brewing Company, Redhook Ale Brewery,
Incorporated and Anchor Brewing Company, other contract brewers such as Pete's
Brewing Company, foreign brewers such as Heineken, Molson, Corona, Amstel and
Becks, and other regional craft brewers and brewpubs. The Company also expects
competition by niche beers produced by affiliates of certain major domestic
brewers such as Anheuser-Busch, Incorporated, Miller Brewing Co. and Coors
Brewing Co. See 'Risk Factors--Competition.'
GOVERNMENT REGULATION
The Company's business is highly regulated by federal, state and local laws
and regulations, federal and state laws and regulations govern licensing
requirements, trade and pricing practices, permitted and required labeling,
advertising, promotion and marketing practices, relationships with distributors
and related matters. For example, federal and state regulators require warning
labels and signage on the Company's products. The Company believes that is has
obtained all regulatory permits and licenses necessary to operate its business
in the states where the Company's products are currently being distributed.
Failure on the part of the Company to comply with federal, state or local
regulations could result in the loss or revocation or suspension of the
Company's licenses, permits or approvals and accordingly could have a material
adverse effect on the Company's business. Governmental entities also levy
various taxes, license fees and other similar charges and may require bonds to
ensure compliance with applicable laws and regulations. The Company must also
comply with numerous federal, state and local environmental protection laws. The
Company is operating within existing laws and regulations or is taking action
aimed at assuring compliance therewith. The Company does not expect compliance
with such laws and regulations to materially affect the Company's capital
expenditures, earnings or competitive position.
The federal government and each of the states levy excise taxes on
alcoholic beverages, including beer. The federal excise tax is currently $18.00
per barrel ($1.30 per case of 24-12 oz. containers) and the state excise taxes
range from $23.80 per barrel to $1.24 per barrel. Federal excise taxes are
typically included in the price charged to retailer by the distributors. All
excise taxes are ultimately passed on to the consumer. It is possible that in
the future the rate of excise taxation could be increased by both the federal
government and a number of state governments. Further increases in excise taxes
on beer, if enacted, could materially and adversely affect the Company's
financial condition and results of operations. There is a small brewers federal
excise tax credit that grants each brewing company with production under
2,000,000 barrels a year an $11.00 credit per barrel on its first 60,000 barrels
produced annually. The Company is currently able to take advantage of up to a
$660,000 annual credit pursuant to this exemption. Although the Company is not
aware if any plans by the federal government to reduce or eliminate this small
brewer's credit or by federal or state authorities to increase the excise tax
rate, and such change could have a material adverse effect on the Company.
Certain states, including California, Connecticut, Delaware, Iowa, Maine,
Massachusetts, Michigan, New York, Oregon and Vermont, and a small number of
local jurisdictions, have adopted restrictive beverage packaging laws and
regulations that require deposits on beverage containers. Congress and a number
of additional state or local jurisdictions may adopt a similar legislation in
the future, and in such event, the Company may be required to incur significant
expenditures in order to comply with such legislation. Changes to federal and
state excise taxes on beer production, federal and state environmental
regulations, including laws relating to packaging and waste discharge, or any
other federal and state laws or regulations which affect the Company's products
could materially adversely affect the Company's results of operations.
SALES, DISTRIBUTION AND MARKETING
The Company intends to distribute and sell its products directly to beer
distributors who will sell directly to retail establishments such as grocery
stores and convenience stores and to bars and restaurants. The Company also
intends to market its products through a brewpub/restaurant it intends to
construct.
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The Company has initiated efforts to identify a suitable location for its
brewpub in the City of New York. The Company's efforts are focused at present in
Manhattan, although no specific location has yet been identified. The size of
that facility will depend in significant part upon its location, the proposed
lease terms and the nature of the restaurant facility which it will include.
Once a specific location is identified the Company will be able to project the
brewing capacity of that location as well as itemized costs. The Company has not
begun the design of its brewery facility and has not entered into any contract
or commitment in connection with its construction. The Company anticipates that
the brewpub will utilize up-to-date brewery and packaging technology.
The Company distributes its products in the New York metropolitan area
through Mootch & Muck, a subsidiary of the Company's parent, Bev-Tyme, Inc. The
Company intends to enter into similar regional distribution arrangements
covering other areas of the United States. The Company has not entered into any
other written distribution arrangements and there can be no assurance that the
Company will be able to enter into distribution arrangements with other local
distributors on terms satisfactory to the Company or at all.
The Company's beers are presently distributed in 14 states: New York, New
Jersey, Massachusetts, Rhode Island, California, Arizona, Ohio, Michigan,
Florida, Georgia, North Carolina, Maryland, Virginia and Illinois.
The Company's marketing efforts will include advertising in regional and
national craft-beer publications, local media outlets (i.e. newspapers) and at
local craft-beer conventions and microbrew tasting events.
SUPPLIERS
The Company purchases its barley and hops from Briess Malting and Hop
Union. The Company has no written agreement with the suppliers.
CONTRACT BREWING
The Company believes that contract brewing gives it economic advantages
through lower capital and overhead costs per barrel and through lower
transportation costs than if it owned a single brewery to produce its beer.
Presently, the Company's products are produced under contract with Hoboken
Brewing Company, a brewery located in Hoboken, New Jersey, which produces,
bottles and labels Perry's using the Company's name and logo. The contract
provides for a term of one (1) year and for the brewing of the beer in
accordance with the Company's formula. The Company's formula remains the
exclusive property of the Company and is exclusive to the private label Perry's
Majestic Beer. The Company must place production orders not less than thirty
(30) days prior to delivery and production must be made in minimum lots of forty
(40) barrels. Although the Company's beer is presently brewed at Hoboken, there
can be no assurance that this brewery will continue to provide services to the
Company. The Company previously had a contract with Frankenmuth, another brewing
company which was terminated due to the destruction of the brewery in a tornado.
In the event the Company is unable to continue its relationship with Hoboken for
any reason, the Company would have to enter into a relationship with another
brewery which is able to produce organic beer to the Company's standards.
Although the Company believes that there are other such brewing facilities which
would be available, and the Company anticipates brewing a portion of its
products at its proposed brewpub facility, there can be no assurance that the
Company will be able to enter into such an agreement with another brewing
facility, or to do so on terms which are similarly favorable.
DISTRIBUTION
The Company distributes Perry's in ten (10) states in the United
States. The Company distributes its beer through a network of over ten (10)
distributors.
ALCOHOL BEVERAGE REGULATION AND TAXATION
The manufacture and sale of alcoholic beverages is a highly regulated and
taxed business. The Company's operations may be subject to more restrictive
regulations and increased taxation by federal, state and local governmental
entities than are those of non-alcohol related businesses. Federal, state and
local laws and regulations govern the production and distribution of beer. These
laws and regulations govern permitting, licensing, trade practices, labeling,
advertising, marketing, distributor relationships and related matters. Federal,
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state and local governmental entities also levy various taxes, license fees and
other similar charges and may require bonds to ensure compliance with applicable
laws and regulations. Failure by the Company to comply with applicable federal,
state or local laws and regulations could result in penalties, fees, suspension
or revocation of permits, licenses or approvals. There can be no assurances that
other or more restrictive laws or regulations will not be enacted in the future.
See 'Risk Factors--Government Regulation; Taxation.'
LICENSES AND PERMITS
The Company purchases beer from one or more contract brewers and sells it
to distributors or retailers pursuant to a federal wholesaler's basic permit
issued to Riverosa. The Company has made application to have that permit issued
in the name of the Company. Brewery and wholesale operations require various
federal, state and local licenses, permits and approvals. In addition, some
states prohibit wholesalers and/or retailers from holding an interest in any
supplier such as the Company. Violation of such regulations can result in the
loss or revocation of existing licenses by the wholesale, retailer and/or
suppliers. The loss or revocation of any existing licenses, permits or
approvals, failure to obtain any additional or new licenses, permits or
approvals or the failure to obtain approval for the transfer of any existing
permits or licenses, including those required as a result of the
recapitalization, could have a material adverse effect on the ability of the
Company to conduct its business. On the federal level, brewers are required to
file with the Bureau of Alcohol, Tobacco and Firearms ('ATF') an amended
Brewer's Notice every time there is a material change in the brewing process or
brewing equipment, change in the brewery's location, change in the brewery's
management or a material change in the brewery's ownership. Brewers must seek
ATF approval of an amended Brewer's Notice prior to the change taking place.
Wholesalers must notify ATF within 30 days of any change in the wholesaler's
operations, change in the wholesalers's location, change in the wholesaler's
management or a material change in the wholesaler's ownership. The Company's
operations are subject to audit and inspection by ATF at any time. The Company
has never been audited or inspected by ATF.
On the state and local level, some jurisdictions merely require notice of
any material change in the operations, management or ownership of a permittee or
licensee. Some jurisdictions require advance approvals and require that new
licenses, permits or approvals must be applied for and obtained in the event of
a change in the management or ownership of the permittee or licensees. State and
local laws and regulations governing the sale of beer within a particular state
by an out-of-state brewer or wholesaler vary from locale to locale.
ATF permits and brewer's registrations can be suspended, revoked or
otherwise adversely affected for failure to pay tax, to keep proper accounts, to
pay fees, to bond premises, to abide by federal alcohol beverage production and
distribution regulations and to notify ATF of any change (as described above),
or if holders of 10% or more of the Company's equity securities are found to be
of questionable character. Permits, licenses and approvals from state regulatory
agencies can be revoked for many of the same reasons.
Because of the many and various state and federal licensing and permitting
requirements, there is a risk that one or more regulatory authorities could
determine that the Company has not complied with applicable licensing or
permitting regulations or does not maintain the approvals necessary for it to
conduct business within their jurisdictions. There can be no assurance that any
such regulatory action would not have a material adverse effect upon the Company
or its operating results.
TAXATION
The federal government and each of the states levy excise taxes on
alcoholic beverages, including beer. The federal excise tax is $18.00 per
barrel. For brewers producing no more than 2,000,000 barrels of beer per
calendar year the federal excise tax is $7.00 per barrel on the first 60,000
barrels of beer removed for consumption or sale during a calendar year. As the
brewer of record of its beers, the Company has been able to take advantage of
this reduced tax on the first 60,000 barrels of its beer produced. Individual
states also impose excise taxes on alcoholic beverages in varying amounts, which
have also been subject to change. The state excise taxes are usually paid by the
Company's distributors.
Congress and state legislatures routinely consider various proposals to
impose additional excise taxes on the production and distribution of alcoholic
beverages, including beer, in connection with various governmental
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<PAGE>
budget balancing or funding proposals. Further increases in excise taxes
on beer, if enacted, could result in a general reduction of malt
beverage sales.
TRADEMARKS
The Company has obtained U.S. Trademark Registration for Perry's Majestic.
The Company regards its trademark as having substantial value and as being an
important factor in the marketing of its products. The Company is not aware of
any infringing uses that could materially affect its current business or any
prior claim to the trademarks that would prevent the Company from using such
trademarks in its business. The Company's policy is to pursue registration of
its marks whenever possible and to oppose vigorously any infringements on its
marks.
MANAGEMENT AND EMPLOYEES
As of July 15, 1996, the Company employed a total of 2 employees on a full
time basis.
The Company has experienced no work stoppages and considers its employee
relations to be satisfactory. The Company's employees are not represented by a
labor union.
CONFLICT OF INTERESTS
After this Offering, Bev-Tyme will continue to own 100% of the Company's
outstanding shares of Preferred Stock. It is anticipated that Mootch & Muck will
continue to distribute a significant percentage of the Company's products, at or
near present levels and that the Company will continue to operate its executive
offices and distribution facilities leased and managed by Bev-Tyme. In addition,
Robert Sipper, Bev-Tyme's President and a Bev-Tyme director, is Chief Executive
Officer of the Company and a member of the Company's Board of Directors. Because
of Bev-Tyme's ownership interest in the Company and the identity of certain
management, certain conflicts of interest may occur between the Company and
Bev-Tyme. In such instances, any member of the Board of Directors who is also a
member of the Bev-Tyme Board of Directors may be precluded from participating in
corporate decisions. Although the Board of Directors of the Company has not
adopted any written policy on this matter, the Delaware Corporation Law contains
specific provisions governing such conflicts.
LIABILITY INSURANCE
The Company, like other manufacturers of products that are ingested, faces
inherent risk of exposure to product liability claims if, among other things,
the use of its products results in an injury. The Company currently does not
have any product liability insurance. There can be no assurance that the Company
will be able to obtain product liability insurance on terms acceptable to the
Company or at all and once obtained there can be no assurance that the Company
will be able maintain such insurance coverage. Moreover, the amount and scope of
any coverage may be inadequate to protect the Company in the event that a
product liability claim is successfully asserted against the Company.
LITIGATION
There is no material litigation pending or threatened against the Company
nor are there any such proceedings to which the Company is a party.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names and ages of the directors, executive officers and significant
employees, and promoters of the Company are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Robert Sipper................................... 42 President, Chief Executive Officer, Chief
Financial Officer, Principal Accounting
Officer and Director
Mark Butler..................................... 44 Vice President--Sales and Secretary and Director
Matthew Harriton................................ 31 Director
</TABLE>
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
Robert Sipper has been Chief Executive Officer and Chief Financial officer
of the Company since March 1, 1996. He has served as a director of Bev-Tyme,
Inc. since November 1993 and Chief Executive Officer and President of Bev-Tyme,
Inc. since January, 1994. He graduated with a J.D. degree from Vermont Law
School in 1978 and entered private practice. He was associated with Dubbs,
Leopold, Davis & DePodwin, Attorneys at Law from 1979-1981. He became a partner
in the law firm of Leopold & Sipper, Attorneys at Law, from 1981 to March 1989.
In March, 1989, Mr. Sipper left the private practice of law and became Chief
Operating Officer/Executive Vice President of Mootch & Muck, a position he holds
today, which was the master Evian distributor for the Metropolitan New York-New
Jersey territory as well as the distributor of many other beverages and selected
specialty foods. Mr. Sipper established a subdistributor network for Evian and
other products in this territory. In 1990, Mr. Sipper negotiated the sale of
Mootch & Muck's Evian Master Distributor Agreement to Canada Dry Bottling
Company of New York.
Mark Butler has been President, Vice President--Sales and Secretary of
Riverosa since January 1990. Mr. Butler was appointed to the Company's Board of
Directors on April 4, 1996. Mr. Butler is also President of Mill Hill
Associates, a company which brokers various beverages to wholesaler and
distributor networks. From April 1988 to January 1990, Mr. Butler was National
Sales Manager for Snapple Beverage Co. From February 1986 to March 1988, he was
National Sales Manager for Glenville Importers. From November 1984 to January
1986, Mr. Butler was National Sales Manager of American Natural Beverage Corp.
From September 1980 to October 1984, he was president of Newport-Cambridge
Provisions which distributed beverages, including exclusive distribution of Soho
Natural Soda in New England. Mr. Butler received a degree in English/Business
Administration and Economics from Western State College of Colorado.
Matthew L. Harriton, age 31, has served on the Company's Board of Directors
since January 3, 1996. Mr. Harriton is the Chief Financial Officer of Embryo
Development Corporation. Embryo Development Corporation is a public company
which trades on NASDAQ and which specializes in developing and distributing
medical devices. Prior to joining Embryo Development Corporation, Mr. Harriton's
professional experience included positions at CIBC Wood Gundy Securities
Corporation from June 1994 to December 1995, Coopers & Lybrand from September
1990 to May 1994, and The First Boston Corporation from June 1986 to June 1988.
Through private investments Mr. Harriton has been involved with the start-up and
development of several restaurants located in Manhattan. Mr. Harriton also
serves as a director of Decor Group, Inc., a privately held company involved in
the home decorating industry. He is a graduate of Lehigh University and received
his M.B.A. from Duke University's Fuqua School of Business.
EXECUTIVE COMPENSATION
No cash or other compensation was paid or accrued by the Company to or on
behalf of the Company's Chief Executive Officer or any of the other executive
officers of the Company since its formation. Each director of the Company is
entitled to receive reasonable out-of-pocket expenses incurred in attending
meetings of the Board of
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<PAGE>
Directors of the Company. The members of the Board of Directors intend to meet
at least quarterly during the Company's fiscal year, and at such other times
duly called.
EMPLOYMENT AGREEMENTS
As of April 4, 1996, the Company entered into a three (3) year employment
agreement with Mark Butler pursuant to which Mr. Butler serves as the Company's
Vice President of Sales. The agreement provides for Mr. Butler to receive a
salary of $25,000 per annum until the closing of this offering and thereafter
$50,000 per annum. In addition, on each of March 31, 1997, March 31, 1998, and
March 31, 1999, the Company has agreed to grant Mr. Butler an option to purchase
100,000 shares of Common Stock exercisable at fair market value on the date of
issuance.
As of April 1996, the Company entered into a three (3) year employment
agreement with Robert Sipper pursuant to which Mr. Sipper serves as the
Company's President. The agreement provides for Mr. Sipper to receive a salary
of $50,000 per annum.
1996 STOCK PLAN
In March 1996, the Board of Directors of the Company adopted, and the
stockholders of the Company approved the adoption of, the 1996 Stock Plan
(hereinafter called the '1996 Plan'). The purpose of the 1996 Plan is to provide
an incentive and reward for those executive officers and other key employees in
a position to contribute substantially to the progress and success of the
Company, to closely align the interests of such employees with the interests of
stockholders of the Company by linking benefits to stock performance and to
retain the services of such employees, as well as to attract new key employees.
In furtherance of that purpose, the 1996 Plan authorizes the grant to executives
and other key employees of the Company and its subsidiaries of stock options,
restricted stock, deferred stock, bonus shares, performance awards, dividend
equivalent rights, limited stock appreciation rights and other stock-based
awards, or any combination thereof. The 1996 Plan is expected to provide
flexibility to the Company's compensation methods, after giving due
consideration to competitive conditions and the impact of federal tax laws. The
Company anticipates that the Stockholders will be requested to approve the
adoption of the 1996 Plan in the near future.
The maximum number of shares of Common Stock with respect to which awards
may be granted pursuant to the 1996 Plan is initially 2,000,000 shares. Shares
issuable under the 1996 Plan may be either treasury shares or authorized but
unissued shares. The number of shares available for issuance will be subject to
adjustment to prevent dilution in the event of stock splits, stock dividends or
other changes in the capitalization of the Company.
The 1996 Plan will be administered by a committee consisting of not less
than two (2) members of the Board of Directors who are 'disinterested' within
the meaning of Rule 16b-3 promulgated under the Exchange Act and 'outside
directors' within the meaning of Section 162(m) of the Code (including persons
who may be deemed outside directors by virtue of any transitional rule which may
be adopted by the Internal Revenue Service implementing such Section). The Board
will determine the persons to whom awards will be granted, the type of award
and, if applicable, the number of shares to be covered by the award. During any
calendar year, no person may be granted under the 1996 Plan awards aggregating
more than 100,000 shares (which number shall be subject to adjustment to prevent
dilution in the event of stock splits, stock dividends or other changes in
capitalization of the Company).
TYPES OF AWARDS
Stock Options. Options granted under the 1996 Plan may be 'incentive stock
options' ('Incentive Options') within the meaning of Section 422 of the Code or
stock options which are not incentive stock options ('Non-Incentive Options'
and, collectively with Incentive Options, hereinafter referred to as 'Options').
The persons to whom Options will be granted, the number of shares subject to
each Option granted, the prices at which Options may be exercised (which shall
not be less than the fair market value of shares of Common Stock on the date of
grant), whether an Option will be an Incentive Option or a Non-Incentive Option,
the time or times and the extent to which Options may be exercised and all other
terms and conditions of Options will be determined by the Committee.
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<PAGE>
Each Incentive Option shall terminate no later than ten (10) years from the
date of grant, except as provided below with respect to Incentive Options
granted to 10% Stockholders (as hereinafter defined). No Incentive Option may be
granted at any time after October 2006. Each Non-Incentive Option shall
terminate not later than fifteen (15) years from the date of grant. The exercise
price at which the shares may be purchased may not be less than the Fair Market
Value of shares of Common Stock at the time the Option is granted, except as
provided below with respect to Incentive Options granted to 10% Stockholders.
Options granted to executive officers may not be exercised at any time prior to
six (6) months after the date of grant.
The exercise price of an Incentive Option granted to a person possessing
more than 10% of the total combined voting power of all shares of stock of the
Company or a parent or subsidiary of the Company ('10% Stockholder') shall in no
event be less than 110% of the Fair Market Value of the shares of the Common
Stock at the time the Incentive Option is granted. The term of an Incentive
Option granted to a 10% Stockholder shall not exceed five (5) years from the
date of grant.
The exercise price of the shares to be purchased pursuant to each Option
shall be paid (i) in full in cash, (ii) by delivery (i.e., surrender) of shares
of the Company's Common Stock owned by the optionee at the time of the exercise
of the Option, (iii) in installments, payable in cash, if permitted by the
Committee or (iv) any combination of the foregoing. The stock-for-stock payment
method permits an optionee to deliver one (1) or more shares of previously owned
Common Stock of the Company in satisfaction of the exercise price of subsequent
Options. The optionee may use the shares obtained on each exercise to purchase a
larger number of shares on the next exercise. (The foregoing assumes an
appreciation in value of previously acquired shares). The result of the
stock-for-stock payment method is that the optionee can generally avoid
immediate tax liability with respect to any appreciation in the value of the
stock utilized to exercise the Option.
Shares received by an optionee upon exercise of a Non-Incentive Option may
not be sold or otherwise disposed of for a period determined by the Board upon
grant of the Option, which period shall be not less than six (6) months nor more
than three (3) years from the date of acquisition of the shares (the 'Restricted
Period'), except that, during the Restricted Period (i) the optionee may offer
the shares to the Company and the Company may, in its discretion, purchase up to
all the shares offered at the exercise price and (ii) if the optionee's
employment terminates during the Restricted Period (except in limited
instances), the optionee, upon written request of the Company, must offer to
sell the shares to the Company at the exercise price within seven (7) business
days. The Restricted Period shall terminate in the event of a Change in Control
of the Company (as defined), or at the discretion of the Board. After the
Restricted Period, an optionee wishing to sell must first offer such shares to
the Company at the Fair Market Value.
Limited Stock Appreciation Rights. The Committee is authorized, in
connection with any Option granted under the 1996 Plan, to grant the holder of
such Option a limited stock appreciation right ('LSAR'), entitling the holder to
receive, within sixty (60) days following a Change in Control, an amount in cash
equal to the difference between the exercise price of the Option and the market
value of the Common Stock on the effective date of the Change in Control. The
LSAR may be granted in tandem with an Option or subsequent to grant of the
Option. The LSAR will only be exercisable to the extent the related Option is
exercisable and will terminate if and when the Option is exercised.
Restricted and Deferred Stock. An award of restricted stock or deferred
stock may be granted under the 1996 Plan. Restricted stock is subject to
restrictions on transferability and other restrictions as may be imposed by the
Committee at the time of grant. In the event that the holder of restricted stock
ceases to be employed by the Company during the applicable restrictive period,
restricted stock that is at the time subject to restrictions shall be forfeited
and reacquired by the Company. Except as otherwise provided by the Committee at
the time of grant, a holder of restricted stock shall have all the rights of a
stockholder including, without limitation, the right to vote restricted stock
and the right to recover dividends thereon. An award of deferred stock is an
award that provides for the issuance of stock upon expiration of a deferral
period established by the Committee. Except as otherwise determined by the
Committee, upon termination of employment of the recipient of the award during
the applicable deferral period, all stock that is at the time subject to
deferral shall be forfeited. Until such time as the stock which is the subject
of the award is issued, the recipient of the award has no rights as a
stockholder.
Dividend Equivalent Awards. A dividend equivalent gives the recipient the
right to receive cash or other property equal in value to the dividends that
would be paid if the recipient held a specified number of shares of
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<PAGE>
Common Stock. A dividend equivalent right may be granted as a component of
another award or as a free standing award.
Bonus Shares and Other Share Based Awards. The 1996 Plan authorizes the
Committee to grant shares as a bonus, or to grant shares or other awards in lieu
of obligations of the Company to pay cash under other plans or compensatory
arrangements, upon such terms as shall be determined by the Committee. The 1996
Plan also authorizes the Committee to grant other forms of awards based upon,
payable in, or otherwise related in whole or in part to, Common Stock,
including, without limitation, convertible or exchangeable debentures or other
debt securities, other rights convertible or exchangeable into shares, purchase
rights for shares, awards contingent upon performance of the Company, and awards
valued by reference to the book value of shares of Common Stock or awards
determined by reference to the value of securities of, or the performance of,
specified subsidiaries.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date of this
Prospectus with respect to the beneficial ownership of the outstanding shares of
the Company's Common Stock by (i) any holder of more than five percent (5%) of
the outstanding shares; (ii) the Company's officers and directors; and (iii) the
directors and officers of the Company as a group:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
(%) OF (%) OF (%) OF
SHARES OF COMMON COMMON TOTAL
NAME AND COMMON STOCK STOCK SHARES OF COMBINED
ADDRESS OF STOCK BEFORE AFTER PREFERRED VOTE BEFORE
BENEFICIAL OWNER(1) OWNED OFFERING OFFERING STOCK OFFERING
- -------------------------------------------------- --------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Robert Sipper..................................... 120,000 4.8 3.9 0 1.2
Marketing Specialities, Inc....................... 1,470,000 58.8 47.4 0 14.7
Hartley T. Bernstein(2)........................... 500,000 20.0 16.1 0 5.0
Bev-Tyme, Inc.(3)................................. 0.0 0 0 7,500,000 75.0
Matthew Harriton.................................. 50,000 2.0 1.6 0.0 0.0
Mark Butler....................................... 0.0 0.0 0.0 0.0 0.0
All officers and directors as a group
(three (3) persons)............................. 170,000 6.8 5.5 0 0
</TABLE>
- ------------------
(1) The address of each Stockholder shown above except as otherwise indicated is
c/o Perry's Majestic Beer, Inc., 134 Morgan Avenue, Brooklyn, New York.
(2) The address of Hartley T. Bernstein is 950 Third Avenue, New York, New York
10022. Mr. Bernstein is a partner in the firm of Bernstein & Wasserman, LLP,
which firm is passing upon certain legal matters in connection with this
offering for the Company.
(3) Includes 500,000 shares of Series A Preferred Stock and 7,000,000 shares of
Series B Preferred Stock.
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<PAGE>
CERTAIN TRANSACTIONS
On October 26, 1995, Bev-Tyme, Inc. entered into a letter of intent to
acquire Riverosa for the sum of $250,000. As part of that understanding,
Bev-Tyme agreed that Riverosa or its successors would enter into a three (3)
year employment agreement with Mark Butler at an annual salary of $25,000 year,
subject to appropriate increase in the event Riverosa (or it successors)
successfully completed an initial public offering of its securities resulting in
net proceeds in excess of $2,000,000. The Employment Agreement would also
provide for an annual bonus as well as stock options based upon performance. In
January 1996, Bev-Tyme, Inc. assigned its rights under the letter of intent to
the Company, which entered into a definitive agreement with Riverosa on March
29, 1996, pursuant to which the Company agreed to pay the sum of $250,000 to
acquire Riverosa. As of April 4, 1996, the Company entered into a three (3) year
employment agreement with Mr. Butler pursuant to which he will receive an annual
salary of $25,000 per year to be increased to $50,000 per year upon completion
of the Company's initial public offering. The Agreement also provides for
payment of an annual bonus based at the sole discretion of the Company's Board
of Directors. Further, the Agreement provides that Mr. Butler will receive
options to purchase 100,000 shares of the Company's stock on each of March 31,
1997, March 31, 1998 and March 31, 1999, at fair market value as of the date of
issuance. The Agreement provides further that Mark Butler, one of the principal
shareholders of Riverosa was appointed to the Company's board of directors on
April 1, 1996. A contract deposit of $150,000 was paid into escrow upon
execution of the agreement and the balance of $100,000 is payable pursuant to a
promissory note bearing interest at a rate of 12 percent (12%) per year. The
promissory note is payable upon the earlier of (i) one year from the date of
issuance or (ii) the closing of the Company's initial public offering.
Prior to the acquisition, Bev-Tyme, through its subsidiary, acted as a
distributor of Perry's Majestic Beer. In January 1996, the Company issued an
aggregate of 2,500,000 shares of its common stock to seven (7) parties for total
consideration of $50,000. These shareholders are Robert Sipper, Hartley
Bernstein, Matthew Harriton, Marketing Specialities, Inc., Ulster Investments
Ltd. and Judith Pace. Robert Sipper is a Director and President of the Company
and of Bev-Tyme. Matthew Harriton is a Director of the Company. Hartley
Bernstein is a Director of Bev-Tyme and a member of Bernstein & Wasserman, LLP,
counsel to the Company. In March 1996, the Company issued to Bev-Tyme 500,000
shares of convertible Series A Preferred Stock and 7,000,000 shares of Series B
Preferred Stock for $150,000 and 400,000 shares of Series C Preferred Stock of
Bev-Tyme. Each share of Bev-Tyme Series C Preferred Stock pays an annual
dividend of $.50 per share and is convertible at the option of the holder into
1.8 shares of Bev-Tyme Common Stock. The Bev-Tyme Series C Preferred Stock has
the right to vote on all matters presented to Bev-Tyme shareholders at the rate
of 1.8 votes per share and is redeemable at a price of $.05 per share so long as
the closing bid price of the Bev-Tyme Common Stock has equaled or exceeded
$20.00 per share for twenty (20) consecutive days. The Company issued these
shares in January 1996 and March 1996 in order to generate funds to acquire
Riverosa, produce and market its product prior to this Offering, and pay the
expenses of this Offering. Each share of the Company's Class A Preferred Stock
issued to Bev-Tyme is convertible into one (1) share of Common Stock and is
entitled to one vote on all corporate matters. The Class B Preferred Stock
issued to Bev-Tyme is not convertible. Each share of Class B Preferred Stock is
entitled to one vote on all corporate matters. Each share of the Bev-Tyme Series
C Preferred Stock issued to the Company is convertible into 18 shares of common
stock and possesses one vote on all corporate matters. As a result of the
foregoing transactions, Bev-Tyme currently owns seventy-five percent (75%) of
the Company's voting stock.
In March, 1996, the Company borrowed an aggregate of $150,000 from seven
(7) unaffiliated lenders (the 'Bridge Lenders'). In exchange for making loans to
the Company, each Bridge Lender received a promissory note (the 'Bridge Note').
Each of the Bridge Notes bears interest at the rate of eight percent (8%) per
annum. The Bridge Notes are due and payable upon the earlier of (i) July 31,
1996 or (ii) the closing of an initial underwritten public offering of the
Company's securities. The Company intends to use a portion of the proceeds of
this Offering to repay the Bridge Lenders. See 'Use of Proceeds.' The Bridge
Lenders were granted the right to receive a total of 3,000,000 Class A Warrants.
The Bridge Lenders subsequently waived their right to receive the Class A
Warrants. The Company entered into the bridge financing transactions because it
required additional financing and no other sources of financing were available
to the Company at that time. See 'Bridge Financing' and 'Underwriting.'
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<PAGE>
DESCRIPTION OF SECURITIES
The Company is offering 583,335 shares of Common Stock, par value $.0001
per share.
COMMON STOCK
The Company is authorized to issue up to 25,000,000 shares of Common Stock,
of which 2,500,000 shares will be issued and outstanding as of the date of this
Prospectus. All of the issued and outstanding shares of Common Stock will be
fully paid, validly issued and non-assessable.
Subject to the rights of holders of Preferred Stock, if any, holders of
shares of Common Stock of the Company are entitled to share equally on a per
share basis in such dividends as may be declared by the Board of Directors out
of funds legally available therefor. There are presently no plans to pay
dividends with respect to the shares of Common Stock. See 'Dividend Policy.'
Upon liquidation, dissolution or winding up of the Company, after payment of
creditors and the holders of any senior securities of the Company, including
Preferred Stock, if any, the assets of the Company will be divided pro rata on a
per share basis among the holders of the shares of Common Stock. The Common
Stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the Common Stock and the Common Stock is not subject to call. The holders of
Common Stock do not have any pre-emptive or other subscription rights.
Holders of shares of Common Stock are entitled to cast one (1) vote for
each share held at all stockholders' meetings including the annual meeting, for
all purposes, including the election of directors. The Common Stock does not
have cumulative voting rights.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 15,000,000 shares of
'blank check' Preferred Stock, whereby the Board of Directors of the Company
shall have the authority, without further action by the holders of the
outstanding Common Stock, to issue shares of Preferred Stock from time to time
in one or more classes or series, to fix the number of shares constituting any
class or series and the stated value thereof, if different from the par value,
and to fix the term of any such series or class, including dividend rights,
dividend rates, conversion or exchange rights, voting rights, rights and terms
of redemption (including sinking fund provisions), the redemption price and the
liquidation preference of such class or series. As of the date of this
Prospectus, there are 500,000 shares of Series A Preferred Stock and 7,000,000
shares of Series B Preferred Stock issued and outstanding. The Company has
agreed with the Representative that it will not issue any additional shares of
preferred stock for a period of twelve (12) months from the date of this
Prospectus without the prior written consent of the Representative.
SERIES A PREFERRED STOCK
Designation and Amount; Par Value. The shares of such series are
designated as Series A Preferred Stock and the number of shares constituting
such series is 500,000, 500,000 of which are issued and outstanding prior to the
Effective Date of the Offering. The Series A Preferred Stock has $.0001 par
value per share.
Dividends. Holders of the Series A Preferred Stock do not have any right
to the payment of any dividend.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, each share
of Series A Preferred Stock shall have a liquidation preference of $.20 plus
unpaid annual dividends that have accrued to date of payment, if any.
Voting Rights. Each holder of Series A Preferred Stock shall be entitled
to one (1) vote per share on all matters presented to the stockholders of the
Company.
Conversion Rights. Each share of Series A Preferred Stock may be converted
into one (1) share of the Company's Common Stock at the option of the holder.
Rank. The shares of Series A Preferred Stock rank senior to all series of
preferred stock and the Common Stock in all respects.
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<PAGE>
SERIES B PREFERRED STOCK
Designation and Amount; Par Value. The shares of such series are
designated as Series B Preferred Stock and the number of shares constituting
such series is 7,000,000, 7,000,000 of which are issued and outstanding prior to
the Effective Date of the Offering. The Series B Preferred Stock has $.0001 par
value per share.
Dividends. Holders of the Series B Preferred Stock do not have any right
to the payment of any dividend.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, each share
of Series B Preferred Stock shall have a liquidation preference of $.01 plus
unpaid annual dividends that have accrued to date of payment, if any.
Voting Rights. Each holder of Series B Preferred Stock shall be entitled
to one (1) vote per share on all matters presented to the stockholders of the
Company.
Rank. The shares of Series B Preferred Stock rank senior to all series of
preferred stock and the Common Stock in all respects except to the Series A
Preferred Stock.
DELAWARE ANTI-TAKEOVER LAW
The Company is governed by the provisions of Section 203 of the General
Corporation Law of Delaware, an anti-takeover law enacted in 1988. In general,
the law prohibits a Delaware public corporation from engaging in a 'business
combination' with an 'interested stockholder' for a period of three (3) years
after the date of the transaction in which the person became an interested
stockholder, unless it is approved in a prescribed manner. As a result of
Section 203, potential acquirors of the Company may be discouraged from
attempting to effect acquisition transactions with the Company, thereby possibly
depriving holders of the Company's securities of certain opportunities to sell
or otherwise dispose of such securities at above-market prices pursuant to such
transactions.
LIMITATION ON LIABILITY OF DIRECTORS
In connection with the Offering, the Representative has agreed to indemnify
the Company, its directors, and each person who controls it within the meaning
of Section 15 of the Securities Act with respect to any statement in or omission
from the registration statement or the Prospectus or any amendment or supplement
thereto if such statement or omission was made in reliance upon information
furnished in writing to the Company by the Representative specifically for or in
connection with the preparation of the registration statement, the prospectus,
or any such amendment or supplement thereto.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers provided that this provision shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
arising under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of stockholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 102
of the Delaware General Corporation Law.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the
39
<PAGE>
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
The Company does not currently have any liability insurance coverage for
its officers and directors.
COMMISSION POLICY
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and other agents of the Company, the Company
has been informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
TRANSFER AGENT & REGISTRAR
The transfer agent and registrar for the Company's securities is American
Stock Transfer & Trust Company (the 'Transfer Agent').
FEDERAL INCOME TAX CONSEQUENCES
The Company has obtained no ruling from the Internal Revenue Service (the
'IRS') with respect to these consequences, and there can be no assurance that
the IRS will agree with the conclusions herein or that a challenge, if made,
will not be successful. This discussion does not address all aspects of U.S.
federal income taxation, and does not discuss considerations applicable to a
holder who is, with respect to the United States, a nonresident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, but does discuss all material federal income tax consequences. This
discussion also does not consider specific facts and circumstances that may be
relevant to a particular holder's tax position. The information is based on
provisions of the Code, existing regulations thereunder and judicial decisions,
and the IRS's current administrative rules, practices and interpretations of
law, all as in effect on the date hereof and all of which are subject to change
or modification. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT SUCH INVESTOR'S
OWN TAX ADVISOR WITH RESPECT TO THE INDIVIDUAL U.S. FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES OF HOLDING AND DISPOSING OF THE COMMON STOCK, AS WELL
AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
CONSEQUENCES TO HOLDERS OF COMMON STOCK
Sale. Upon the sale of Common Stock to an unrelated party other than the
Company, the holder will recognize gain or loss measured by the difference
between the amount realized and the holder's adjusted tax basis in the share.
Such gain or loss generally will be capital gain or loss if the share of Common
Stock is a capital asset in the hands of the holder (i.e. property generally
held for investment). This gain or loss will be a long-term capital gain or loss
if the shares of Common Stock was held for more than one year. An individual
holder's capital gains are potentially subject to a reduced tax rate if the
share of Common Stock were held for more than one year, while his other capital
losses are deductible annually only to the extent of the capital gains plus
$3,000. If a share of Common Stock is redeemed by the Company, the holder will
generally recognize income or loss equal to the difference between the holder's
tax basis in the share of Common Stock and the redemption price; provided that
the receipt of cash from the Company is not treated under the Internal Revenue
Code as a dividend.
Under Section 1202 of the Code, certain noncorporate holders who hold
(either directly or through a partnership, 'S' corporation or regulated
investment company) certain stock that is acquired directly from an issuing
corporation for more than five years may exclude from gross income 50%(subject
to certain maximum exclusions) of any gain realized on the sale or exchange of
such stock, However, this exclusion is available only if the stock is'qualified
small business stock.' In order to be qualified small business stock, the
company issuing stock must have 'aggregate gross assets' of less than
$50,000,000 immediately after the issuance of the stock and otherwise be
classified as a 'qualified small business' throughout the period the stock is
held by a shareholder. The Company has represented that its aggregate gross
assets will be less than $50,000,000 at the time the shares are issued.
Nonetheless, it is not possible to determine whether the Common Stock issued
hereunder will be qualified small business stock at the time of its sale or
exchange by a holder.
40
<PAGE>
This uncertainty is due in part to the lack of Treasury Regulations or IRS
authority interpreting the qualified small business stock rules, including the
requirement that 80% of the Company's assets (by value) be used in the 'active
conduct of a qualified trade or business.' This requirement is violated if,
among other things, (i) the Company's business 'involves the performance of
services in the field of health' or has as its principal asset the reputation or
skill of its employees, (ii) more than 10% of the value of the Company's net
assets are attributable to corporate stock or securities held for investment
other than to finance research and experimentation in a qualified trade or
business or to meet the Company's reasonable working capital needs within the
next two years, or (iii) the total value of the corporate stock or securities
owned by the Company exceeds 50% of the total value of its assets (regardless of
whether such stock or securities are required for present or future research and
experimentation or working capital needs). The Company believes that it meets
these requirements.
Furthermore, certain parts of the qualified small business stock rules
(including the 'active conduct of a qualified trade or business' requirement,
but not including, the $50,000,000 aggregate gross asset requirement) apply
throughout the holding period of the Common Stock. Subsequent actions or events
(such as an increase in the Company's overall percentage of investment assets, a
decline in the value of its other assets, or the Company's redemption of shares
of stock within two years of the issuance of the Common Stock) may prevent the
Common Stock from qualifying. Finally, it is possible that Congress will
eliminate the qualified small business stock at the time of its sale or other
disposition, and holders should consult their tax advisors at that time to
determine to what extent this is the case.
The Company believes that the foregoing discussion considers all the
material tax issues applicable to any investment in the Shares (other than any
such issues that arise out of an investor's particular circumstances, and that
do not apply to all investors, such as, for example, the ownership by an
investor of other shares of Common Stock) and that, in the event of a challenge
by the IRS it is more likely than not (i.e. the likelihood is greater than 50%)
that the tax consequences will be determined as described herein.
41
<PAGE>
SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part also
covers the sale of 2,500,000 shares of Common Stock held by securityholders of
the Company, 120,000 of which are held by Robert Sipper, hereinafter
collectively referred to as the 'Selling Securityholders.' The shares of Common
Stock being registered on behalf of Selling Securityholders constitute 100% of
such outstanding shares prior to the Offering and 81% of the outstanding shares
of Common Stock upon completion of the Offering. The Company will not receive
any of the proceeds on the sale of the securities by the Selling
Securityholders. The resale of the securities of the Selling Securityholders are
subject to Prospectus delivery and other requirements of the Securities Act of
1933, as amended (the 'Act'). Sales of such securities or the potential of such
sales at any time may have an adverse effect on the market prices of the
securities offered hereby. See 'Risk Factors--Shares Eligible for Future Sale
May Adversely Affect the Market.'
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES OF SHARES OF PERCENT OF
STOCK COMMON STOCK COMMON
OWNED STOCK OWNED STOCK
BEFORE OFFERED AFTER AFTER
NAME OFFERING HEREBY OFFERING OFFERING
- ----------------------------------------------------------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
Robert Sipper.................................................... 120,000 120,000 0 0
Ulster Investments Ltd........................................... 120,000 120,000 0 0
Hartley Bernstein................................................ 500,000 500,000 0 0
First National Fund Corp......................................... 120,000 120,000 0 0
Matthew Harriton................................................. 50,000 50,000 0 0
Marketing Specialities, Inc...................................... 1,470,000 1,970,000 0 0
Judith Pace...................................................... 120,000 120,000 0 0
--------- --------- --------- -----
Total............................................................ 2,500,000 2,500,000 0 0
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>
The securities offered hereby may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares 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 in connection with such sales of securities. The securities
offered by the Selling Securityholders may be sold by one or more of the
following methods, without limitations: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. The Selling Securityholders
and intermediaries through whom such securities are sold may be deemed
'underwriters' within the meaning of the Act with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a Prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
Offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for sales purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers and the proposed selling price to the public.
Sales of securities by the Selling Securityholder or even the potential of
such sales would likely have an adverse effect on the market prices of the
securities offered hereby.
42
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy
of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, the Underwriters as set forth below and for whom VTR
Capital Inc. is the representative, have agreed to purchase from the Company
583,335 Shares offered hereby from
the Company on a 'firm commitment' basis, if
any are purchased.
UNDERWRITER NUMBER OF SHARES
- ----------- -----------------
VTR Capital, Inc. .................... -----------------
Investor Associates, Inc. ............ -----------------
.................... -----------------
The Underwriter's have advised the Company that it proposes to offer the Shares
to the public at $6.00 per Share as set forth on the cover page of this
Prospectus and that it may allow to certain dealers who are NASD members
concessions not to exceed $ per Share, of which not in excess of $ per Share
may be reallowed to other dealers who are members of the NASD. After the initial
public offering, the public offering price, concession and reallowance may be
changed by the Underwriters.
The public offering price of the Shares was arbitrarily determined by
negotiations between the Company and the Representative and do not necessarily
relate to the assets, book value or results of operations of the Company or any
other established criteria of value.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Representative against certain liabilities in connection
with the Registration Statement, including liabilities arising under the Act.
Insofar as indemnification for liabilities arising under the Act may be provided
to officers, directors or persons controlling the Company, the Company has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy and is therefore unenforceable.
The Company has agreed to pay to the Representative a non-accountable
expense allowance of three percent (3%) of the aggregate Offering price of the
Shares offered hereby.
The Company has agreed to sell to the Representative, or its designees, for
an aggregate purchase price of $58, an option (the 'Representative's Share
Purchase Option') to purchase up to an aggregate of 58,333 Shares. The
Representative's Share Purchase Option shall be exercisable during a four (4)
year period commencing one (1) year from the Effective Date. The
Representative's Share Purchase Option may not be assigned, transferred, sold or
hypothecated by the Representative until twelve (12) months after the Effective
Date of this Prospectus, except to officers or directors of the Representative
or to selling group members in this Offering. Any profits realized upon the sale
of the Shares issuable upon exercise of the Representative's Share Purchase
Option may be deemed to be additional underwriting compensation. The exercise
price of the Shares issuable upon exercise of the Representative's Share
Purchase Option during the period of exercisability shall be one hundred twenty
percent (120%) of the initial public offering price of the Shares. The exercise
of the Representative's Share Purchase Option and the number of shares covered
thereby are subject to adjustment in certain events to prevent dilution. For the
life of the Representative's Share Purchase Option, the holders thereof are
given, at a nominal cost, the opportunity to profit from a rise in the market
price of the Company's Common Stock with a resulting dilution in the interest of
other stockholders. The Company may find it more difficult to raise capital for
its business if the need should arise while the Representative's Share Purchase
Option is outstanding. At any time when the holders of the Representative's
Share Purchase Option might be expected to exercise it, the Company would
probably be able to obtain additional capital on more favorable terms.
If the Company enters into a transaction (including a merger, joint
venture, equity financing, debt financing, or the acquisition of another entity)
introduced to the Company by the Representative, the Company has agreed to pay
the Representative a finder's fee equal to five percent (5%) of the first
$4,000,000 of consideration involved in the transaction, ranging in $1,000,000
increments down to two percent (2%) of the excess, if any, over $6,000,000.
Upon the closing of the sale of the Shares offered hereby, the Company will
enter into a two (2) year financial advisory and investment banking agreement
with the Representative, pursuant to which the Company will be obligated to pay
the Representative $72,000 in advance upon the closing of the Offering, for
financial and investment advisory services to the Company. Under the agreement,
the Representative has agreed to assist the Company (i) in reviewing its
financial performance and preparing annual budgets; (ii) in determining its
financial
43
<PAGE>
needs and developing strategies for identifying appropriate financial sources;
(iii) in developing strategies for possible acquisitions of complementary
businesses, products or services; and (iv) in providing general consultations
regarding planning and business strategies, structuring of transactions,
investment of funds and raising additional capital.
The Company has agreed not to issue any securities for a period of twelve
(12) months from the Effective Date, without the prior written consent of the
Representative.
The foregoing is a summary of certain provisions of the Underwriting
Agreement and Representative's Share Purchase Option which have been filed as
exhibits hereto.
DETERMINATION OF PUBLIC OFFERING PRICE
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price for the Shares has been determined by
negotiations between the Company and the Representative. Among the factors
considered in the negotiations were the market price of the Company's Common
Stock, an analysis of the areas of activity in which the Company is engaged, the
present state of the Company's business, the Company's financial condition, the
Company's prospects, an assessment of management, the general condition of the
securities market at the time of this Offering and the demand for similar
securities of comparable companies. The public offering price of the Shares does
not necessarily bear any relationship to assets, earnings, book value or other
criteria of value applicable to the Company.
The Company anticipates that the Common Stock will be listed for quotation
on The OTC Bulletin Board under the symbol, BEER, but there can be no assurances
that an active trading market will develop, even if the securities are accepted
for quotation. The Representative intends to make a market in all of the
publicly-traded securities of the Company.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon for
the Company by Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY 10022.
Bernstein & Wasserman, LLP, has served, and continues to serve, as counsel to
the Representative in matters unrelated to this Offering. Certain legal matters
will be passed upon for the Representative by Cohn & Birnbaum P.C., 100 Pearl
Street, Hartford, CT 06103. See 'Management' and 'Principal Stockholders.'
EXPERTS
Certain of the financial statements of the Company included in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports, have been audited by Moore Stephens,
P.C. independent certified public accountants, whose reports thereon appear
elsewhere herein and in the Registration Statement.
ADDITIONAL INFORMATION
This Prospectus constitutes part of a Registration Statement on Form SB-2
filed by the Company with the Securities and Exchange Commission (the
'Commission') under the Securities Act and omits certain information contained
in the Registration Statement. Reference is hereby made to the Registration
Statement and to its exhibits for further information with respect to the
Company and the Common Stock offered hereby. Statements contained herein
concerning provisions of documents are necessarily summaries of such documents,
and each statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
The Registration Statement, including the exhibits thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission at: 450 Fifth Street, Washington, D.C. 20549; and at the offices of
the Commission located at 7 World Trade Center, New York, NY 10048; and copies
of such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, Washington, D.C. 20549 at prescribed rates.
44
<PAGE>
PERRY'S MAJESTIC BEER, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE TO PAGE
------------
<S> <C>
Pro Forma Combined Financial Statements
Introduction....................................................................................... F-2
Notes to the Pro Forma Financial Statements........................................................ F-3
Balance Sheet--March 31, 1996...................................................................... F-4
Statement of Operations--For the Year Ended December 31, 1995...................................... F-5
Statement of Operations--For the Three Months Ended March 31, 1996................................. F-6
PERRY'S MAJESTIC BEER, INC.
Independent Auditor's Report....................................................................... F-7
Balance Sheet as of March 31, 1996................................................................. F-8
Statement of Stockholders' Equity from Inception (December 1995) through the
Period ended March 31, 1996...................................................................... F-9
Statement of Cash Flows from Inception (December 1995) through the
Period ended March 31, 1996...................................................................... F-10
Notes to Financial Statements...................................................................... F-11 - F-12
RIVEROSA COMPANY, INC.
Independent Auditor's Report....................................................................... F-13
Balance Sheet as of December 31, 1995 (Audited) and March 31, 1996 (Unaudited)..................... F-14
Statements of Operations for the years ended December 31, 1995 and 1994 (Audited) and the three
month ended March 31, 1996 and 1995 (Unaudited).................................................. F-15
Statements of Stockholders' Equity for the two years ended December 31, 1995 (Audited) and for the
three months ended March 31, 1996 and 1995 (Unaudited)........................................... F-16
Statements of Cash Flows for the years ended December 31, 1995 and 1994 (Audited) and for the three
months ended March 31, 1996 and 1995 (Unaudited)................................................. F-17
Notes to Financial Statements...................................................................... F-19 - F-21
</TABLE>
F-1
<PAGE>
PERRY'S MAJESTIC BEER, INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS [UNAUDITED]
The following pro forma combined balance sheet as of March 31, 1996, and
the pro forma combined statements of operations for the year ended December 31,
1995 and for the three months ended March 31, 1996 give effect to Perry's
Majestic Beer, Inc. [the 'Company'] acquiring the stock of a beverage business,
Riverosa Company, Inc. ['Riverosa'] on March 31, 1996.
The pro forma information is based on the historical financial statements
of Perry's Majestic Beer, Inc. and Riverosa Company, Inc. giving effect to the
transaction under the purchase method of accounting and the assumptions and
adjustments in the accompanying notes to the pro forma financial statements.
The acquisition will be accounted for using the purchase method. The pro
forma balance sheet assumes the transaction was effective on the balance sheet
date. The pro forma statements of operations give effect to these transactions
as if they had occurred at the beginning of the fiscal year presented. The
historical statements of operations will reflect the effects of these
transactions from the date on which they occurred. There were no revenue or
expense activities for the period ended March 31, 1996 for Perry's Majestic
Beer, Inc. The pro forma combined statements are based on the historical
financial statements of Perry's Majestic Beer, Inc. and Riverosa Company, Inc.
Financial statements of Riverosa, Inc. are presented for the same periods that
Perry's would be required to furnish.
F-2
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS [UNAUDITED]
(A) To reflect allocation for the acquisition of Riverosa Company, Inc. with
annual amortization of goodwill of approximately $50,000 (quarterly amount
of $12,500).
Goodwill will be amortized over five years.
Goodwill is computed as follows:
<TABLE>
<S> <C>
Cash.............................................................................................. $150,000
Notes Payable..................................................................................... 100,000
--------
Cost of Acquisition............................................................................... 250,000
Estimated Value of Riverosa Net Assets Acquired................................................... 3,576
--------
Goodwill.......................................................................................... $246,424
--------
--------
</TABLE>
(B) To record annual employment contract of $25,000 (three months of $6,250).
(C) To record annual interest expense of $8,000 on $100,000 note payable at 8%
(three months of $2,000).
F-3
<PAGE>
PERRY'S MAJESTIC BEER, INC.
PRO FORMA COMBINED BALANCE SHEET AS OF MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL STATEMENTS
-----------------------------------
PERRY'S
MAJESTIC RIVEROSA
BEER, INC. COMPANY, INC.
MARCH 31, MARCH 31, PRO FORMA
1996 1996 ADJUSTMENTS COMBINED
---------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash........................ $ 60,200 $43,995 $ -- $ 104,195
Accounts Receivable......... -- 4,941 -- 4,941
Stock Subscription
Receivable............... 4,800 -- -- 4,800
Notes Receivable............ 135,000 -- -- 135,000
Inventory................... -- 9,460 -- 9,460
------------- ---------- ----------- ----------
Total Current Assets.......... 200,000 58,396 -- 258,396
------------- ---------- ----------- ----------
Investments................... 2,250,000 -- (250,000)(A) 2,000,000
------------- ---------- ----------- ----------
Other Assets:
Goodwill.................... -- -- 246,424(A) 246,424
Surety Bonds................ -- 575 -- 575
------------- ---------- ----------- ----------
Total Other Assets............ -- 575 246,424 246,999
------------- ---------- ----------- ----------
Total Assets.................. $ 2,450,000 $58,971 $ (3,576) $2,505,395
------------- ---------- ----------- ----------
------------- ---------- ----------- ----------
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current Liabilities:
Accounts Payable and Accrued
Expenses................. $ -- $20,361 $ -- $ 20,361
Notes Payable............... 250,000 -- -- 250,000
Officers' Loan Payable...... -- 29,634 -- 29,634
Income Taxes Payable........ -- 5,400 -- 5,400
------------- ---------- ----------- ----------
Total Current Liabilities..... 250,000 55,395 -- 305,395
------------- ---------- ----------- ----------
Stockholders' Equity:
Common Stock................ 250 1,000 (1,000)(A) 250
Preferred Stock............. 7,500 -- -- 7,500
Additional Paid-in
Capital.................. 2,192,250 -- -- 2,192,250
Retained Earnings........... -- 2,576 (2,576)(A) --
------------- ---------- ----------- ----------
Total Stockholders' Equity.... 2,200,000 3,576 (3,576) 2,200,000
------------- ---------- ----------- ----------
Total Liabilities and
Stockholders' Equity........ $ 2,450,000 $58,971 $ (3,576) $2,505,395
------------- ---------- ----------- ----------
------------- ---------- ----------- ----------
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-4
<PAGE>
PERRY'S MAJESTIC BEER, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL STATEMENTS
--------------------------------
PERRY'S MAJESTIC
BEER, INC.
FOR THE PERIOD
DECEMBER 1995 RIVEROSA
(DATE OF COMPANY, INC.
INCEPTION) FOR THE
THROUGH YEAR ENDED
MARCH 31, DECEMBER 31, PRO FORMA
1996 1995 ADJUSTMENTS COMBINED
---------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Sales--Net.................................................. $ -- $81,185 $ -- $ 81,185
Cost of Goods Sold.......................................... -- 61,057 -- 61,057
---------------- ------------- ----------- ---------
Gross Profit.............................................. -- 20,128 -- 20,128
---------------- ------------- ----------- ---------
Selling, General and 50,000(A)
Administrative Expenses................................... -- 17,494 25,000(B) 92,494
---------------- ------------- ----------- ---------
Income (Loss) from Operations............................. -- 2,634 (75,000) (72,366 )
---------------- ------------- ----------- ---------
Other (Income) Expense:
Interest Expense.......................................... -- 8,499 8,000(C) 16,499
Interest Income........................................... -- (1,141) -- (1,141 )
---------------- ------------- ----------- ---------
Other Expense--Net........................................ -- 7,358 8,000 15,358
---------------- ------------- ----------- ---------
(Loss) Before Income Taxes................................ -- (4,724) (83,000) (87,724 )
Provision for Income Taxes.................................. -- -- -- --
---------------- ------------- ----------- ---------
Net (Loss)................................................ $ -- $(4,724) $ (83,000) $(87,724 )
---------------- ------------- ----------- ---------
---------------- ------------- ----------- ---------
Number of Shares.......................................... 2,500,000 2,500,000
---------------- ---------
---------------- ---------
Net (Loss) Per Share...................................... $ -- $ (.04 )
---------------- ---------
---------------- ---------
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-5
<PAGE>
PERRY'S MAJESTIC BEER, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL STATEMENTS
--------------------------------
PERRY'S MAJESTIC
BEER, INC.
FOR THE PERIOD
DECEMBER 1995 RIVEROSA
(DATE OF COMPANY, INC.
INCEPTION) FOR THE THREE
THROUGH MONTHS ENDED
MARCH 31, MARCH 31, PRO FORMA
1996 1996 ADJUSTMENTS COMBINED
---------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Sales--Net.................................................. $ -- $24,136 $ -- $ 24,136
Cost of Goods Sold.......................................... -- 19,390 -- 19,390
---------------- ------------- ----------- ---------
Gross Profit.............................................. -- 4,746 -- 4,746
---------------- ------------- ----------- ---------
Selling, General and Administrative Expenses................ 12,500(A)
-- 11,347 6,250(B) 30,097
---------------- ------------- ----------- ---------
Income (Loss) from Operations............................. -- (6,601) (18,750) (25,351 )
---------------- ------------- ----------- ---------
Other (Income) Expense:
Interest Expense.......................................... -- 750 2,000(C) 2,750
Interest Income........................................... -- -- -- --
---------------- ------------- ----------- ---------
Other Expense--Net........................................ -- 750 2,000 2,750
---------------- ------------- ----------- ---------
(Loss) Before Income Taxes................................ -- (7,351) (20,750) (28,101 )
Provision for Income Taxes.................................. -- -- -- --
---------------- ------------- ----------- ---------
Net (Loss)............................................. $ -- $(7,351) $ (20,750) $(28,101 )
---------------- ------------- ----------- ---------
---------------- ------------- ----------- ---------
Number of Shares....................................... 2,500,000 2,500,000
---------------- ---------
---------------- ---------
Net (Loss) Per Share................................... $ -- $ (.01 )
---------------- ---------
---------------- ---------
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-6
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders of
Perry's Majestic Beer, Inc.
New York, New York
We have audited the accompanying balance sheet of Perry's Majestic Beer, Inc. as
of March 31, 1996, and the related statements of stockholders' equity, and cash
flows for the period from inception (December 1995) through March 31, 1996.
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 audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Perry's Majestic Beer, Inc. as
of March 31, 1996, and its cash flows for the period from inception to March 31,
1996, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company had no revenue or expense operations and has
negative working capital. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 7. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
April 4, 1996
F-7
<PAGE>
PERRY'S MAJESTIC BEER, INC.
BALANCE SHEET AS OF MARCH 31, 1996
<TABLE>
<S> <C>
ASSETS:
Current Assets:
Cash.............................................................................................. $ 60,200
Subscription Receivable(1B)....................................................................... 4,800
Note Receivable--Related Party(3)................................................................. 75,000
Note Receivable--Bridge Loan(6)................................................................... 60,000
------------
Total Current Assets.............................................................................. 200,000
------------
Non-Current Assets:
Investment in Riverosa(2)......................................................................... 250,000
Investment in Bev-Tyme, Inc.--Preferred Stock--Related Party(3)................................... 2,000,000
------------
Total Non-Current Assets.......................................................................... 2,250,000
------------
Total Assets...................................................................................... $ 2,450,000
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Bridge Loan Payable(6)............................................................................ $ 150,000
Note Payable Acquisition(2)....................................................................... 100,000
------------
Total Current Liabilities......................................................................... 250,000
------------
Commitments and Contingencies..................................................................... --
------------
Stockholders' Equity:
Preferred Stock, $.001 Par Value Per Share, 15,000,000 Blank Check Shares Authorized, Convertible
Class A--Issued and Outstanding, 500,000 Shares; Non-Convertible Class B--Issued and
Outstanding, 7,000,000 Shares(3)............................................................... 7,500
Additional Paid-in Capital--Preferred Stock(3).................................................... 2,142,500
Common Stock--$.0001 Par Value, Authorized 25,000,000 Shares, Issued and Outstanding, 2,500,000
Shares(1B)..................................................................................... 250
Additional Paid-in Capital--Common Stock(1B)...................................................... 49,750
Retained Earnings................................................................................. --
------------
Total Stockholders' Equity........................................................................ 2,200,000
------------
Total Liabilities and Stockholders' Equity........................................................ $ 2,450,000
------------
------------
</TABLE>
See Notes to Financial Statements.
F-8
<PAGE>
PERRY'S MAJESTIC BEER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
------------------ ------------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- ------ --------- ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance--January 1, 1996................ -- $ -- -- $ -- $ -- $ -- $ --
Common Stock Issued for Cash............ -- -- 2,500,000 250 49,750 -- 50,000
500,000 Shares of Series A and 7,000,000
Shares of Series B Preferred Stock
Issued for Cash and Investment in
Bev-Tyme, Inc. (Series C Preferred)... 7,500,000 7,500 -- -- 2,142,500 -- 2,500,000
Balance--March 31, 1996................. 7,500,000 $7,500 2,500,000 $250 $2,192,250 $ -- $ 2,200,000
--------- ------ --------- ------ ---------- ---------- -------------
--------- ------ --------- ------ ---------- ---------- -------------
</TABLE>
See Notes to Financial Statements.
F-9
<PAGE>
PERRY'S MAJESTIC BEER, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (DECEMBER 1995) THROUGH MARCH 31, 1996
<TABLE>
<S> <C>
Net Cash--Operating Activities..................................................................... $ --
---------
Investing Activities:
Partial Payment on Acquisition of Riverosa Company................................................. (150,000)
---------
Financing Activities:
Proceeds from Sale of Preferred Stock to Bev-Tyme, Inc............................................. 75,000
Proceeds from Sale of Common Stock................................................................. 45,200
Proceeds from Bridge Loans......................................................................... 90,000
---------
Net Cash--Financing Activities..................................................................... 210,200
---------
Net Increase in Cash............................................................................... 60,200
Cash--Beginning of Period............................................................................ --
---------
Cash--End of Period................................................................................ $ 60,200
---------
---------
Supplemental Disclosures of Cash Flow Information:
Cash paid for the period for:
Interest........................................................................................ $ --
Income Taxes.................................................................................... $ --
</TABLE>
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
None.
See Notes to Financial Statements.
F-10
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Nature of Operations--Perry's Majestic Beer, Inc., a Delaware
corporation (the 'Company' or 'Perry's'), was formed in December 1995. There
have been no revenue or expense activities through March 31, 1996. The Company
became a subsidiary of Bev-Tyme, Inc. as of March 29, 1996 (See Note 3).
(B) Capital Stock--In January 1996, the Company issued 2,500,000 shares of
common stock to seven (7) parties for a total consideration of $50,000. At March
31, 1996, $45,200 was collected and the balance of $4,800, received April 4,
1996, is reflected as a stock subscription receivable.
(C) Earnings Per Share--The number of shares to be used for earnings per
share calculation purposes will be based on the number of shares issued and
outstanding for the period presented. Convertible Preferred Stock shares are not
included because their effect is anti-dilutive.
(D) Cash Equivalents--The Company's policy is to classify all highly liquid
debt instruments purchased with an initial maturity of three months or less to
be cash equivalents. There were no cash equivalents at March 31, 1996.
(E) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(F) Goodwill--Amounts paid in excess of the estimated value of net assets
acquired of Riverosa have been charged to goodwill. Goodwill is related to
revenues the Company anticipates realizing in future years. The Company has
decided to amortize its goodwill over a period of up to five years under the
straight-line method. The Company's policy is to evaluate the periods of
goodwill amortization to determine whether later events and circumstances
warrant revised estimates of useful lives. The Company also evaluates whether
the carrying value of goodwill has become impaired by comparing the carrying
value of goodwill to the value of projected undiscounted cash flows from
acquired assets or businesses. Impairment is recognized if the carrying value of
goodwill is less than the projected undiscounted cash flow from the acquired
assets or business.
(2) BUSINESS COMBINATION
On March 29, 1996, the Company entered into an agreement to acquire all of
the stock of Riverosa Company, Inc. for $250,000 of which $150,000 in cash was
put into escrow as of March 31, 1996 and a note payable was issued for $100,000.
The note is payable with interest of 8% and is due upon the earlier of one year
from the date of issuance or the closing of the Company's initial public
offering.
(3) INVESTMENT--RELATED PARTY
On March 29, 1996, the Company issued to Bev-Tyme, Inc. (a public
corporation) 500,000 shares of convertible Class A Preferred Stock and 7,000,000
shares of non-convertible Class B Preferred Stock for 400,000 shares of Series C
Preferred Stock of Bev-Tyme, Inc. (valued at $2,000,000) and $150,000. As of
March 31, 1996, $75,000 of cash was collected and the balance of $75,000, which
was received on April 4, 1996, is reflected as a note receivable on the
financial statements as of March 31, 1996. Each share of Class A Preferred Stock
may be convertible by the holder into one (1) share of Common Stock. Each share
of Class A Preferred Stock and Class B Preferred Stock has attached to it the
right to vote on all matters submitted to the Company.
The investment in Bev-Tyme, Inc. is classified as 'available for sale' and
is presented at estimated fair value.
(4) 1996 STOCK OPTION PLAN
In March 1996, the Board of Directors of the Company adopted, and the
stockholders of the Company approved the adoption of the 1996 Stock Option Plan.
The maximum number of shares of common stock with respect to which awards may be
granted pursuant to the 1996 Plan is initially 2,000,000 shares.
F-11
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) PROPOSED PUBLIC OFFERING
The Company is filing a registration statement for 583,335 shares of common
stock at $6.00 per share. The anticipated net proceeds from this offering are
approximately $2,548,009.
(6) BRIDGE LOAN
On March 31, 1996, the Company borrowed an aggregate of $150,000 from seven
(7) unaffiliated lenders (the 'Bridge Lenders'). In exchange for making loans to
the Company, each Bridge Lender received a promissory note (the 'Bridge Note').
Each of the Bridge Notes bears interest at the rate of eight percent (8%) per
annum. The Bridge Notes are due an payable upon the earlier of (i) July 31, 1996
and (ii) the closing of an initial underwritten public offering of the Company's
securities. The Company intends to use a portion of the proceeds of this
offering to repay the Bridge Lenders. As of March 31, 1996, $90,000 was received
in cash from the bridge loan and $60,000, received April 4, 1996, is reflected
on the financial statements as a note receivable at March 31, 1996.
(7) GOING CONCERN
As shown in the accompanying financial statements, the Company did not
generate cash from operations and had negative working capital for the period
ended March 31, 1996. These factors create an uncertainty about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern. The Company acquired Riverosa Company, Inc. for $250,000 (See
Note 2), and is pursuing a public offering of common stock as a vehicle for
financing future operations (See Note 5). The continuation of the Company as a
going concern is dependent upon the success of these plans.
(8) NEW AUTHORITATIVE PRONOUNCEMENTS
The Financial Accounting Standards Board ('FASB') issued Statement of
Financial Accounting Standards ('SFAS') No. 123, 'Accounting for Stock-Based
Compensation,' in October 1995. SFAS No. 123 uses a fair value based method of
accounting for stock options and similar equity instruments as contrasted to the
intrinsic valued based method of accounting prescribed by Accounting Principles
Board ('APB') Opinion No. 25, 'Accounting for Stock Issued to Employees.' The
Company has not decided if it will adopt SFAS No. 123 or continue to apply APB
Opinion No. 25 for financial reporting purposes. SFAS No. 123 will have to be
adopted for financial note disclosure purposes in any event. The accounting
requirements of SFAS No. 123 are effective for transactions entered into in
fiscal years that begin after December 15, 1995; the disclosure requirements of
SFAS No. 123 are effective for financial statements for fiscal years beginning
after December 15, 1995.
(9) FINANCIAL INSTRUMENTS
The carrying amount of cash, notes receivable and payable approximates fair
value because of their short maturities.
(10) SUBSEQUENT EVENTS (UNAUDITED)
On April 5, 1996, the Company entered into a one (1) year employment
agreement with Mark Butler pursuant to which Mr. Butler serves as the Company's
Vice President of Sales. The agreement provides for Mr. Butler to receive a
salary of $25,000 per annum and upon the close of the proposed public offering,
a salary of $50,000 per annum. The employment agreement also provides for an
annual bonus as well as stock options based upon performance.
On April 19, 1996, Perry's Majestic Beer, Inc. lent $75,000 to Bev-Tyme,
Inc.
F-12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders of
Riverosa Company, Inc.
New York, New York
We have audited the accompanying balance sheet of Riverosa Company, Inc. as of
December 31, 1995, and the related statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1995. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Riverosa Company, Inc. as of
December 31, 1995, and the consolidated results of their operations and their
cash flows for each of the two years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has incurred a net loss as a result of a
significant decrease in sales. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 7. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
April 1, 1996
F-13
<PAGE>
RIVEROSA COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current Assets:
Cash...................................................... $43,995 $ 38,782
Accounts Receivable....................................... 4,941 --
Inventory................................................. 9,460 11,175
----------- ------------
Total Current Assets...................................... 58,396 49,957
Other Asset:
Surety Bonds.............................................. 575 575
----------- ------------
Total Assets.............................................. $58,971 $ 50,532
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable and Accrued Expenses..................... $20,361 $ 4,571
Officers' Loan Payable.................................... 29,634 29,634
Income Taxes Payable...................................... 5,400 5,400
----------- ------------
Total Current Liabilities.............................. 55,395 39,605
----------- ------------
Commitments and Contingencies(5)............................ -- --
----------- ------------
Stockholders' Equity:
Common Stock--200 Shares, Authorized Issued and
Outstanding; No Par Value, $5.00 Stated Value.......... 1,000 1,000
Retained Earnings......................................... 2,576 9,927
----------- ------------
Total Stockholders' Equity.................................. 3,576 10,927
----------- ------------
Total Liabilities and Stockholders' Equity.................. $58,971 $ 50,532
----------- ------------
----------- ------------
</TABLE>
See Notes to Financial Statements.
F-14
<PAGE>
RIVEROSA COMPANY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
-------------------------- -------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales--Net.................................................. $24,136 $19,430 $81,185 $195,095
Cost of Goods Sold.......................................... 19,390 14,946 61,057 133,250
----------- ----------- ------- --------
Gross Profit.............................................. 4,746 4,484 20,128 61,845
----------- ----------- ------- --------
Selling, General and Administrative Expenses:
Selling, Advertising and Promotion........................ 7,283 530 3,187 8,023
General and Administrative Expenses....................... 4,064 2,005 14,307 23,347
----------- ----------- ------- --------
Total Selling, General and Administrative Expenses........ 11,347 2,535 17,494 31,370
----------- ----------- ------- --------
(Loss) Income from Operations............................. (6,601) 1,949 2,634 30,475
----------- ----------- ------- --------
Other (Income) Expense:
Interest Expense--Related Party........................... 750 2,320 8,499 10,214
Interest Income........................................... -- (509) (1,141) --
----------- ----------- ------- --------
Other Expenses--Net....................................... 750 1,811 7,358 10,214
----------- ----------- ------- --------
(Loss) Income Before Provision for Income Taxes........... (7,351) 138 (4,724) 20,261
Provision for Income Taxes.................................. -- -- -- 5,400
----------- ----------- ------- --------
Net (Loss) Income......................................... $(7,351) $ 138 $(4,724) $ 14,861
----------- ----------- ------- --------
----------- ----------- ------- --------
</TABLE>
See Notes to Financial Statements.
F-15
<PAGE>
RIVEROSA COMPANY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS AMOUNT
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993................................ 200 $1,000 $ (210) $ 790
Net Income for the year ended December 31, 1994........... -- -- 14,861 14,861
------ ------ -------- -------------
Balance at December 31, 1994................................ 200 1,000 14,651 15,651
Net (Loss) for the year ended December 31, 1995........... -- -- (4,724) (4,724)
------ ------ -------- -------------
Balance at December 31, 1995................................ 200 1,000 9,927 10,927
Net (Loss) for the three months ended March 31, 1996
(Unaudited)............................................ -- -- (7,351) (7,351)
------ ------ -------- -------------
Balance at March 31, 1996 (Unaudited)....................... 200 $1,000 $ 2,576 $ 3,576
------ ------ -------- -------------
------ ------ -------- -------------
</TABLE>
See Notes to Financial Statements.
F-16
<PAGE>
RIVEROSA COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
-------------------------- -------------------
1996 1995 1995 1994
----------- ----------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Operating Activities:
Net (Loss) Income......................................... $(7,351) $ 138 $ (4,724) $14,861
----------- ----------- -------- -------
Adjustments to Reconcile Net (Loss) Income to Net Cash
Provided by Operating Activities:
Bad Debt Expense....................................... -- 400 1,500 --
Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable.................................. (4,941) 10,400 40,420 9,898
Inventory............................................ 1,715 6,003 18,539 5,870
Other Assets......................................... -- -- -- (100)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses................ 15,790 (7,000) (3,391) (7,295)
Income Taxes Payable................................. -- -- 5,400
----------- ----------- -------- -------
Total Adjustments...................................... 12,564 9,803 57,068 13,773
----------- ----------- -------- -------
Net Cash--Operating Activities............................ 5,213 9,941 52,344 28,634
----------- ----------- -------- -------
Financing Activities:
Repayment of Officers' Loan Payable....................... -- (15,500) (71,502) --
----------- ----------- -------- -------
Net Increase (Decrease) in Cash and Cash Equivalents...... 5,213 (5,559) (19,158) 28,634
Cash and Cash Equivalents--Beginning of Period.............. 38,782 57,940 57,940 29,306
----------- ----------- -------- -------
Cash and Cash Equivalents--End of Period.................. $43,995 $ 52,381 $ 38,782 $57,940
----------- ----------- -------- -------
----------- ----------- -------- -------
Supplemental Disclosures of Cash Flow Information:
Cash paid for the period for:
Interest............................................... $ -- $ -- $ 8,499 $10,214
Income Taxes........................................... $ -- $ -- $ -- $ --
</TABLE>
See Notes to Financial Statements.
F-17
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the heading 'Experts' and to the
use of our report dated April 4, 1996, of Perry's Majestic Beer, Inc., modified
as to Perry's Majestic Beer, Inc.'s ability to continue as a going concern, and
our report dated April 1, 1996, of Riverosa Company, Inc., modified as to
Riverosa Company, Inc's. ability to continue as a going concern, in this
Registration Statement and related Prospectus of Perry's Majestic Beer, Inc.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
July 16, 1996
F-18
<PAGE>
RIVEROSA COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 IS UNAUDITED)
(1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General and Organization--Riverosa Company, Inc. (the 'Company') a New York
Corporation, was founded in November of 1992. The Company coordinates the
manufacturing and distributing of microbrewed beers and ales to customers
throughout the United States, but primarily in the New York metropolitan area.
Cash and Cash Equivalents--The Company classifies all highly liquid debt
instruments purchased with an initial maturity of three months or less to be
cash equivalents.
Inventory--Inventory is stated at the lower of cost or market (net
realizable value). Cost is comprised of packaging materials and includes
purchases and freight, and are determined on the first-in, first-out (FIFO)
basis.
Risk Concentrations--Financial instruments that potentially subject the
Company to concentrations of credit risk include cash and cash equivalents and
accounts receivable arising from its normal business activities. The Company
places its cash and cash equivalents with a high credit quality financial
institution. The Company's cash and cash equivalents have not been subject to
credit risk beyond insured amounts.
The Company routinely assesses the financial strength of its customers, and
based upon factors surrounding the credit risk of its customers, has established
an allowance for uncollectible accounts amounting to $1,500 at December 31,
1995, and, as a consequence, believes that its accounts receivable credit risk
exposure beyond this allowance is limited.
The Company currently facilitates the manufacture and distribution of its
products from one contract brewery. Although there are a limited number of
breweries, management believes that other suppliers could provide similar beers
on comparable terms. A change in brewery, however, could cause delay in
distribution and a possible loss of sales, which would affect operating results
adversely.
The Company relies on other wholesale distributors for resale of its
product to retailers. As a result, the Company faces the risk that their
distributors may face financial hardship. In addition, the Company is dependent
upon the distributor to provide the resources necessary to promote the Company's
product. The Company currently is highly dependent upon Bev-Tyme, Inc. for
distribution of the Company's beers (See Note 8). Although management believes
that other distributors are available, any material delays would affect
operating results adversely. To mitigate these risks, the Company continues to
explore opportunities to expand its distribution base.
The sale of Perry's Majestic Beer products have accounted for all of the
Company's sales since inception and the Company believes the sale of Perry's
products will continue to account for most of its sales in the foreseeable
future. As a result, the Company's future operating results are highly dependent
upon market acceptance of Perry's beer. In addition, as the sale of beer is
seasonal in nature, the results of the Company's operations may vary from
quarter to quarter.
Revenue Recognition--Revenue is recognized at the time products are shipped
and title passes.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-19
<PAGE>
RIVEROSA COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 IS UNAUDITED)
(2) INCOME TAXES
The components of the provisions for income tax are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------ ------
<S> <C> <C>
CURRENT:
Federal....................................................................... $ -- $2,800
State and Local............................................................... -- 3,800
Benefit of Net Operating Loss Carryforward.................................... -- (1,200)
------ ------
Total Current................................................................. -- 5,400
------ ------
DEFERRED:
Federal....................................................................... -- --
State......................................................................... -- --
------ ------
Total Deferred................................................................ -- --
------ ------
Total Provision for Income Taxes.............................................. $ -- $5,400
------ ------
------ ------
</TABLE>
The Company's effective income tax is different from what would be expected
if the federal statutory rate were applied to income from continuing operations
primarily because of state taxes and the use of operating loss benefits.
(3) OFFICERS' LOAN PAYABLE
Loans to officers are payable on demand with interest payable at 10% per
annum.
(4) FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents and trade payables
approximates fair value because of their short maturities. The carrying amount
of officers' loan payable approximates its fair market value.
(5) COMMITMENTS AND CONTINGENCIES
(A) Related Party--The Company operated in space owned by one of the
Company's shareholders and as a result has not incurred rent expense for the
year ended December 31, 1995 and 1994.
(B) The Company has minimum volume commitments on several of their
distribution contracts with vendors, whereby the vendor has the option to
terminate an agreement if certain volume targets are not met.
(C) Brewing Agreement--In November 1992, the Company's stockholders entered
into an agreement, on behalf of the Company, with a brewery to brew and bottle
beer under the private label of 'Perry's Majestic.' As part of the agreement,
the Company agrees to provides the brewery, at its own expense, all the
necessary packaging materials to allow the brewer to manufacture the product in
accordance with federal and state regulations.
The agreement automatically renews annually. Either party may terminate the
agreement by giving four month prior written notice to the other party.
(D) Significant Customer--In 1995, there were four customers who accounted
for 64% of the revenues. These customers which included Bev-Tyme, Inc. (See Note
8) and three other customers were 15%, 24%, 14% and 11% of 1995 revenues,
respectively.
F-20
<PAGE>
RIVEROSA COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 IS UNAUDITED)
(5) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
In 1994, there were two customers who accounted for 44% of the Company's
revenues. These customers which included Bev-Tyme, Inc. (See Note 8) and one
other customer were 31% and 13% of 1994 revenues, respectively.
(6) NEW AUTHORITATIVE PRONOUNCEMENTS
The Financial Accounting Standards Board ('FASB') issued Statement of
Financial Accounting Standards ('SFAS') No. 121, 'Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of,' in March of
1995. SFAS No. 121 established accounting standards for the impairment of long-
lived assets, certain identifiable intangibles, and goodwill related to those
assets to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. Adoption
of SFAS No. 121 is not expected to have a material impact on the Company's
financial statements.
(7) GOING CONCERN
As shown in the accompanying financial statements, the Company incurred a
net loss of approximately $5,000 for the year ended December 31, 1995 as a
result of a significant decrease in sales. These factors create an uncertainty
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. The Company has been acquired by
Perry's Majestic Beer, Inc., which intends to pursue a public offering as a
vehicle for financing future operations to expand the distribution base of its
products. The continuation of the Company as a going concern is dependent upon
the success of these plans.
(8) SUBSEQUENT EVENTS
On March 29, 1996, the Company entered into an agreement to be acquired by
Perry's Majestic Beer, Inc. for $250,000.
Also on March 29, 1996, Perry's Majestic Beer, Inc. issued preferred stock
to Bev-Tyme, Inc. (a public corporation) for 400,000 shares of Series C
Preferred Stock of Bev-Tyme, Inc. and $150,000.
F-21
<PAGE>
------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER WOULD BE UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.......................... 2
Prospectus Summary............................. 3
The Company.................................. 3
The Offering................................. 4
Summary Financial Information.................. 6
Risk Factors................................... 7
Use of Proceeds................................ 17
Dilution....................................... 19
Capitalization................................. 20
Dividend Policy................................ 21
Selected Financial Data........................ 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 26
Management..................................... 33
Principal Stockholders......................... 36
Certain Transactions........................... 37
Description of Securities...................... 38
Selling Securityholders........................ 42
Underwriting................................... 43
Legal Matters.................................. 44
Experts........................................ 44
Additional Information......................... 44
Financial Statements........................... F-1
</TABLE>
------------------------
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
583,335 SHARES OF COMMON STOCK,
PAR VALUE $.0001 PER SHARE
PERRY'S MAJESTIC BEER, INC.
------------------------
PROSPECTUS
------------------------
VTR CAPITAL, INC.
, 1996
------------------------------------------------------
<PAGE>
ALTERNATE PAGE
PROSPECTUS SUBJECT TO COMPLETION, DATED JULY 26, 1996
PERRY'S MAJESTIC BEER, INC.
2,500,000 SHARES OF COMMON STOCK
------------------------
This Prospectus relates to the sale of 2,500,000 shares of Common Stock,
owned by certain selling securityholders, hereinafter collectively referred to
as the 'Selling Securityholders.' The Company will not receive any of the
proceeds on the sale of the securities by the Selling Securityholders. The
shares being registered on behalf of the Selling Securityholders constitute 100%
of such outstanding shares prior to the Offering and 81% of the outstanding
shares of Common Stock upon completion of the Offering. The resale of the
securities of the Selling Securityholders are subject to Prospectus delivery and
other requirements of the Securities Act of 1933, as amended (the 'Act'). Sales
of such securities or the potential of such sales at any time may have an
adverse effect on the market prices of the securities offered hereby. See
'Selling Securityholders' and 'Risk Factors--Shares Eligible for Future Sale May
Adversely Affect the Market.'
The Company has applied for inclusion of the Common Stock on The OTC
Bulletin Board, although there can be no assurances that an active trading
market will develop even if the securities are accepted for quotation. See 'Risk
Factors--Lack of Prior Market for Common Stock; No Assurance of Public Trading
Market.'
The Common Stock offered by this Prospectus may be sold from time to time
by the Selling Securityholders, or by their transferees. No underwriting
arrangements have been entered into by the Selling Securityholders. The
distribution of the securities by the Selling Securityholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares 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 in connection with sales of such securities.
The Selling Securityholders and intermediaries through whom such securities
may be sold may be deemed 'underwriters' within the meaning of the Securities
Act of 1933, as amended (the '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 Act.
The Company will not receive any of the proceeds from the sale of the
securities by the Selling Securityholders. All costs incurred in the
registration of the securities of the Selling Securityholders are being borne by
the Company. See 'Selling Securityholders.'
------------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
OFFERED HEREBY AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD
THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
'DILUTION' AND 'RISK FACTORS.'
------------------------
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.
THE DATE OF THIS PROSPECTUS IS , 1996
ALT-1
<PAGE>
ALTERNATE PAGE
COMPANY OFFERING
On the date of this Prospectus, a Registration Statement under the Act with
respect to an underwritten public offering (the 'Offering') of 583,335 shares of
Common Stock, par value $.0001, per share ('Shares') by the Company was declared
effective by the Securities and Exchange Commission ('SEC'), and the Company
commenced the sale of shares offered thereby. Sales of securities under this
Prospectus by the Selling Securityholders or even the potential of such sales
may have an adverse effect on the market price of the Company's securities.
SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part also
covers the sale of 2,500,000 shares of Common Stock held by securityholders of
the Company, 120,000 of which are held by an officer of the Company collectively
referred to as the 'Selling Securityholders.' The shares being registered on
behalf of the Selling Securityholders constitute 100% of such outstanding shares
prior to the Offering and 81% of the outstanding shares of Common Stock upon
completion of the Offering. The Company will not receive any of the proceeds on
the sale of the securities by the Selling Securityholders. The resale of the
securities of the Selling Securityholders are subject to Prospectus delivery and
other requirements of the Securities Act of 1933, as amended (the 'Act'). Sales
of such securities or the potential of such sales at any time may have an
adverse effect on the market prices of the securities offered hereby. See 'Risk
Factors--Shares Eligible for Future Sale May Adversely Affect the Market.'
Accordingly, an additional 2,500,000 shares of Common Stock will become
transferrable at such time.
The following table sets forth the holders of the shares of Common Stock
which are being offered by the Selling Securityholders and the number of shares
owned before the Offering, the number of shares being offered and the number of
shares and the percentage of the class to be owned after the Offering is
complete.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON COMMON SHARES OF PERCENT OF
STOCK OWNED STOCK STOCK OWNED COMMON
BEFORE OFFERED AFTER STOCK AFTER
NAME OFFERING HEREBY OFFERING OFFERING
- ------------------------------------------------------------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Robert Sipper..................................................... 120,000 120,000 0 0
Ulster Investments Ltd............................................ 120,000 120,000 0 0
Hartley Bernstein................................................. 500,000 500,000 0 0
First National Fund Corp.......................................... 120,000 120,000 0 0
Matthew Harriton.................................................. 50,000 50,000 0 0
Marketing Specialities, Inc....................................... 1,470,000 1,470,000 0 0
Judith Pace....................................................... 120,000 120,000 0 0
----------- --------- ----------- -----
Total............................................................. 2,500,000 2,500,000 0 0
----------- --------- ----------- -----
----------- --------- ----------- -----
</TABLE>
ALT-2
<PAGE>
ALTERNATE PAGE
PLAN OF DISTRIBUTION
The securities offered hereby may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares 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 in connection with such sales of securities. The securities
offered by the Selling Securityholders may be sold by one or more of the
following methods, without limitations: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. The Selling Securityholders
and intermediaries through whom such securities are sold may be deemed
'underwriters' within the meaning of the Act with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a Prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
Offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for sales purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers and the proposed selling price to the public.
Sales of securities by the Selling Securityholders or even the potential of
such sales would likely have an adverse effect on the market prices of the
securities offered hereby. See 'Company Offering.'
ALT-3
<PAGE>
------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER WOULD BE UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.......................... 2
Prospectus Summary............................. 3
The Company.................................. 3
The Offering................................. 4
Summary Financial Information.................. 6
Risk Factors................................... 7
Use of Proceeds................................ 17
Dilution....................................... 19
Capitalization................................. 20
Dividend Policy................................ 21
Selected Financial Data........................ 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 26
Management..................................... 33
Principal Stockholders......................... 36
Certain Transactions........................... 37
Description of Securities...................... 38
Company Offering............................... 42
Selling Securityholders........................ 42
Underwriting................................... 43
Legal Matters.................................. 44
Experts........................................ 44
Additional Information......................... 44
Financial Statements........................... F-1
</TABLE>
2,500,000 SHARES OF COMMON STOCK
PERRY'S MAJESTIC BEER, INC.
------------------------
PROSPECTUS
------------------------
VTR CAPITAL, INC.
, 1996
------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In connection with the Offering, the Representative agreed to indemnify the
Company, its directors, and each person who controls it within the meaning of
Section 15 of the Act with respect to any statement in or omission from the
registration statement or the Prospectus or any amendment or supplement thereto
if such statement or omission was made in reliance upon information furnished in
writing to the Company by the Representative specifically for or in connection
with the preparation of the registration statement, the prospectus, or any such
amendment or supplement thereto.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers provided that this provision shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
arising under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of Stockholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section
102(b)(7) of the Delaware General Corporation Law.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
The Company does not currently have any liability insurance coverage for
its officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this Offering are as follows:
<TABLE>
<S> <C>
SEC filing fee*......................................................... $ 10,000
The Nasdaq Small Cap Market filing fee.................................. 11,000
NASD filing fee......................................................... 2,000
Accounting fees and expenses*........................................... 75,000
Legal fees and expenses*................................................ 175,000
Blue Sky fees and expenses*............................................. 55,000
Printing and engraving*................................................. 65,000
Transfer Agent's and Registrar's fees*.................................. 4,000
Miscellaneous expenses*................................................. 28,000
Consulting fees......................................................... 72,000
--------
Total.............................................................. $497,000
--------
--------
</TABLE>
- ------------------
* Estimated
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following information sets forth all securities of the Company sold by
it since inception, which securities were not registered under the Securities
Act of 1933, as amended:
In January 1996, the Company issued 2,500,000 shares of Common Stock to
seven (7) parties for a total consideration of $50,000.
In March, 1996, the Company borrowed an aggregate of $150,000 from seven
(7) unaffiliated lenders (the 'Bridge Lenders'). In exchange for making loans to
the Company, each Bridge Lender received a promissory note (the 'Bridge Note').
Each of the Bridge Notes bears interest at the rate of eight percent (8%) per
annum. The Bridge Notes are due and payable upon the earlier of (i) July 31,
1996 and (ii) the closing of an initial underwritten public offering of the
Company's securities. The Company intends to use a portion of the proceeds of
this Offering to repay the Bridge Lenders. See 'Use of Proceeds.' The Bridge
Lenders were granted the right to receive a total of 3,000,000 Class A Warrants.
The Bridge Lenders subsequently waived that right. See 'Bridge Financings' and
'Underwriting.'
In March, 1996, the Company issued 50,000 shares of Series A Preferred
Stock and 7,000,000 shares of Series B Preferred Stock to Bev-Tyme, Inc. for
consideration of $150,000 and 400,0000 shares of Series C Preferred Stock of
Bev-Tyme.
The Company has relied on Section 4(2) of the Securities Act of 1933, as
amended, for its private placement exemption, such that the sales of the
securities were transactions by an issuer not involving any public offering.
Reference is also made hereby to 'Certain Transactions,' 'Dilution,'
'Principal Stockholders' and 'Description of Securities' in the Prospectus for
more information with respect to the previous issuance and sale of the Company's
securities.
All of the aforesaid securities have been appropriately marked with a
restricted legend and are 'restricted securities' as defined in Rule 144 of the
rules and the regulations of the Securities and Exchange Commission, Washington
D.C. 20549. All of the aforesaid securities were issued for investment purposes
only and not with a view to redistribution, absent registration. All of the
aforesaid persons have been fully informed and advised concerning the
Registrant, its business, financial and other matters. Transactions by the
Registrant involving the sales of these securities set forth above were issued
pursuant to the 'private placement' exemptions under the Securities Act of 1933,
as amended, as transactions by an issuer not involving any public offering. The
Registrant has been informed that each person is able to bear the economic risk
of his investment and is aware that the securities were not registered under the
Securities Act of 1933, as amended, and cannot be re-offered or re-sold until
they have been so registered or until the availability of an exemption
therefrom. The Transfer Agent and registrar of the Registrant will be instructed
to mark 'stop transfer' on its ledgers to assure that these securities will not
be transferred absent registration or until the availability of an exemption
therefrom is determined.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
1.01 -- Form of Underwriting Agreement.
1.02 -- Form of Selected Dealers Agreement.
3.01* -- Certificate of Incorporation of the Company.
3.02* -- Amendment of Certificate of Incorporation.
3.03* -- By-Laws of the Company.
3.04 -- Form of Certificate of Designation of Series A Preferred Stock.
3.05 -- Form of Certificate of Designation of Series B Preferred Stock.
4.01 -- Specimen Certificate for shares of Common Stock.
4.04 -- Form of Representative's Share Purchase Option.
5.01 -- Opinion of Bernstein & Wasserman, LLP, counsel to the Company.
10.01* -- Bridge Loan Agreements and Related Promissory Notes.
10.02 -- 1996 Stock Plan.
10.03* -- Agreement by and between the Company and Riverosa dated March 31, 1996.
10.04* -- Form of Financial Consulting Agreement by and between the Company and VTR Capital, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
10.05* -- Agreement by and between the Company and Frankenmuth Brewery.
10.06* -- Agreement by and between the Company and Hoboken Brewing Company dated July 15, 1996.
10.07 -- Employment Agreement by and between the Company and Robert J. Sipper dated April 4, 1996.
10.08 -- Employment Agreement by and between the Company and Mark Butler dated April 4, 1996.
23.01 -- Consent of Bernstein & Wasserman, LLP (to be included in Exhibit 5.01).
23.02 -- Consent of Moore Stephens, P.C.
</TABLE>
- ------------------
* Previously filed.
ITEM 28. UNDERTAKINGS.
(a) Rule 415 Offering
The undersigned Registrant will:
1. File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Act, treat each such
post-effective amendment as a new registration statement of the securities
offered, and the Offering of such securities at that time shall be deemed
to be the initial bona fide offering.
3. File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the Offering.
(b) Equity Offerings of Nonreporting Small Business Issuers
The undersigned Registrant will provide to the Representative at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Representative to
permit prompt delivery to each purchaser.
(c) Indemnification
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the provisions referred to in Item 22 of this Registration Statement
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.
(d) Rule 430A
The undersigned Registrant will:
1. For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in the form of a
prospectus filed by the small business issuer under Rule 424(b)(1) or (4)
or 497(h) under the Act as part of this Registration Statement as of the
time the Commission declared it effective.
2. For any liability under the Act, treat each post-effective
amendment that contains a form of prospectus as a new registration
statement for the securities offered in the Registration Statement, and
that the Offering of the securities at that time as the initial bona fide
Offering of those securities.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant, certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in New
York, New York on July 25, 1996.
PERRY'S MAJESTIC BEER, INC.
By: /s/ ROBERT SIPPER
--------------------------------
President, Chief Executive Officer,
Chief Financial Officer and Principal
Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendments thereto has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT SIPPER President, Chief Executive Officer, Chief July 25, 1996
- ------------------------------------------- Financial Officer, Principal Accounting
Robert Sipper Officer and Director
- ------------------------------------------- Vice President--Sales, Secretary
Mark Butler and Director
/s/ MATTHEW HARRITON Director July 25, 1996
- -------------------------------------------
Matthew Harriton
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
1.01 -- Form of Underwriting Agreement.
1.02 -- Form of Selected Dealers Agreement.
3.01* -- Certificate of Incorporation of the Company.
3.02* -- Amendment of Certificate of Incorporation.
3.03* -- By-Laws of the Company.
3.04 -- Form of Certificate of Designation of Series A Preferred Stock.
3.05 -- Form of Certificate of Designation of Series B Preferred Stock.
4.01 -- Specimen Certificate for shares of Common Stock.
4.04 -- Form of Representative's Share Purchase Option.
5.01 -- Opinion of Bernstein & Wasserman, LLP, counsel to the Company.
10.01* -- Bridge Loan Agreements and Related Promissory Notes.
10.02 -- 1996 Stock Plan.
10.03* -- Agreement by and between the Company and Riverosa dated March 31, 1996.
10.04* -- Form of Financial Consulting Agreement by and between the Company and VTR Capital, Inc.
10.05* -- Agreement by and between the Company and Frankenmuth Brewery.
10.06* -- Agreement by and between the Company and Hoboken Brewing Company dated July 15, 1996.
10.07 -- Employment Agreement by and between the Company and Robert J. Sipper dated April 4, 1996.
10.08 -- Employment Agreement by and between the Company and Mark Butler dated April 4, 1996.
23.01 -- Consent of Bernstein & Wasserman, LLP (to be included in Exhibit 5.01).
23.02 -- Consent of Moore Stephens, P.C.
</TABLE>
- ------------------
* Previously filed.
<PAGE>
583,335 Shares of Common Stock,
par value $.0001 per share,
and one Class A Redeemable Common Stock Purchase Warrant
to purchase one share of Common Stock)
PERRY'S MAJESTIC BEER, INC.
UNDERWRITING AGREEMENT
New York, New York
_____________________, 1996
VTR Capital, Inc.
99 Wall Street -- 20th Floor
New York, New York 10005
Perry's Majestic Beer, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Underwriter") an aggregate of 583,335
shares of Common Stock, par value $.0001 per share ("Common Stock").
Unless the context otherwise requires, the aggregate of 583,335 shares to
be sold by the Company are herein called the "Shares" or the "Securities."
You have advised the Company that you desire to purchase the Shares. The
Company confirms the agreements made by it with respect to the purchase of the
Shares by the Underwriter as follows:
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with the Underwriter that:
(a) A registration statement (File No. 333-3458) on Form SB-2 relating
to the public offering of the Shares, including a form of prospectus subject to
completion, copies of which have heretofore been delivered to the Underwriter,
has been prepared in conformity with the requirements of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act and one or more
amendments to such registration statement may have been so filed. After the
execution of this Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed, in such registration statement),
with such changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and
<PAGE>
approved by the Underwriter prior to the execution of this Agreement, or (ii) if
such registration statement, as it may have been amended, has not been declared
by the Commission to be effective under the Act, an amendment to such
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Underwriter prior to the
execution of this Agreement. As used in this Agreement, the term "Registration
Statement" means such registration statement, as amended at the time when it was
or is declared effective, including all financial schedules and exhibits thereto
and including any information omitted therefrom pursuant to Rule 430A under the
Act and included in the Prospectus (as hereinafter defined); the term
"Preliminary Prospectus" means each prospectus subject to completion filed with
such registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); and the term
"Prospectus" means the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act, or, if no prospectus is required to be filed pursuant
to said Rule 424(b), such term means the prospectus included in the Registration
Statement.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus. At the time the Registration Statement
becomes effective and at all times subsequent thereto up to and on the Closing
Date (as hereinafter defined), (i) the Registration Statement and Prospectus
will in all respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus will
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make statements therein not
misleading; provided, however, that the Company makes no representations,
warranties or agreements as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation thereof. It is understood that, for
purposes of this Section and Section 6(b), the only information furnished in
writing by or on behalf of the Underwriter for inclusion in the Registration
Statement and the Prospectus, is the statements set forth in the Prospectus on
page 2 with respect to stabilization, the paragraph under the heading
"Underwriting" relating to concessions to certain dealers and the identity of
counsel to the Underwriter under the heading "Legal Matters."
(c) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware with full
corporate power and authority to own its properties and conduct its business as
described in the Prospectus and is duly qualified or licensed to do business as
a foreign corporation and is in good standing in New York and in each other
jurisdiction in which the nature of its business or the character or location of
its properties requires such qualification, except where the failure to so
qualify will not materially adversely affect the Company's business, properties
or financial condition.
(d) The authorized, issued and outstanding capital stock of the
Company as of the date hereof is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and nonassessable; except as set forth in the Prospectus, no options,
warrants, or other rights to purchase, agreements or other obligations to issue,
or agreements or other rights to convert any obligation into, any shares of
capital stock of the Company have been granted or entered into by the Company;
and the capital stock conforms to all statements relating thereto contained in
the Registration Statement and Prospectus.
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(e) The Shares are duly authorized, and when issued and delivered
pursuant to this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights of any security holder of the
Company. Neither the filing of the Registration Statement nor the offering or
sale of the Shares as contemplated in this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock, except as described in the
Registration Statement.
The Shares contained in the Share Purchase Option (as defined in the
Registration Statement) have been duly authorized and, when duly issued and
delivered, such Warrants will constitute valid and legally binding obligations
of the Company enforceable in accordance with their terms and entitled to the
benefits provided by the Share Purchase Option, except as enforceability may be
limited by bankruptcy, insolvency or other laws affecting the rights of
creditors generally or by general equitable principles and the indemnification
contained in paragraph 7 of the Share Purchase Option may be unenforceable. The
shares of Common Stock included in the Share Purchase Option when issued and
sold will be duly authorized, validly issued, fully paid and non-assessable and
free of preemptive rights and no personal liability will attach to the ownership
thereof.
(f) This Agreement and the Share Purchase Option have been duly and
validly authorized, executed, and delivered by the Company. The Company has full
power and authority to authorize, issue, and sell the Shares to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is required
in connection with such authorization, execution and delivery or in connection
with the authorization, issuance, and sale of the Shares or the Share Purchase
Option, except such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, and except to the extent
noncompliance with the following would not have a material adverse effect on the
condition (financial or otherwise), business prospects, net worth or properties
of the Company (a "Material Adverse Effect"), the Company is not in violation,
breach, or default of or under, and consummation of the transactions herein
contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge, or encumbrance upon any of the property or
assets of the Company pursuant to the terms of any material indenture, mortgage,
deed of trust, loan agreement, or other agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
property or assets of the Company is subject, nor will such action result in any
violation of the provisions of the articles of incorporation or the by-laws of
the Company, as amended, or any statute or any order, rule or regulation
applicable to the Company of any court or of any regulatory authority or other
governmental body having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus, the
Company has good and marketable title to all properties and assets described in
the Prospectus as owned by the Company, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to its business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, the Company is not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and, to the best knowledge of the Company, no claim has been asserted
by anyone adverse to rights of the Company as lessor, sublessor, lessee, or
sublessee under any of the leases or subleases mentioned above, or affecting or
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<PAGE>
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company owns or leases all
such properties described in the Prospectus as are necessary to its operations
as now conducted and, except as otherwise stated in the Prospectus, as proposed
to be conducted as set forth in the Prospectus.
(i) Subject to the qualifications stated in the Prospectus, the
Company possesses all right, title and interest in and to certain assets,
including intellectual property, which are the subject of an Asset Purchase
Agreement dated March 29, 1996 by and between the Company and Riverosa Company,
Inc., free and clear of all liens, claims, charges, encumbrances, restrictions,
or ownership interest or claims of any other person, and the Company is not in
violation, breach, or default of or under, and consummation of the transactions
herein contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, such Asset Purchase Agreement.
(j) Moore Stephens, P.C., who have given their reports on certain
financial statements filed with the Commission as a part of the Registration
Statement, are with respect to the Company, independent public accountants as
required by the Act and the Rules and Regulations.
(k) The financial statements and schedules, together with related
notes, set forth in the Prospectus or the Registration Statement present fairly
the financial position and results of operations and changes in cash flow
position of the Company on the basis stated in the Registration Statement, at
the dates and for the periods to which they apply. Said statements and schedules
and related notes have been prepared in accordance with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved except as disclosed in the Prospectus and Registration Statement. The
information set forth under the caption "Selected Financial Data" in the
Prospectus fairly presents, on the basis stated in the Prospectus, the
information included therein.
(l) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and except as otherwise
disclosed or contemplated therein, the Company has not incurred any liabilities
or obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which would
have a material adverse effect, and there has not been any change in the capital
stock of, or any incurrence of short-term or long-term debt by, the Company or
any issuance of options, warrants or other rights to purchase the capital stock
of the Company or any material adverse change or any development involving, so
far as the Company can now reasonably foresee, a prospective adverse change in
the condition (financial or other), net worth, results of operations, business,
key personnel or properties of it which would be material to the business or
financial condition of the Company.
(m) Except as set forth in the Prospectus, there is not now pending
or, to the knowledge of the Company, threatened, any action, suit or proceeding
to which the Company is a party before or by any court or governmental agency or
body, which might result in any material adverse change in the condition
(financial or other), business prospects, net worth, or properties of the
Company, nor are there any actions, suits or proceedings related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race; and no labor disputes involving the employees of the Company
exist or, to the knowledge of the Company, are threatened which might be
expected to adversely affect the conduct of the business, property or operations
or the financial condition or results of operations of the Company.
4
<PAGE>
(n) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state, and foreign income and franchise tax returns required
to be filed as of the date hereof and has paid all taxes shown as due thereon;
and there is no tax deficiency which has been asserted against the Company.
(o) Except as disclosed in the Registration Statement, the Company has
sufficient licenses, permits, and other governmental authorizations currently
necessary for the conduct of its business or the ownership of its properties as
described in the Prospectus and are in all material respects complying therewith
and owns or possesses adequate rights to use all material patents, patent
applications, trademarks, service marks, trade-names, trademark registrations,
service mark registrations, copyrights, and licenses necessary for the conduct
of such businesses and has not received any notice of conflict with the asserted
rights of others in respect thereof. To the best knowledge of the Company, none
of the activities or business of the Company is in violation of, or may cause
the Company to violate, any law, rule, regulation, or order of the United
States, any country, state, county, or locality, or of any agency or body of the
United States or of any country, state, county or locality, the violation of
which would have a Material Adverse Effect.
(p) The Company has not, directly or indirectly, at any time (i) made
any contributions to any candidate for political office, or failed to disclose
fully any such contribution in violation of law or (ii) made any payment to any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(q) On the Closing Dates (as hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Shares to the Underwriter hereunder
will have been fully paid or provided for by the Company and all laws imposing
such taxes will have been complied with in all material respects.
(r) All contracts and other documents of the Company which are, under
the Rules and Regulations, required to be filed as exhibits to the Registration
Statement have been so filed.
(s) The Company has no subsidiaries.
(t) Except as disclosed in the Registration Statement, the Company has
not entered into any agreement pursuant to which any person is entitled either
directly or indirectly to compensation from the Company for services as a finder
in connection with the proposed public offering.
(u) Except as disclosed in the Prospectus, no officer, director, or
stockholder of the Company has any National Association of Securities Dealers,
Inc. (the "NASD") affiliation.
2. Purchase, Delivery and Sale of the Shares
(a) Subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties, and agreements herein contained,
the Company agrees to issue and sell
5
<PAGE>
to the Underwriter, and the Underwriter agrees to buy from the Company at
$______________ per Share, at the place and time hereinafter specified, 583,335
Shares.
Delivery of the Shares against payment therefor shall take place at
the offices of Bernstein & Wasserman, LLP, 950 Third Avenue, New York, New York
(or at such other place as may be designated by agreement between the
Underwriter and the Company) at 10:00 a.m., New York time, on
_____________________, 1996, or at such later time and date as the Underwriter
may designate in writing to the Company at least two business days prior to such
purchase, but not later than _____________________, 1996, such time and date of
payment and delivery for the Shares being herein called the "Closing Date."
(b) The Company will make the certificates for the securities
comprising the Shares to be purchased by the Underwriter hereunder available to
the Underwriter for checking at least two full business days prior to the
Closing Date. The certificates shall be in such names and denominations as the
Underwriter may request, at least three full business days prior to the Closing
Date. Delivery of the certificates at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Shares to be
purchased by the Underwriter hereunder will be delivered by the Company to the
Underwriter for the account of the Underwriter against payment of the respective
purchase prices by the Underwriter, by certified or bank cashier's checks in New
York Clearing House funds, payable to the order of the Company.
It is understood that the Underwriter proposes to offer the Shares to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
3. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective. If required, the Company will file the Prospectus
and any amendment or supplement thereto with the Commission in the manner and
within the time period required by Rule 424(b) under the Act. Upon notification
from the Commission that the Registration Statement has become effective, the
Company will so advise the Underwriter and will not at any time, whether before
or after the effective date, file any amendment to the Registration Statement or
supplement to the Prospectus of which the Underwriter shall not previously have
been advised and furnished with a copy or to which the Underwriter or its
counsel shall have reasonably objected in writing or which is not in compliance
with the Act and the Rules and Regulations. At any time prior to the later of
(A) the completion by the Underwriter of the distribution of the Shares
contemplated hereby (but in no event more than nine months after the date on
which the Registration Statement shall have become or been declared effective)
and (B) 25 days after the date on which the Registration Statement shall have
become or been declared effective, the Company will prepare and file with the
Commission, promptly upon the Underwriter's request, any amendments or
supplements to the Registration Statement or Prospectus which, in the opinion of
counsel to the Company and the Underwriter, may be reasonably necessary or
advisable in connection with the distribution of the Shares.
As soon as the Company is advised thereof, the Company will advise the
Underwriter, and provide the Underwriter copies of any written advice, of the
receipt of any comments
6
<PAGE>
of the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or any
amended Prospectus, of any request made by the Commission for an amendment of
the Registration Statement or for supplementing of the Prospectus or for
additional information with respect thereto, of the issuance by the Commission
or any state or regulatory body of any stop order or other order or threat
thereof suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Shares for offering in any jurisdiction,
or of the institution of any proceedings for any of such purposes, and will use
its best efforts to prevent the issuance of any such order, and, if issued, to
obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to the Underwriter copies of
each Preliminary Prospectus, and the Company has consented and hereby consents
to the use of such copies for the purposes permitted by the Act. The Company
authorizes the Underwriter and dealers to use the Prospectus in connection with
the sale of the Shares for such period as in the opinion of counsel to the
Underwriter and the Company the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of the
happening, at any time within such period as a Prospectus is required under the
Act to be delivered in connection with sales by the Underwriter or dealer of any
event of which the Company has knowledge and which materially affects the
Company or the securities of the Company, or which in the opinion of counsel for
the Company and counsel for the Underwriter should be set forth in an amendment
of the Registration Statement or a supplement to the Prospectus in order to make
the statements therein not then misleading, in light of the circumstances
existing at the time the Prospectus is required to be delivered to a purchaser
of the Shares or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the Rules and Regulations, the Company
will notify the Underwriter promptly and forthwith prepare and furnish to the
Underwriter copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as the Underwriter may reasonably
request, in order that the Prospectus, as so amended or supplemented, will not
contain any untrue statement of a material fact or omit to state any material
facts necessary in order to make the statements in the Prospectus, in the light
of the circumstances under which they are made, not misleading. The preparation
and furnishing of any such amendment or supplement to the Registration Statement
or amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriter, except that in case the Underwriter is
required, in connection with the sale of the Shares, to deliver a Prospectus
nine months or more after the effective date of the Registration Statement, the
Company will upon request of and at the expense of the Underwriter, amend or
supplement the Registration Statement and Prospectus and furnish the Underwriter
with reasonable quantities of prospectuses complying with Section 10(a)(3) of
the Act.
The Company will comply with the Act, the Rules and Regulations and
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder in connection with the offering and issuance of the
Shares.
(b) The Company will furnish such information as may be required and
to otherwise cooperate and use its best efforts to qualify to register the
Shares for sale under the securities or "blue sky" laws of such jurisdictions as
the Underwriter may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities or to execute a general consent of service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the Shares. The Company will, from time to time,
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<PAGE>
prepare and file such statements and reports as are or may be required to
continue such qualification in effect for so long a period as the counsel to the
Company and the Underwriter deem reasonably necessary.
(c) If the sale of the Shares provided for herein is not consummated
as a result of the Company not performing its obligations hereunder in all
material respects, the Company shall pay (i) all costs and expenses incurred by
it which are incident to the performance of the Company's obligations hereunder,
including but not limited to, all of the expenses itemized in Section 8, and
(ii) the accountable expenses of the Underwriter (including the reasonable fees
and expenses of counsel to the Underwriter) not exceeding $100,000 in the
aggregate.
(d) The Company will use its best efforts to (i) cause a registration
statement under the Securities Exchange Act of 1934 to be declared effective
concurrently with the completion of this offering and will notify you in writing
immediately upon the effectiveness of such registration statement, and (ii) if
requested by you, to obtain and keep current a listing in the Standard & Poors
or Moody's OTC Industrial Manual.
(e) For so long as the Company is a reporting company under either
Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the Company, at
its expense, will furnish to its stockholders an annual report (including
financial statements audited by independent public accountants), in reasonable
detail and at its expense, will furnish to the Underwriter during the period
ending five (5) years from the date hereof, (i) as soon as practicable after the
end of each fiscal year, but no earlier than the filing of such information with
the Commission a balance sheet of the Company and any of its subsidiaries as at
the end of such fiscal year, together with statements of income, surplus and
cash flow of the Company and any subsidiaries for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of independent accountants; (ii) as soon as practicable after the end of each of
the first three fiscal quarters of each fiscal year, but no earlier than the
filing of such information with the Commission, consolidated summary financial
information of the Company for such quarter in reasonable detail; (iii) as soon
as they are publicly available, a copy of all reports (financial or other)
mailed to security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with the
Commission or any securities exchange or automated quotation system on which any
class of securities of the Company is listed; and (v) such other information as
the Underwriter may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will deliver to the Underwriter at or before the
Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon the Underwriter's order, from time
to time until the effective date of the Registration Statement, as many copies
of any Preliminary Prospectus filed with the Commission prior to the effective
date of the Registration Statement as the Underwriter may reasonably request.
The Company will deliver to the Underwriter on the effective date of the
Registration Statement and
8
<PAGE>
thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as the Underwriter may from time to time
reasonably request.
(h) The Company will make generally available to its security holders
and deliver to the Underwriter as soon as it is practicable to do so but in no
event later than 90 days after the end of twelve months after its current fiscal
quarter, an earnings statement (which need not be audited) covering a period of
at least twelve consecutive months beginning after the effective date of the
Registration Statement, which shall satisfy the requirements of Section 11(a) of
the Act.
(i) The Company will apply the net proceeds from the sale of the
Shares substantially for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Shares and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.
(j) The Company will promptly prepare and file with the Commission any
amendments or supplements to the Registration Statement, Preliminary Prospectus
or Prospectus and take any other action, which in the opinion of counsel to the
Underwriter and counsel to the Company, may be reasonably necessary or advisable
in connection with the distribution of the Shares, and will use its best efforts
to cause the same to become effective as promptly as possible.
(k) The Company will reserve and keep available that maximum number of
its authorized but unissued securities which are issuable upon exercise of the
Share Purchase Option outstanding from time to time.
(l) Upon completion of this offering, the Company will make all
filings required, including registration under the Securities Exchange Act of
1934, and will use its best efforts to obtain the listing of the Common Stock on
the OTC Bulletin Board and will use its best efforts to effect and maintain such
listing for at least five years from the date of this Agreement to the extent
that the Company has at least 300 record holders of Common Stock.
(m) Except for the transactions contemplated by this Agreement, the
Company represents that it has not taken and agrees that it will not take,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Shares or to facilitate the sale or resale of
the Shares.
(n) On the First Closing Date and simultaneously with the delivery of
the Shares, the Company shall execute and deliver to the Underwriter the Share
Purchase Option. The Share Purchase Option will be substantially in the form
filed as an Exhibit to the Registration Statement.
(o) During the twelve month period commencing on the Closing Date, the
Company will not, without the prior written consent of the Underwriter, issue,
sell, offer to sell, grant option for the sale of, acquire any option to dispose
of, or otherwise dispose of (directly or indirectly) any of the Company's
securities, including, without limitation, shares of Common Stock, except as set
forth in the Registration Statement.
(p) For a period of five (5) years from the Effective Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit) (i) the Company's financial
statements for each of the first three (3) fiscal quarters prior to the
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announcement of quarterly financial information, (ii) each of the Company's
quarterly reports on Form 10-Q filed with the Commission, and (iii) all
quarterly financial information mailed to stockholders. The Company shall not be
required to file a report of such accountants relating to such review of any of
the foregoing with the Commission.
(q) The Company agrees to pay to the Underwriter a finder's fee of
5.0% of the first $4,000,000.00, 4.0% of the next $1,000,000.00, 3.0% of the
next $1,000,000.00 and 2% of the excess, if any, over $6,000,000.00, of the
aggregate consideration received by the Company with respect to any transaction
(including, but not limited to, mergers, acquisitions, joint ventures, and any
other business for the Company) introduced to the Company by the Underwriter and
consummated by the Company (an "Introduced Consummated Transaction") during the
five (5) year period commencing on the Closing Date. The entire amount of any
such finder's fee due and payable to the Underwriter shall be paid in full by
certified funds or cashier's check payable to the order of such Underwriter or
in cash, at the first closing of the Introduced Consummated Transaction for
which the finder's fee is due. This Section 3(r) shall not be deemed to apply to
the offer, sale or exercise of the Shares or the Share Purchase Option as
contemplated hereby.
4. Conditions of Underwriter's Obligation. The obligations of the
Underwriter to purchase and pay for the Shares which the Underwriter has agreed
to purchase hereunder, are subject to the accuracy (as of the date hereof, and
as of the Closing Date) of and compliance with the representations and
warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and you
shall have received notice thereof not later than 10:00 a.m., New York time, on
the day following the date of this Agreement, or at such later time or on such
later date as to which the Underwriter may agree in writing (provided that you
shall be deemed to have timely received such notice if the Underwriter shall
have released the Shares for public sale); on or prior to the Closing Date no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that or a similar purpose shall have been
instituted or shall be pending or, to the Underwriter's knowledge or to the
knowledge of the Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the satisfaction of the Commission; and no stop order shall be
in effect denying or suspending effectiveness of such qualification nor shall
any stop order proceedings with respect thereto be instituted or pending or
threatened. If required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act.
(b) At the Closing Date, you shall have received the opinion, dated as
of the First Closing Date, of Bernstein & Wasserman LLP, or such other counsel
for the Company who shall be acceptable to the Underwriter, in form and
substance satisfactory to counsel for the Underwriter, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to own its properties
and conduct its business as described in the Registration Statement and
Prospectus and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in New York and each other jurisdiction in
which the ownership or leasing of its properties or conduct of its business
requires such qualification except where the failure to qualify or
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be licensed will not have a material adverse effect and has no affiliates or
subsidiaries except as disclosed in the Registration Statement;
(ii) The authorized capitalization of the Company as of the date
hereof is as set forth under "Capitalization" in the Prospectus; all shares of
the Company's outstanding Preferred Stock (as defined in the Prospectus) and
Common Stock requiring authorization for issuance by directors have been duly
authorized and upon payment of consideration therefor, will be validly issued,
fully paid and non-assessable and conform in all material respects to the
description thereof contained in the Prospectus; to such counsel's knowledge the
outstanding shares of Preferred Stock and Common Stock of the Company have not
been issued in violation of the preemptive rights of any shareholder and the
shareholders of the Company do not have any preemptive rights or other rights to
subscribe for or to purchase, nor are there any restrictions upon the voting or
transfer of any of the Common Stock or the Preferred Stock except as provided in
the Prospectus; the Common Stock and the Share Purchase Option conform in all
material respects to the respective descriptions thereof contained in the
Prospectus; the Shares have been, and the shares of Common Stock to be issued
upon exercise of (i) the Share Purchase Option, and (ii) all other outstanding
warrants to purchase Common Stock (the "Other Warrants") upon issuance in
accordance with the terms of such Other Warrants, and the Share Purchase Option
will have been, duly authorized and, when issued and delivered in accordance
with their respective terms, will be duly and validly issued, fully paid,
non-assessable, free of preemptive rights and no personal liability will attach
to the ownership thereof; all prior sales by the Company of the Company's
securities have been made in compliance with or under an exemption from
registration under the Act and applicable state securities laws; a sufficient
number of Shares and shares of Common Stock has been reserved for issuance upon
exercise of the Warrants, the Share Purchase Option, and, to the best of such
counsel's knowledge, neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives rise to
any registration rights other than those which have been waived or satisfied;
(iii) This Agreement and the Share Purchase Option have been duly
and validly authorized, executed, and delivered by the Company;
(iv) The certificates evidencing the shares of Common Stock
comply with the Delaware General Corporation Law;
(v) Except as otherwise disclosed in the Registration Statement,
such counsel knows of no pending or threatened legal or governmental proceedings
to which the Company is a party which would materially adversely affect the
business, property, financial condition, or operations of the Company; or which
question the validity of the Shares, this Agreement, or the Share Purchase
Option, or of any action taken or to be taken by the Company pursuant to this
Agreement or the Share Purchase Option; to such counsel's knowledge there are no
governmental proceedings or regulations required to be described or referred to
in the Registration Statement which are not so described or referred to;
(vi) The execution and delivery of this Agreement or the Share
Purchase Option and the incurrence of the obligations herein and therein set
forth and the consummation of the transactions herein or therein contemplated,
will not result in a breach or violation of, or constitute a default under the
certificate or articles of incorporation or by-laws of the Company or to the
best knowledge of counsel after due inquiry, in the performance or observance of
any material obligations, agreement, covenant, or condition contained in any
bond, debenture, note, or other evidence of indebtedness or in any material
contract, indenture, mortgage, loan agreement, lease, joint venture, or
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other agreement or instrument to which the Company is a party or by which it or
any of its properties is bound or in violation of any order, rule, regulation,
writ, injunction, or decree of any government, governmental instrumentality, or
court, domestic or foreign, the result of which would have a Material Adverse
Effect;
(vii) The Registration Statement has become effective under the
Act, and to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in effect, and no proceedings for
that purpose have been instituted or are pending before, or threatened by, the
Commission; the Registration Statement and the Prospectus (except for the
financial statements and other financial data contained therein, or omitted
therefrom, as to which such counsel need express no opinion) as of the Effective
Date comply as to form in all material respects with the applicable requirements
of the Act and the Rules and Regulations;
(viii) In the course of preparation of the Registration Statement
and the Prospectus such counsel has participated in conferences with the
President and _________________________________ of the Company with respect to
the Registration Statement and Prospectus and our discussions did not disclose
to such counsel any information which gives such counsel reason to believe that
the Registration Statement or any amendment thereto at the time it became
effective contained any untrue statement of a material fact required to be
stated therein or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus or any supplement thereto contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make statements
therein, in light of the circumstances under which they were made, not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto, and other financial information (including
without limitation, the pro forma financial information) and schedules contained
therein, as to which such counsel need express no opinion);
(ix) All descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and other
agreements to which the Company is a party are accurate and fairly present in
all material respects the information required to be shown, and such counsel is
familiar with all contracts and other agreements referred to in the Registration
Statement and the Prospectus and any such amendment or supplement or filed as
exhibits to the Registration Statement, and such counsel does not know of any
contracts or agreements to which the Company is a party of a character required
to be summarized or described therein or to be filed as exhibits thereto which
are not so summarized, described, or filed;
(x) No authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in connection with
the authorization, issuance, transfer, sale, or delivery of the Shares by the
Company, in connection with the execution, delivery, and performance of this
Agreement by the Company or in connection with the taking of any action
contemplated herein, or the issuance of the Share Purchase Option or the
Securities underlying the Share Purchase Option, other than registrations or
qualifications of the Shares under applicable state or foreign securities or
Blue Sky laws and registration under the Act; and
(xi) The Shares have been duly authorized for quotation on the
OTC Bulletin Board.
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Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law other than the law of
the United States or of the States of Delaware and New York upon opinions of
counsel satisfactory to the Underwriter, in which case the opinion shall state
that they have no reason to believe that the Underwriter and they are not
entitled to so rely.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related matters
shall be satisfactory to or approved by Cohn & Birnbaum P.C., counsel to the
Underwriter.
(d) The Underwriter shall have received a letter prior to the
effective date of the Registration Statement and again on and as of the Closing
Date from Moore Stephens, P.C., independent public accountants for the Company,
substantially in form and substance reasonably acceptable to the Underwriter,
with respect to certain financial information contained in the Registration
Statement and Prospectus and including estimates of the Company's revenues and
results of operations for the period ending at the end of the month immediately
preceding the effective date.
(e) At the Closing Date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects with the same effect as if made on and as of the Closing Date and the
Company shall have performed all of its obligations hereunder and satisfied all
the conditions on its part to be satisfied at or prior to the Closing Date; (ii)
the Registration Statement and the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and shall in all material
respects conform to the requirements thereof, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; (iii) there shall have been, since the respective dates as of
which information is given, no material adverse change, or to the Company's
knowledge, any development involving a prospective material adverse change, in
the business, properties, condition (financial or otherwise), results of
operations, capital stock, long-term or short-term debt, or general affairs of
the Company from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration Statement, and
the Company shall have not incurred any material liabilities or entered into any
material agreement not in the ordinary course of business other than as referred
to in the Registration Statement and Prospectus; (iv) except as set forth in the
Prospectus, no action, suit, or proceeding at law or in equity shall be pending
or threatened against the Company which would be required to be set forth in the
Registration Statement, and no proceedings shall be pending or threatened
against the Company before or by any commission, board, or administrative agency
in the United States or elsewhere, wherein an unfavorable decision, ruling, or
finding would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations, or general affairs of the
Company; and (v) the Underwriter shall have received, at the Closing Date,
certificates signed by each of the President and the principal operating officer
of the Company dated as of the Closing Date, evidencing, to the best knowledge
of such officers, compliance with the provisions of this subsection (e).
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<PAGE>
(f) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Shares or Common Stock, and no proceedings for the taking of such action shall
have been instituted or shall be pending, or, to the knowledge of the
Underwriter or the Company, shall be contemplated by the Commission or the NASD.
The Company represents that at the date hereof it has no knowledge that any such
action is in fact contemplated by the Commission or the NASD.
(g) At the Closing Date, the Underwriter and the Company shall have
entered into a consulting agreement, in form and substance satisfactory to
counsel for the Underwriter, which shall provide, without limitation, that (i)
the Company shall engage the Underwriter as a consultant to the Company for a
period of two (2) years, and (ii) the Underwriter shall be paid an annual
retainer fee of $36,000 per year (which amount shall be paid in full in advance
on the Closing Date).
(h) On or prior to the Closing Date, the Company shall have obtained
written releases from any and all other investment banking firms having rights
to underwrite an offering of the Company's securities.
(i) If any of the conditions herein provided for in this Section shall
not have been fulfilled in all material respects as of the date indicated, this
Agreement and all obligations of the Underwriter under this Agreement may be
cancelled at, or at any time prior to, the Closing Date by the Underwriter
notifying the Company of such cancellation in writing or by telegram at or prior
to the Closing Date. Any such cancellation shall be without liability of the
Underwriter to the Company.
5. Conditions of the Obligations of the Company. The obligation of the
Company to sell and deliver the Shares is subject to the following conditions:
(a) The Registration Statement shall have become effective not later
than 10:00 a.m. New York time, on the day following the date of this Agreement,
or on such later date as the Company and the Underwriter may agree in writing.
(b) At the Closing Date, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
(c) The Underwriter shall not have been prohibited or suspended by the
Commission from acting as an underwriter or market-maker of the Securities.
6. Indemnification
(a) The Company agrees (i) to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against
any losses, claims, damages, or liabilities, joint or several (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), to which
such Underwriter or such controlling person may become subject, under the Act or
otherwise, and (ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages, or liabilities; insofar
as such losses, claims, damages, or liabilities
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<PAGE>
(or actions in respect thereof) relating to (i) and (ii) arise out of or are
based upon (1) any untrue statement or alleged untrue statement of any material
fact contained in (A) the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, (B) any blue sky
application or other document executed by the Company specifically for that
purpose containing written information specifically furnished by the Company and
filed in any state or other jurisdiction in order to qualify any or all of the
Shares under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), or (2) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be required to indemnify the Underwriter and any
controlling person or be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage, or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto, and provided, further, that the indemnity with respect to
any Preliminary Prospectus shall not be applicable on account of any losses,
claims, damages, liabilities, or litigation arising from the sale of Shares to
any person if a copy of the Prospectus was not delivered to such person at or
prior to the written confirmation of the sale to such person. This indemnity
will be in addition to any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company, each
of its directors, each nominee (if any) for director named in the Prospectus,
each of its officers who have signed the Registration Statement and each person,
if any, who controls the Company within the meaning of the Act, against any
losses, claims, damages, or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and reasonable attorneys' fees) to which the Company or any such
director, nominee, officer, or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
specifically for use in the preparation thereof, or (ii) any violation by the
Underwriter in the sale of such Shares of any applicable state or federal law or
any rule, regulation or instruction thereunder relating to violations based on
unauthorized statements by the Underwriter or any of their representatives,
provided that such violation is not based upon any violation of such law, rule,
or regulation or instruction by the party claiming indemnification or inaccurate
or misleading information furnished by the Company or its representatives,
including information furnished to the Underwriter as contemplated herein. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be
15
<PAGE>
made against the indemnifying party under this Section, notify in writing the
indemnifying party of the commencement thereof (for such purposes it shall be
sufficient for the Company, as the indemnified party, to notify the
Underwriter); but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that the reasonable fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action (including any impleaded
parties) include both the indemnified party and the indemnifying party and in
the reasonable judgment of the counsel to the indemnified party, it is advisable
for the indemnified party to be represented by separate counsel (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
indemnified party, which firm shall be designated in writing by the indemnified
party). No settlement of any action against an indemnified party shall be made
without the consent of the indemnified party, which shall not be unreasonably
withheld in light of all factors of importance to such indemnified party. If it
is ultimately determined that indemnification is not permitted, then an
indemnified party will return all monies advanced by the indemnifying party to
the indemnified party.
7. Contribution. In order to provide for just and equitable contribution
under the Act in any case in which the indemnification provided in Section 6
hereof is requested but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case,
then the Company and each person who controls the Company, in the aggregate, and
the Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) (after contribution from
others) in such proportions that the Underwriter is responsible in the aggregate
for that portion of such losses, claims, damages, or liabilities represented by
the percentage that the underwriting discount per Share appearing on the cover
page of the Prospectus bears to the public offering price appearing thereon and
the Company shall be responsible for the remaining portion, provided, however,
that if such allocation is not permitted by applicable law, then allocated in
such proportion as is appropriate to reflect relative benefits but also the
relative fault of the Company and the Underwriter and controlling persons, in
the aggregate, in connection with the statements or omissions which resulted in
such damages and other relevant equitable considerations shall also be
16
<PAGE>
considered. The relative fault shall be determined by reference to, among other
things, whether in the case of an untrue statement of a material fact or the
omission to state a material fact, such statement or omission relates to
information supplied by the Company or the Underwriter and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such untrue statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if the respective obligations of the Company and
the Underwriter to contribute pursuant to this Section 7 were to be determined
by pro rata or per capita allocation of the aggregate damages or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section 7. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 1(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the word "Company" includes any
officer, director, or person who controls the Company within the meaning of
Section 15 of the Act. If the full amount of the contribution specified in this
paragraph is not permitted by law, then the Underwriter and each person who
controls the Underwriter shall be entitled to contribution from the Company, its
officers, directors, and controlling persons, and the Company, its officers,
directors, and controlling persons shall be entitled to contribution from the
Underwriter to the full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and the
Underwriter. No contribution shall be requested with regard to the settlement of
any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
8. Costs and Expenses
(a) Whether or not this Agreement becomes effective or the sale of the
Shares to the Underwriter is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company including,
but not limited to, the fees and expenses of counsel to the Company and of the
Company's accountants; the costs and expenses incident to the preparation,
printing, filing, and distribution under the Act of the Registration Statement
(including the financial statements therein and all amendments and exhibits
thereto), Preliminary Prospectus, and the Prospectus, as amended or
supplemented, the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Shares contemplated hereby; all expenses,
including reasonable fees and disbursements of counsel to the Underwriter, in
connection with the qualification of the Shares under the state securities or
blue sky laws which the Underwriter shall designate; the cost of printing and
furnishing to the Underwriter copies of the Registration Statement, each
Preliminary Prospectus, the Prospectus, this Agreement, and the Blue Sky
Memorandum, any fees relating to the listing of the Common Stock on the OTC
Bulletin Board, NASDAQ, or any other securities exchange; the cost of printing
the certificates representing the securities comprising the Shares; and the fees
of the transfer agent and warrant agent. The Company shall pay any and all taxes
(including any transfer, franchise, capital stock, or other tax imposed by any
jurisdiction) on sales to the Underwriter hereunder. The Company will also pay
all costs and expenses incident to the furnishing of any amended Prospectus or
of any supplement to be attached to the Prospectus as called for in Section 3(a)
of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at the
First Closing Date pay to the Underwriter a non-accountable expense allowance of
$105,000. In the event the transactions contemplated hereby are not consummated
by reason of any action by the Underwriter (except if such prevention is based
upon a breach by the Company of any covenant, representation, or warranty
contained herein or because any other condition to the Underwriter's obligations
hereunder
17
<PAGE>
required to be fulfilled by the Company is not fulfilled) the Company shall not
be liable for any expenses of the Underwriter, including the Underwriter's legal
fees. In the event the transactions contemplated hereby are not consummated by
reason of the Company being unable to perform its obligations hereunder in all
material respects, the Company shall be liable for the actual accountable
out-of-pocket expenses of the Underwriter, including reasonable legal fees, not
to exceed in the aggregate $100,000.
(c) Except as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter, against any losses, claims, damages, or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys' fees), to which the Underwriter or persons may become subject insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. Effective Date. The Agreement shall become effective upon its execution
except that the Underwriter may, at its option, delay its effectiveness until
11:00 a.m., New York time on the first full business day following the effective
date of the Registration Statement, or at such earlier time on such business day
after the effective date of the Registration Statement as the Underwriter in its
discretion shall first commence the initial public offering of the Shares. The
time of the initial public offering shall mean the time of release by the
Underwriter of the first newspaper advertisement with respect to the Shares, or
the time when the Shares are first generally offered by the Underwriter to
dealers by letter or telegram, whichever shall first occur. This Agreement may
be terminated by the Underwriter at any time before it becomes effective as
provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14, and 15 shall
remain in effect notwithstanding such termination.
10. Termination
(a) After this Agreement becomes effective, this Agreement, except for
Sections 3(c), 6, 7, 8, 12, 13, 14, and 15 hereof, may be terminated at any time
prior to the Closing Date by the Underwriter if in the Underwriter's judgment it
is impracticable to offer for sale or to enforce contracts made by the
Underwriter for the resale of the Shares agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident, or other calamity, or
from any labor dispute or court or government action, order, or decree, (ii)
trading in securities on the New York Stock Exchange or the American Stock
Exchange having been generally suspended or limited, (iii) material federal
governmental restrictions having been imposed on trading in securities generally
(not in force and effect on the date hereof), (iv) a banking moratorium having
been declared by federal or New York state authorities, (v) an outbreak of major
international hostilities involving the United States or other substantial
national or international calamity having occurred after the execution of this
Agreement, (vi) a pending or threatened legal or governmental proceeding or
action relating generally to the Company's business, or a notification having
been received by the Company of the threat of any such proceeding or action,
which would materially adversely affect the Company; (vii) except as
contemplated by the Prospectus, the Company is merged with or consolidated into
or acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs; (viii) the passage by the Congress of the United States
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or by any state legislative body of similar impact, of any act or measure, or
the adoption of any orders, rules or regulations by any governmental body or any
authoritative accounting institute or board, or any governmental executive,
which is reasonably believed likely by the Underwriter to have a material
adverse impact on the business, financial condition, or financial statements of
the Company (ix) any material adverse change in the financial or securities
markets beyond normal market fluctuations having occurred since the date of this
Agreement, or (x) any material adverse change having occurred, since the
respective dates of which information is given in the Registration Statement and
Prospectus, in the earnings, business prospects, or general condition of the
Company, financial or otherwise, whether or not arising in the ordinary course
of business.
(b) If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, the
Company shall be promptly notified by the Underwriter, by telephone or telegram,
confirmed by letter.
11. Underwriter's Share Purchase Option. At or before the Closing Date,
the Company will sell the Underwriter or its designees for a consideration of
$58.00 and upon the terms and conditions set forth in the form of the
Underwriter's Share Purchase Option annexed as an exhibit to the Registration
Statement, an Underwriter's Share Purchase Option to purchase an aggregate of
58,333 Shares. In the event of conflict in the terms of this Agreement and the
Underwriter's Share Purchase Option with respect to language relating to the
Underwriter's Share Purchase Option, the language of the Underwriter's Share
Purchase Option shall control.
12. Representations, Warranties of the Underwriter. The Underwriter
represents and warrants to the Company that it is registered as a broker-dealer
in all jurisdictions in which it is offering the Shares; and that it will comply
with all applicable state or federal laws relating to the sale of the Shares,
including, but not limited to, violations based on unauthorized statements by
any such Underwriter or its representatives.
13. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company and the Underwriter and the undertakings set forth in
or made pursuant to this Agreement will remain in full force and effect until
three years from the date of this Agreement, regardless of any investigation
made by or on behalf of the Underwriter, the Company, or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Shares and the termination of this Agreement.
14. Notice. Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed, delivered, or telecopied
and confirmed to them at VTR Capital, Inc., 99 Wall Street -- 20th Floor, New
York, New York 10005, with a copy sent to Cohn & Birnbaum P.C., 100 Pearl
Street, Hartford, Connecticut 06103-4500, Attention: Michael F. Mulpeter, Esq.,
or if sent to the Company, will be mailed, delivered, or telecopied and
confirmed to it at 134 Morgan Avenue, Brooklyn, New York 11237, with a copy sent
to Bernstein & Wasserman, LLP, 950 Third Avenue, New York, New York 10022,
Attention: Steven F. Wasserman, Esq. Notice shall be deemed to have been duly
given if mailed or transmitted by any standard form of telecommunication.
15. Parties in Interest. The Agreement herein set forth is made solely for
the benefit of the Underwriter, the Company, any person controlling the Company
or the Underwriter, and directors of the Company, nominees for directors (if
any) named in the Prospectus, its officers who have signed
19
<PAGE>
the Registration Statement, and their respective executors, administrators,
successors, assigns and no other person shall acquire or have any right under or
by virtue of this Agreement. The term "successors and assigns" shall not include
any purchaser, as such purchaser, from the Underwriter of the Shares.
16. Applicable Law. This Agreement will be governed by, and construed in
accordance with, of the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
17. Counterparts. This agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto and delivered to the other parties (including by fax, followed by
original copies by overnight mail).
18. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings, and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in writing, signed by the
Underwriter and the Company.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it will become a binding
agreement between the Company and the Underwriter in accordance with its terms.
Very truly yours,
PERRY'S MAJESTIC BEER, INC.
By ______________________________
Its President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
VTR CAPITAL, INC.
By ______________________________
Lorette D. Farris
Its Chief Operating Officer
20
<PAGE>
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. NO
OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE
CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY
SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY
KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE
DATE.
PERRY'S MAJESTIC BEER, INC.
583,335 Shares of Common Stock
SELECTED DEALERS AGREEMENT
_____________________, 1996
Dear Sirs:
1. VTR Capital, Inc., named as the Underwriter in the enclosed Preliminary
Prospectus ("the Underwriter"), proposes to offer on a firm commitment basis,
subject to the terms and conditions and execution of the Underwriting Agreement,
583,335 shares of common stock (the "Shares"), par value $.0001 per share (the
"Common Stock"). The Shares are more particularly described in the enclosed
Preliminary Prospectus, additional copies of which as well as the Prospectus
(after effective date) will be supplied in reasonable quantities upon request.
2. The Underwriter is soliciting offers to buy Shares, upon the terms and
conditions hereof, from Selected Dealers, who are to act as principals,
including you, who are (i) registered with the Securities and Exchange
Commission ("the Commission") as broker-dealers under the Securities Exchange
Act of 1934, as amended ("the 1934 Act"), and members in good standing with the
National Association of Securities Dealers, Inc. ("the NASD"), or (ii) dealers
of institutions with their principal place of business located outside the
United States, its territories and possessions and not registered under the 1934
Act who agree to make no sales within the United States, its territories and
possessions or to persons who are nationals thereof or residents therein and, in
making sales, to comply with the NASD's interpretation with respect to
free-riding and withholding. Shares are to be offered to the public at a price
of $______________ per Share. Selected Dealers will be allowed a concession of
not less than _____% of the offering price. You will be notified of the precise
amount of such concession prior to the effective date of the Registration
Statement. The offer is solicited subject to the issuance and delivery of the
Shares and their acceptance by the Underwriter, to the approval of legal matters
by counsel and to the terms and conditions as herein set forth.
3. Your offer to purchase may be revoked in whole or in part without
obligation or commitment of any kind by you any time prior to acceptance and no
offer may be accepted by us and no sale can be made until after the registration
statement covering the Shares has become effective with the Commission. Subject
to the foregoing, upon execution by you of the Offer to Purchase below and the
return of same to us, you shall be deemed to have offered to purchase the number
of
<PAGE>
Shares set forth in your offer on the basis set forth in paragraph 2 above. Any
oral notice by us of acceptance of your offer shall be immediately followed by
written or telegraphic confirmation preceded or accompanied by a copy of the
Prospectus. If a contractual commitment arises hereunder, all the terms of this
Selected Dealers Agreement shall be applicable. We may also make available to
you an allotment to purchase Shares, but such allotment shall be subject to
modification or termination upon notice from us any time prior to an exchange of
confirmations reflecting completed transactions. All references hereafter in
this Agreement to the purchase and sale of the Shares assume and are applicable
only if contractual commitments to purchase are completed in accordance with the
foregoing.
4. You agree that in re-offering the Shares, if your offer is accepted
after the Effective Date, you will make a bona fide public distribution of same.
You will advise us upon request of the Shares purchased by you remaining unsold,
and we shall have the right to repurchase such Shares upon demand at the public
offering price less the concession as set forth in paragraph 2 above. Any of the
Shares purchased by you pursuant to this Agreement are to be re-offered by you
to the public at the public offering price, subject to the terms hereof and
shall not be offered or sold by you below the public offering price before the
termination of this Agreement.
5. Payment for Shares which you purchase hereunder shall be made by you on
such date as we may determine by certified or bank cashier's check payable in
New York Clearinghouse funds to VTR Capital, Inc. Certificates for the
securities shall be delivered as soon as practicable at the offices of VTR
Capital, Inc., 99 Wall Street -- 20th Floor, New York, New York 10005. Unless
specifically authorized by us, payment by you may not be deferred until delivery
of certificates to you.
6. A registration statement covering the offering has been filed with the
Commission in respect to the Shares. You will be promptly advised when the
registration statement becomes effective. Each Selected Dealer in selling the
Shares pursuant hereto agrees (which agreement shall also be for the benefit of
the Company) that it will comply with the applicable requirements of the
Securities Act of 1933 and of the 1934 Act and any applicable rules and
regulations issued under said Acts. No person is authorized by the Company or by
the Underwriter to give any information or to make any representations other
than those contained in the Prospectus in connection with the sale of the
Shares. Nothing contained herein shall render the Selected Dealers a member of
the underwriting group or partners with the Underwriter or with one another.
7. You will be informed by us as to the states in which we have been
advised by counsel the Shares have been qualified for sale or are exempt under
the respective securities or blue sky laws of such states, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell Shares in any state.
8. The Underwriter shall have full authority to take such action as we may
deem advisable in respect of all matters pertaining to the offering or arising
thereunder. The Underwriter shall not be under any liability to you, except such
as may be incurred under the Securities Act of 1933 and the rules and
regulations thereunder, except for lack of good faith and except for obligations
assumed by us in this Agreement, and no obligation on our part shall be implied
or inferred herefrom.
9. Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate when the
offering is completed. Nothing herein contained shall be deemed a commitment on
our part to sell you any Shares; such contractual commitment can only be made in
accordance with the provisions of paragraph 3 hereof.
2
<PAGE>
10. You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("Association") and registered as a
broker-dealer or are not eligible for membership under Section I of the By-Laws
of the Association who agree to make no sales within the United States, its
territories, or possessions or to persons who are nationals thereof or residents
therein and, in making sales, to comply with the NASD's interpretation with
respect to free-riding and withholding. Your attention is called to the
following: (a) Article III, Sections 1, 8, 24, 25, 26 and 36 of the Rules of
Fair Practice of the Association and the interpretations of said Section
promulgated by the Board of Governors of such Association including the
interpretation with respect to "FreeRiding and Withholding"; (b) Section 10(b)
of the 1934 Act and Rules 10b-6 and 10b-10 of the general rules and regulations
promulgated under said Act; (c) Securities Act Release #3907; (d) Securities Act
Release #4150; and (e) Securities Act Release #4968 requiring the distribution
of a Preliminary Prospectus to all persons reasonably expected to be purchasers
of Shares from you at least 48 hours prior to the time you expect to mail
confirmations. You, if a member of the Association, by signing this Agreement,
acknowledge that you are familiar with the cited law, rules, and releases, and
agree that you will not directly and/or indirectly violate any provisions of
applicable law in connection with your participation in the distribution of the
Shares.
11. In addition to compliance with the provisions of paragraph 10 hereof,
you will not, until advised by us in writing or by wire that the entire offering
has been distributed and closed, bid for or purchase Shares or its component
securities in the open market or otherwise make a market in such securities or
otherwise attempt to induce others to purchase such securities in the open
market. Nothing contained in this paragraph 11 shall, however, preclude you from
acting as agent in the execution of unsolicited orders of customers in
transactions effectuated for them through a market maker.
12. You understand that the Underwriter may in connection with the offering
engage in stabilizing transactions. If the Underwriter contracts for or
purchases in the open market in connection with such stabilization any Shares
sold to you hereunder and not effectively placed by you, the Underwriter may
charge you the Selected Dealer's concession originally allowed you on the Shares
so purchased, and you agree to pay such amount to us on demand.
13. By submitting an Offer to Purchase you confirm that your net capital is
such that you may, in accordance with Rule 15c3-1 adopted under the 1934 Act,
agree to purchase the number of Shares you may become obligated to purchase
under the provisions of this Agreement.
14. You acknowledge that the offering of the Shares is being made in
accordance with the requirements of Schedule E to the By-Laws of the NASD.
Accordingly, as required by Schedule E to the By-Laws of the NASD, you agree
that (i) you shall not recommend to a customer the purchase of Shares unless you
shall have reasonable grounds to believe that the recommendation is suitable for
such customer on the basis of information furnished by such customer concerning
the customer's investment objectives, financial situation and needs, and any
other information known to you, (ii) in connection with all such determinations,
you shall maintain in your files the basis for such determination, and (iii) you
shall not execute any transaction in Shares in a discretionary account without
the prior specific written approval of the customer.
3
<PAGE>
15. All communications from you should be directed to us at the office of
the Underwriter, VTR Capital, Inc., 99 Wall Street -- 20th Floor, New York, New
York 10005. All communications from us to you shall be directed to the address
to which this letter is mailed.
Very truly yours,
VTR CAPITAL, INC.
By______________________________
Lorette D. Farris
Its Chief Operating Officer
ACCEPTED AND AGREED TO AS OF THE _____
DAY OF _____________________, 1996
[Name of Dealer]
By ______________________________
Its
4
<PAGE>
To: VTR Capital, Inc.
_________________________________
_________________________________
_________________________________
We hereby subscribe for _____________________ (_____) Shares of Common
Stock, par value $.0001 per share, of Perry's Majestic Beer, Inc., in accordance
with the terms and conditions stated in the foregoing letter. We hereby
acknowledge receipt of the Prospectus referred to in the first paragraph thereof
relating to said Shares. We further state that in purchasing said Shares we have
relied upon said Prospectus and upon no other statement whatsoever, whether
written or oral. We confirm that we are a dealer actually engaged in the
investment banking or securities business and that we are either (i) a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD") or (ii) a dealer with its principal place of business located outside
the United States, its territories and its possessions and not registered as a
broker or dealer under the Securities Exchange Act of 1934, as amended, who
hereby agrees not to make any sales within the United States, its territories or
its possessions or to persons who are nationals thereof or residents therein. We
hereby agree to comply with the provisions of Section 24 of Article III of the
Rules of Fair Practice of the NASD, and if we are a foreign dealer and not a
member of the NASD, we also agree to comply with the NASD's interpretation with
respect to free-riding and withholding, to comply, as though we were a member of
the NASD, with the provisions of Sections 8 and 36 of Article III thereof as
that Section applies to non-member foreign dealers.
[Name of Dealer]
______________________________
By ______________________________
Address
______________________________
______________________________
______________________________
Dated _____________________, 1996
<PAGE>
CERTIFICATE OF DESIGNATION
ESTABLISHING A SERIES OF SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
PERRY'S MAJESTIC BEER, INC.
To the Secretary of State
of the State of Delaware:
PERRY'S MAJESTIC BEER, INC. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify that: pursuant to the provisions of Section 151(g)
of the General Corporation Law of the State of Delaware, the following
resolution establishing and designating a series of shares of preferred stock
and fixing and determining the relative rights and preferences thereof was duly
adopted by the Board of Directors of the Company as of March 29, 1996:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of this Company in accordance with the
provisions of its Certificate of Incorporation as amended, a series of
preferred stock, $.0001 par value per share, of the Company be established
and given the distinctive designation of "Series A Convertible Preferred
Stock" (the "Series A Preferred Stock"). The number of shares of the Series
A Preferred Stock authorized to be issued by the Company shall be 500,000
shares. The rights, preferences, privileges and restrictions granted to and
imposed upon the Series A Preferred Stock are as set forth on the attached
Exhibit A.
IN WITNESS WHEREOF, Perry's Majestic Beer, Inc., has caused this
Certificate to be signed by its President, this 29th day of March, 1996.
PERRY'S MAJESTIC BEER, INC.
By:___________________________
Name: Robert Sipper
Title: President
<PAGE>
EXHIBIT A
1. Dividends
Holders of the Series A Preferred Shares do not have any right to the
payment of any dividend.
2. Voting
(a) The holders of Series A Preferred Shares shall be entitled to one (1)
vote per share on all matters presented to the stockholders except as set forth
below.
(b) The Company shall not, without the affirmative vote or consent of the
holders of the shares representing at least a majority of the shares of Series A
Preferred Stock then outstanding, voting as a separate class:
(i) in any manner authorize or create any class of capital stock
ranking, either as to payment of dividends or distribution of assets, prior
to or on a parity with the Series A Preferred Stock; or
(ii) in any manner alter or change the designations, powers,
preferences or rights or the qualifications, limitations or restrictions of
the Series A Preferred Stock;
provided, however, that except as otherwise provided by law, any such majority
vote or consent shall be sufficient authorization, insofar as the Series A
Preferred Stock is concerned, for any such action, and when such action is
effected upon such vote or consent, holders of shares of the Series A Preferred
Stock dissenting from such action shall not have any rights to payment for their
shares by reasons of this provision.
3. Rights on Liquidation, Dissolution or Winding Up
In the event of any liquidation, dissolution, or winding up of the affairs
of the Company, whether voluntary or involuntary, each issued and outstanding
share of Series A Preferred Stock shall entitle the holder of record thereof to
payment at the rate of $.20 per share, before any payment or distribution of the
net assets of the Company (whether stated capital or surplus) shall be made to
or set apart for the holders of record of the issued and outstanding Junior
Securities in respect of said Junior Securities. After setting apart or paying
in full the preferential amounts aforesaid to the holders of record of the
issued and outstanding Series A Preferred Stock, the remaining net assets
(whether stated capital or surplus), if any, shall be distributed exclusively to
the holders of record of the issued and outstanding Junior Securities, each
issued and outstanding Junior Security entitling the holder of record thereof to
receive an equal proportion of said remaining net assets relative to all other
holders of any class or type of Junior Security. If the net assets of the
Company shall be insufficient to pay in full the preferential amounts among the
holders of the Series A Preferred Stock as aforesaid, then each issued and
outstanding Series
2
<PAGE>
A Preferred Stock and such other shares having priority with the Series A
Preferred Stock shall entitle the holder of record thereof to a ratable
proportion of said net assets, and the holders of the Junior Securities shall in
no event be entitled to participate in the distribution of said net assets in
respect to their Junior Securities. Without excluding any other proceeding which
does not in fact effect a liquidation, dissolution, or winding up of the
Company, a merger or consideration of the Company into or with any other
corporation, a merger of any other corporation into the Company, participation
by the Company in a plan for share exchanges with any other corporation, or a
sale, lease, mortgage, pledge, exchange, transfer or other disposition by the
Company of all or substantially all of its assets shall not be deemed, for the
purposes of this paragraph, to be a liquidation, dissolution, or winding up of
the Company, provided that in each case, effective provision is made by the
resulting and surviving corporation or otherwise for the protection of the
rights of the holders of the Series A Preferred Stock.
4. Conversion
(a) Commencing on the date of issuance, such shares of the Series A
Preferred Stock of the Company shall be convertible from time to time, subject
to adjustment, at the option of the holders of record thereof into fully paid
and nonassessable shares of Common Stock of the Company upon surrender to the
Company or its designee of the certificate or certificates representing the
share or shares of Series A Preferred Stock to be converted, together with a
written notice of election to convert; and, upon receipt by the Company or its
designee of such notice and of such surrendered certificate or certificates with
any appropriate endorsement thereon, as may be prescribed by the Board of
Directors, any such holder shall be entitled to receive a certificate or
certificates representing the shares of Common Stock into which such share or
shares of Series A Preferred Stock is convertible, and any such holder shall be
deemed to be a holder of record of said share of Common Stock as of the time of
said receipt by the Company or its designee. The basis for such conversion shall
be one (1) share of Common Stock for each share of Series A Preferred Stock so
converted.
(b) In connection with effecting any transfer to the Company for
cancellation of any Series A Preferred Stock upon conversion of the same into
shares of Common Stock, the Company may, but shall not be obliged to, issue a
certificate or certificates for fractions of a share of Common Stock. Any Series
A Preferred Stock which have been converted shall be canceled and shall be
restored to the status of authorized but unissued Preferred shares.
(c) Whenever the Company shall (i) pay a dividend in shares of Common Stock
to holders of Common Stock or a dividend to holders of Common Stock payable in
shares of the Company's capital stock other than shares of Common Stock, (ii)
subdivide or combine outstanding shares of Common Stock, (iii) issue to all
holders of shares of Common Stock, rights, warrants or options entitling them
for a period of not more than forty-five (45) days to purchase shares of Common
Stock (or securities convertible into shares of Common Stock) at a price per
share (or having a conversion price per share) less than the then current per
share market price for such shares of Common Stock, (iv) distribute to all
holders of shares of Common Stock evidences of indebtedness or assets (excluding
cash dividends) or rights or warrants (other than those referred to above) or,
(v) take or permit to be taken any other action
3
<PAGE>
which will result in the dilution of the conversion rights and privileges of the
Series A Preferred Stock, then the Board of Directors of the Company shall
forthwith cause to be made any such adjustment on the basis of conversion as it
shall determine to be necessary to preserve to said holders of the Series A
Preferred Stock those rights and privileges which are substantially
proportionate to the rights and privileges of the Series A Preferred Stock
existing prior to said event or events, and an appropriate adjustment shall be
made with respect to the conversion rate of the Series A Preferred Stock such
that the percentage interests of shares of Common Stock of the Company that a
holder of Series A Preferred Stock would own upon the conversion of Series A
Preferred Stock subsequent to the occurrence of any of the events set forth in
(i) - (v) preceding shall be identical as if any such event shall not have
occurred. No adjustment of the conversion rate will be required until cumulative
adjustments would require any increase or decrease of at least 1% in the number
of shares of Common Stock into which each share of Series A Preferred Stock is
then convertible. No adjustment of the conversion rate will be made for cash
distributions or cash dividends.
(d) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the surviving
corporation, in case of any statutory exchange of securities with another
corporation, or in case of any sale or conveyance to another corporation of all
or substantially all of the assets of the Company, there will be no adjustment
of the conversion rate of the Series A Preferred Stock but each holder of a
share of Series A Preferred Stock then outstanding will have the right
thereafter to convert such share of Series A Preferred Stock solely into the
kind and amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance by a holder of the
number of shares of Common Stock into which each such share of Series A
Preferred Stock might have been converted immediately prior to such
consolidation, merger, statutory exchange, sale or conveyance, assuming such
holder of shares of Common Stock failed to exercise his rights of election, if
any, as to the kind or amount of securities, cash or other property receivable
upon such consolidation, merger, statutory exchange, sale or conveyance
(provided, that if the kind or amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance for each non-electing share shall be deemed to be the kind and amount
so receivable per share by plurity of the non-electing share).
(e) In the case of a cash merger of the Company into another corporation or
any other cash transaction of the type mentioned above, the effect of these
provisions would be that the conversion features of the Series A Preferred Stock
would thereafter be limited to converting the Series A Preferred Stock at the
conversion rate in effect at such time into the same amount of cash per share
that such holder would have received had such holder converted the Series A
Preferred Stock into Common Stock immediately prior to the effective date of
such cash merger or transaction. Depending upon the terms of such cash merger or
transaction, the aggregate amount of cash so received on conversion could be
more or less than the liquidation preference of the Series A Preferred Stock.
The Company has the option, exercisable at any time, to increase the conversion
rate, so long as such increase is for a minimum period of twenty (20) days and
is irrevocable during such period and the Company notifies holders of Series A
Preferred Stock at least fifteen (15) days prior to the date on which the
reduced conversion price
4
<PAGE>
takes effect.
5. Rank of Series A Convertible Preferred Stock
The Series A Preferred Stock shall rank senior to all series of preferred
stock in all respects.
6. Notices
Any notice or other communication under the provisions of this Certificate
shall be in writing, and shall be given by postage prepaid, registered or
certified mail, return receipt requested, by hand delivery with an
acknowledgment copy requested, or by the Express Mail service offered by the
United States Post Office or any other reputable service which guarantees
overnight delivery ("Overnight Mail"), directed to the Company at 134 Morgan
Avenue, Brooklyn, N.Y. 11237 and to the Holders at their respective addresses as
set forth in the records of the Company, or to any new address of which the
Company or any Holder shall have informed the others by the giving of notice in
the manner provided herein. Such notice or communication shall be effective, if
sent by mail, three (3) days after it is mailed within the continental United
States; if sent by Overnight Mail, one day after it is mailed; or by hand
delivery, upon receipt.
5
<PAGE>
CERTIFICATE OF DESIGNATION
ESTABLISHING A SERIES OF SHARES OF
SERIES B PREFERRED STOCK
OF
PERRY'S MAJESTIC BEER, INC.
To the Secretary of State
of the State of Delaware:
PERRY'S MAJESTIC BEER, INC. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify that: pursuant to the provisions of Section 151(g)
of the General Corporation Law of the State of Delaware, the following
resolution establishing and designating a series of shares of preferred stock
and fixing and determining the relative rights and preferences thereof was duly
adopted by the Board of Directors of the Company as of March 29, 1996:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of this Company in accordance with the
provisions of its Certificate of Incorporation as amended, a series of
preferred stock, $.0001 par value per share, of the Company be established
and given the distinctive designation of "Series B Preferred Stock" (the
"Series B Preferred Stock"). The number of shares of the Series B Preferred
Stock authorized to be issued by the Company shall be 500,000 shares. The
rights, preferences, privileges and restrictions granted to and imposed
upon the Series B Preferred Stock are as set forth on the attached Exhibit
A.
IN WITNESS WHEREOF, Perry's Majestic Beer, Inc., has caused this
Certificate to be signed by its President, this 29th day of March, 1996.
PERRY'S MAJESTIC BEER, INC.
By:________________________
Name: Robert Sipper
Title: President
<PAGE>
EXHIBIT A
1. Dividends
Holders of the Series B Preferred Shares do not have any right to the
payment of any dividend.
2. Voting
(a) The holders of Series B Preferred Shares shall be entitled to one (1)
vote per share on all matters presented to the stockholders except as set forth
below.
(b) The Company shall not, without the affirmative vote or consent of the
holders of the shares representing at least a majority of the shares of Series B
Preferred Stock then outstanding, voting as a separate class:
(i) in any manner authorize or create any class of capital stock
ranking, either as to payment of dividends or distribution of assets, prior
to or on a parity with the Series B Preferred Stock; or
(ii) in any manner alter or change the designations, powers,
preferences or rights or the qualifications, limitations or restrictions of
the Series B Preferred Stock;
provided, however, that except as otherwise provided by law, any such majority
vote or consent shall be sufficient authorization, insofar as the Series B
Preferred Stock is concerned, for any such action, and when such action is
effected upon such vote or consent, holders of shares of the Series B Preferred
Stock dissenting from such action shall not have any rights to payment for their
shares by reasons of this provision.
3. Rights on Liquidation, Dissolution or Winding Up
In the event of any liquidation, dissolution, or winding up of the affairs
of the Company, whether voluntary or involuntary, each issued and outstanding
share of Series B Preferred Stock shall entitle the holder of record thereof to
payment at the rate of $.01 per share, before any payment or distribution of the
net assets of the Company (whether stated capital or surplus) shall be made to
or set apart for the holders of record of the issued and outstanding junior
securities in respect of said junior securities, except the Series A Preferred
Stock (the "Junior Securities"). After setting apart or paying in full the
preferential amounts aforesaid to the holders of record of the issued and
outstanding Series B Preferred Stock, the remaining net assets (whether stated
capital or surplus), if any, shall be distributed exclusively to the holders of
record of the issued and outstanding Junior Securities, each issued and
outstanding Junior Security entitling the holder of record thereof to receive an
equal proportion of said remaining net assets relative to all other holders of
any class or type of Junior Security. If the net assets of the Company shall be
insufficient to pay in full the preferential amounts among the holders of the
Series B Preferred
2
<PAGE>
Stock as aforesaid, then each issued and outstanding Series B Preferred Stock
and such other shares having priority with the Series B Preferred Stock shall
entitle the holder of record thereof to a ratable proportion of said net assets,
and the holders of the Junior Securities shall in no event be entitled to
participate in the distribution of said net assets in respect to their Junior
Securities. Without excluding any other proceeding which does not in fact effect
a liquidation, dissolution, or winding up of the Company, a merger or
consideration of the Company into or with any other corporation, a merger of any
other corporation into the Company, participation by the Company in a plan for
share exchanges with any other corporation, or a sale, lease, mortgage, pledge,
exchange, transfer or other disposition by the Company of all or substantially
all of its assets shall not be deemed, for the purposes of this paragraph, to be
a liquidation, dissolution, or winding up of the Company, provided that in each
case, effective provision is made by the resulting and surviving corporation or
otherwise for the protection of the rights of the holders of the Series B
Preferred Stock.
4. Rank of Series B Convertible Preferred Stock
The Series B Preferred Stock shall rank senior to all series of preferred
stock in all respects, except the Series A Preferred Stock.
5. Notices
Any notice or other communication under the provisions of this Certificate
shall be in writing, and shall be given by postage prepaid, registered or
certified mail, return receipt requested, by hand delivery with an
acknowledgment copy requested, or by the Express Mail service offered by the
United States Post Office or any other reputable service which guarantees
overnight delivery ("Overnight Mail"), directed to the Company at 134 Morgan
Avenue, Brooklyn, N.Y. 11237 and to the Holders at their respective addresses as
set forth in the records of the Company, or to any new address of which the
Company or any Holder shall have informed the others by the giving of notice in
the manner provided herein. Such notice or communication shall be effective, if
sent by mail, three (3) days after it is mailed within the continental United
States; if sent by Overnight Mail, one day after it is mailed; or by hand
delivery, upon receipt.
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<PAGE>
PERRY'S MAJESTIC BEER, INC.
Incorporated Under the Laws of the State of Delaware
CUSIP: 715072 104
COMMON STOCK
This certifies that
is the owner of
fully paid and non-assessable shares of common stock of the par value $.0001 per
share of Perry's Majestic Beer, Inc. transferable on the books of the
Corporation by the holder hereof in person or by authorized Attorney, upon
surrender of this Certificate, properly endorsed. This Certificate is not valid
until countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
Secretary
President:
<PAGE>
Option to Purchase
58,333 Shares
PERRY'S MAJESTIC BEER, INC.
SHARE PURCHASE OPTION
Dated: _____________________, 1996
THIS CERTIFIES that VTR CAPITAL, INC., 99 Wall Street, New York, New York
10005 (hereinafter sometimes referred to as the "Holder"), is entitled to
purchase from PERRY'S MAJESTIC BEER, INC., a Delaware corporation (hereinafter
referred to as the "Company"), at the prices and during the periods as
hereinafter specified, up to 58,333 shares (the "Shares") of the Company's
Common Stock, par value $.0001 per share (the "Common Stock").
The Shares have been registered under a Registration Statement on Form SB-2
(File No. 333- 3458) declared effective by the Securities and Exchange
Commission on _____________________, 1996 (the "Registration Statement"). This
Option (the "Option") to purchase 58,333 Shares (the "Option Shares") was
originally issued pursuant to an underwriting agreement between the Company and
VTR Capital, Inc. (the "Underwriter") in connection with a public offering of
583,335 Shares (the "Public Shares") through the Underwriter, in consideration
of $58.00 received for the Option.
Except as specifically otherwise provided herein, the Shares issued
pursuant to this Option shall bear the same terms and conditions as described
under the caption "Description of Securities" in the Registration Statement,
except that the holder shall have registration rights under the Securities Act
of 1933, as amended (the "Act"), for the Option and the Common Stock the
underlying the Option.
1. The rights represented by this Option shall be exercised at the prices,
subject to adjustment in accordance with paragraph 8 of this Option, and during
the periods as follows:
(a) Between _____________________, 1997 and _____________________,
2001, inclusive, the Holder shall have the option to purchase the Shares at a
price per Share equal to 120% of offering price of the Public Shares (subject to
adjustment pursuant to paragraph 8 hereof) (the "Exercise Price").
(b) After _____________________, 2001, the Holder shall have no right
to purchase any Shares hereunder.
2. The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
(by certified or bank cashier's check drawn on a bank in the State of New York)
of the Exercise Price then in effect for the
<PAGE>
number of Shares specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any; and (iii) delivery to the Company of a
duly executed agreement signed by the person(s) designated in the purchase form
to the effect that such person(s) agree(s) to be bound by the provisions of
paragraph 6 and subparagraphs (b), (c) and (d) of paragraph 7 hereof. This
Option shall be deemed to have been exercised, in whole or in part to the extent
specified, immediately prior to the close of business on the date this Option is
surrendered and payment is made in accordance with the foregoing provisions of
this paragraph 2, and the person or persons in whose name or names the
certificates for shares of Common Stock shall be issuable upon such exercise
shall become the holder or holders of record of such Common Stock at that time
and date. The Common Stock and the certificates for the Common Stock so
purchased shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) days, after the rights represented by this Option shall have
been so exercised.
3. This Option shall not be transferred, sold, assigned, or hypothecated
until _____________________, 1997, except that it may be transferred to
successors of the Holder, and may be assigned in whole or in part to any member
of the National Association of Securities Dealers, Inc. that acts as a selected
dealer in connection with the sale of the Public Shares any person who is an
officer of the Holder during such period, or any person who is an officer of
such selected dealer during such period. Any such assignment shall be effected
by the Holder (i) executing the form of assignment at the end hereof and (ii)
surrendering this Option for cancellation at the office or agency of the Company
referred to in paragraph 2 hereof, accompanied by a certificate (signed by an
officer of the Holder if the Holder is a corporation), stating that each
transferee is a permitted transferee under this paragraph 3 hereof; whereupon
the Company shall issue, in the name or names specified by the Holder (including
the Holder), a new Option or Options of like tenor and representing in the
aggregate rights to purchase the same number of Shares as are purchasable
hereunder.
4. The Company covenants and agrees that all shares of Common Stock which
may be purchased hereunder will be duly and validly issued, fully paid and
nonassessable, and no personal liability will attach to the holder thereof. The
Company further covenants and agrees that during the periods within which this
Option may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of its Common Stock to provide for the
exercise of this Option.
5. This Option shall not entitle the Holder to any voting, dividend, or
other rights as a stockholder of the Company.
6. (a) During the period set forth in paragraph 1(a) hereof, the Company
shall advise the Holder or its transferee, whether the Holder holds the Option
or has exercised the Option and holds Shares, by written notice at least 30 days
prior to the filing of any post-effective amendment to the Registration
Statement or of any new registration statement or post-effective amendment
thereto under the Act covering any securities of the Company, for its own
account or for the account of others (other than a registration statement on
Form S-4 or S-8 or any successor forms thereto), and will for a period of five
years from the effective date of the Registration Statement, upon the request of
the Holder, include in any such post-effective amendment or registration
statement, such information as may be required to permit a public offering of
the Option or all or any of the Shares underlying the Option (the "Registrable
Securities"). The Company shall supply prospectuses and such other documents as
the Holder may request in order to facilitate the public sale or other
disposition of the Registrable Securities, use its best efforts to register and
qualify any of the Registrable Securities for sale in such states as such Holder
designates provided that the Company shall not be required to qualify as a
foreign corporation or a dealer in securities or execute a general consent to
service of
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<PAGE>
process in any jurisdiction in any action and do any and all other acts and
things which may be reasonably necessary or desirable to enable such Holders to
consummate the public sale or other disposition of the Registrable Securities,
and furnish indemnification in the manner provided in paragraph 7 hereof. The
Holder shall furnish information and indemnification as set forth in paragraph 7
except that the maximum amount which may be recovered from the Holder shall be
limited to the amount of proceeds received by the Holder from the sale of the
Registrable Securities. The Company shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the holders of Registrable Securities requested to be included in the
registration to include such securities in such underwritten offering on the
same terms and conditions as any similar securities of the Company included
therein. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering advises the holders of Registrable Securities that
the total amount of securities which they intend to include in such offering is
such as to materially and adversely affect the success of such offering, then
the amount of securities to be offered for the accounts of holders of
Registrable Securities shall be eliminated, reduced, or limited to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount, if any, recommended by such managing underwriter or
underwriters (any such reduction or limitation in the total amount of
Registrable Securities to be included in such offering to be borne by the
holders of Registrable Securities proposed to be included therein pro rata). The
Holder will pay its own legal fees and expenses and any underwriting discounts
and commissions on the securities sold by such Holder and shall not be
responsible for any other expenses of such registration.
(b) If any 50% holder (as defined below) shall give notice to the
Company at any time during the period set forth in paragraph 1(b) hereof to the
effect that such holder desires to register under any of the Registrable
Securities under such circumstances that a public distribution (within the
meaning of the Act) of any such securities will be involved then the Company
will promptly, but no later than forty-five (45) days after receipt of such
notice (sometimes hereinafter referred to in this subsection (b) as the
"Notice"), file a post-effective amendment to the current Registration Statement
or a new registration statement pursuant to the Act, to the end that the
Registrable Securities may be publicly sold under the Act as promptly as
practicable thereafter and the Company will use its best efforts to cause such
registration to become and remain effective for a period of 120 days (including
the taking of such steps as are reasonably necessary to obtain the removal of
any stop order); provided that such holder shall furnish the Company with
appropriate information in connection therewith as the Company may reasonably
request in writing. The 50% holder (which for purposes hereof shall mean any
direct or indirect transferee of such holder) may, at its option, request the
filing of a post-effective amendment to the current Registration Statement or a
new registration statement under the Act with respect to the Registrable
Securities on only one occasion during the term of this Option. The Holder may
at its option request the registration of the Option and/or any of the
securities underlying the Option in a registration statement made by the Company
as contemplated by Section 6(a) or in connection with a request made pursuant to
this Section 6(b) prior to acquisition of the Shares issuable upon exercise of
the Option and even though the Holder has not given notice of exercise of the
Option. The 50% holder may, at its option, request such post-effective amendment
or new registration statement during the described period with respect to the
Option, or separately as to the Common Stock included in such registration
rights may be exercised by the 50% holder prior to or subsequent to the exercise
of the Option. Within ten business days after receiving any such notice pursuant
to this subsection (b) of paragraph 6, the Company shall give notice to the
other holders of the Options, advising that the Company is proceeding with such
post-effective amendment or registration statement and offering to include
therein the securities underlying the Options of the other holders. Each holder
electing to include its Registrable Securities in any such offering shall
provide written notice to the Company within twenty (20) days after receipt
3
<PAGE>
of notice from the Company. The failure to provide such notice to the Company
shall be deemed conclusive evidence of such holder's election not to include its
Registrable Securities in such offering. Each holder electing to include its
Registrable Securities shall furnish the Company with such appropriate
information (relating to the intentions of such holders) in connection therewith
as the Company shall reasonably request in writing. In the event such
registration statement is not filed within the period specified herein, the
expiration date of this Option and the underlying Warrants shall be extended by
an amount of time equal to the delay in filing. All costs and expenses of the
first such post-effective amendment or new registration statement shall be borne
by the Company, except that the holders shall bear the fees of their own counsel
and any underwriting discounts or commissions applicable to any of the
securities sold by them. If the Company determines to include securities to be
sold by it in any registration statement pursuant to this Section 6(b), such
registration shall be deemed to have been a registration under Section 6(a).
The Company shall be entitled to postpone the filing of any
registration statement pursuant to this Section 6(b) otherwise required to be
prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
statement would cause a violation of Rule 10b-6 under the Securities Exchange
Act of 1934, (iii) the Company is engaged in an underwritten offering and the
managing underwriter has advised the Company in writing that such a registration
statement would have a material adverse effect on the consummation of such
offering or (iv) the Company is subject to an underwriter's lock-up as a result
of an underwritten public offering and such underwriter has refused in writing
the Company's request to waive such lock-up. In the event of such postponement,
the Company shall be required to file the registration statement pursuant to
this Section 6(b) within 60 days of the consummation of the event requiring such
postponement.
The Company will use its best efforts to maintain such registration
statement or post-effective amendment current under the Act for a period of at
least six months (and for up to an additional three months if requested by the
Holder) from the effective date thereof. The Company shall supply prospectuses,
and such other documents as the Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities,
use its best efforts to register and qualify any of the Registrable Securities
for sale in such states as such holder designates, provided that the Company
shall not be required to qualify as a foreign corporation or a dealer in
securities or execute a general consent to service of process in any
jurisdiction in any action and furnish indemnification in the manner provided in
paragraph 7 hereof.
(c) The term "50% holder" as used in this paragraph 6 shall mean the
holder of at least 50% of the Common Stock underlying the Option (considered in
the aggregate) and shall include any owner or combination of owners of such
securities, which ownership shall be calculated by determining the number of
shares of Common Stock held by such owner or owners.
7. (a) Whenever pursuant to paragraph 6 a registration statement relating
to the Option or any other Registrable Securities is filed under the Act,
amended or supplemented, the Company will indemnify and hold harmless each
holder of the securities covered by such registration statement, amendment, or
supplement (such holder being hereinafter called the "Distributing Holder"), and
each person, if any, who controls (within the meaning of the Act) the
Distributing Holder, and each underwriter (within the meaning of the Act) of
such securities and each person, if any, who controls (within the meaning of the
Act) any such underwriter, against any losses, claims, damages, or liabilities,
joint or several, to which the Distributing Holder, any such controlling person
or any such underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages,
4
<PAGE>
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any such registration statement or any preliminary prospectus or final
prospectus constituting a part thereof or any amendment or supplement thereto,
or arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and will reimburse the Distributing Holder and each such controlling
person and underwriter for any legal or other expenses reasonably incurred by
the Distributing Holder or such controlling person or underwriter in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement in reliance
upon and in conformity with written information furnished by such Distributing
Holder or any other Distributing Holder, for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, each person,
if any, who controls the Company (within the meaning of the Act) against any
losses, claims, damages, or liabilities, joint and several, to which the Company
or any such director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in said registration statement, said preliminary prospectus,
said final prospectus, or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing Holder for
use in the preparation thereof; and will reimburse the Company or any such
director, officer, or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
paragraph 7.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
5
<PAGE>
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such action. Such adjustment shall be made successively whenever any
event listed above shall occur.
(b) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in subsection (e) below) on the record date mentioned below, the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying each Share by the product of the Exercise Price in
effect immediately prior to the date of such issuance multiplied by a fraction,
the numerator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current market price
per share of the Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or purchase
(or into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and
to the extent that shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock) actually
delivered.
(c) In case the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and-dividends or distributions referred to in
subsection (a) above) or subscription rights or warrants (excluding those
referred to in subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying each Share by the
product of the Exercise Price in effect immediately prior thereto multiplied by
a fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding multiplied by the current market price per share of Common
Stock (as defined in subsection (e) below), less the fair market value (as
determined by the Company's Board of Directors) of said assets or evidences of
indebtedness so distributed or of such rights or warrants, and the denominator
of which shall be the total number of shares of Common Stock outstanding
multiplied by such current market price per share of Common Stock. Such
adjustment shall be made
6
<PAGE>
successively whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately
after the record date for the determination of shareholders entitled to receive
such distribution.
(d) Whenever the Exercise Price payable upon exercise of this Option
is adjusted pursuant to subsections (a), (b), or (c) above, the number of Option
Shares purchasable upon exercise of this Option shall simultaneously be adjusted
by multiplying the number of Option Shares initially issuable upon exercise of
this Option by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(e) For the purpose of any computation under subsections (b) and (c)
above, the current market price per share of Common Stock at any date shall be
deemed to be the average of the daily closing prices for 20 consecutive business
days before such date. The closing price for each day shall be the last sale
price regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock is admitted
to trading or listed, or if not listed or admitted to trading on such exchange,
the average of the highest reported bid and lowest reported asked prices as
reported by NASDAQ, or other similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market price as
determined by the Board of Directors.
(f) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least ten cents ($0.10)
in such price; provided, however, that any adjustments which by reason of this
subsection (i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Section 8
to the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income tax liability to the
holders of Common Stock or securities convertible into Common Stock (including
Warrants issuable upon exercise of this Option).
(g) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly, but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Option Shares issuable upon exercise of this Option
and, if requested, information describing the transactions giving rise to such
adjustments, to be mailed to the Holder, at the address set forth herein, and
shall cause a certified copy thereof to be mailed to its transfer agent, if any.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(h) In the event that at any time, as a result of an adjustment made
pursuant to subsection (a) above, the Holder thereafter shall become entitled to
receive any shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this Option shall be
subject to adjustment from time to time in a manner and on terms as
7
<PAGE>
nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in subsections (a) to (f), inclusive above.
9. This Agreement shall be governed by and in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, Perry's Majestic Beer, Inc. has caused this Option to
be signed by its duly authorized officers under its corporate seal, and this
Option to be dated _____________________, 1996.
PERRY'S MAJESTIC BEER, INC.
By ______________________________
Its President
(Corporate Seal)
8
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder,
Shares of Common Stock of Perry's Majestic Beer, Inc., par value $.0001 per
share, and herewith makes payment of $______________ therefor, and requests that
the certificates for shares of Common Stock be issued in the name(s) of, and
delivered to _________________________________ whose address(es) is (are)
_________________________________________________________________________.
______________________________
By ______________________________
Dated:
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and transfers
unto _________________________________ the right to purchase Shares represented
by the foregoing Option to the extent of _____ Shares, and appoints
_________________________________ attorney to transfer such rights on the books
of Perry's Majestic Beer, Inc., with full power of substitution in the premises.
Dated: ______________________________
By ___________________________
Address:
______________________________
______________________________
______________________________
In the presence of:
<PAGE>
[Letterhead of Bernstein & Wasserman LLP]
July 22, 1996
Board of Directors
Perry's Majestic Beer, Inc.
134 Morgan Avenue
Brooklyn, New York 11237
Re: Perry's Majestic Beer, Inc.
Registration Statement on Form SB-2
Gentlemen:
We have acted as counsel for Perry's Majestic Beer., a Delaware corporation
(the "Company"), in connection with the preparation and filing by the Company of
a registration statement (the "Registration Statement") on Form SB-2, File No.
333-3458, under the Securities Act of 1933, relating to the public offering of
583,335 shares of the Company's Common Stock, par value $.0001 per share (the
"Common Stock"). The offering also involves the sale to the Underwriter of an
option (the "Representative's Option") to purchase up to 58,333 shares of Common
Stock, and the registration of an additional 2,500,000 shares of Common Stock on
behalf of selling stockholders (the "Selling Securityholder's Securities").
We have examined the Certificate of Incorporation and the By-Laws of the
Company, the minutes of the various meetings and consents of the Board of
Directors of the Company, drafts of the Underwriting Agreement relating to the
offering of the Common Stock, drafts of the Representative's Option, draft forms
of certificates representing the Common Stock, originals or copies of such
records of the Company, agreements, certificates of public officials,
certificates of officers and representatives of the Company and others, and such
other documents, certificates, records, authorizations, proceedings, statutes
and judicial decisions as we have deemed necessary to form the basis of the
opinion expressed below. In such examination, we have assumed the genuiness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity to originals of all documents submitted to us as copies
thereof. As to various questions of fact material to such opinion, we have
relied upon statements and certificates of officers and representatives of the
Company and others.
Based on the foregoing, we are of the opinion that:
<PAGE>
1. All shares of Common Stock have been duly authorized and, when issued
and sold in accordance with the Prospectus, will be validly issued, fully paid
and non-assessable.
2. The Representative's Option has been duly authorized and, when issued
and sold in accordance with the Prospectus, will be validly issued.
3. The shares of Common Stock included in the Selling Securityholder's
Securities have been duly authorized, validly issued, fully paid and
nonassessable; and, when sold in accordance with the appropriate prospectus (the
"Selling Securityholder Prospectus") forming a part of the Registration
Statement, will continue to be duly authorized, validly issued, fully paid and
nonassessable.
4. The shares of Common Stock issuable upon exercise of the
Representative's Option have been duly authorized and reserved for issuance and,
when issued in accordance with the terms of the Representative's Option will be
duly authorized, validly issued, fully paid and nonassessable.
We hereby consent to be named in the Registration Statement, the Prospectus
and the Selling Securityholder Prospectus as attorneys who have passed upon
legal matters in connection with the offering of the securities offered thereby
under the caption "Legal Matters."
We further consent to your filing a copy of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
BERNSTEIN & WASSERMAN
B&W/jm
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PERRY'S MAJESTIC BEER, INC.
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1996 Stock Plan
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PERRY'S MAJESTIC BEER, INC.
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1996 Stock Plan
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1. Purposes ....................................................... 1
2. Definitions .................................................... 1
3. Administration ................................................. 3
4. Shares Subject to the Plan ..................................... 4
5. Persons Eligible; Annual Limitations ........................... 4
6. Specific Terms of Awards ....................................... 5
7. Certain Provisions Applicable to Awards ........................ 10
8. Change in Control Provisions ................................... 13
9. Adjustments .................................................... 14
10. General Provisions ............................................. 15
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PERRY'S MAJESTIC BEER, INC.
1996 STOCK PLAN
1. Purposes. The 1996 Stock Plan (the "Plan") is intended to promote the
interests of Perry's Majestic Beer, Inc. (the "Company") and its stockholders
and the security of its employees and other key employees who are in a position
to contribute substantially to the progress to seek such results; to closely
align the interests of such employees with the interests of stockholders of the
Company by linking rewards hereunder to stock performance; to retain in the
Company the benefits of the services of such employees; and to attract to the
service of the Company new key employees of high quality.
2. Definitions. In addition to terms defined in Sections 1 and 8 of the
Plan, the following terms used in the Plan shall have the meanings set forth
below:
(a) "Award" shall mean any Option, LSAR, Restricted Stock, Deferred
Stock, Shares granted as a bonus or in lieu of other awards, Dividend
Equivalent, or Other ShareBased Award, or any other right or interest
granted to a Participant under the Plan.
(b) "Change in Control" shall have the meaning specified in Section
8(b).
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time. References to any provisions of the Code shall be deemed
to include regulations and proposed regulations thereunder and successor
provisions and regulations thereto.
(d) "Committee" shall mean the Compensation Committee of the Board of
Directors, or such other Committee as may be designated by the Board of
Directors, subject to the requirements of Section 3.
(e) "Covered Employee" shall mean a person who is an executive officer
deemed by the Committee, prior to commencement of any fiscal year, as
reasonably likely to be a "named executive officer" in the Summary
Compensation Table of the Company's proxy statement reporting compensation
paid to such person for such fiscal year and whose compensation over $1
million would not be deductible under Section 162(m) of the Code, but for
the provisions of the Plan and any other "qualified performance-based
compensation" plan (as defined under Section 162(m) of the Code) of the
Company; provided, however, that the Committee may determine that a
Participant has ceased to be a Covered Employee prior to payout of any
Award.
(f) "Deferred Stock" shall mean a right, granted to a Participant
under Section
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6(e), to receive Shares at the end of a specified deferral period.
(g) "Directors," "Board of Directors" and "Board" shall mean the Board
of Directors of the Company as constituted from time to time.
(h) "Dividend Equivalent" shall mean a right, granted to a Participant
under Section 6(g), to receive cash, Shares, other Awards, or other
property equal in value to dividends paid with respect to a specified
number of Shares or other periodic payments. Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award, and
may be paid currently or on a deferred basis.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" of a Share shall be the mean average of the
bid and asked prices of a Share on The Nasdaq SmallCap Market (or, if the
Common Stock is not listed for trading on The Nasdaq SmallCap Market, such
principal exchange system on which such Shares are then listed or quoted)
on a specified date, or the last preceding date on which such prices were
reported; or if such Shares are not then listed on any exchange or quoted
in The Nasdaq SmallCap Market, then the Fair Market Value of such Shares
shall be the average of the bid and asked prices of the Shares in the
over-the-counter market on the specified date or the last preceding date on
which such bid and asked prices were quoted; or if no such prices are
available, the Fair Market Value shall be determined by the Committee in
its discretion using any reasonable method.
(k) "Incentive Stock Option" or "ISO" shall mean an incentive stock
option within the meaning of Section 422 of the Code.
(l) "LSAR" or "Limited Stock Appreciation Right" shall mean the right
granted to a Participant under Section 6(c) to be paid an amount, in the
event of a Change in Control, measured by the appreciation in the Fair
Market Value of a Share from the date of grant to the date of exercise of
the right, with payment to be made in cash, Shares, or other Awards as
specified in the Award or determined by the Committee.
(m) "Non-Incentive Stock Option" shall mean an Option which is not an
ISO.
(n) "Option" shall mean an option of the purchase of Shares granted
under Section 6(b) of the Plan, which will be either an ISO or
Non-Incentive Stock Option.
(o) "Other Share-Based Award" shall mean a right, granted to a
Participant under Section 6(h), that relates to or is valued by reference
to Shares, other Awards relating to Shares, or other property.
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(p) "Participant" shall mean a person who, as an executive officer or
other key employee of the Company or a subsidiary, is selected by the
Committee to receive an Award under the Plan.
(q) "Restricted Stock" shall mean an award of Shares to a Participant
under Section 6(d) that may be subject to certain restrictions and to a
risk of forfeiture.
(r) "Rule 16b-3" shall mean Rule 16b-3, as from time to time in effect
and applicable to the Plan and Participants, promulgated by the Securities
and Exchange Commission under Section 16 of the Exchange Act.
(s) "Share" shall mean a share of Common Stock, par value $.0001 per
share, of the Company, and such other securities as may be substituted or
resubstituted for Shares pursuant to Section 9.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, which shall consist of not less than two Directors designated by
the Board of Directors. Directors who serve on the Committee shall be
"disinterested persons" within the meaning of Rule 16b-3 and shall be
"outside directors" within the meaning of Section 162(m) of the Code
(including persons deemed to be outside directors pursuant to any
transitional rules adopted by the Internal Revenue Service). The Board of
Directors may fill any vacancy in the Committee. The Secretary of the
Company shall be ex officio the Secretary of the Committee. Subject to the
terms of the Plan, the Committee shall have full authority in its sole
discretion to administer the Plan, including, but without limiting the
generality of the foregoing, determining the persons to whom Awards shall
be granted; the type of Award and the number of Shares to which each Award
shall relate; the time of such grants; the terms of payment, if any
relating to any Award; the dates on which Awards may be exercised or the
risk of forfeiture or deferral period relating to Awards shall lapse or
terminate, and the acceleration of any such dates; the expiration date of
Awards; whether, to what extent, and under what circumstances an Award may
be settled, or the exercise price of an Award may be paid, in cash, Shares,
other Awards, or other property; and all other terms and conditions of
Awards. The Committee shall also have full power, in its sole discretion,
to interpret the Plan, and to prescribe, amend, and rescind rules and
regulations relating thereto and agreements relating to Awards, and to make
all other determinations under the Plan, subject to the terms of the Plan.
Decisions of the Committee with respect to the administration and
interpretation of the Plan shall be final, conclusive, and binding upon all
persons interested in the Plan.
(b) Manner of Exercise of Committee Authority. Unless authority is
specifically reserved to the Board of Directors under the terms of the
Plan, the Company's Certificate of Incorporation or Bylaws, or applicable
law, the Committee shall have sole
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discretion in exercising authority under the Plan. The Committee shall
select one of its members as its chairman and shall hold meetings at such
times and places as it shall deem advisable. Any action of the Committee
shall be taken with the approval of a majority of its members present and
voting at a meeting duly called and held at which a quorum is present. A
majority of the Committee's members shall constitute a quorum. Any action
may be taken by a written instrument signed by all members of the Committee
and such action shall be fully as effective as if taken by a majority of
the members at a meeting duly called and held. The Committee may delegate
to officers or managers of the Company or any subsidiary of the Company the
authority, subject to such terms as the Committee shall determine, to
perform administrative functions and, with respect to Participants not
subject to Section 16 of the Exchange Act, to perform such other functions
as the Committee may determine, to the extent permitted under Rule 16b-3
and applicable law.
(c) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other
information furnished to him by any officer or other employee of the
Company or any subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant, legal counsel or
other professional retained by the Company to assist in the administration
of the Plan. No member of the Committee, nor any officer or employee of the
Company or a subsidiary acting on behalf of the Committee, shall be
personally liable for any action, determination, or interpretation taken or
made in good faith with respect to the Plan, and such persons shall, to the
extent permitted by law, be fully indemnified and protected by the Company
with respect to any such action, determination, or interpretation.
4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 9 hereof, the total
number of Shares reserved for delivery to Participants in connection with
Awards under the Plan shall be 2,000,000 shares.
(b) No Award (including an Award that may only be settled in cash) may
be granted if the number of Shares to which such Award relates, when added
to the number of Shares previously delivered under the Plan and the number
of Shares to which other then-outstanding Awards relate, exceeds the number
of Shares deemed available under this Section 4. The Committee may adopt
procedures for the counting of Shares under this Section 4 to ensure
appropriate counting, avoid double counting (in the case of tandem or
substitute Awards), and provide for adjustments in any case in which the
number of Shares actually delivered differs from the number of Shares
previously counted in connection with an Award or awards made pursuant to
other Company plans. Any Shares delivered pursuant to an Award may consist,
in whole or in part, of authorized and unissued Shares or treasury Shares.
5. Persons Eligible; Annual Limitations. Persons eligible to receive
Awards shall be the executive officers and other key employees of the Company
and/or any of its subsidiaries (including
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officers or key employees who may be members of the Board of Directors). During
any calendar year, no Participant may be granted, under the Plan, Options or
other Awards under Section 6(b) through 6(h) relating to more than 100,000
Shares and in no event shall the aggregate amount of such grant exceed at the
time of grant an amount equal to $100,000, subject to adjustment in accordance
with Section 9 hereof. With respect to any Award that may be settled in cash, no
Participant may be paid during any calendar year an amount that exceeds the
greater of the Fair Market Value of the number of Shares set forth in the
preceding sentence at the date of grant or the date of settlement of the Award
(this limitation is separate and not affected by the number of Awards granted
during such calendar year subject to the limitation in the preceding sentence).
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6 and otherwise in accordance with the Plan. In
addition, the Committee may impose on any Award or the exercise thereof, at
the date of grant or thereafter (subject to Section 10(e)), such additional
terms and conditions, not inconsistent with the provisions of the Plan, as
the Committee shall determine, including terms requiring forfeiture of
Awards in the event of termination of employment by the Participant. Except
as provided in Sections 6(f), 6(h), 7(a), or 7(b), or to the extent
necessary to comply with requirements of the New York Business Corporation
Law that lawful consideration be paid for Shares, only services may be
required as consideration for the grant (but not the exercise) of any
Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable under an
Option shall be determined by the Committee; provided, however,
that, except as provided in Section 7(a), such exercise price
shall be not less than the Fair Market Value of a Share on the
date of grant of such Option and, in all cases, shall be not less
than par value of a Share.
(ii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in
part, the methods by which such exercise price may be paid or
deemed to be paid, the form of such payment, including, without
limitation, cash, Shares, other Awards or awards granted under
other Company plans, or other property (including notes or other
contractual obligations of Participants to make payment on a
deferred basis, such as through "cashless exercise" arrangements,
to the extent permitted by applicable law), and the methods by
which Shares will be delivered or deemed to be delivered to
Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Section 422 of the Code,
including but not limited to the requirement that no ISO shall be
granted more than ten years
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after the effective date of the Plan. Anything in the Plan to the
contrary notwithstanding, no provision of the Plan relating to
ISOs shall be interpreted, amended, or altered, nor shall any
discretion or authority granted under the Plan be exercised, so
as to disqualify either the Plan or any ISO under Section 422 of
the Code.
(iv) Restriction on Sale or Disposition of Shares Subject to Non-ISOs.
Upon the grant of an Option which is not an ISO, the Committee
shall specify a period of time during which the sale or other
disposition of Shares acquired pursuant to such Option shall be
restricted, which period shall be not less than six months nor
more than three years after exercise of an Option ("Restricted
Period"). In the case of Shares purchased upon the exercise of
non-ISOs:
(A) During the Restricted Period, such Shares may not be sold,
transferred, pledged, assigned or otherwise disposed by the
holder thereof except that the optionee may offer the Shares
to the Company and the Company may purchase up to all the
Shares offered, in its sole discretion, during such period
at a price equal to the exercise price of the Shares.
Furthermore, upon termination of optionee's employment with
the Company during the Restricted Period for reasons other
than death, disability or retirement due to advanced age,
such optionee shall be required, upon written request of the
Company made during the Restricted Period, within seven (7)
business days to sell to the Company up to all of the Shares
purchased at the exercise price. If the Company does not
require such sale, the optionee shall continue to hold such
shares subject to the restrictions imposed by this clause
(A).
(B) After the end of the Restricted Period, in the event the
holder of such Shares desires to sell such Shares, such
holder shall first offer by written notice such Shares to
the Company at the Fair Market Value thereof on the date of
such notice and the Company shall have until the close of
business on the seventh business day after receipt of such
offer to accept it in whole or in part by written notice
thereof. If the Company shall elect to purchase such Shares
it shall pay cash therefor on the fifth business day
following the date of the notice of the acceptance of the
offer. If the Company shall not elect to purchase such
Shares, the offering holder shall then be free to sell all
Shares offered to and not acquired by the Company for a
period of 30 days beginning on the first business day after
the date the Company gives notice that it does not elect to
purchase such Shares or after expiration of the period
within which the Company can elect to purchase, whichever is
sooner. Upon the expiration of such 30 day period, the
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holder must again offer the Shares to the Company as
aforesaid before any sale thereof. The restrictions
contained in this clause (B) shall be applicable to persons
who succeed, by will or by reason of the laws of descent and
distribution, to the rights of holders of NonIncentive Stock
Options or Shares acquired upon exercise thereof.
(v) Right of First Refusal Concerning Shares Subject to ISOs. The
right of first refusal granted to the Company with respect to the
sale or disposition of Shares acquired pursuant to the exercise
of a Non-Incentive Stock Option set forth in Clause (B) of
subparagraph (iv) above also shall be applicable to Shares
acquired pursuant to the exercise of ISOs from the date of
exercise of such Options. These restrictions shall also be
applicable to persons who succeed by will or by reason of the
laws of descent and distribution to the rights of the holders of
ISOs or shares acquired upon exercise thereof.
(vi) Exercise Price and Term for 10% Stockholders. The exercise price
of an ISO granted to a person possessing more than 10% of the
total combined voting power of all shares of stock of the Company
or a parent or subsidiary of the Company ("10% Stockholder")
shall in no event be less than 110% of the Fair Market Value of
the shares of the Common Stock at the time the ISO is granted.
The term of an ISO granted to a 10% Stockholder shall not exceed
five years from the date of grant.
(c) Limited Stock Appreciation Rights. The Committee is authorized to
grant LSARs to Participants on the following terms and conditions:
(i) Grant. The Committee, in connection with any Option, either at
the time the Option is granted or any other time thereafter while
the Option is outstanding, may grant to any optionee an LSAR
entitling the holder, in the event of a Change in Control of the
Company, to receive from the Company at any time during the
60-day period following such Change in Control, in lieu of
exercising such Option, an amount of cash equal to the excess of
(x) the Fair Market Value of the number of Shares as to which the
LSAR is exercised (determined as of the effective date of the
Change in Control) over (y) the exercise price, times the number
of Shares as to which such LSAR is exercised.
(ii) Payment. An optionee who exercises an LSAR will receive payment
of the amount of cash due within 20 business days after such
exercise.
(iii) Conditions to Exercise. An LSAR will be exercisable only when
the underlying Option is otherwise exercisable and will be
transferable only when the Option is otherwise transferable. In
the event of the death of an optionee, an LSAR may be exercised
following a Change in Control only to
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the extent the related Option may be exercised by such person's
executor or legal representative. In addition, in the case of an
ISO, any exercise of an LSAR can only be made when the Fair
Market Value of the Shares subject to the ISO exceeds the
exercise price of such Option.
(iv) Termination. Upon the exercise of an Option pursuant to the Plan,
the LSAR relating to the Shares covered by such Option shall
terminate. Upon the exercise of an LSAR, the related Option, to
the extent the number of Shares with respect to which such LSAR
was exercised, shall terminate. If any Option shall expire or
terminate for any reason without having been exercised in full,
the LSAR with respect thereto shall terminate.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions, if any,
as the Committee may impose, which restrictions may lapse
separately or in combination at such time, under such
circumstances, in such installments, or otherwise, as the
Committee may determine. Except to the extent restricted under
the terms of the Plan and any Award agreement relating to the
Restricted Stock, a Participant granted Restricted Stock shall
have all of the rights of a stockholder including, without
limitation, the right to vote Restricted Stock and the right to
receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable restriction
period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided, however, that the Committee may provide, by rule or
regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions
relating to Restricted Stock will be waived in whole or in part
in the event of terminations resulting from specified causes.
(iii) Certificates of Shares. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in
the name of the Participant, such certificates shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, the Company
shall retain physical possession of the Certificate, and the
Participant shall have delivered a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.
(iv) Dividends. Dividends paid on Restricted Stock shall be either
paid at the
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dividend payment date in cash or in unrestricted Shares having a
Fair Market Value equal to the amount of such dividends, or the
payment of such dividends shall be deferred and/or the amount or
value thereof automatically reinvested in additional Restricted
Stock, other Awards, or other investment vehicles, as the
Committee shall determine or permit the Participant to elect.
Shares distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Shares
or other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred
Stock to Participants, subject to the following terms and conditions:
(i) Award and Restrictions. Delivery of Shares will occur upon
expiration of the deferral period specified for an Award of
Deferred Stock by the Committee (or, if permitted by the
Committee, as elected by the Participant). In addition, Deferred
Stock shall be subject to such restrictions as the Committee may
impose, if any, which restrictions may lapse at the expiration of
the deferral period or at earlier specified times, separately or
in combination, in installments, or otherwise, as the Committee
may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment (as determined under criteria
established by the Committee) during the applicable deferral
period or portion thereof to which forfeiture conditions apply
(as provided in the Award agreement evidencing the Deferred
Stock), all Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided, however, that the
Committee may provide, by rule or regulation or in any Award
agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock
will be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Deferred Stock.
(f) Bonus Shares and Awards in Lieu of Cash Obligations. The Committee
is authorized to grant Shares as a bonus, or to grant Shares or other
Awards in lieu of Company obligations to pay cash under other plans or
compensatory arrangements; provided, however, that, in the case of
Participants subject to Section 16 of the Exchange Act and unless otherwise
determined by the Board of Directors, such cash amounts are determined
under such other plans in a manner that complies with applicable
requirements of Rule 16b-3 so that the acquisition of Shares or Awards
hereunder shall be exempt from Section 16(b) liability. Shares or Awards
granted hereunder shall be subject to such other terms as shall be
determined by the Committee.
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(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to Participants. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Shares, Awards, or other
investment vehicles as the Committee may specify.
(h) Other Share-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Shares, as deemed by
the Committee to be consistent with the purposes of the Plan, including,
without limitation, convertible or exchangeable debentures or other debt
securities, other rights convertible or exchangeable into Shares, purchase
rights for Shares, Awards with value and payment contingent upon
performance of the Company or any other factors designated by the
Committee, and Awards valued by reference to the book value of Shares or
the value of securities of or the performance of specified subsidiaries.
The Committee shall determine the terms and conditions of such Awards.
Awards for which Participants are required to pay consideration, and Shares
delivered pursuant to an Award in the nature of a purchase right granted
under this Section 6(h) shall be purchased for such consideration, paid for
at such times, by such methods, and in such forms, including, without
limitation, cash, Shares, other Awards, or other property, as the Committee
shall determine. Cash awards, as an element of or supplement to any other
Awards under the Plan, shall also be authorized pursuant to this Section
6(h).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other Award granted under the Plan or awards made pursuant to other Company
plans, any subsidiary, or any business entity to be acquired by the Company
or a subsidiary, or any other right of a Participant to receive payment
from the Company or any subsidiary. Awards granted in addition to or in
tandem with other Awards or awards made pursuant to other Company plans may
be granted either as of the same time as or a different time from the grant
of such other Awards or awards made pursuant to other Company plans. The
per share exercise price of any Option or purchase price of any other Award
conferring a right to purchase Shares:
(i) Granted in substitution for an outstanding Award or award made
pursuant to other Company plans shall be not less than the lesser
of the Fair Market Value of a Share at the date such substitute
Award is granted or such Fair Market Value at that date reduced
to reflect the Fair Market Value at that date of the Award or
award made pursuant to other Company plans required to be
surrendered by the Participant as a condition to receipt of the
substitute Award; or
(ii) Restoratively granted in tandem with an outstanding Award or
award made
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pursuant to other Company plans shall be not less than the lesser
of the Fair Market Value of a Share at the date of grant of the
later Award or at the date of grant of the earlier Award or award
made pursuant to other Company plans.
(b) Exchange or Buyout Provisions. The Committee may at any time offer
to exchange or buy out any previously granted Award for a payment in cash,
Shares, other Awards (subject to section 7(a)), or other property based on
such terms and conditions as the Committee shall determine and communicate
to the Participant at the time that such offer is made.
(c) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided, however, that in no event
shall the term of any ISO or an LSAR granted in tandem therewith exceed a
period of ten years from the date of its grant (or such shorter period as
may be applicable under Section 422 of the Code).
(d) Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award agreement, payments to be made by the Company or a
subsidiary upon the grant or exercise of an Award may be made in such forms
as the Committee shall determine, including, without limitation, cash,
Shares, other Awards, or other property, and may be made in a single
payment or transfer, in installments, or on a deferred basis. Such payments
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents in respect of installment or deferred
payments denominated in Shares.
(e) Rule 16b-3 Compliance.
(i) Six-Month Holding Period. Unless a Participant could otherwise
exercise a derivative security or dispose of Shares delivered
upon exercise of a derivative security granted under the Plan
without incurring liability under Section 16(b) of the Exchange
Act, (x) Shares delivered under the Plan other than upon exercise
or conversion of a derivative security granted under the Plan
shall be held for at least six months from the date of
acquisition, and (y), with respect to a derivative security
granted under the Plan, at least six months shall elapse from the
date of acquisition of the derivative security to the date of
disposition of the derivative security (other than upon exercise
or conversion) or its underlying equity security.
(ii) Reformation To Comply with Exchange Act Rules. It is the intent
of the Company that this Plan comply in all respects with
applicable provisions of Rule 16b-3 or Rule 16a-1(c)(3) under the
Exchange Act in connection with any grant of Awards to or other
transaction by a Participant who is subject to Section 16 of the
Exchange Act (except for transactions exempted under alternative
Exchange Act Rules or acknowledged in writing to be non-exempt
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by such Participant). Accordingly, if any provision of this Plan
or any Award agreement relating to an Award does not comply with
the requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then
applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to
the applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so
that such Participant shall avoid liability under Section 16(b).
(f) Installment Payment Arrangements. Upon grant or exercise of an
Award, the Committee may, in its discretion, permit the payment of any
exercise or purchase price or other consideration, in whole or in part, in
installments, subject to the terms of this Section 7(f). Each such
installment payment arrangement will be evidenced by a promissory note, the
terms and conditions of which shall be determined by the Committee subject
to the following: (a) the maximum term of any note shall be 15 years from
date of the original payment obligation, (b) the minimum interest rate with
respect to amounts loaned hereunder shall be such rate as may be determined
by the Committee from time to time, but in no event shall such rate be less
than the rate required to avoid imputation of interest (or original issue
discount) under Section 483 or any similar provision of the Code, (c) the
note shall be secured as and to the extent determined by the Committee, but
the employee shall be personally liable despite any security pledged, (d)
the note may be prepaid in full or in part at any time without penalty, and
(e) the unpaid principal and interest of any note will become due and
payable on the earlier to occur of the sale of any Shares in connection
with which the payment obligation was incurred and 30 days after the
Participant's employment with the Company terminates (unless the Committee,
in its discretion, extends the note for an additional period). In addition,
the Committee may authorize the Company to make, guarantee, or arrange for
a loan or loans to a Participant to enable the Participant to pay any
federal, state, or local income or other taxes due in connection with an
Award. The Committee shall have the authority to forgive repayment of, or
waive rights relating to, any note or loan authorized hereunder, including
interest thereon. Any arrangement under this Section 7(f) entered into to
permit a Participant to purchase or carry securities shall comply with the
applicable provisions of Regulation G promulgated by the Federal Reserve
Board, and arrangements shall be entered into and continue only to the
extent that such arrangements otherwise shall comply with all applicable
laws, regulations, and contractual obligations of the Company.
(g) Performance-Based Awards to Covered Employees. Other provisions of
the Plan notwithstanding and unless otherwise determined by the Committee,
the provisions of this Section 7(g) shall apply to any Award the
exercisability or settlement of which is subject to the achievement of
performance conditions (other than an Option granted with an exercise price
at least equal to 100% of Fair Market Value of Shares on the date of grant)
if such Award is granted to a person who, at the time of grant, is a
Covered Employee. The terms used in this Section 7(g) shall be interpreted
in a manner consistent with Section 162(m) of the Code and regulations
thereunder (including Proposed Regulation 1.162-27). The performance
objectives for an Award subject to this Section 7(g) shall consist of one
or more business criteria and a targeted level or levels of performance
with respect to such
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criteria, as specified by the Committee but subject to this Section 7(g).
Performance objectives shall be objective and shall otherwise meet the
requirements of Section 162(m)(4)(C) of the Code and regulations thereunder
(including Proposed Regulation 1.162- 27(e)(2)). The following business
criteria shall be used by the Committee in connection with a performance
objective:
(1) Consolidated net income;
(2) Pre-tax earnings from continuing operations of the Company, a
subsidiary or business unit;
(3) Revenues of the Company, a subsidiary or a business unit;
(4) Earnings per common share; and/or
(5) Return on common equity.
Achievement of performance objectives shall be measured over a period of
one, two, three, of four years, as specified by the Committee. No business
criteria other than those named for an Award to a Covered Employee under
this Section 7(g). For each such Award relating to a Covered Employee, the
Committee shall establish the targeted level or levels of performance for
each business criteria. Performance objectives may differ for Awards under
this Section 7(g) to different Covered Employees and from year to year. The
Committee may determine that an Award under this Section 7(g) shall be
payable upon achievement of any one of his performance objectives or may
require that two or more of the performance objectives must be achieved in
order for an Award to be payable. The Committee may, in its discretion,
reduce the amount of a payout otherwise to be made in connection with an
Award under this Section 7(g), but may not exercise discretion to increase
such amount, and the Committee may consider other performance criteria in
exercising such discretion. All determinations by the Committee as to the
achievement of performance objectives shall be made in writing. The
Committee may not delegate any responsibility under this Section 7(g).
8. Change in Control Provisions.
(a) Acceleration Provisions. In the event of a "Change in Control," as
defined in this Section 8, the following acceleration provisions shall
apply:
(i) Any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested,
subject only to the restrictions set forth in Sections 7(e)(i),
10(a), and 10(m); and
(ii) The restrictions, deferral limitations, and forfeiture conditions
applicable to any other Award granted under the Plan shall lapse
and such Awards shall be deemed fully vested, and any performance
conditions imposed with respect to Awards, shall be deemed to be
fully achieved (or in the case of an Award subject to Section
7(g), achieved to the extent of the actual achievement to the
date of the Change in Control), subject to the restrictions on
dispositions
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of equity securities set forth in Sections 7(e)(i), 10(a), and
10(m).
(b) Definition of "Change in Control." For purposes of the Plan, a
"Change in Control" shall have occurred if at any time prior to the
expiration or termination of the last Award granted under the Plan:
(i) The stockholders of the Company approve a merger or consolidation
of which the Company is not the surviving corporation, or a sale
or disposition of all or substantially all of the Company's
assets or a plan of complete liquidation of the Company;
(ii) A tender offer or exchange offer for securities of the Company is
made by any person (as such term is used in Section 13(d) and
14(d)(3) of the Exchange Act), other than any person who is a
member of the existing Board of Directors of the Company, as
defined, with the intent to take over and control the Company;
(iii) Any person, other than any person who is a member of the
existing Board of Directors, is or becomes the beneficial owner
(as such term is defined in Rule 13d-3 under the Exchange Act) of
Shares representing 25% or more of the combined voting power of
the Company's then outstanding securities; or
(iv) The persons constituting the existing Board of Directors cease
for any reason whatsoever to constitute at least a majority of
the Company's Board of Directors;
provided, however, that no Change in Control shall be deemed to have
occurred with respect to any Award (other than an ISO or an LSAR in tandem
with an ISO if the exercise of discretion under this provision would cause
such ISO to lose its status as an Incentive Stock Option) if the Board
shall determine, prior to the occurrence of the event specified in Section
8(b)(i) through (iv) hereof, that such event shall not constitute a Change
in Control for purposes of the Plan; and provided further, that a Change in
Control shall not include increases in the percentage of voting power of
persons who beneficially own or control Shares or other outstanding
securities of the Company which occur solely as a result of a reduction in
the amount of Shares or other securities outstanding or as a result of the
exercise of Options or vesting of Awards granted hereunder.
(c) Definition of "existing Board of Directors." For purposes of the
Plan, the term "existing Board of Directors" shall mean the persons
constituting the Board of Directors of the Company on the date of adoption
of the Plan, together with each new Director whose election, or nomination
for election by the Company's stockholders, is approved by a vote of the
majority of the members of the existing Board of Directors who are in
office immediately prior to the election or nomination of such Director.
9. Adjustments. In the event that the Committee shall determine that any
dividend or
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other distribution (whether in the form of cash, Shares, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Shares such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and kind of Shares
which may thereafter be delivered in connection with Awards, (ii) the number and
kind of Shares that may be delivered or deliverable in respect of outstanding
Awards, (iii) the number of shares with respect to which Awards may be granted
to a given Participant in the specified period as set forth in Section 5, and
(iv) the exercise price, grant price, or purchase price relating to any Award
or, if deemed appropriate, make provision for a cash payment with respect to any
outstanding Award; provided, however, in each case, that, with respect to ISOs,
no such adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b)(1) of the Code or previously issued
ISOs to lose their status as such. In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the Company or
any subsidiary or the financial statements of the Company or any subsidiary, or
in response to changes in applicable laws, regulations, or accounting
principles, or tax rates and regulations, or accounting principles, or tax
adjustments are intended to be objectively determinable and non discretionary
and, as such, consistent with the qualification of Awards as "performance-based
compensation" under Section 162(m) of the Code, and shall be construed
accordingly. To the extent it shall be determined, based on an opinion of
counsel, that any such adjustment would likely cause compensation relating to an
Award to a Covered Employee to fail to be deductible under Section 162(m) of the
Code, such adjustment shall not be authorized or made, unless otherwise
determined by the Committee.
10. General Provisions.
(a) Compliance With Legal and Exchange Requirements. The Company shall
not be obligated to deliver Shares upon the exercise or settlement of any
Award or take other actions under the Plan until the Company shall have
determined that applicable federal and state laws, rules, and regulations
have been complied with and such approvals of any regulatory or
governmental agency have been obtained and contractual obligations to which
the Award may be subject have been satisfied. The Company, in its
discretion, may postpone the issuance or delivery of Shares under any Award
until completion of such stock exchange listing or registration or
qualification of such Shares or other required action under any federal or
state law, rule, or regulation as the Company may consider appropriate, and
may require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance
or delivery of Shares under the Plan.
(b) Nontransferability. A Participant's rights under the Plan
(including any right that may constitute a "derivative security" under the
general definition of Rule 16a-1(c)(3)) may not be transferred, pledged,
mortgaged, hypothecated, or otherwise encumbered, and shall not be subject
to claims of the Participant's creditors; provided, however, that the
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Committee may permit transfers of Options and other Awards for estate
planning purposes if and to the extent such transfers do not cause a
Participant who is then subject to Section 16 of the Exchange Act who then
or thereafter has transactions with respect to such Option or Award to lose
the benefit of the exemption under Rule 16b-3 for such transactions (unless
the Participant acknowledges in writing that such transfer is non-exempt),
or violate other rules or regulations of the Securities and Exchange
Commission or the Internal Revenue Service or materially increase the cost
of the Company's compliance with such rules or regulations.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken hereunder shall be construed as creating any contract of employment
between the Company or any of its subsidiaries and any employee or
otherwise giving any employee the right to be retained in the employ of the
Company or any of its subsidiaries, nor shall it interfere in any way with
the right of the Company or any of its subsidiaries to terminate any
employee's employment at any time.
(d) Taxes. In the event that the Company or any of its subsidiaries
shall be required to withhold any amount by reason of any federal, state,
or local tax law, rule, or regulation or by reason of the grant or exercise
of any Award, the Company or its subsidiaries shall be entitled to deduct
and withhold such amount from any other cash payment or payments to be made
by the Company or its subsidiaries (including from payroll) to such person.
In any such event, the Participant shall make available to the Company or
its subsidiaries, promptly when required, sufficient funds to meet the
Company's or subsidiary's requirement of such withholding; and the Company
shall be entitled to take such steps as the Committee may deem advisable in
order to have such funds available to the Company or its subsidiary at the
required time or times. This Committee authority shall include authority to
withhold or receive Shares or other property, on a mandatory basis or at
the election of the Participant, and to make cash payments in respect
thereof in satisfaction of a Participant's tax obligations (which may
include mandatory withholding obligations and obligations of the
Participant in excess of such mandatory obligations relating to an Award).
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any such action shall be subject to the approval
of the Company's stockholders at or before the next annual meeting of
stockholders after such Board action if such stockholder approval is
require by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Shares may then be
listed or quoted, and the Board may otherwise, in its discretion, determine
to submit other such changes to the Plan to stockholders for approval;
provided, however, that, without the consent of an affected Participant, no
amendment, alteration, suspension, discontinuation, or termination of the
Plan may materially impair the rights of such Participant under any Award
theretofore granted to him. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate, any
Award theretofore granted and any Award agreement relating thereto;
provided, however,
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<PAGE>
that, without the consent of an affected Participant, no such amendment,
alteration, suspension, discontinuation, or termination of any Award may
materially impair the rights of such Participant under such Award.
(f) No Rights to Awards; No Stockholder Rights. Nothing contained in
the Plan shall be deemed to give any person eligible to receive an Award
hereunder, or any heir, distributee, executor, administrator or personal
representative of any such person, any interest or title to any specific
property of the Company, or any of its subsidiaries, or any other right
against the Company or any of its subsidiaries other than as set forth in
the Plan. Neither the establishment of the Plan nor any other action taken
now or at any time with regard thereto shall be construed as giving any
person whatsoever any legal or equitable right against the Company unless
such right shall be specifically provided for in the Plan. There is no
obligation for uniformity of treatment of Participants and employees under
the Plan. No Award shall confer on any Participant any of the rights of a
stockholder of the Company unless and until Shares are duly issued or
transferred and delivered to the Participant in accordance with the terms
of the Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give
any such Participant any rights that are greater than those of a general
creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under the Plan to deliver cash, Shares, other Awards,
or other property pursuant to any Award, which trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the
Committee otherwise determines with the consent of each affected
Participant. If and to the extent authorized by the Committee, the Company
may deposit into such a trust Shares for delivery to the Participant in
satisfaction of the Company's obligations under any Award. If so provided
by the Committee, upon such a deposit of Shares or other assets for the
benefit of a Participant, there shall be substituted for the rights of the
Participant to receive delivery of Shares and other payments under this
Agreement a right to receive the assets of the trust (to the extent that
the deposited Shares or other assets represented the full amount of the
Company's obligation under the Award at the date of deposit). The trustee
of the trust may be authorized to dispose of trust assets and reinvest the
proceeds in alternative investments, subject to such terms and conditions
as the Committee may specify and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitation on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
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(i) Binding Effect. The provisions of the Plan shall be binding upon
the heirs, distributees, executors, administrators and personal
representatives of any person participating under the Plan. Any person
claiming any rights under the Plan as a beneficiary or otherwise through a
Participant shall be subject to all of the terms and conditions of the Plan
and any additional terms and conditions as may be imposed by the Committee.
(j) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other awards, or other property shall be issued or paid in
lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(k) Compliance with Code Section 162(m). It is the intent of the
Company that, unless otherwise determined by the Committee, Options and
other Awards subject to the performance objectives specified under Section
7(g) granted under the Plan to persons who are Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder (including
Proposed Regulation 1.162-27(c) (2) shall constitute "qualified
performance-based compensation" within the meaning of Code Section 162(m)
and regulations thereunder (including Proposed Regulation 1.162-27(e), and
subject to the transition rules under Proposed Regulation 1.162-27(h) (2)
thereunder. Accordingly, unless otherwise determined by the Committee, if
any provision of the Plan or any Award agreement relating to such Award
granted to a Covered Employee does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements, and no provision shall be deemed to confer
upon the Committee or any other person discretion to increase the amount of
compensation otherwise payable to a Covered Employee in connection with
such Award upon attainment of the performance objectives.
(l) Governing Law. The Plan and all related documents shall be
governed by, and construed in accordance with, the laws of the State of
Delaware (except to the extent provisions of federal law may be
applicable). If any provision hereof shall be held by a Court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of
the Plan shall continue to be fully effective.
(m) Effective Date; Plan Termination. The Plan shall become effective
as of March [1], 1996; provided, however, that the Plan shall have been
approved by the affirmative votes of the holders of a majority of voting
securities present in person or represented by proxy, and entitled to vote
at the next annual meeting of Company stockholders for which the record
date is after the effective date of the Plan, or any adjournment thereof,
or prior to such annual meeting at a special meeting of stockholders or by
the written consent of the holders of a majority of voting securities
entitled to vote, in accordance with applicable provisions of the New York
Business Corporation Law. Any Awards granted under the Plan prior to such
approval of stockholders shall not be effective unless and until
stockholder approval is obtained, and, if stockholders fail to approve the
Plan as specified hereunder, any previously granted Award shall be
forfeited and canceled,
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and Participants shall repay to the Company any payments received pursuant
to Dividend Equivalents or dividend payments on Restricted Stock. Unless
earlier terminated under Section 10(e) hereto, the Plan shall terminate on
and no further Awards may be granted under the Plan after [October 30],
2006.
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<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 4, 1996 by and
between Perry's Majestic Beer, Inc., a Delaware corporation with offices
at 134 Morgan Ave, Brooklyn, New York 11237 (the "Corporation"), and
Robert J. Sipper, an individual residing at RD1 Box 394C Dug Road, Chester,
New York 10918 (the "Executive").
W I T N E S S E T H
WHEREAS, the Corporation is desirous of employing the unique
experience, ability and services of Executive as a principal executive
officer from the effective date hereof and in utilizing his experience,
background and know-how; and to extend the term of employment of the
Executive; and
WHEREAS, the Executive currently holds the positions of President
and Chief Executive Officer of Bev-Tyme, Inc., the majority shareholder of
the Corporation and Executive Vice President and Chief Operating Officer
of Mootch & Muck, Inc., a wholly owned subsidiary of Bev-Tyme, Inc; and
WHEREAS, the Executive shall continue to retain these positions.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein the parties agree as follows:
1
<PAGE>
1. Employment.
The Corporation employs Executive and Executive hereby
accepts the employment as the President and Chief Executive Officer
of the Corporation commencing on the date hereof through March 31, 1999.
2. Duties.
Executive shall serve as President and the Chief Executive
Officer of the Corporation. It is understood that (a) the Executive may
have other investments and personal ventures and (b) may be a member of
the board of directors of other corporations, which, from time to time,
may require minimal portions of his time, but which ventures,
investments, directorships and/or the time associated therewith shall not
interfere or be in conflict with his duties hereunder. The Executive shall
render all services hereunder in the New York metropolitan area or in such
other area as the Executive and the Corporation shall determine by mutual
agreement; provided, that the Executive agrees to travel for business
purposes for reasonable lengths of time.
3. Compensation of Executive.
3.1 Salary. Commencing upon the date hereof, the
Corporation shall pay to Executive a salary (the "Initial Salary") of
Fifty Thousand Dollars ($50,000.00) per annum, subject to adjustment as
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<PAGE>
set forth in Sections 3.2, 3.3, 3.4 and 7 below. Such compensation shall be
paid to Executive with the same frequency as other executives of the
Corporation are compensated.
3.2 Cost of Living Adjustments. As promptly as
practical on the anniversary date of each year of the Term of this
Agreement, the Corporation shall adjust Executive's "Salary" (as that
term is defined in Section 3.3 below) by the amount of the increase, if
any, in the Executive's cost of living, which shall be calculated by the
Corporation using as the basis of such computation the "Revised
Consumers Price Index-Cities" published by the Bureau of Labor Statistics
of the United States Department of Labor.
3.3 Increase in Initial Salary. As promptly as practical
on the anniversary date of each year of the Term of this Agreement,
Executive's Base Salary shall be increased by an amount equal to five (5%)
percent or such greater amount as may be determined by the Company's
Board of Directors.
3.4 Bonus. Effective immediately and for every year
thereafter during the term hereof, in addition to the Executive's salary,
Executive shall be entitled to the following bonus:
A) Preferred stock options in a minimum amount of 200,000
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<PAGE>
shares, exercisable at 60% of the fair market value on the date said
options are granted.
3.5 Expenses. In addition to those expenses expressly set
forth herein, the Corporation shall pay or reimburse Executive for all
reasonable, documented out-of-pocket expenses actually paid by Executive
in connection with performing his duties as an officer of the Corporation.
3.6 Automobile Expenses. With respect to Executive's use
of an automobile in connection with the performance of his duties
hereunder, the Corporation shall, at the direction of Executive, either
reimburse Executive for, or directly pay the reasonable costs of, the use
of an automobile during the Term of this Agreement. In addition the
Corporation shall pay all of the usual expenditures in connection
therewith; i.e., fuel, insurance, tolls, parking, customary maintenance and
repairs etc. The type of automobile shall be selected by the Executive.
3.7 Benefits. Executive shall be entitled to participate in
the Corporation's pension, profit sharing, group insurance, option plans,
hospitalization, and group health and benefit plans and all other benefits
and plans as the Corporation provides to its senior executives. All health
and dental insurance shall be on a family basis. In the event the
Corporation doesn't establish a health and dental plan the Corporation
4
<PAGE>
agrees to reimburse the Executive for the cost of same.
4. Termination.
4.1 The provisions contained in Sections 4.2 hereof shall
survive the termination of this Agreement and subject to Section 4 hereof
the provisions contained in Sections 1, 2 and 3 hereof shall cease and
terminate upon the earliest of the events specified below:
(a) The date on which the Term terminates pursuant to Section
1 hereof.
(b) The death of the Executive.
(c) The delivery by the Corporation to the Executive of written
notice of termination at any time after the Executive is disabled. The
term "disabled" for purposes of this Agreement shall mean the Executive
has been unable due to sickness or injury substantially to perform his
regular duties and responsibilities for the Corporation (i) for a period of
twelve (12) consecutive months or (ii) for an aggregate of eighteen (18)
months within any period of twenty four (24) consecutive months or (iii)
for twelve (12) months after the Executive is certified incompetent by a
court with jurisdiction thereof and all appeals from such certification
have expired.
(d) The Corporation's termination of this Agreement for
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<PAGE>
"Cause" upon notice of such termination to the Executive. Such notice
shall be in writing and shall specify with reasonable detail the nature of
the "Cause" for such termination. Termination by the Corporation for
"Cause" shall mean termination by a vote of the majority of the
Corporation's Board of Directors (exclusive of the Executive) because of
material, gross and willful misconduct on the part of the Executive in
connection with the business of the Corporation. Notice by the
Corporation to terminate the Executive for cause shall also provide the
executive with (i) a period of thirty (30) days during which the Executive
shall be given the opportunity to cure such deficient performance and (ii)
and opportunity at the expiration of such thirty (30) day period together
with his counsel, to be heard before the Board of Directors. If the
Executive doesn't cure such deficient performance, the termination for
Cause shall be effective immediately after the hearing before the Board of
Directors or if the Executive declines the opportunity to be heard upon the
expiration of the thirty (30) day period. The employment of the Executive
shall in no event be considered to have been terminated by the Corporation
for cause if termination of his employment took place as a result of an act
or omission which occurred more than twelve calendar months prior to the
Executive's having been given notice of the termination of his employment
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<PAGE>
for such act or commission unless the commission of such act or such
commission could not at the time of such commission or omission have
not been known to a member of the Board of Directors of the Corporation
(other than the Executive, if he is then a member of the Board of
Directors), in which case more than twelve calendar months from the date
that the commission of such act or such commission was or could
reasonably have been so known.
(e) The Executive's termination of his employment hereunder
for "Good Reason" by giving written notice thereof to the Corporation. For
purposes of this Agreement, the Executive shall have "Good Reason" to
terminate his employment if:
(i) Any duties are assigned to the Executive that are
materially inconsistent with or are a material change from his duties as
set forth in Section 2 hereof; or
(ii) The Corporation fails to comply in any material respect
with any of its material covenants and agreements hereunder; or
(iii) The Corporation purports to terminate the Executive's
employment and doesn't comply with the procedures set forth in Section
4.1 (d). The Executive's written notice of termination of his employment
hereunder for "Good Reason" shall specify with reasonable detail the
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<PAGE>
nature of the grounds for such termination and provide the Corporation
with a period of thirty (30) days during which the Corporation shall be
given the opportunity to cure its deficient performance.
(f) In the event of a Change of Control (as hereinafter
defined), the Executive shall have the right to terminate voluntarily his
employment with the Corporation, with or without Good Reason, within
two years after the occurrence of such Change of Control by giving
written notice of termination to the Corporation. A Change of Control
shall be deemed to occur upon (i) the election of one or more individuals to
the Board of Directors of the Corporation which election results in the
election of directors, the majority of whom were nominated by a party
other than the management of the Corporation, unless individuals have
been elected as directors or nominated for election as directors by a
majority of directors of New Day, (ii) a board of directors election which
results in the election of a Chairman of the Board other than the
Executive, (iii) the sale by the Corporation of all or substantially all of its
assets in one transaction or a series of transactions to any Person, (iv)
the merger or consolidation of the Corporation with any Person as a result
of which the Executive doesn't remain the President and Chief Executive
Officer (Nothing contained in this definition shall limit or restrict the
8
<PAGE>
right of the Executive from participating in any discussions or voting on
any matter referred to in this definition at any meeting of the Board of
Directors of New Day or the Corporation's Board of Directors. For purposes
of this Agreement the term "Affiliate" shall mean persons that directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, any other Person. For
purposes of this Agreement the term "Person" shall mean an individual,
partnership, firm, trust, corporation, limited liability company, limited
liability partnership, limited partnership, association or other similar
entity. When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring,
holding, or disposing of securities of the Company, such syndicate or group
shall be deemed a "Person" for the purposes of this Agreement.
4.2 The Executive shall be entitled to the following upon the
termination of this Agreement:
(a) If the Corporation terminates this Agreement for Cause,
the Executive shall receive base salary through the date of termination.
(b) In the event of the Executive's death or if the Corporation
terminates the Executive's employment hereunder on the ground the
Executive is disabled, the Executive's estate or legal representative or the
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<PAGE>
Executive, as the case may be, shall receive:
(i) the Executive's base salary through the date of
termination;
(ii) payment for any unused vacation to which Executive
would have been entitled pursuant to Section 5 hereof; and
(iii) a pro rata portion of any bonus which would have been
payable pursuant to section 3.4 hereof, which shall be calculated as
follows: the annual bonus, multiplied by a fraction the numerator of
which shall be the number of days during such year prior to death or
termination and the denominator of which shall be 365.
(c) If the Corporation shall terminate the Executive's
employment without cause, in breach of this Agreement (it being
understood that a purported termination for Cause which is disputed and
finally determined not to have been proper shall be a termination by the
Corporation without cause), or if Executive shall terminate his
employment for Good Reason, then:
(i) The Corporation shall pay Executive the amounts set
forth in section 4.2 (b) above;
(ii) The Corporation shall continue paying to the Executive
his salary for the balance of the term in accordance with section 3 hereof
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and the Executive shall continue to be entitled to and shall receive his
benefits under sections 3.2, 3.3, 3.4, 3.5, 3.6 and 3.7 hereof for the balance
of the Term; and
(d) Upon the voluntary termination of employment with the
Corporation by the Executive within two years after the occurrence of a
Change of Control, or upon the involuntary termination of employment
with the Corporation of the Executive for any reason other than death,
disability or termination for Cause within two years after the occurrence
of a Change in Control, the Corporation, or the consolidated, surviving or
transferee Person in the event of a consolidation, merger or sale of
assets, shall (I) pay to the Executive, in a lump sum immediately
subsequent to the date of such termination, in addition to any
compensation otherwise owed to the Executive at the time of such
termination, an amount (the "Benefit") equal to the total cash
compensation, including salary, to be paid to the Executive during the
balance of the term, provided, however, that in no event shall the benefit
be less than an amount equal to the product of the annual salary at the
time of the termination multiplied by two (2), and (ii) provide for the
period of the balance of the Term commencing on such termination of
employment, medical, dental, life insurance coverage for the Executive
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and the members of his family (Benefits) which is not less favorable to
the Executive than the group medical, dental, life insurance coverage
carried by the Corporation for the Executive and the members of his
family either immediately prior to such termination of employment pr on
the occurrence of such Change in Control, whichever is greater, provided,
however, that the Corporation's obligation to provide benefits shall
terminate to the extent the Executive obtains comparable medical, dental
and life insurance coverage from any other employer during such period,
but the executive shall not have any obligation to seek or accept
employment during such period, whether or not any such employment
would provide comparable medical, dental and life insurance coverage. In
the event that, subsequent to a Change in Control, the Executive incurs any
costs or expenses, including attorneys fees, in the enforcement of his
rights under this section 4.2 then the corporation shall reimburse the
Executive for such costs or expenses should it be decided by a court of
competent jurisdiction that the Corporation failed to honor its obligations
under this section 4.2.
(e) The Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other
employment or otherwise, and payments to the Executive provided for in
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this Agreement shall be made without set off or reduction for
compensation received for subsequent employment.
5. Vacations.
Executive shall be entitled to a vacation of four (4) weeks per
year, during which period his Salary shall be paid in full. Executive shall
take his vacation at such time or times as Executive shall determine is
covenient.
6. Disclosure of Confidential Information.
Executive recognizes that he has had and will continue to have
access to secret and confidential information regarding the Corporation,
including but not limited to its customer lists, know-how and business
plans. Executive acknowledges that such information is of great value to
the Corporation, is the sole property of the Corporation and has been and
will be acquired by him in confidence. In consideration of the obligations
undertaken by the Corporation herein, Executive will not, at any time,
during or after his employment hereunder, reveal, divulge or make known
to any person, any information acquired by Executive during the course of
his employment, which is treated as confidential by the Corporation,
including but not limited to its customer list and not otherwise in the
public domain. The provisions of this section 6 shall survive Executive's
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employment hereunder.
7. Bev-Tyme, Inc./Mootch & Muck Employment Agreements
The Corporation acknowledges that the Executive has the right
to transfer any and all terms and conditions set forth in his employment
agreements with Bev Tyme, Inc. and Mootch & Muck, Inc. to the Corporation.
The intent of this paragraph is to permit the Executive to transfer such
items such as salary and benefits to the Corporation. In the event the
Executive elects to transfer the salary and benefits of either or both of
the Bev Tyme, Inc. and/or Mootch & Muck, Inc. employment agreements,
they shall be in addition to the then current salary and benefits received
by the Executive pursuant to the terms of this agreement.
8. Miscellaneous.
8.1 Assignments. Neither Executive nor the Corporation
may assign or delegate any of their rights or duties under this Agreement
without the express written consent of the other.
8.2 Entire Agreement. This Agreement constitutes and
embodies the full and complete understanding and agreement of the
parties with respect to Executive's employment by the Corporation,
supersedes all prior understandings and agreements (including existing
agreement), whether oral or written, between Executive and the
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Corporation and shall nor be amended, modified or changed except by an
instrument in writing executed by the party to be charged. The invalidity
or partial invalidity of one or more provisions of this Agreement shall not
invalidate any other provision of this Agreement. No waiver by either
party of any provision or condition to be performed shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same time
or any prior or subsequent time.
8.3 Binding Effect. This Agreement shall inure to the
benefit of, be binding upon and enforceable against, the parties hereto and
their respective successors, heirs, beneficiaries and permitted assigns.
8.4 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
8.5 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given when personally
delivered, sent by registered or certified mail, return receipt requested,
postage prepaid, or by private overnight mail service (e.g. Federal Express)
to the parties hereto. To be effective, all notices to the Corporation shall
also be given simultaneously by like means to Perry's Majestic Beer, Inc.,
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134 Morgan Ave., Brooklyn, New York 11237, Attn: Chief Executive Officer
and notices to the Executive at his address on the books and records kept
by the corporation. Notice shall be deemed given on the sooner of the date
actually received or the third business day after sending.
8.6 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
without giving effect to such State's conflicts of laws provisions and
each of the parties hereto irrevocably consents to the jurisdiction and
venue of the federal and state courts located in the State of New York,
County of Kings.
8.7 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one of the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
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Agreement as of the date set forth above.
PERRY'S MAJESTIC BEER, INC.
/s/ Robert J. Sipper /s/ Robert J. Sipper
By: Robert J. Sipper Robert J. Sipper
Pres/CEO
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 4, 1996, by and between Mark
Butler, an individual residing at , ("Butler" or
the "Employee") and Perry's Majestic Beer, lnc., having offices at 134 Morgan
Avenue, Brooklyn, NY 11237 (the "Company").
WHEREAS, the Company is desirous of engaging the employment services of
Butler and Butler is desirous of providing his employment services to Company in
connection with the day-to-day operations of the Company with respect to
manufacturing, production and marketing of the Company's products.
NOW, THEREFORE, in consideration of mutual premises and covenants contained
herein, the parties hereto agree as follows:
1. The Company hereby agrees to employ Butler and Butler hereby agrees to
be employed as the Company's Executive Vice President. Butler shall have the
duties commensurate with such title.
2. The term of this Agreement shall be for the period of three (3) years
commencing on the date first set forth above (the "Term"). Each twelve month
period during the term of this Agreement (i.e. March 31 to March 31) is
sometimes hereinafter referred to as a "Contract Year." The territory covered by
this Agreement shall be every place where the Company presently does business or
may do business during the term hereof.
3. As consideration for Butler's agreement to provide his services to the
Company, the Company hereby agrees to pay to Butler a minimum salary of $25,000
per annum for each year
<PAGE>
during the Term hereof; provided, however, that in the event the Company
completes a public offering of its securities pursuant to which the Company
receives net proceeds in excess of $2,000,000, the annual salary payable to
Butler during the Term shall be increased to $50,000 per year. Such salary
hereunder shall be payable by the Company on a bi-weekly basis. In addition, the
Company shall pay to the Employee a bonus at the sole discretion of the board of
directors. Employee agrees that during the term of this agreement he shall not
work, advise or consult for any other beer company/business.
4. As additional consideration, on each of March 31, 1997, March 31, 1998
and March 31, 1999, the Company shall deliver to Employee an option to purchase
100,000 shares of the Company's Common Stock exercisable at fair market value on
the date of issuance, for a period of four (4) years.
Although subsequent to the Company's initial public offering, the
Company is under no obligation to file a registration statement under the
Securities Act for the sale or transfer of any shares of the Company's Common
Stock which underlie the options to be awarded to Employee under this paragraph
4 (the "Option Share"), the Company agrees, at its sole cost and expense, that:
(a) If at any time subsequent to the Company's initial public offering
and during the term of this Agreement, the Company determines to file with the
U.S. Securities and Exchange Commission ("SEC") a registration statement in
connection with the proposed issuance for cash of any of the Company's Common
Stock (a "Company Offering"), the Company will give written or telegraphic
notice of its determination to Employee at least twenty (20) days prior to the
anticipated filing date. Subject to the Employee's exercise of the options
granted in this paragraph 4 pursuant to the terms hereof, and upon the written
request of Employee given within ten (10) days after the
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<PAGE>
receipt of any such notice from the Company, the Company will, subject to the
limitations set forth below, use its best efforts to cause such number of the
Option Shares as are set specified in such written request of Employee to be
included in such registration statement to the extent necessary, to permit the
sale or other disposition by the Employee of the Option Shares.
(b) If a Company is proposed to be underwritten in whole or in part,
whether or not on a firm commitment or best efforts basis, the Option Shares
shall be included at Employee's request per the Company and Employee's notice
requirements described in subparagraph (a) of this paragraph 4 in the Company
Offering on the same terms and conditions as the Company's Common Stock
otherwise being sold through the underwriter(s), provided, however, that if in
the opinion of the managing underwriter(s) of such Company Offering, the
inclusion of the Securities would interfere with the successful marketing of the
Company's Common Stock by the Company, then the Employee shall reduce the amount
of the Option Shares to be included in the Company Offering to the extent
necessary to comply with the recommendation of such managing underwriter(s).
(c) If and whenever the Company is required by this paragraph 4 to
effect the registration of the Option Shares under the Securities Act, the
Company will use all reasonable efforts (and a determination that such efforts
have been employed shall be conclusively made by a letter to such effect from
counsel to the Company) to:
(i) Prepare and file with the Commission a registration statement
with respect to the Option Shares and to cause such registration
statement to become effective at the earliest possible time and (by
preparing and filing with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary) to remain effective during the
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<PAGE>
period required for the distribution of the (Option Shares covered by
such registration statement.
(ii) Enter into a written underwriting agreement in form and
substance reasonably satisfactory to the Company and the managing
underwriter(s) if a Company Offering is to be underwritten sole or in
part, whether or not on a firm commitment or best efforts basis.
(iii) Furnish to the Employee, in connection with a Company
Offering in which the Employee is participating such reasonable number
of copies of the registration statement, preliminary prospectus, final
prospectus and other documents as may reasonably be requested;
(iv) Register or qualify the Option Share under the securities or
"blue sky" laws of such jurisdictions within the United States as the
Company and the managing underwriter(s) reasonably request, provided
that the Company shall not be required to consent to general service
of process for all purposes in any jurisdiction where it is not then
qualified to do business as a foreign corporation;
(v) Notify the Employee promptly after the Company shall receive
notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of
such registration statement has been filed.
(vi) Notify the Employee, during any period during which the
Option Shares may be distributed pursuant to a registered offering and
a prospectus relating to such registration statement is required to be
delivered under the Securities Act, of
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<PAGE>
the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances then existing, not misleading,
and at the request of the Employee prepare and furnish to the Employee
a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that as thereafter delivered to
the purchasers of such Option shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances then existing, not
misleading; and
(vii) Furnish, at the request of the Employee, on the date that
the Option Shares are delivered to the underwriter(s) pursuant to an
Underwritten Offering, (i) an opinion, dated such date of the
independent counsel representing the Company for the purposes of such
registration, addressed to the underwriter(s) and to the Employee to
the effect that such registration statement has become effective under
the Securities Act and that to the best knowledge of such counsel (A)
no stop order suspending the effectiveness thereof has been instituted
or is pending or contemplated under the Securities Act; (B) the
registration statement, the related prospectus, and each amendment or
supplement thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the requirements of
the Securities Act and the applicable rules and regulations of the
Commission thereunder (except that such counsel need express no
opinion as to any
5
<PAGE>
statistical or other numerical data or financial statements and notes
related thereto contained therein); and (C) in connection with the
preparation of the registration statement, the related prospectus, and
each amendment or supplement thereto, (I) no facts have come to the
attention of such counsel or that would lead such counsel to believe
that either the registration statement or the prospectus, or any
amendment or supplement thereto, as of their respective elective or
issue dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances
under which they were made, not misleading (except that such counsel
need express no opinion as to any statistical or other numerical data
or financial statements and the notes related thereto contained
therein), and (II) such counsel did not become aware of any pending
legal or governmental proceeding applying to the Company which was not
disclosed in the registration statement or the prospectus, or any
amendment or supplement thereto, which might or have material adverse
effect upon the business or financial condition of the Company, (ii)
any other opinions that the underwriters may reasonably request, and
(iii) a letter, dated such date, from the independent public
accountants of the Company, addressed to the underwriter(s) and to the
Employee, stating that they are independent public accountants within
the meaning of the Securities Act and the rules and regulations of the
Commission thereunder and that in the opinion of such accountants, the
financial statements and other financial data of the Company included
in the registration statement or the prospectus, or any amendment or
supplement thereto, as of their respective effective
6
<PAGE>
or issue dates, complied as to form in all material respects with the
applicable accounting requirements of the Securities Act and the rules
and regulations of the Commission thereunder.
5. Employee shall be entitled four (4) weeks paid vacation during the term
hereof. Additionally, Employee shall be entitled to all health and insurance
benefits and any other employee benefit plans afforded by the Company to all of
its employees. The Company shall have the right, but not the obligation, to take
out "key-man" insurance on Employee. Employee agrees to consent to and make
himself available for any physical examinations required by any insurance
company chosen by Company in connection with Company's procurement of any such
"key-man" insurance during the term hereof.
6. (a) During the Term hereof, Employee agrees to be employed by the
Company and as such, shall devote his best efforts to advance the interests of
Company. The foregoing proscription shall not prohibit Employee from making any
passive investments in any corporations, or being a limited partner in any
limited partnership.
(b) Except in the course of the performance of his duties hereunder,
for no less than three (3) years after the execution hereof, whether or not
employed by the Company, and for one (1) year after the expiration or
termination of this Agreement, Employee agrees that he shall not, directly or
indirectly, alone or as a member of a partnership, or as an employee, officer,
director, or shareholder of any other corporation, be engaged in or concerned
with any other duties or pursuits within the Northeastern United States (the
"Non Compete Territory") that may compete directly or indirectly in any manner
whatsoever with the Company's business at the date of the expiration or
termination hereof, except with the prior written consent of Company, which
consent may be
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<PAGE>
withheld by Company in its sole and absolute discretion. The foregoing
proscription shall not prohibit Employee from making any passive investments in
any corporations, or being a limited partner in any limited partnership.
(c) Butler expressly agrees that for one (l) year after the expiration
or termination of this Agreement, within the Non-Compete Territory, Butler shall
neither (i) engage in any beer/ale business activities whatsoever with any
customers of the Company, nor (ii) contact any customers of the Company for any
beer/ale purpose.
7. Employee acknowledges and agrees that his services to be provided to
Company hereunder are of a unique and extraordinary character, and to replace
the services of Employee would cause the Company great hardship. Accordingly, in
the event of a breach or threatened breach by the Employee of the provisions
herein, including but not limited to Sections 5 and 7 hereof, in addition to
Company's other remedies hereunder, Company shall be entitled to a temporary or
permanent injunction restraining Employee from violation of any of the terms
hereof. Nothing herein contained shall be construed as prohibiting Company from
pursuing any and all other remedies available to it for any such breach or
threatened breach.
8. Any financial advice, memoranda, customer list or other documentation
which Employee becomes aware of during the term of this Agreement shall not be
disclosed to any third-party or person for any reason whatsoever without the
express, prior written approval of Company, which may be withheld by Company in
its absolute discretion. It is expressly acknowledged and agreed by Employee
that Company shall be furnishing proprietary, confidential product, financial,
marketing, organizational, customer and other data relating to the business of
Company (hereinafter referred to, together with the advice, memoranda and
documentation referred to in the preceding
8
<PAGE>
sentence as "confidential information") during the term hereof. Confidential
information includes not only original information, but also information
transferred orally, in writing or by any other means whether now known or
hereafter devised. All confidential information which Employee learns of during
the term hereof and all confidential information given by Company to Employee
will be considered non-public and shall be retained as such by Employee.
Confidential information shall be used by Employee solely in correction with his
duties hereunder and for no other purpose whatsoever. Upon the termination of
this Agreement for any reason, Employee shall immediately deliver to Company all
copies of any confidential information and other materials delivered to Employee
by Company and all abstracts and summaries thereof prepared by Employee.
Employee shall not have the right to disclose any confidential information to
any third-person or entity for any reason whatsoever upon the expiration or
termination of this Agreement.
Notwithstanding the foregoing, Employee shall not be deemed to have
breached the aforementioned confidentiality obligation if Employee can
sufficiently evidence to the Company and its counsel by written records that
with respect to any of the Confidential Information, it:
(i) was at the time of the disclosure by the Company to Employee,
in the public domain;
(ii) has, subsequent to disclosure by the Company to Employee,
become part of the public domain, through no fault, act or omission of
Employee, directly or indirectly, in violation of such obligation;
(iii) was, at the time of the disclosure by the Company to
Employee, in Employee's possession and was not otherwise directly or
indirectly, acquired from the Company;
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<PAGE>
(iv) was received by Employee from any third party, provided that
such information was not obtained by said third party from the Company
improperly, directly or indirectly, and was not improperly disclosed
by the third party to Employee.
9. It is expressly understood that the services of Employee are unique and
accordingly, Employee may not assign any of his rights or obligations hereunder.
Company shall have the right to assign its rights and obligations hereunder,
provided, however, that Company shall remain liable for all compensation to
Employee hereunder.
10. (a) Termination by Company for Cause.
(i) This Agreement and the Term may be terminated "for cause" by
the Company. If the Company determines that "cause" exists for
termination of the Employee's employment, written notice thereof must
be given to the Employee describing the state of affairs or facts
deemed by the Company to constitute such cause. The Employee shall
have 45 days after receipt of such notice to cure the reason
constituting cause if he does so, the Term shall not be terminated for
the cause specified in the notice. During such 45 day period, the Term
shall continue and the Employee shall continue to receive his salary,
expenses and benefits pursuant to this Agreement. If such cause is not
cured to the Company's reasonable satisfaction within such 45 day
period, the Employee may then be immediately terminated by the
Company. For purposes of this paragraph, the words "for cause" or
"cause" shall be limited to: (A) actions on the part of the Employee
which constitute gross negligence or willful misconduct in the
performance or non-performance of the Employee's duties that have the
effect of materially injuring the reputation, business or business
relationships of the
10
<PAGE>
Company; or (B) the conviction of the Employee (including a conviction
on a nolo contendere plea) of any felony, or of any crime or offense
which involves property or money of the Company or moral turpitude; or
(C) Employee's incarceration following any conviction which restricts
or limits the ability of the Employee to provide his duties hereunder.
(ii) In the event the Agreement and the Term are terminated by
the Company for cause, the Employee's entire right to salary and
benefits hereunder shall cease upon such termination.
(b) Termination by Company Without Cause.
(i) The Company shall have the right to terminate the Agreement
and the Term without cause on thirty (30) days' written notice to the
Employee.
(ii) In the event the Agreement and the Term are terminated
without cause, the Company shall pay the Employee a lump sum equal to
$25,000.00 and the Company shall immediately deliver to Employee any
stock options which would have been delivered to him over the balance
of the Term.
(iii) Notwithstanding anything to the contrary herein contained,
in the event the Agreement and the Term are terminated without cause,
the provisions of Sections 6(b) and 6(c) shall no longer apply to
Employee, but the "piggyback registration rights" of Employee
contained in paragraph 6(b) shall survive any such termination of the
Agreement and Term without cause.
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<PAGE>
(c) Voluntary Termination by the Employee.
(i) The Employee shall have the right to voluntarily terminate
the Agreement and the Term upon thirty (30) days' written notice to
the Company, in which event, the Employee shall no longer be entitled
to any salary, future option awards or benefits hereunder.
(d) Termination bv the Employee for Cause.
This Agreement and the Term may be terminated "for cause" by the
Employee. If the Employee determines that "cause" exists for
termination of the Agreement and Term, written notice thereof must be
given to the Company describing the state of affairs or facts deemed
by the Employee to constitute such cause. The Company shall have 45
days after receipt of such notice to cure the reason constituting
cause and if it does so, the Term shall not be terminated for the
cause specified in the notice. During such 45 day period, the Term
shall continue and the Employee shall continue to receive his salary,
expenses and benefits pursuant to this Agreement. If such cause is not
cured to the Employee's reasonable satisfaction within such 45 day
period, the Employee may then immediately terminate the Agreement and
the Term. For purposes of this paragraph, the words "for cause" or
"cause" shall include, but not be limited to: (A) actions on the part
of the Company which constitute gross negligence or willful misconduct
in the performance or non-performance of its duties that have the
effect of materially injuring the reputation, business or business
relationships of the Employee; or (B) the failure of the Company: (x)
to pay salary or bonus; (y) to issue stock options or (z) honor
Employee's "piggyback registration rights" pursuant to paragraph 4
hereof.
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(ii) In the event the Agreement and the Term are terminated by
the Employee for cause, the Employee, in addition to any and all other
legal and equitable rights the Employee might have, and
notwithstanding any provisions to the contrary herein contained, the
provisions of Section 6(b) and 6(c) shall no longer apply to Employee.
(e) Termination for Disability.
(i) Should the Employee be absent from work as a result of
personal injury, sickness or other disability for any continuous
period of time exceeding 180 days, and if after reasonable
accommodation, the Employee is still unable to perform his duties
hereunder, the Agreement and Term may be terminated by the Company,
upon written notice given to the Employee because of the Employee's
permanent disability.
(ii) In the event the Agreement and the Term are terminated for
Employee's permanent disability, then following such termination, (A)
the Employee shall continue to be entitled to salary for a period of
ninety (90) days thereafter and (B) Employee shall continue to receive
his stock option awards pursuant to paragraph 4, which provision shall
survive any such termination for permanent disability.
(f) Termination upon Death.
If not earlier terminated, this Agreement and the Term shall
terminate upon the death of the Employee and the Company shall pay the
Employee's estate the following: (i) his salary for a period of one
year and (ii) the remainder of the stock option to have been awarded
to Employee pursuant to paragraph 4.
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11. Each of the parties hereto represents, warrants and agrees that it has
the full right, power and authority to enter into this Agreement, and upon the
full execution hereof this Agreement shall be a valid and binding and
enforceable against each of the parties in accordance with its terms.
12. Each of the parties hereto expressly acknowledges and agrees that all
representations, warranties and agreements made by both parties hereunder,
except with respect to the Company's obligation to compensate Employee
subsequent to the expiration or termination hereof, shall survive the expiration
or termination of this Agreement.
13. This Agreement, including any exhibits and schedules hereto and other
documents and certificates delivered pursuant to the terms hereof, sets forth
the entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein, and supersede all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto.
14. All notices requested and other communication required herein shall be
in writing and shall be deemed to be duly given and delivered by either
certified or registered mail, return receipt requested with postage prepaid or
by private overnight mail service (e.g., Federal Express).
If to Butler:
Mark Butler
With copy to:
Law Offices of Alfred Cavallaro
630 Fifth Avenue, Suite 2162
New York, NY 10111
Attn: Alfred Cavallaro, Esq.
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If to Company:
Perry's Majestic Beer, Inc.
134 Morgan Avenue
Brooklyn, NY 11237
With copy to:
Bernstein & Wasserman
950 Third Avenue, 10th Floor
New York, NY 10022
Attn: Hartley T. Bernstein, Esq.
Or in each case to such other person who addresses any party shall furnish
to the other party in writing.
15. The remedies provided herein shall be cumulative and shall not preclude
Company from asserting any other rights or seeking any other remedies against
Employee.
16. If in any jurisdiction, any provision of this Agreement or its
application to any party or circumstance is restricted, prohibited or
unenforceable, such provision shall, as to such jurisdiction, be ineffective
only to the extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions hereof and without affecting the validity
or enforceability of such provision in any other jurisdiction or its application
to other parties or circumstances.
17. No party hereto shall make or issue, or cause to be made or issued, any
announcement or written statement concerning this Agreement or the transactions
contemplated hereby for dissemination to customers, suppliers, sales
representatives or employees or the general public prior to the execution
hereof.
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18. This Agreement and the legal relations among the parties hereto shall
be governed by and constructed in accordance with the laws of the State of New
York without regard to its conflicts of law doctrine. Each of the parties hereto
irrevocably consents to the jurisdiction of the Federal and State Courts located
in the State of New York.
19. This Agreement may be executed simultaneously in one or more original
or facsimile counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day of
April 1996.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
Robert Sipper
Chief Executive Officer
/s/ Mark Butler
Mark Butler
16
