<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1996
REGISTRATION NO. 333-6033
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO THE
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
BERMUDA 2082 72-1323940
(JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
CT CORPORATION SYSTEM 1 GALLERIA BOULEVARD (SUITE 912)
1633 BROADWAY METAIRIE, LOUISIANA 70001
NEW YORK, NEW YORK 10019 (504) 849-2739
(212) 664-1666 (ADDRESS, INCLUDING ZIP CODE, AND
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
AGENT FOR SERVICE)
</TABLE>
------------------------
<TABLE>
<S> <C> <C>
LAWRENCE A. DARBY, III, ESQ. COPIES TO: LAWRENCE B. FISHER, ESQ.
HOWARD, DARBY & LEVIN ORRICK, HERRINGTON & SUTCLIFFE
1330 AVENUE OF THE AMERICAS 666 FIFTH AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10103
(212) 841-1000 (212) 506-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the 'Securities Act') check the following box: [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
----------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page of Outside Front Cover Page
Prospectus...........................................................
2. Inside Front and Outside Back Cover Pages of Prospectus................ Inside Front and Outside Back Cover
Pages
3. Summary Information, Risk Factors and Ratio of Earnings to Fixed
Charges.............................................................. Prospectus Summary; Risk Factors;
The Company
4. Use of Proceeds........................................................ Prospectus Summary; Use of Proceeds;
Business
5. Determination of Offering Price........................................ Outside Front Cover Page; Risk
Factors; Underwriting
6. Dilution............................................................... Risk Factors; Dilution
7. Selling Security Holders............................................... *
8. Plan of Distribution................................................... Outside Front Cover Page;
Underwriting
9. Description of Securities to be Registered............................. Outside Front Cover Page; Prospectus
Summary; Capitalization;
Description of Securities
10. Interests of Named Experts and Counsel................................. *
11. Information with Respect to the Registrant............................. Outside Front Cover Page; Prospectus
Summary; Risk Factors; The
Company; Use of Proceeds; Dividend
Policy; Capitalization; Dilution;
Selected Consolidated Financial
Data; Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Business; Management; Principal
Stockholders; Certain
Transactions; Description of
Securities; Certain Foreign Issuer
Considerations; Taxation; Shares
Eligible for Future Sale;
Consolidated Financial Statements;
Outside Back Cover Page
12. Disclosure of Commission Position on Indemnification for Securities Act *
Liabilities..........................................................
</TABLE>
- ------------
* Item is inapplicable or response thereto is in the negative.
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 30, 1996
PROSPECTUS
[LOGO]
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
1,333,333 SHARES OF COMMON STOCK AND
1,333,333 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to an offering (the 'Offering') of 1,333,333 shares
(the 'Shares') of common stock, par value US$0.01 per share ('Common Stock'),
and 1,333,333 Redeemable Common Stock Purchase Warrants (the 'Warrants') of
American Craft Brewing International Limited, a Bermuda corporation (the
'Company' or 'AmBrew International'). The Shares and Warrants are sometimes
hereinafter collectively referred to as the 'Securities.' The Shares and
Warrants may be purchased separately and will be transferable separately
immediately following completion of this Offering. Each Warrant entitles the
registered holder thereof to purchase one share of Common Stock at an exercise
price of $ [125% of the initial public offering price] per share at any
time during the period commencing six months from the date of this Prospectus
and terminating five (5) years from the date of this Prospectus. The Warrant
exercise price is subject to adjustment under certain circumstances. Commencing
eighteen (18) months after the date of this Prospectus, the Company may redeem
all, but not less than all, of the Warrants at $0.10 per Warrant on thirty (30)
days' prior written notice to the warrantholders, if the per share closing bid
quotation of the Common Stock as reported on the Nasdaq SmallCap Market
('Nasdaq') equals or exceeds 300% of the initial public offering price per Share
for any twenty (20) trading days within a period of thirty (30) consecutive
trading days ending on the fifth trading day prior to the notice of redemption.
The Warrants will be exercisable until the close of business on the day
immediately preceding the date fixed for redemption. See 'Description of
Securities -- Warrants.'
Prior to this Offering, there has been no public market for the Common Stock
or the Warrants, and there can be no assurance that such a market will develop
after the consummation of this Offering or, if developed, that it will be
sustained. It is currently anticipated that the initial public offering prices
will be between US$5.00 and US$6.00 per Share and US$0.10 per Warrant. For
information regarding the factors considered in determining the initial public
offering prices of the Shares and Warrants and the terms of the Warrants, see
'Risk Factors' and 'Underwriting.' It is anticipated that upon consummation of
this Offering, the Shares and Warrants will be included for quotation on Nasdaq
and will trade separately immediately after the Offering under the symbols
'ACBI' and 'ACBIW', respectively.
THESE ARE SPECULATIVE SECURITIES. THE SECURITIES OFFERED
HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE 'RISK FACTORS'
COMMENCING ON PAGE 8 AND 'DILUTION.'
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO PUBLIC UNDERWRITING DISCOUNT(1) PROCEEDS TO COMPANY(2)
<S> <C> <C> <C>
Per Share................................. $ $ $
Per Warrant............................... $0.10 $ $
Total(3).................................. $ $ $
</TABLE>
(1) Does not include additional compensation to National Securities Corporation,
the representative of the several Underwriters (the 'Representative'), in
the form of (i) a non-accountable expense allowance of 3% of the gross
proceeds of this Offering, (ii) warrants (the 'Representative's Warrants')
to purchase up to 133,333 shares of Common Stock at an exercise price of $
per share [125% of the initial public offering price] and/or up to 133,333
warrants to purchase Common Stock at an exercise price of US$0.125 per
warrant. In addition, see 'Underwriting' for information concerning
indemnification and contribution arrangements with the Underwriters and
other compensation payable to the Representative.
(2) Before deducting estimated expenses of $625,000 payable by the Company,
excluding the non-accountable expense allowance payable to the
Representative.
(3) The Company has granted to the Underwriters an option exercisable within 45
days after the date of this Prospectus to purchase up to an aggregate of
200,000 additional shares of Common Stock and/or 200,000 additional Warrants
upon the same terms and conditions as set forth above, solely to cover
over-allotments, if any (the 'Over-allotment Option'). If such
Over-allotment Option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See 'Underwriting.'
The Securities are being offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, and subject to
approval of certain legal matters by their counsel and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
this Offering and to reject any order in whole or in part. It is expected that
delivery of the Securities offered hereby will be made against payment at the
offices of National Securities Corporation, Seattle, Washington on or about
, 1996.
NATIONAL SECURITIES CORPORATION
The date of this Prospectus is , 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
[Inside front and outside back cover pages of Prospectus contain two labeled
advertisements used by the Company, one picture of the Company's South China
Brewery and one picture of the Company's products and raw materials used therein
accompanied by the following text: 'AT LAST...Hong Kong has its own Independent
Micro-Brewery. South China Brewery is proud to introduce its Flagship Beer,
CROOKED ISLAND ALE, a light, golden ale with a fresh clean nose and crisp
finish. The ale is hand-crafted in small batches in Hong Kong with pale malted
barley from Great Britain and hops from the United States.']
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
SEE PAGES 6, 11 AND 12 FOR DISCUSSION OF THE RISKS ASSOCIATED WITH THE
COMPANY'S INCORPORATION IN BERMUDA, THE LOCATION OF ASSETS IN FOREIGN
JURISDICTIONS AND THE DIFFICULTIES ASSOCIATED WITH SERVICE OF PROCESS AND OTHER
MATTERS.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Consolidated Financial Statements of American Craft
Brewing International Limited, which include the results of operations of the
South China Brewing Company Limited, a Hong Kong company ('South China'), and
SCBC Distribution Company Limited, a Hong Kong company ('SCBC,' and collectively
with South China, the 'South China Brewery'), and Notes thereto included
elsewhere in this Prospectus. Except as set forth in the Consolidated Financial
Statements and unless otherwise indicated in this Prospectus, all information in
this Prospectus reflects, effective prior to the date of this Prospectus, (i)
the exchange (the 'Share Exchange'), of substantially all of the issued and
outstanding shares of capital stock of South China and SCBC, by the stockholders
thereof for 23,750 shares of capital stock of American Craft Brewing
International Limited, a British Virgin Islands company ('Craft'), (ii) the
issuance of 1,250 shares of capital stock of Craft to certain investors in Hong
Kong (the 'Hong Kong Placement'), (iii) the eighty-for-one stock split by Craft
(the 'Share Split') and (iv) the amalgamation of Craft into the Company (the
'Merger', and together with the Share Exchange, the Hong Kong Placement and the
Share Split, the 'Reorganization'). The information in this Prospectus also
assumes that none of the Over-allotment Option, the Warrants or the
Representative's Warrants will be exercised. See 'The Company' and Note 16 of
Notes to the Consolidated Financial Statements. Unless otherwise required by the
context, the terms 'AmBrew International' and the 'Company' refer to American
Craft Brewing International Limited and its subsidiaries. All references in this
Prospectus to '$' shall mean United States dollars.
The Securities offered hereby involve a high degree of risk and immediate
substantial dilution. See 'Risk Factors' and 'Dilution.'
THE COMPANY
AmBrew International owns and operates the South China Brewery, the first
in a series of international breweries based on the concept of American-style
micro-breweries. The South China Brewery, the first American-style micro-brewery
in Hong Kong, produces fresh, high-quality, preservative-free, hand-crafted
beers using state-of-the-art American-manufactured brewing equipment.
Hand-crafted beers are distinguishable by their full flavor which results from
traditional brewing styles. The Company believes that American-style
micro-brewing has growth potential in other key world markets and that the South
China Brewery is a model that can be adapted to other markets.
The American-style micro-brewery concept has developed over the past ten
years into the fastest growing segment of the American beer industry.
American-style micro-breweries produce less than 15,000 barrels per year of
hand-crafted beers in a variety of styles. The Company believes that the growing
demand for micro-brewed beers in the United States is part of a broader shift in
preferences on the part of a certain segment of consumers away from
mass-produced products and toward high-quality, distinctive foods and beverages.
While craft beers currently account for less than 2% of total United States beer
consumption, sales volume of these beers grew by 50% in 1995 and had an annual
growth rate of approximately 47% during the period from 1985 through 1994.
AmBrew International believes that the demand for craft beers is not limited to
the United States and is committed to the production of a variety of craft beers
designed to appeal to a growing number of consumers in global markets.
The Company exported the American-style micro-brewery concept to Hong Kong
with the establishment of the South China Brewery in June 1995. With only one
head brewer and six other employees, the South China Brewery produces,
distributes and markets two full-flavored beers marketed under South China's own
brand names, Crooked Island Ale and Dragon's Back India Pale Ale, and custom
produces beers for local Hong Kong establishments in accordance with their
individual specifications to market under their own labels. One of these
custom-produced beers, Delaney's Ale, won a Gold Award at the Association of
Brewers' World Beer Cup in June 1996. The South China Brewery is designed to
permit small and economical production runs of differentiated products to meet
special tastes or other custom requirements and for sale in niche markets.
Increased consumer demand for high quality, full-flavored beers has allowed the
South China Brewery to achieve a price premium
3
<PAGE>
<PAGE>
relative to mass-produced domestic beer producers and to set its prices at the
upper end of the premium import market.
The Company's senior management and Board of Directors have extensive
experience in the international beverage alcohol industry. The Company expects
to utilize this experience to identify new markets receptive to the
American-style micro-brewery concept and to seek out strategic local partners to
co-invest in new micro-breweries in such markets. The Company plans to establish
and operate, either through wholly-owned subsidiaries or through majority-owned
joint venture arrangements with strategic local partners, a series of
micro-breweries similar in concept to the South China Brewery. The Company
expects that these partners will use their knowledge of local regulation and
markets to facilitate the establishment and acceptance of the Company's
micro-breweries and their products. In pursuing its expansion strategy, the
Company will move into both markets dominated by mass-market breweries and
markets in which high-quality beer producers will be the Company's primary
competition. In markets where mass-produced beers are sold to a broad consumer
profile, AmBrew International intends to develop craft beers as locally produced
premium product alternatives. In markets in which there are already a number of
traditional high-quality beer producers, the Company intends to produce
distinctive micro-brewed products for niche market segments. The Company has
preliminarily identified seven locations in which it is considering establishing
breweries by the end of 1997, subject to more extensive feasibility studies:
Zurich, Dublin, Shanghai, Tecate (Mexico), Budapest, Singapore and Warsaw.
The Company expects to achieve greater economies of scale as it expands.
For example, the Company intends to enter into a contract with Micro Brew
Systems Company, Limited ('Micro Brew Systems') which supplied the equipment for
the South China Brewery, or another comparable provider of state-of-the-art
brewing equipment, to purchase, at discounted prices, the necessary brewing
equipment for its proposed new breweries. In addition, the Company believes that
it can benefit from volume discounts on purchases of equipment and ingredients.
Based on the growth of its South China Brewery to date, the Company believes it
is well-positioned to establish similar American-style micro-breweries in other
markets.
4
<PAGE>
<PAGE>
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
AND IMMEDIATE DILUTION TO NEW INVESTORS. SEE 'RISK FACTORS' AND 'DILUTION.'
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.................................... 1,333,333 Shares and 1,333,333 Warrants. Each Warrant
entitles the registered holder thereof to purchase one
share of Common Stock. The Shares and the Warrants may be
purchased separately and will be transferable separately
immediately following completion of this Offering. See
'Description of Securities' and 'Underwriting.'
Offering Price........................................ $[ ] per Share and $[ ] per Warrant
Common Stock Outstanding:
Prior to the Offering(1)......................... 2,000,000 shares of Common Stock
After the Offering(2)............................ 3,355,151 shares of Common Stock
Warrant Exercise Price................................ $ per Share [125% of the initial public offering
price per Share], subject to adjustment in certain
circumstances. See 'Description of Securities --
Warrants.'
Warrant Exercise Period............................... The period commencing six months after the date of this
Prospectus and terminating five years from the date of
this Prospectus.
Redemption............................................ Commencing 18 months after the date of this Prospectus,
the Company may redeem all, but not less than all, of the
Warrants at a price of $0.10 per Warrant, on not less
than 30 days' prior written notice to current holders, if
the per Share closing bid quotation as reported on Nasdaq
equals or exceeds $ per Share [300% of the initial
public offering price per Share] for any twenty (20)
trading days within a period of thirty (30) consecutive
trading days ending on the fifth trading day prior to the
date on which the Company gives notice of redemption. The
Warrants will be exercisable until the close of business
on the day immediately preceding the date fixed for
redemption in such notice. See 'Description of
Securities -- Warrants.'
Use of Proceeds....................................... To repay up to $887,000 in debt; for capital expenditures
of approximately $5 million relating to the establishment
of proposed expansion breweries, including $2.8 million
for the purchase of micro-brewing equipment; and for
working capital and general corporate purposes. See 'Use
of Proceeds,' 'Business -- Proposed Expansion Markets'
and 'Certain Transactions.'
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Proposed Nasdaq Symbols............................... Shares -- 'ACBI'
Warrants -- 'ACBIW'
</TABLE>
- ------------
(1) Excludes (i) 300,000 shares of Common Stock reserved for future issuance
pursuant to options available for grant under the Company's 1996 Stock
Option Plan (the 'Stock Option Plan'), and (ii) 500,000 shares of Common
Stock reserved for future issuance pursuant to $370,000 principal amount of
notes issued to certain investors in Singapore and Hong Kong (the 'Bridge
Notes') and warrants issued in connection with the Bridge Notes (the 'Bridge
Warrants'). See 'Management -- Stock Option Plan,' 'Certain Transactions'
and 'Underwriting.'
(2) Includes the issuance of 21,818 shares of Common Stock upon the consummation
of this Offering assuming an initial public offering price per Share of
$5.50 and no conversion of the convertible Bridge Notes (112,727 shares of
Common Stock assuming full conversion of the convertible Bridge Notes) and
excludes 300,000 shares of Common Stock reserved for future issuance
pursuant to options available for grant under the Stock Option Plan and
21,818 shares of Common Stock reserved for future issuance pursuant to the
Bridge Warrants assuming an initial public offering price per Share of $5.50
and no conversion of the convertible Bridge Notes (112,727 shares of Common
Stock assuming full conversion of the convertible Bridge Notes). See
'Certain Transactions.'
------------------------
THE COMPANY IS ORGANIZED UNDER THE LAWS OF THE ISLANDS OF BERMUDA. CERTAIN
OF THE COMPANY'S DIRECTORS, OFFICERS AND CONTROLLING PERSONS, AS WELL AS CERTAIN
OF THE EXPERTS NAMED IN THIS PROSPECTUS, RESIDE OUTSIDE THE UNITED STATES. ALL
OR A SUBSTANTIAL PORTION OF THEIR ASSETS AND THE ASSETS OF THE COMPANY ARE
LOCATED OUTSIDE THE UNITED STATES. AS A RESULT, IT MAY NOT BE POSSIBLE FOR
INVESTORS TO EFFECT SERVICE OF PROCESS WITHIN THE UNITED STATES UPON SUCH
PERSONS OR TO ENFORCE JUDGMENTS AGAINST THE COMPANY OR SUCH PERSONS OBTAINED IN
UNITED STATES COURTS PREDICATED UPON THE CIVIL LIABILITY PROVISIONS OF THE
FEDERAL OR STATE SECURITIES LAWS OF THE UNITED STATES. THE COMPANY HAS BEEN
ADVISED BY APPLEBY, SPURLING & KEMPE, BERMUDA COUNSEL TO THE COMPANY, THAT THE
ENFORCEMENT OF JUDGMENTS OF UNITED STATES COURTS OBTAINED IN ACTIONS AGAINST THE
COMPANY OR SUCH PERSONS PREDICATED UPON THE CIVIL LIABILITY PROVISIONS OF THE
FEDERAL OR STATE SECURITIES LAWS AND THE ENFORCEABILITY, IN ORIGINAL ACTIONS, OF
LIABILITIES AGAINST THE COMPANY OR SUCH PERSONS PREDICATED SOLELY UPON THE
FEDERAL OR STATE SECURITIES LAWS OF THE UNITED STATES WOULD REQUIRE THE
COMMENCEMENT OF A SEPARATE ACTION IN THE BERMUDA COURTS. THERE IS UNCERTAINTY AS
TO WHETHER THE COURTS OF BERMUDA WOULD (i) ENFORCE JUDGEMENTS OF UNITED STATES
COURTS OBTAINED AGAINST THE COMPANY OR SUCH PERSONS PREDICATED UPON THE CIVIL
LIABILITY PROVISIONS OF THE FEDERAL SECURITIES LAWS OF THE UNITED STATES OR (ii)
ENTERTAIN ORIGINAL ACTIONS BROUGHT IN BERMUDA COURTS AGAINST THE COMPANY OR SUCH
PERSONS PREDICATED UPON THE FEDERAL SECURITIES LAWS OF THE UNITED STATES. THE
COMPANY HAS IRREVOCABLY APPOINTED CT CORPORATION SYSTEM, 1633 BROADWAY, NEW
YORK, NEW YORK 10019, AS ITS AUTHORIZED AGENT TO RECEIVE SERVICE OF PROCESS IN
ANY LEGAL ACTION OR PROCEEDING AGAINST IT BASED UPON THE FEDERAL OR STATE
SECURITIES LAWS OF THE UNITED STATES AND/OR ARISING OUT OF OR RELATING TO THIS
OFFERING, AND WILL IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK, NEW YORK.
6
<PAGE>
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents summary consolidated financial data of the
Company. For a description of the Consolidated Financial Statements from which
the following financial data have been derived, see the introduction to
'Selected Consolidated Financial Data.' The summary consolidated financial data
set forth below should be read in conjunction with 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, 1995 OCTOBER 31, 1995 APRIL 30, 1996
---------------- ---------------------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $ 63,707 $ 63,707 $ 244,753
Cost of sales.......................................... (38,960) (38,960) (43,055)
---------------- ----------- ----------------
Gross profit....................................... 24,747 24,747 201,698
Selling, general and administrative expenses........... (292,888) (195,846) (207,094)
Interest expense, net.................................. (17,838) (16,059) (24,908)
Other expenses, net.................................... (2,265) (2,265) (888)
---------------- ----------- ----------------
Loss before income taxes........................... (288,244) (189,423) (31,192)
Income tax benefit..................................... 47,560 31,255 5,147
---------------- ----------- ----------------
Net loss........................................... $ (240,684) $ (158,168) $ (26,045)
Net loss per common share.............................. $ (0.12) $ (0.08) $ (0.01)
Number of shares outstanding(1)........................ 2,000,000 2,000,000 2,000,000
<CAPTION>
APRIL 30, 1996
------------------------------------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA(2) ADJUSTED(2)(3)
---------------- ---------------------- ----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets................................... $140,850 $ 510,850 $5,494,850
Total assets........................................... $893,013 $1,263,013 $6,247,013
Total current liabilities.............................. $587,194 $ 957,194 $ 70,194
Total long-term liabilities............................ $ 24,864 $ 24,864 $ 24,864
Total liabilities...................................... $612,058 $ 982,058 $ 95,058
Total shareholders' equity............................. $280,955 $ 280,955 $6,151,955
</TABLE>
- ------------
(1) Assumes the consummation of the Reorganization and excludes (i) 300,000
shares of Common Stock reserved for future issuance pursuant to options
available for grant under the Stock Option Plan and (ii) 500,000 shares of
Common Stock reserved for future issuance pursuant to the Bridge Notes and
the Bridge Warrants. See 'Management -- Stock Option Plan,' 'Certain
Transactions' and 'Underwriting.'
(2) Gives pro forma effect to the issuance of $370,000 principal amount of
Bridge Notes. See 'Certain Transactions.'
(3) Adjusted to give effect to (at an assumed initial public offering price of
$5.50 per Share and $0.10 per Warrant) (i) the receipt of the estimated net
proceeds of this Offering and the initial application of such estimated net
proceeds as described herein, and (ii) assuming that the Bridge Note holders
elect to be repaid with the proceeds of this Offering instead of converting
their Bridge Notes into shares of Common Stock as provided by the terms of
the Bridge Notes, (a) the issuance to the Bridge Note holders of 21,818
shares of Common Stock and Bridge Warrants to purchase an equal number of
shares of Common Stock and (b) the recognition of a non-recurring, non-cash
interest expense of $100,000 for the unamortized portion of the original
issue discount relating to the repayment of the Bridge Notes. In the event
that the holders of the Bridge Notes elect to convert each of the
convertible Bridge Notes into shares of Common Stock upon consummation of
this Offering (at an assumed initial public offering price of $5.50 per
Share), they will be entitled to receive 112,727 shares of Common Stock and
Bridge Warrants to purchase an additional 112,727 shares of Common Stock.
See 'Use of Proceeds' and 'Certain Transactions.'
7
<PAGE>
<PAGE>
RISK FACTORS
An investment in the Securities involves a high degree of risk. The
following risk factors should be considered carefully in addition to the other
information in this Prospectus before purchasing the Securities. Prospective
investors should be in a position to risk the loss of their entire investment.
BUSINESS RISKS
Limited Operating History; Net Loss; Accumulated Deficit. Since the South
China Brewery commenced commercial operations in June 1995, investors will not
have a full fiscal year of results on which to base an investment decision. The
Company had a net loss of $240,684 for the year ended October 31, 1995 and a net
loss of $26,045 for the six months ended April 30, 1996. The Company had an
accumulated deficit of $248,460 as of October 31, 1995 and an accumulated
deficit of $274,505 as of April 30, 1996. The results of the Company for the six
months ended April 30, 1996 may not be indicative of the Company's results for
the fiscal year ended October 31, 1996. The Company's operations are subject to
all the risks inherent in an emerging business enterprise. These include, but
are not limited to, high expense levels relative to production, complications
and delays frequently encountered in connection with the development and
introduction of new products, the ability to recruit and retain accomplished
management personnel, competition from established breweries, the need to expand
production and distribution and the ability to establish and sustain product
quality. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.
No Assurance of Ability to Establish Additional Breweries. The Company's
strategy includes the development of micro-breweries in the Pacific Rim, Europe
and Mexico through wholly-owned subsidiaries or through majority-owned joint
venture arrangements. Successful expansion will require management of various
factors associated with the construction of new facilities in geographically and
politically diverse locations. Factors include site selection, local land use
requirements, obtaining governmental permits and approvals, adequacy of
municipal infrastructure, environmental uncertainties, possible cost estimation
errors or overruns, additional financing, construction delays, weather problems
and other factors, many of which are beyond the Company's control. There can be
no assurance that the Company will be successful in establishing and operating
additional breweries. See 'Business -- Proposed Expansion Markets.'
No Assurance of Ability to Finance Additional Breweries; Effect of Start-Up
Expenses. Based on current estimates, the Company believes that the net
proceeds of this Offering, after the repayment of certain debt, will be
sufficient to establish only five of seven micro-breweries the Company intends
to develop and operate by the end of 1997. The Company currently plans to
obtain, if possible, additional financing for these breweries from third
parties. The Company intends to propose to strategic local partners that they
purchase minority equity interests in certain of the proposed breweries and also
intends to utilize debt financing for these breweries if available. There is no
assurance that the Company will be successful in locating local joint venture
partners and debt financing may not be available when needed or on terms
acceptable to the Company. Moreover, such debt financing will likely contain
restrictive covenants and result in security interests being granted in the
assets of the Company and its subsidiaries. If adequate financing is not
available, the Company may be required to delay expansion beyond that funded by
the net proceeds of this Offering. The Company anticipates that salaries, other
overhead costs and capital expenditures associated with such capacity expansion
will be significant. The Company does not expect that such additional capacity,
when available, will immediately be fully utilized. As a result, the Company's
results of operations are likely to be adversely affected in future periods as
it incurs start-up expenses in connection with new facilities that are operating
below maximum capacity. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and 'Business -- Proposed Expansion
Markets.'
Brand Concentration; Development of New Brands. The sale of one brand of
beer accounted for approximately 23% of the South China Brewery's sales during
the quarter ended April 30, 1996. There can be no assurance that this brand will
achieve market acceptance or maintain its customer following. 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 brands that adequately
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address such changes. There can be no assurance that the Company will be
successful in developing, introducing and marketing new brands on a timely and
regular basis. If the Company is unable to introduce new brands or if the
Company's new brands are not successful, the Company's sales may be adversely
affected as customers seek competitive products. In addition, the introduction
or announcement of new brands by the Company could result in reduction of sales
of the Company's existing brands, 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 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, results of operations and
financial condition. See 'Business -- Products.'
No Assurance of Market Acceptance; Unpredictable Trends in Consumer
Preferences and Spending. The products of micro-breweries are generally not
established in the consumer markets of the Pacific Rim, Europe and Mexico. No
assurance can be given that specialty beers will be accepted in the markets into
which the Company intends to expand. Changes in consumer spending can affect
both the quality 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. Demographics
of a market area may also affect spending patterns. In addition, consumer tastes
may change over time or may vary in the markets which the Company plans to enter
and there is no assurance that the same level of sales and operating margins can
be maintained in the Company's existing market or achieved in new markets.
Similarly, there can be no assurance that the Company's products will be
successful in its existing market or will penetrate new markets. See
'Business -- Proposed Expansion Markets.'
Risk of Third Party Claims of Infringement of Intellectual Property. The
Company will rely on a combination of trade secret, copyright and trademark
laws, non-disclosure 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 confusingly similar brand names or promotional materials or
developing products with taste and other qualities similar to the Company's
beers. See 'Business -- Intellectual Property.'
No Assurance of Availability of Raw Materials. The South China Brewery
relies upon a single supplier (other than for labels) for each of the raw
materials used to make and package its beers. While the South China Brewery
believes that multiple sources of supply are available for all of its
ingredients and raw materials, if the South China Brewery were unable to obtain
adequate quantities of ingredients or other raw materials, delays or reductions
in product shipments could occur which would have an adverse effect on the South
China Brewery's business, results of operations and financial condition. As with
most agricultural products, the supply and price of raw materials used to
produce the South China Brewery's beers can be affected by factors beyond the
control of the South China Brewery, such as drought, frost, other weather
conditions, economic factors affecting growing decisions, various plant diseases
and pests. If any of the foregoing were to occur, the Company's business,
results of operations and financial condition would be adversely affected. In
addition, the Company's results of operations are dependent upon its ability to
accurately forecast its requirements of raw materials. Any failure by the
Company to accurately forecast its demand for 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 business, results of operations and financial condition. See
'Business -- Brewing Operations' and ' -- Suppliers.'
Highly Competitive Market. The beer industry is intensely competitive.
While there are no other craft brewers in Hong Kong, the South China Brewery
competes directly with premium import beers as well as with mass-produced beers
marketed by a number of much larger producers. Some much larger United States
beer producers are currently marketing their beers in the United States as craft
beers. There can be no assurance that, in the future, the Company will not face
competition from mass-
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produced beer marketed internationally as craft beer. Similarly, the Company may
face competition from brewers or other investors who wish to establish
American-style micro-breweries in Hong Kong or in areas in which the Company
plans to locate proposed breweries. See 'Business -- Competition.'
Dependence on Key Personnel. Management of the Company's business is at
this time substantially dependent on the services of the Company's Chairman,
Peter W. H. Bordeaux, its Deputy Chairman, Federico G. Cabo Alvarez, its
Executive Vice President and Chief Operating Officer, James L. Ake, and its
Managing Director for Hong Kong Operations, David K. Haines. Competition for
qualified executive personnel in the beverage alcohol industry is intense and
the Company will compete with public and private organizations and other
companies for the services of such personnel. Although the Company has
employment agreements with Messrs. Ake and Haines, there can be no assurance
that they will remain with the Company. Loss of the services of Messrs.
Bordeaux, Cabo, Ake, Haines or of any other key management employee could have
an adverse effect on the Company's business. The Company does not carry key man
life insurance for any of these executives and while it is investigating the
cost and availability of purchasing such insurance, it has made no decision as
to whether to obtain it. Expansion will require recruiting and hiring additional
key employees, including sales representatives. There can be no assurance that
the Company will be able to hire such persons when needed or on favorable terms
or that any such new employees will be successfully assimilated into the
Company's management. See 'Management.'
Product Liability Risk. The Company's operations are subject to certain
hazards and liability risks faced by all brewers, such as potential
contamination of ingredients or products by bacteria or other external agents
that may be wrongfully or accidentally introduced into products or packaging.
There can be no assurance that any such contamination will not occur. The
occurrence of such a problem could result in a costly product recall and serious
damage to the Company's reputation for product quality. In addition, the
Company's products are not pasteurized and have a 90-day shelf life. The
Company's operations are also subject to certain injury and liability risks
normally associated with the operation and possible malfunction of brewing and
other equipment. Although the Company maintains insurance against certain risks
under various general liability and product liability insurance policies, there
can be no assurance that the Company's insurance will be adequate. See
'Business -- Brewing Operations,' ' -- South China Facility' and
' -- Insurance.'
Single Wholesale Production Facility and Uninsured Losses. The Company
currently utilizes one production facility for which it has obtained
comprehensive insurance, including liability, fire and extended coverage, as is
customarily obtained for businesses similar to the Company's. Certain types of
losses of a catastrophic nature, however, such as losses resulting from floods,
tornadoes, thunderstorms and earthquakes, are either uninsurable or not
economically insurable to the full extent of potential losses. No assurance can
be given that such 'Acts of God,' work stoppages, regulatory actions or other
events interrupting production would not have an adverse effect on the Company's
business, financial condition and results of operations. See
'Business -- Insurance.'
Variability of Margins and Operating Results; Seasonality. The Company
anticipates that in the future its profit margins will fluctuate and may decline
as a result of many factors, including disproportionate depreciation and other
fixed and semi-variable operating costs during periods when the Company's
breweries are producing below maximum designed production capacity; increased
shipping, sales personnel and marketing costs as the Company penetrates
additional markets; fluctuating prices; increasing competition; possible
increases in the cost of packaging materials and brewing ingredients; changes in
product sales mix; potential increases in Hong Kong excise taxes or taxes in
other jurisdictions in which the Company expands or distributes products; and
start-up, overhead and other costs resulting from establishment of new breweries
and distribution of the Company's products. In addition, the Company has
historically operated with little or no backlog, and its ability to predict
sales for an upcoming quarter is limited. Due to its reliance on Company-owned
and/or operated breweries, a significant portion of the Company's overhead will
not be susceptible to short-term adjustment in response to sales below
management's expectations, and an excess of production capacity could therefore
have a significant negative impact on the Company's operating results. A variety
of other factors may also lead to significant fluctuations in the Company's
quarterly results of operations, including timing of new brewery introductions,
seasonality of demand, and general economic conditions.
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To date, demand for the Company's products has been generally higher from
September to January and has been generally lower from May to July.
RISKS OF INTERNATIONAL OPERATIONS
The Company currently intends to establish its micro-breweries only in
locations outside the United States. Accordingly, the Company will be subject to
various political, economic and other risks present in conducting international
operations. Such risks include the following:
Hong Kong -- Transfer of Sovereignty. Substantially all the Company's
assets are currently located in Hong Kong. As a result, the Company's
business, results of operations and financial condition may be influenced
by the political situation in Hong Kong and by the general state of the
Hong Kong economy. On July 1, 1997, sovereignty over Hong Kong will be
transferred from the United Kingdom to the People's Republic of China, and
Hong Kong will become a Special Administrative Region of China (an 'SAR').
As provided in the Sino-British Joint Declaration on the Question of Hong
Kong and the Basic Law of the Hong Kong SAR of China (the 'Basic Law'), the
Hong Kong SAR will have a high degree of autonomy except in foreign and
defense affairs. Under the Basic Law, the Hong Kong SAR is to have its own
legislature, legal and judicial system and full economic autonomy for 50
years. However, there can be no assurance that the transfer of sovereignty
and changes in political or other conditions will not result in an adverse
impact on the Company's business, results of operations or financial
condition.
Risks Relating to China. The Company plans to establish a
micro-brewery in China either through a wholly-owned subsidiary or a
majority-owned joint venture and to increase direct sales in China of beer
brewed at its Hong Kong facility. As a consequence, the Company's results
of operations and financial condition may be influenced by the economic,
political, legal and social conditions in China. China is in the process of
implementing a 'socialist market economy' in which market forces are
expected to have a significant role, subject to policies and macro-economic
regulations established by the Chinese government. Economic growth in China
has been uneven among various sectors of the economy and among geographic
regions. Many of the economic reform measures which have been implemented
are experimental and may be subject to change or repeal. Other political,
economic and social factors can also lead to further readjustment of the
reform measures. There is no assurance that the current government and
economic system will remain stable. The legislative trend in China over the
past decade has been to enhance the protection afforded to foreign
investment and allow for more active control by foreign parties of foreign
invested enterprises. There can be no assurance, however, that legislation
directed towards promoting foreign investment and experimentation will
continue.
Foreign Exchange and Exchange Rate Risks. If the Company successfully
acquires interests in joint ventures or establishes new breweries located
in the Pacific Rim, Europe or Mexico, the Company expects that a
substantial portion of the revenues of such breweries, as well as revenues
generated by its South China Brewery, will be denominated in local
currency. A portion of such revenues will need to be converted to U.S.
dollars in order for the Company to pay dividends in U.S. dollars. Both the
conversion of local currencies into U.S. dollars and the remittance of
local currencies abroad, depending on the local laws where such brewery
operates, may require government approval. There can be no assurance that
the breweries will be able to obtain expatriate currency for such purposes
or that the Company will be able to convert such currency into U.S.
dollars. See 'Business -- Proposed Expansion Markets.'
Risk of Governmental Regulation. The Company's operations require and
will require various licenses, permits and approvals in Hong Kong and in
other locations. The loss or revocation of any existing licenses, permits
or approvals or the failure to obtain any necessary licenses, permits or
approvals in new jurisdictions where the Company intends to do business
would have an adverse effect on the ability of the Company to conduct its
business and/or on its ability to expand into such jurisdictions.
Authorization to commence brewing operations will be required in each
country in which the Company intends to operate breweries. No assurance can
be given that the Company will obtain such authorization, licenses or other
necessary approvals. In addition, countries in which the Company wishes to
operate breweries may have regulatory schemes that impose other
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impediments on the operation of breweries. There can be no assurance that
the Company will be able to profitably operate breweries in light of these
restrictions. See 'Business -- Government Regulation.'
Risks of Foreign Legal Systems. Many of the countries where the
Company plans to operate have legal systems that differ from the United
States legal system and may provide substantially less protection for
foreign investors.
STRUCTURAL, MARKET AND CORPORATE GOVERNANCE RISKS
Management's Broad Discretion in Use of Proceeds.__Although the Company
intends to apply the net proceeds of this Offering in the manner described under
'Use of Proceeds,' it has broad discretion within such proposed uses as to the
precise allocation of the net proceeds, the timing of expenditures and all other
aspects of the use thereof. For example, approximately $5 million, or 85.0% of
the net proceeds of this Offering will be allocated and used to make capital
expenditures in connection with the establishment of certain of the Company's
proposed breweries in the Pacific Rim, Europe and Mexico. The Company reserves
the right to reallocate the net proceeds of this Offering among the various
categories set forth under 'Use of Proceeds' as it, in its sole discretion,
deems necessary or advisable.
Rights of Stockholders under Bermuda Law. The Company is incorporated
under the laws of the Islands of Bermuda. Principles of law relating to such
matters as the validity of corporate procedures, the fiduciary duties of the
Company's management, directors and controlling stockholders, and the rights of
its stockholders, including those persons who will become stockholders of the
Company in connection with this Offering, are governed by Bermuda law and the
Company's Memorandum of Amalgamation and Bye-laws. Such principles of law may
differ from those that would apply if the Company were incorporated in a
jurisdiction in the United States. In addition, the Company has been advised by
Appleby, Spurling & Kempe, its Bermuda counsel, that there is uncertainty as to
whether the courts of Bermuda would enforce (i) judgments of United States
courts obtained against the Company or its officers and directors resident in
foreign countries predicated upon the civil liability provisions of the
securities laws of the United States or any state or (ii) in original actions
brought in Bermuda, liabilities against the Company or such persons predicated
upon the securities laws of the United States or any state. See 'Description of
Securities -- Bermuda Law.'
Effect of Issuance of Preferred Stock. The Company's Bye-laws permit the
issuance of 500,000 shares of 'blank check' preferred stock, with designations,
rights and preferences that may be determined from time to time by the Board of
Directors. At the time of this Offering, none of the shares of preferred stock
will be issued and outstanding. However, the Board of Directors is empowered,
subject to the consent of the Representative for a period of thirteen (13)
months from the date of this Prospectus, to issue the preferred stock with
dividend, liquidation, conversion, voting or other rights that could adversely
affect the voting power or other rights of the holders of the Common Stock. In
addition, such charter provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Company's Common Stock
and may have the effect of delaying or preventing a change in control of the
Company. The issuance of preferred stock could also decrease the amount of
earnings and assets available for distribution to the holders of the Common
Stock. There can be no assurance that the Company will not issue preferred stock
at some time in the future. See 'Description of Securities -- Preferred Stock.'
Effect of Stock Options. In accordance with the Stock Option Plan, the
Company has reserved a total of 300,000 authorized but unissued shares of Common
Stock for issuance to executive employees and directors. The committee
administering the Stock Option Plan will have sole authority and discretion to
grant options under the Stock Option Plan. Options granted will be exercisable
during the period specified by the committee administering the Stock Option Plan
except that options will become immediately exercisable in the event of a Change
in Control (as defined in the Stock Option Plan) of the Company and in the event
of certain mergers and reorganizations of the Company. The existence of such
options could limit the price that certain investors might be willing to pay in
the future for shares of the Company's Common Stock and may have the effect of
delaying or preventing a change in control of the Company. The exercise of such
options could also decrease the amount of earnings and assets available for
distribution to the holders of the Common Stock. See 'Management -- Stock Option
Plan.'
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Shares Eligible for Future Sale. The Shares and Warrants will be freely
tradeable unless acquired by affiliates of the Company. The market price of the
Shares and/or the Warrants of the Company could be adversely affected by the
sale of substantial amounts of Common Stock in the public market following this
Offering. No prediction can be made as to the effect that future sales of Common
Stock and of the availability of the shares of Common Stock for future sale will
have on the market prices of the Shares and the Warrants prevailing from time to
time. The Company and the existing stockholders (and any holders of outstanding
securities exercisable or exchangeable for or convertible into shares of Common
Stock) have agreed not to, directly or indirectly, issue, offer, agree or offer
to sell, sell, transfer, assign, encumber, grant an option for purchase or sale
of, pledge, hypothecate or otherwise dispose of any beneficial interest in such
securities for a period of thirteen months (six months in the case of holders of
Bridge Notes) from the date of this Prospectus without the prior written consent
of the Company and the Representative other than, in the case of such
stockholders and holders of the Bridge Notes, (i) shares of Common Stock
transferred pursuant to bona fide gifts when the transferee agrees in writing to
be similarly bound or (ii) securities transferred through the law of descent,
and in the case of the Company, (a) pursuant to options existing on the date of
this Prospectus and pursuant to the exercise of the Warrants and the
Representative's Warrants or pursuant to the terms of the Bridge Notes and the
Bridge Warrants or (b) debt securities issued to non-affiliated third parties in
connection with bona fide business acquisitions and/or expansion consistent with
the Company's business plans as generally described in this Prospectus. The
registration, sale or issuance of Common Stock after that thirteen month period
(or six month period in the case of shares underlying the Bridge Notes), could
have an adverse impact on the market prices of the Shares and/or the Warrants.
Sales of substantial amounts of Common Stock or the perception that such sales
could occur could adversely affect the prevailing market prices for the Shares
and/or the Warrants. Upon expiration of this thirteen month period (or six month
period in the case of shares underlying the Bridge Notes), all such shares may
be sold subject to the limitations of, and in accordance with, Rule 144 under
the Securities Act of 1933 (the 'Securities Act'). Additional shares of Common
Stock, including shares issuable upon exercise of options issued pursuant to the
Stock Option Plan and shares underlying the Representative's Warrants, Bridge
Warrants and the Warrants will also become eligible for sale in the public
market from time to time in the future. See 'Certain Transactions,' 'Description
of Securities,' 'Shares Eligible for Future Sale' and 'Underwriting.'
Control by Existing Stockholders; Benefits of Offering to Existing
Stockholders. Following this Offering, the Company's directors, officers and
principal (greater than 5%) stockholders, and certain of their affiliates, will
beneficially own approximately 57% of the outstanding shares of Common Stock,
including 21,818 shares of Common Stock issuable upon consummation of this
Offering pursuant to the terms of Bridge Notes assuming an initial public
offering price per Share of $5.50 and no conversion of the convertible Bridge
Notes. As a result of such ownership, these stockholders will be able to control
the election of all directors and other actions submitted to a vote of the
Company's stockholders. Certain former and existing stockholders provided,
respectively, a guarantee and letters of credit in connection with a Promissory
Note issued to Hibernia National Bank on March 31, 1995 with principal payments
due on September 30, 1996 and March 31, 1997 (the 'Hibernia Note') and an
existing stockholder made a direct loan to the Company pursuant to a Limited
Recourse Promissory Note issued to BPW Holding LLC on March 5, 1996 (the 'BPW
Note'). A portion of the net proceeds of this Offering will be used to retire
both the Hibernia Note and the BPW Note. In addition, a portion of the net
proceeds of this Offering will be used to retire up to $370,000 of Bridge Notes
at the consummation of this Offering. The existing stockholders will benefit
from the use of the proceeds of this Offering. See 'Use of Proceeds,'
'Dilution,' 'Principal Stockholders' and 'Certain Transactions.'
Potential Adverse Effects of the Exercise of Warrants. The Warrants
offered hereby grant the holders the right to purchase 1,333,333 shares of
Common Stock commencing six months from the date hereof at 125% of the initial
public offering price per share of Common Stock. The Company will also grant, in
connection with this Offering, the Representative's Warrants which entitle the
Representative to purchase up to 133,333 shares of Common Stock at an exercise
price of 125% of the initial public offering price per Share and/or up to
133,333 warrants at an exercise price of $0.125 per warrant each entitling the
holder thereof to purchase one share of Common Stock at an exercise price of
165% of the initial public offering price per Share. The Representative's
Warrants may be exercised for a period of
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four years commencing on the first anniversary of the date hereof. In addition,
the Company has granted the Bridge Warrants entitling the holders thereof the
right to purchase, in the aggregate, up to that number of shares of Common Stock
equal to the sum of (i) the quotient obtained by dividing 120,000 by the initial
public offering price per Share and (ii) the quotient obtained by dividing the
principal amount of the Bridge Notes converted into shares of Common Stock upon
the consummation of this Offering by the product of 0.5 and the initial public
offering price per Share in each case commencing six months from the date hereof
at 150% of the initial public offering price per Share. Assuming an initial
public offering price per Share of $5.50 and no conversion of the Bridge Notes
convertible into shares of Common Stock upon the consummation of this Offering,
the Bridge Warrants will, in the aggregate, entitle the holders thereof to
purchase up to 21,818 shares of Common Stock (112,727 shares of Common Stock
assuming full conversion of the convertible Bridge Notes). The existence of the
Warrants, the Representative's Warrants and the Bridge Warrants may prove to be
a hinderance to future financing by the Company. In addition, the exercise of
any such warrants may further dilute the net tangible book value of the Shares.
For the term of the Warrants, the Representative's Warrants and the Bridge
Warrants, the holders thereof will have the opportunity to profit from a rise in
the market price of the Common Stock without assuming risk of ownership, with a
resulting dilution in the interest of other security holders. As long as the
Warrants, the Representative's Warrants and the Bridge Warrants remain
unexercised, the Company's ability to obtain additional equity capital might be
adversely affected. Moreover, the holders may be expected to exercise such
warrants at a time when the Company would, in all likelihood, be able to obtain
any needed capital through a new offering of its securities on terms more
favorable than those provided by the currently outstanding warrants. The Company
has agreed that, under certain circumstances, it will register under federal and
state securities laws the shares of Common Stock and warrants underlying the
Representative's Warrants. These registration obligations could involve
substantial expense to the Company and may adversely affect the terms upon which
the Company may obtain additional financing. See 'Certain Transactions,'
'Description of Securities' and 'Underwriting.'
Necessity of Future Registration of Warrants and State Blue Sky
Registration; Exercise of Warrants. The Warrants are separately transferable
immediately upon issuance. Although the Warrants will not knowingly be sold to
purchasers in jurisdictions in which the Warrants are not registered or
otherwise qualified for sale or exempt, purchasers may buy Warrants in the
after-market in, or may move to, jurisdictions in which the Warrants and the
Common Stock underlying the Warrants are not so registered or qualified or
exempt. In this event, the Company would be unable lawfully to issue Common
Stock to those persons desiring to exercise their Warrants (and the Warrants
would not be exercisable by those persons) unless and until the Warrants and the
underlying Common Stock are registered, or qualified for sale in jurisdictions
in which such purchasers reside, or an exemption from such registration or
qualification requirement exists in such jurisdictions. There can be no
assurance that the Company will be able to effect any required registration or
qualification.
The Warrants will not be exercisable unless the Company maintains a current
effective registration statement under the Securities Act either by filing
post-effective amendments to the Registration Statement of which this Prospectus
is a part or by filing a new registration statement with respect to the exercise
of the Warrants. The Company has agreed to use its reasonable efforts to file
and maintain, so long as the Warrants are exercisable, a current effective
registration statement relating to the Warrants and the shares of Common Stock
underlying the Warrants. However, there can be no assurance that it will be able
to do so or that the Warrants or such underlying Common Stock will be or
continue to be so registered.
The value of the Warrants could be adversely affected if a then-current
prospectus covering the Common Stock issuable upon exercise of the Warrants is
not available pursuant to an effective registration statement or if such Common
Stock is not registered or qualified for sale or exempt from registration or
qualification in the jurisdictions in which the holders of the Warrants reside.
See 'Description of Securities -- Warrants.'
Representative's Potential Influence on the Market; Possible Limitation on
Market Making Activities. The Representative may act as a broker-dealer with
respect to the purchase or sale of the Shares and the Warrants in the market
where each will trade and may solicit exercise of the Warrants.
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In addition, the Representative and its designees may exercise their
registration rights with respect to the Common Stock or warrants underlying the
Representative's Warrants. Unless granted an exemption by the Securities and
Exchange Commission (the 'Commission') from Rule 10b-6 ('Rule 10b-6') under the
Securities Exchange Act of 1934 (the 'Exchange Act'), the Representative and any
other soliciting broker-dealers will be prohibited from engaging in any market
making activities or solicited brokerage activities with respect to the
Company's securities during periods prescribed by exemptions (xi) and (xii) to
Rule 10b-6 (i) before the solicitation of the exercise of any Warrants until the
later of the termination of such solicitation activity or the termination of any
right the Representative may have to receive commissions for further
solicitation of Warrants and (ii) during any distribution of the Common Stock
and Warrants underlying the Representative's Warrants as well as during any
other distribution of the Company's securities in which the Representative is
participating. As a result, the Representative and any other soliciting
broker-dealers and participants in any distribution of the Company's securities
may be unable to continue to make a market for the Company's securities during
certain periods while the Warrants are exercisable and during any distribution
of the Company's securities in which the Representative is participating. Such a
limitation, while in effect, could impair the liquidity and market price of the
Securities. See 'Underwriting.'
Potential Adverse Effect of Redemption of Warrants. Commencing eighteen
(18) months after the date of this Prospectus, all, but not less than all, of
the Warrants are subject to redemption at $0.10 per Warrant on thirty (30) days
prior written notice to the warrantholders if the per share closing bid
quotation of the Shares as reported on Nasdaq equals or exceeds 300% of the
initial public offering price per share of Common Stock for any twenty (20)
trading days within a period of thirty (30) consecutive trading days ending on
the fifth trading day prior to the date of the notice of redemption. If the
Warrants are redeemed, holders of the Warrants will lose their rights to
exercise after the expiration of the 30-day notice of redemption period. Upon
receipt of the notice of redemption, holders would be required to: (i) exercise
the Warrants and pay the exercise price at a time when it may be disadvantageous
for them to do so, (ii) sell the Warrants at the current market price, if any,
when they might otherwise wish to hold the Warrants, or (iii) accept the
redemption price which is likely to be substantially less than the market value
of the Warrants at the time of redemption. Warrantholders whose Warrants are
redeemed would also lose the potential for appreciation in the Common Stock
underlying the Warrants. See 'Description of Securities -- Warrants.'
Limited Underwriting History. Although National Securities Corporation,
the Representative of the several Underwriters, has been in business for over 40
years, the Representative has participated in only nine public offerings as an
underwriter in the last five years. In evaluating an investment in the Company,
prospective investors in the Securities offered hereby should consider the
Representative's limited experience. See 'Underwriting.'
No Prior Market; Possible Volatility of Stock Price. Prior to this
Offering, there has been no public market for the Securities and there can be no
assurance that an active public market for the Securities will develop or
continue after this Offering or that the market prices of the Securities will
not decline below their respective initial public offering prices. The initial
public offering prices of the Securities were determined by negotiations between
the Company and the Representative, and may not be indicative of the market
price for the Securities after this Offering. See 'Underwriting' for factors
considered in determining the initial public offering prices. From time to time
after this Offering, there may be significant volatility in the market prices of
the Securities. Quarterly operating results of the Company, announcements of new
breweries or the introduction of new products by the Company or its competitors,
developments in the Company's relationships with its suppliers, joint venture
brewing partners or distributors, regulatory developments, general market
conditions or other developments affecting the Company or its competitors could
cause the respective market prices of the Securities to fluctuate substantially.
The equity markets have, on occasion, experienced significant price and volume
fluctuations that have affected the market prices for many companies' securities
and that have often been unrelated to the operating performance of these
companies. Any such fluctuations that occur following completion of this
Offering may adversely affect the respective market prices of the Securities.
15
<PAGE>
<PAGE>
Immediate and Substantial Dilution. The purchasers of the Shares will
experience immediate and substantial dilution in pro forma, as adjusted net
tangible book value in the amount of $3.67 or 67% per Share. The Company's
current stockholders acquired shares of Common Stock for consideration that was
substantially less than the public offering price of the shares of Common Stock
offered hereby. As a result, new investors will bear substantially all of the
risks inherent in an investment in the Company. In the event that the Company
issues additional shares of Common Stock in the future, including shares that
may be issued in connection with future acquisitions, purchasers of shares may
experience further dilution in net tangible book value per share of the Common
Stock of the Company. Three hundred thousand shares of Common Stock have been
reserved for issuance upon exercise of options granted pursuant to the Stock
Option Plan, 500,000 shares of Common Stock have been reserved for future
issuance pursuant to the Bridge Notes and the Bridge Warrants and 266,666 shares
of Common Stock have been reserved for issuance pursuant to the Representative's
Warrants. The issuance of Common Stock under the Stock Option Plan or pursuant
to the Bridge Notes, the Bridge Warrants or the Representative's Warrants may
result in further dilution to new investors. Assuming an initial public offering
price per Share of $5.50, the Company could be required to issue up to 225,454
shares of Common Stock pursuant to the terms of the Bridge Notes and the Bridge
Warrants. Upon the consummation of this Offering, the Company could be required
to issue up to 112,727 shares of Common Stock assuming an initial public
offering price of $5.50 per Share and full conversion of the Bridge Notes for an
aggregate consideration of $250,000, or a price per share of $2.22. See
'Dilution' and 'Management -- Stock Option Plan.'
Dividend Policy. The Company intends to retain all earnings to finance the
development and expansion of its business and does not intend to pay cash
dividends on the Common Stock in the foreseeable future. Any future declaration
of dividends will depend, among other things, on the Company's results of
operations, capital requirements and financial condition, and on such other
factors as the Company's Board of Directors may, in its discretion, consider
relevant. See 'Dividend Policy.'
No Assurance of Continued Nasdaq Listing. The Board of Governors of the
National Association of Securities Dealers, Inc. has established certain
standards for the initial listing and continued listing of a security on Nasdaq.
The standards for initial listing require, among other things, that an issuer
have total assets of $4,000,000 and capital and surplus of at least $2,000,000;
that the minimum bid price for the listed securities be $3.00 per share; that
the minimum market value of the public float (the shares held by non-insiders)
be at least $2,000,000, and that there be at least two market makers for the
issuer's securities. The maintenance standards require, among other things, that
an issuer have total assets of at least $2,000,000 and capital and surplus of at
least $1,000,000; that the minimum bid price for the listed securities be $1.00
per share; that the minimum market value of the 'public float' be at least
$1,000,000 and that there be at least two market makers for the issuer's
securities. A deficiency in either the market value of the public float or the
bid price maintenance standard will be deemed to exist if the issuer fails the
individual stated requirement for ten consecutive trading days. If an issuer
falls below the bid price maintenance standard, it may remain on Nasdaq if the
market value of the public float is at least $1,000,000 and the issuer has
$2,000,000 in equity. There can be no assurance that the Company will continue
to satisfy the requirements for maintaining a Nasdaq listing. If the Company's
securities were to be excluded from Nasdaq, it would adversely affect the prices
of such securities and the ability of holders to sell them, and the Company
would be required to comply with the initial listing requirements to be relisted
on Nasdaq.
If the Company is unable to satisfy Nasdaq's maintenance requirements and
the price per share were to drop below $5.00, then unless the Company satisfied
certain net asset tests, the Company's securities would become subject to
certain penny stock rules promulgated by the Securities and Exchange Commission.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standarized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. In addition, the penny
stock rules require that prior to a transaction in a penny stock not otherwise
exempt from such rules, the broker-dealer must make a special written
16
<PAGE>
<PAGE>
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If the Company's Common Stock becomes subject to the penny stock
rules, investors in the Offering may find it more difficult to sell their
shares.
THE COMPANY
AmBrew International owns and operates the South China Brewery, Hong Kong,
the first of a series of American-style micro-breweries the Company intends to
establish in selected locations in the Pacific Rim, Europe and Mexico.
AmBrew International was incorporated in Bermuda in June 1996. AmBrew
International is a holding company whose assets following the Reorganization
consist of all of the outstanding shares of the Hong Kong companies comprising
the South China Brewery. See 'Prospectus Summary' and Note 1 to Notes to
Consolidated Financial Statements. The South China Brewery companies were
established in 1994 by a group of investors involved in the alcohol beverage
industry.
AmBrew International's principal executive office is located at 1 Galleria
Boulevard (Suite 912) Metairie, Louisiana 70001 and its telephone number is
(504) 849-2739.
17
<PAGE>
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered
hereby after deducting estimated underwriting discounts and commissions and
expenses payable by the Company in connection with this Offering, are estimated
to be approximately $5.9 million ($6.8 million if the Over-allotment Option is
exercised in full) assuming initial public offering prices of $5.50 per Share
and $0.10 per Warrant.
Approximately $5 million of the net proceeds will be used to make capital
expenditures in connection with the establishment of certain of the Company's
proposed breweries in the Pacific Rim, Europe and Mexico through wholly-owned
subsidiaries or through majority-owned joint venture arrangements with strategic
local partners, including $2.8 million for the purchase of micro-brewing
equipment from Micro Brew Systems, or another comparable provider of brewing
equipment. The remainder of the net proceeds, if any, will be used for working
capital and other general corporate purposes. The following table sets forth
each amount in tabular format as an approximate percentage of net proceeds.
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
DOLLAR AMOUNT NET PROCEEDS
------------- -------------
<S> <C> <C>
Capital expenditures relating to establishment of proposed breweries.............. $ 5,000,000 85.0%
Repayment of Hibernia Note........................................................ 452,000 7.6
Repayment of Bridge Notes......................................................... 370,000 6.3
Repayment of BPW Note............................................................. 65,000 1.1
------------- -----
$ 5,887,000 100%
------------- -----
------------- -----
</TABLE>
$452,000 of the net proceeds will be used to retire the remaining principal
amount of the Hibernia Note, with principal payments due on September 30, 1996
and March 31, 1997 and an interest rate equal to Citibank prime plus 0.5%; up to
$370,000 of the net proceeds will be used to retire the Bridge Notes, due
September 1, 1997, with an interest rate of 12% per annum; and $65,000 of the
net proceeds will be used to retire the BPW Note, due ten days after the
consummation of this Offering with an interest rate of 5.5% per annum.
The foregoing represents the Company's current best estimate of its
allocation of the net proceeds of this Offering based on the current state of
its business operations, its current plans and current economic and industry
conditions. Although the Company does not contemplate material changes in the
proposed allocation of the use of proceeds, to the extent the Company finds that
adjustment is required by reason of business conditions or otherwise, the
amounts shown may be adjusted among the uses indicated above. See 'Risk
Factors_--_Management's Broad Discretion in Use of Proceeds.'
The proceeds of the Bridge Notes were used to finance a portion of the
expenses of this Offering. See 'Certain Transactions.'
The Company believes that the net proceeds of this Offering will be
sufficient to establish five of seven micro-breweries it intends to develop and
operate by the end of 1997. See 'Risk Factors.' The Company currently plans to
obtain, if possible, additional financing for these breweries from third
parties. The Company intends to propose to strategic local partners that they
purchase minority equity interests in certain of the proposed breweries and also
intends to utilize debt financing. The Company believes that this financing, if
obtained on acceptable terms, in conjunction with the net proceeds of this
Offering, will enable the Company to establish seven proposed breweries. Pending
the aforementioned uses, the net proceeds from this Offering will be invested in
interest-bearing government securities or short-term investment-grade
securities.
18
<PAGE>
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock. The
Company intends to retain all earnings to finance the development and expansion
of its business and does not intend to pay cash dividends on the Common Stock in
the foreseeable future. The payment of any dividends in the future will depend,
among other things, on the Company's results of operations, capital requirements
and financial condition, and on such other factors as the Company's Board of
Directors may, in its discretion, consider relevant.
The amount of dividends payable by the South China Brewery as well as by
future subsidiaries of the Company operating the proposed expansion breweries is
and will be subject to general limitations imposed by the corporate laws of the
respective jurisdictions of incorporation of such subsidiaries as well as
restrictions in debt agreements. Dividends paid to the Company by these
subsidiaries may be subject to investment registration requirements and
withholding requirements.
19
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at April
30, 1996, (i) on an actual basis, (ii) on a pro forma basis giving effect to the
issuance of $370,000 principal amount of Bridge Notes and (iii) on a pro forma,
as adjusted basis to give effect to (at an assumed initial public offering price
of $5.50 per Share and $0.10 per Warrant) (x) the receipt of the estimated net
proceeds of this Offering and the initial application of such estimated net
proceeds as described in 'Use of Proceeds' and (y) assuming that the Bridge Note
holders elect to be repaid with the proceeds of this Offering instead of
converting their Bridge Notes into shares of Common Stock as provided by the
terms of the Bridge Notes (I) the issuance to the Bridge Note holders of 21,818
shares of Common Stock at no cost and Bridge Warrants to purchase an equal
number of shares of Common Stock and (II) the recognition of a non-recurring,
non-cash interest expense of $100,000 for the unamortized portion of the
original issue discount relating to the repayment of the Bridge Notes. In the
event that the holders of the Bridge Notes elect to convert each of the
convertible Bridge Notes into shares of Common Stock upon consummation of this
Offering (at an assumed initial public offering price of $5.50 per Share), they
will be entitled to receive 112,727 shares of Common Stock and Bridge Warrants
to purchase an additional 112,727 shares of Common Stock. See 'Certain
Transactions.'
<TABLE>
<CAPTION>
APRIL 30, 1996
-----------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA ADJUSTED
--------- ----------- -------------
<S> <C> <C> <C>
Current portion of long-term bank loan................................ $ 452,000 $ 452,000 $ --
Bridge Notes payable(1)............................................... -- 370,000 --
Current portion of capital lease obligations.......................... 12,858 12,858 12,858
Shareholders' loans................................................... 85,638 85,638 20,638
--------- ----------- -------------
Total current portion of debt.................................... 550,496 920,496 33,496
Capital lease obligations, net of current portion..................... 24,864 24,864 24,864
--------- ----------- -------------
Total non-current portion of debt................................ 24,864 24,864 24,864
Stockholders' equity:
Common Stock, $0.01 par value; 10,000,000 shares authorized,
2,000,000 shares outstanding actual and pro forma(2), and
3,355,151 shares outstanding pro forma, as adjusted(3)......... 645 645 13,978
Additional paid-in capital....................................... 554,815 554,815 6,512,482
Preferred Stock, $0.01 par value, 500,000 shares authorized and
no shares outstanding.......................................... -- -- --
Accumulated deficit.............................................. (274,505) (274,505 ) (374,505)
--------- ----------- -------------
Total stockholders' equity....................................... 280,955 280,955 6,151,955
--------- ----------- -------------
Total capitalization................................... $ 856,315 $1,226,315 $ 6,210,315
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
- ------------
(1) The Bridge Notes were issued in May 1996 to finance a portion of the
expenses of this Offering. See 'Certain Transactions.'
(2) Excludes (i) 300,000 shares of Common Stock reserved for future issuance
pursuant to options available for grant under the Stock Option Plan and (ii)
500,000 shares of Common Stock reserved for future issuance pursuant to the
Bridge Notes and the Bridge Warrants. See 'Management -- Stock Option Plan,'
'Certain Transactions' and 'Underwriting.'
(3) Includes the issuance of 21,818 shares of Common Stock upon the consummation
of this Offering pursuant to the terms of the Bridge Notes assuming no
conversion of the convertible Bridge Notes (112,727 shares of Common Stock
assuming full conversion of the convertible Bridge Notes and an initial
public offering price per Share of $5.50).
20
<PAGE>
<PAGE>
DILUTION
The net tangible book value of the South China Brewery at April 30, 1996
was approximately $280,955, or $0.14 per share of Common Stock including in the
calculation 21,818 shares of Common Stock issuable pursuant to the terms of the
Bridge Notes upon the consummation of this Offering (assuming an initial public
offering price per Share of $5.50 and no conversion of the convertible Bridge
Notes). Net tangible book value per share represents the amount of the Company's
total tangible assets less total liabilities divided by the number of shares of
Common Stock outstanding at that date. After giving effect to the sale of the
Shares and the Warrants at an assumed initial public offering price of $5.50 per
Share and $0.10 per Warrant, and after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, the
Company's pro forma, as adjusted net tangible book value at April 30, 1996 would
have been $6,151,955 or $1.83 per share of Common Stock. This represents an
immediate increase in the net tangible book value of $1.69 per share to existing
stockholders and an immediate dilution of $3.67 per share to new investors
purchasing Shares in this Offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $5.50
Net tangible book value per share at April 30, 1996.......................... $0.14
Increase per share attributable to new investors............................. $1.69
-----
Pro forma, as adjusted net tangible book value per share after the
Offering................................................................... $1.83
-----
Dilution per share to new investors.......................................... $3.67
-----
-----
</TABLE>
The computations in the table set forth above assume that the
Over-allotment Option is not exercised. If the Over-allotment Option is
exercised in full, the pro forma net tangible book value at April 30, 1996 would
have been $7,126,354 or $2.00 per share of Common Stock.
The following table summarizes, on a pro forma, as adjusted basis, after
giving effect to this Offering and to the issuance of 21,818 shares of Common
Stock issuable pursuant to the terms of the Bridge Notes upon the consummation
of this Offering (assuming no conversion of the convertible Bridge Notes), the
number of shares purchased from the Company, the total consideration paid and
the average price per share paid by the existing stockholders and by the new
investors at an assumed initial public offering price of $5.50 per Share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................................... 2,021,818 60.3% $ 555,460 7.0% $0.27
New investors........................................... 1,333,333 39.7% 7,333,332 93.0% $5.50
--------- ------- ---------- -------
Total.............................................. 3,355,151 100.0% $7,888,792 100.0%
--------- ------- ---------- -------
--------- ------- ---------- -------
</TABLE>
The information presented above, with respect to existing stockholders,
assumes no exercise of the Over-allotment Option. In addition, 1,599,999 shares
of Common Stock have been reserved for issuance upon exercise of the Warrants
and 266,666 shares of Common Stock have been reserved for issuance upon exercise
of the Representative's Warrants, 300,000 shares of Common Stock have been
reserved for future issuance upon exercise of options granted pursuant to the
Stock Option Plan and 21,818 shares of Common Stock have been reserved for
future issuance pursuant to the Bridge Warrants assuming no conversion of the
convertible Bridge Notes (112,727 shares of Common Stock assuming full
conversion of the convertible Bridge Notes) and an initial public offering price
of $5.50 per Share. The issuance of such shares of Common Stock may result in
further dilution to new investors. See 'Management -- Stock Option Plan' and
'Underwriting.'
21
<PAGE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the fiscal year ended October
31, 1995, have been derived from the Consolidated Financial Statements included
elsewhere in this Prospectus which have been audited by Arthur Andersen & Co.,
independent public accountants, whose report thereon is also included elsewhere
in this Prospectus. The selected consolidated financial data as of April 30,
1996, and for the six month periods ended October 31, 1995 and April 30, 1996,
are unaudited, but in the opinion of management include all adjustments
necessary for a fair presentation of such data. The selected consolidated
financial data set forth below should be read in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30,
1995 1995 1996
--------------- --------------------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $ 63,707 $ 63,707 $ 244,753
Cost of sales.......................................... (38,960) (38,960) (43,055)
--------------- --------------------- ----------------
Gross profit...................................... 24,747 24,747 201,698
Selling, general and administrative expenses........... (292,888) (195,846) (207,094)
Interest expense, net.................................. (17,838) (16,059) (24,908)
Other expenses, net.................................... (2,265) (2,265) (888)
--------------- --------------------- ----------------
Loss before income taxes.......................... (288,244) (189,423) (31,192)
Income tax benefit..................................... 47,560 31,255 5,147
--------------- --------------------- ----------------
Net loss.......................................... $ (240,684) $ (158,168) $ (26,045)
Net loss per common share.............................. $ (0.12) $ (0.08) $ (0.01)
Number of shares outstanding(1)........................ 2,000,000 2,000,000 2,000,000
<CAPTION>
APRIL 30, 1996
---------------------------------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA(2) ADJUSTED(2)(3)
--------------- --------------------- ----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets................................... $ 140,850 $ 510,850 $5,494,850
Total assets........................................... $ 893,013 $ 1,263,013 $6,247,013
Total current liabilities.............................. $ 587,194 $ 957,194 $ 70,194
Total long-term liabilities............................ $ 24,864 $ 24,864 $ 24,864
Total liabilities...................................... $ 612,058 $ 982,058 $ 95,058
Total shareholders' equity............................. $ 280,955 $ 280,955 $6,151,955
</TABLE>
- ------------
(1) Assumes the consummation of the Reorganization and excludes (i) 300,000
shares of Common Stock reserved for future issuance pursuant to options
available for grant under the Stock Option Plan and (ii) 500,000 shares of
Common Stock reserved for future issuance pursuant to the Bridge Notes and
the Bridge Warrants. See 'Management -- Stock Option Plan,' 'Certain
Transactions' and 'Underwriting.'
(2) Gives pro forma effect to the issuance of $370,000 principal amount of
Bridge Notes. See 'Certain Transactions.'
(3) Adjusted to give effect to (at an assumed initial public offering price of
$5.50 per Share and $0.10 per Warrant) (i) the receipt of the estimated net
proceeds of this Offering and the initial application of such estimated net
proceeds as described herein, and (ii) assuming that the Bridge Note holders
elect to be repaid with the proceeds of this Offering instead of converting
their Bridge Notes into shares of Common Stock as provided by the terms of
the Bridge Notes, (a) the issuance to the Bridge Note holders of 21,818
shares of Common Stock and Bridge Warrants to purchase an equal number of
shares of Common Stock and (b) the recognition of a non-recurring, non-cash
interest expense of $100,000 for the unamortized portion of the original
issue discount relating to the repayment of the Bridge Notes. In the event
that the holders of the Bridge Notes elect to convert each of the
convertible Bridge Notes into shares of Common Stock upon consummation of
this Offering (at an assumed initial public offering price of $5.50 per
Share), they will be entitled to receive 112,727 shares of Common Stock and
Bridge Warrants to purchase an additional 112,727 shares of Common Stock.
See 'Use of Proceeds' and 'Certain Transactions.'
22
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Unless otherwise indicated, the following discussion addresses the combined
financial condition and results of operations of the South China Brewery, which
consists of brewing and distribution operating subsidiaries of the Company
located in Hong Kong. The discussion should be read in conjunction with the
'Selected Consolidated Financial Data' and the Consolidated Financial Statements
and the Notes thereto included elsewhere in this Prospectus. In addition, the
period-to-period presentation set forth under ' -- Results of Operations' will
not necessarily be indicative of future results and future net losses can be
expected as increased expenses are incurred in connection with the establishment
of the proposed expansion breweries.
The South China Brewery relies upon a single supplier (other than for
labels) for each of the raw materials used to make and package the Company's
beers. While the South China Brewery believes that multiple sources of supply
are available for all of its ingredients and raw materials, if the South China
Brewery were unable to obtain adequate quantities of ingredients or other raw
materials, delays or reductions in product shipments would occur which would
have an adverse effect on the South China Brewery'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, various plant diseases and pests. If any of the foregoing were to
occur, no assurance can be given that such condition would not have an adverse
effect on the Company's business, financial condition and results of operations.
See 'Business -- Brewing Operations' and ' -- Suppliers.'
A substantial portion of the South China Brewery's sales are made to a
small number of customers on an open account basis and generally no collateral
is required. For the six months ended April 30, 1996, 72.1% of net sales were
generated by sales to these customers. At April 30, 1996, the five largest
accounts receivable constituted 82% of the South China Brewery's accounts
receivable. See Note 14 of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
The South China Brewery commenced operations in June 1995 and has not
experienced a full fiscal year of operations. The first sales of the South China
Brewery's products occurred in July 1995. For comparison purposes, the following
presentation compares the six months ended October 31, 1995 with the six months
ended April 30, 1996. The following table sets forth for the periods indicated
certain line items from the South China Brewery's summary of operations
expressed as a percentage of the South China Brewery's net sales for each of the
six months ended October 31, 1995 and April 30, 1996, respectively:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, 1995 APRIL 30, 1996
------------------ ------------------
<S> <C> <C>
Net sales................................................... 100.0% 100.0%
Cost of sales............................................... 61.2% 17.6%
Gross profit................................................ 38.8% 82.4%
Selling, general and administrative expenses................ 307.4% 84.6%
Operating loss.............................................. 268.6% 2.2%
Interest expense, net....................................... 25.2% 10.2%
Net loss.................................................... 248.3% 10.6%
</TABLE>
Net Sales. For the six months ended October 31, 1995 and April 30, 1996,
the South China Brewery had net sales of $63,707 and $244,753, respectively. The
growth in sales resulted from an increased awareness of and acceptance by
consumers of the South China Brewery's flagship brand, Crooked Island Ale, the
first micro-brewed beer produced and sold in Hong Kong. In addition, in
September 1995, the South China Brewery entered into contracts for the brewing
and supply of custom
23
<PAGE>
<PAGE>
brewed ales for consumption in two Hong Kong pubs. Private label sales have
accounted for 72.1% of all of the South China Brewery's sales for the six months
ending April 30, 1996 though the Company expects that sales of the South China
Brewery's brands will increase relative to its private label sales. See
'Business -- Products -- Specialty Brewing.'
Cost of Sales. The South China Brewery's cost of sales for the six months
ended October 31, 1995 and April 30, 1996 was $38,960 and $43,055, respectively.
The improvement in gross profit percentage was due to the lower cost per barrel
of kegged products over bottled products resulting from the South China
Brewery's increased sales of kegged products during the six months ended April
30, 1996 and to more efficient use of brewery equipment.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six months ended October 31, 1995 and April 30,
1996 were $195,846 and $207,094, respectively. The selling, general and
administrative expenses for the six months ended October 31, 1995 reflect
advertising and marketing costs of $24,312 compared to advertising and marketing
costs of $12,298 for the six months ended April 30, 1996. The higher costs for
the earlier period were due to start-up advertising and promotion. This decrease
in expenses was in part offset by staff salary expense which increased during
the six months ended April 30, 1996 over the six months ended October 31, 1995
by $50,846 due to the hiring of an office manager and an additional sales
representative. The Company's selling, general and administrative expenses,
including salary, marketing and other operational expenses, will increase as the
proposed expansion breweries are established.
Net Interest Expense. Net interest expense for the six months ended
October 31, 1995 and April 30, 1996 was $16,059 and $24,908, respectively. The
Company's net interest expense is expected to decrease in the future as the
Company intends to repay the Hibernia Note and the BPW Note out of the net
proceeds of this Offering. See 'Use of Proceeds.'
LIQUIDITY AND CAPITAL RESOURCES
Until this Offering, the South China Brewery has been able to satisfy its
cash requirements through a combination of private sales of equity, borrowings
from a stockholder and from an institutional lender (supported by a guarantee
and letters of credit from stockholders) and cash flow from operations. At April
30, 1996, the South China Brewery had total current assets of $140,850,
consisting of $6,232 in cash on hand, and $61,162 in accounts receivable, net
$29,585 in inventories, and $43,871 in other current assets. At April 30, 1996,
the South China Brewery's five largest accounts receivable accounted for 82% of
its total accounts receivable as of such date.
At April 30, 1996, the Company had total liabilities of $612,058 of which
$587,194 were current liabilities and a resulting working capital deficit of
$446,344.
At April 30, 1996, the South China Brewery had fixed capital lease
obligations of $17,179 per year for each of the three years ending April 30,
1999 relating to its delivery vehicles. At April 30, 1996, the South China
Brewery had $128,774 in operating lease commitments over the two year period
ending April 30, 1998 relating to its warehouse and brewery facility. The
Company may expand the production capacity at the South China Brewery by 50%
with the purchase of five fermentation tanks at an installed cost of
approximately $150,000. Any such purchase would be funded by cash flow generated
by the South China Brewery.
The amount of dividends payable by the South China Brewery as well as by
future subsidiaries of the Company operating the proposed expansion breweries is
and will be subject to general limitations imposed by the corporate laws of the
respective jurisdictions of incorporation of such subsidiaries as well as
restrictions in debt agreements. Dividends paid to the Company by these
subsidiaries may be subject to local investment registration requirements and
withholding requirements.
In May 1996, Craft issued $370,000 principal amount of Bridge Notes bearing
an interest rate of 12% per annum to certain investors in Singapore and Hong
Kong and maturing September 1, 1997. Pursuant to the terms of the Bridge Notes,
these investors are entitled to receive 21,818 shares of Common Stock assuming
no conversion of the convertible Bridge Notes (112,727 shares of Common Stock
assuming full conversion of the convertible Bridge Notes) and an initial public
offering price per Share of $5.50 and Bridge Warrants entitling such investors
to purchase, in the aggregate, up to 21,818
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shares of Common Stock assuming no conversion of the convertible Bridge Notes
(112,727 shares of Common Stock assuming full conversion of the convertible
Bridge Notes) and an initial public offering price per Share of $5.50,
commencing six months from the date hereof at 150% of the initial public
offering price per Share.
On March 31, 1995, the South China Brewery borrowed $565,000 from Hibernia
National Bank. The loan was evidenced by a promissory note with principal
payments due on September 30, 1996 and March 31, 1997 and an interest rate equal
to Citibank prime plus 0.5%. The amount due on the Hibernia Note has been
reduced to $452,000 through principal repayments by the Company. The South China
Brewery borrowed $65,000 evidenced by a limited recourse promissory note dated
March 5, 1996 due ten days after the date of this Prospectus bearing an interest
rate of 5.5%.
The Company intends to devote a portion of the net proceeds of this
Offering to repay loans used for working capital purposes. The Company intends
to retire the Bridge Notes (that are not converted by the holders thereof into
shares of Common Stock upon the consummation of this Offering), the Hibernia
Note and the BPW Note with a portion of the net proceeds of this Offering.
Although the Company believes that the balance of the net proceeds of this
Offering should be sufficient to establish five of the seven micro-breweries it
intends to develop and operate by the end of 1997, the Company currently plans
to obtain, if possible, additional financing for these breweries from third
parties. The Company intends to propose to strategic local partners that they
purchase minority equity interests in certain of the proposed breweries and also
intends to utilize debt financing for these breweries, if available. Such
financing, or other additional financing, will be required to enable the Company
to establish all seven proposed breweries.
The Company has recently entered into new employment agreements with its
Executive Vice President, Chief Operating Officer and Secretary, James L. Ake
and with its Managing Director for Hong Kong Operations, David K. Haines, which
provide for annual base salaries of $72,000 and $60,000, respectively. See
'Management -- Executive Compensation.'
If the Company's assumptions change or prove to be inaccurate or the net
proceeds of this Offering prove to be insufficient, the Company may be required
to curtail its expansion activities or seek additional financing through the
sale of additional debt or equity securities or borrowings from banks or other
sources. There can be no assurance that such financing would be available or, if
available, could be obtained on terms satisfactory to the Company.
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BUSINESS
GENERAL
AmBrew International owns and operates the South China Brewery, the first
in a series of international breweries based on the concept of American-style
micro-breweries. The South China Brewery, the first American-style micro-brewery
in Hong Kong, produces fresh, high-quality, preservative-free, hand-crafted
beers using state-of-the-art American-manufactured brewing equipment.
Hand-crafted beers are distinguishable by their full flavor which results from
traditional brewing styles. The Company believes that American-style
micro-brewing has growth potential in other key world markets and that the South
China Brewery is a model that can be adapted to other markets.
The American-style micro-brewery concept has developed over the past ten
years into the fastest growing segment of the American beer industry.
American-style micro-breweries produce less than 15,000 barrels per year of
hand-crafted beers in a variety of styles. The Company believes that the growing
demand for micro-brewed beers in the United States is part of a broader shift in
preferences on the part of a certain segment of consumers away from
mass-produced products and toward high-quality, distinctive foods and beverages.
While craft beers currently account for less than 2% of total United States beer
consumption, sales volume of these beers grew by 50% in 1995 and had an annual
growth rate of approximately 47% during the period from 1985 through 1994.
AmBrew International believes that the demand for craft beers is not limited to
the United States and is committed to the production of a variety of craft beers
designed to appeal to a growing number of consumers in global markets.
The Company exported the American-style micro-brewery concept to Hong Kong
with the establishment of the South China Brewery in June 1995. With only one
head brewer and six other employees, the South China Brewery produces,
distributes and markets two full-flavored beers marketed under South China's own
brand names, Crooked Island Ale and Dragon's Back India Pale Ale, and custom
produces beers for local Hong Kong establishments in accordance with their
individual specifications to market under their own labels. One of these
custom-produced beers, Delaney's Ale, won a Gold Award at the Association of
Brewers' World Beer Cup in June 1996. The South China Brewery is designed to
permit small and economical production runs of differentiated products to meet
special tastes or other custom requirements and for sale in niche markets.
Increased consumer demand for high quality, full-flavored beers has allowed the
South China Brewery to achieve a price premium relative to mass-produced
domestic beer producers and to set its prices at the upper end of the premium
import market.
The Company's senior management and Board of Directors have extensive
experience in the international beverage alcohol industry. The Company expects
to utilize this experience to identify new markets receptive to the
American-style micro-brewery concept and to seek out strategic local partners to
co-invest in new micro-breweries in such markets. The Company plans to establish
and operate, either through wholly-owned subsidiaries or through majority-owned
joint venture arrangements with strategic local partners, a series of
micro-breweries similar in concept to the South China Brewery. The Company
expects that these partners will use their knowledge of local regulation and
markets to facilitate the establishment and acceptance of the Company's
micro-breweries and their products. In pursuing its expansion strategy, the
Company will move into both markets dominated by mass-market breweries and
markets in which high-quality beer producers will be the Company's primary
competition. In markets where mass-produced beers are sold to a broad consumer
profile, AmBrew International intends to develop craft beers as locally produced
premium product alternatives. In markets in which there are already a number of
traditional high-quality beer producers, the Company intends to produce
distinctive micro-brewed products for niche market segments. The Company has
preliminarily identified seven locations in which it is considering establishing
breweries by the end of 1997, subject to more extensive feasibility studies:
Zurich, Dublin, Shanghai, Tecate (Mexico), Budapest, Singapore and Warsaw.
The Company expects to achieve greater economies of scale as it expands.
For example, the Company intends to enter into a contract with Micro Brew
Systems Company, Limited ('Micro Brew Systems') which supplied the equipment for
the South China Brewery, or another comparable provider of state-of-the-art
brewing equipment, to purchase, at discounted prices, the necessary brewing
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equipment for its proposed new breweries. In addition, the Company believes that
it can benefit from volume discounts on purchases of equipment and ingredients.
Based on the growth of its South China Brewery to date, the Company believes it
is well-positioned to establish similar American-style micro-breweries in other
markets.
AMERICAN-STYLE MICRO-BREWERIES AND THE BREWING INDUSTRY
American-style micro-breweries produce small quantities of fresh,
high-quality, preservative-free hand-crafted beers. In 1995, craft brewers, both
regional and micro, comprised the only growing segment of the United States beer
market. According to the Association of Brewers of Boulder, Colorado, 830 new
breweries have been established in the United States since 1980: 17 'regional
craft breweries' (breweries producing between 15,000 and 500,000 barrels per
year); 280 micro-breweries (breweries producing less than 15,000 barrels for
off-premises sale); and 533 brewpubs (brewery restaurants that sell mostly on
premises).
AmBrew International believes that it can take advantage of this
micro-brewery market niche opportunity by selling high-quality, hand-crafted
beers in certain international markets just as United States micro-brewers have
done in domestic markets. While craft beers currently account for less than 2%
of total United States beer consumption, sales volume of these beers grew by 50%
in 1995 and had an annual growth rate of approximately 47% during the period
from 1985 through 1994. Based on its experience in the industry, the Company
believes that the South China Brewery presently is the only American-equipped
micro-brewery outside of the United States.
SOUTH CHINA BREWERY
The Company exported the American-style micro-brewery concept by
establishing the South China Brewery in Hong Kong in June 1995. The South China
Brewery produces its specialty products in a state-of-the-art, company-owned
facility using traditional brewing methods. A head brewer and two assistants
brew all of the South China Brewery's beer. With only one head brewer and six
other employees, the South China Brewery produces, distributes and markets two
full-flavored, craft beers marketed under South China's own brand names, Crooked
Island Ale and Dragon's Back India Pale Ale, and custom brews beers for local
Hong Kong establishments in accordance with their individual specifications to
market under their own labels. The South China Brewery is designed to permit
small and economical production runs of differentiated products to meet special
tastes or other custom requirements and for sale in niche markets.
PROPOSED EXPANSION MARKETS
The Company plans to establish and operate, either through wholly-owned
subsidiaries or through majority-owned joint venture arrangements with strategic
local partners, a series of state-of-the-art, American-style micro-breweries.
The Company is currently considering the following locations, subject to more
extensive feasibility studies: Zurich, Dublin, Shanghai, Tecate (Mexico),
Buda pest, Singapore and Warsaw. Preliminary work has commenced at several of
the proposed sites:
Zurich.__The Company has entered into a non-binding letter of intent with
Lateltin AG ('Lateltin') to establish a micro-brewery in Zurich which provides
that AmBrew International will acquire 60% of the equity interest of a joint
venture, of which Lateltin will hold the remaining equity interest. The Company
has indentified a proposed site for the Zurich expansion brewery.
Dublin.__The Company has entered into a non-binding letter of intent with
Twinmeadows, Ltd., trading as Meadows Micro-Brewery ('Meadows'), to establish a
micro-brewery in the Dublin vicinity. The letter of intent provides that AmBrew
International will acquire 51% of the equity interest of a joint venture of
which affiliates of Meadows will hold the balance of the equity interest. The
Company has identified a site for the Dublin expansion brewery, which site is
fully prepared for the installation of micro-brewery equipment.
Shanghai. The Company has identified a prospective site for the Shanghai
expansion brewery, is currently conducting negotiations with prospective Chinese
joint venture partners.
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Tecate. The Company has selected the site for the Tecate expansion
brewery, has commenced work for a preliminary site lay-out and is currently
conducting lease negotiations. The proposed site is in Mexico less than one mile
from the California border. The Company's present plan is to distribute its
products in Mexico, although there may be opportunities for distribution in
southern California.
There can be no assurance that the Company will be successful in
establishing and operating additional breweries at any of such sites. However,
the Company currently expects to obtain, if possible, financing for these
breweries from third parties. The Company intends to propose to strategic local
partners that they purchase minority equity interests in certain of the proposed
breweries and also intends to utilize debt financing. The Company expects to
utilize the extensive experience of management and the Board of Directors in the
international beverage alcohol industry to seek out strategic local partners for
such co-investment purposes. Such financing, or other additional financing, will
be required to enable the Company to establish all seven proposed breweries. See
'Use of Proceeds.'
The Company expects to achieve economies of scale with its proposed
breweries through volume discounts on equipment and ingredient purchases and
reduction of brewery start-up expenses. The Company intends to enter into a
contract with Micro Brew Systems, or a comparable provider of micro-brewing
equipment, to purchase brewing equipment manufactured by JV Northwest, Ltd. of
Portland, Oregon ('JVNW') at a price discounted for volume purchases. For each
of the proposed breweries, the Company will conduct a feasibility study covering
brewery licensing, taxation and local operating costs and conduct a head brewer
search. In addition, the Company expects to utilize its experience with the
South China Brewery to speed the process from start-up to profitable operations
at the proposed breweries.
Successful expansion will require management of various factors associated
with the construction of new facilities in geographically and politically
diverse locations. Factors include site selection, local land use requirements,
obtaining governmental permits and approvals, adequacy of municipal
infrastructure, environmental uncertainties, possible cost estimation errors or
overruns, additional financing, construction delays, weather problems and other
factors, many of which are beyond the Company's control. There can be no
assurance that the Company will be successful in establishing and operating
additional breweries.
If the Company successfully acquires interests in joint ventures or
establishes new breweries located in the Pacific Rim, Europe or Mexico, the
Company expects that a substantial portion of the revenues of such breweries, as
well as revenues generated by its South China Brewery, will be denominated in
local currency. A portion of such revenues will need to be converted to U.S.
dollars in order for the Company to pay dividends in U.S. dollars. Both the
conversion of local currencies in U.S. dollars and the remittance of local
currencies abroad, depending on the local laws where such brewery operates, may
require government approval. There can be no assurance that the breweries will
be able to obtain expatriate currency for such purposes or that the Company will
be able to convert such currency into U.S. dollars. While the Company does not
currently engage in hedging or other transactions intended to manage the risks
relating to foreign currency exchange, inflation or interest rate fluctuations,
it may elect to do so in the future as it expands into new markets.
BREWING OPERATIONS
The Company's beer is prepared from barley, grain, hops, yeast and water.
Distinctive styles of beer depend upon how the barley is malted, the use of hops
and the proportions of the ingredients, among other factors. The following
discusses the production process for the South China Brewery. The Company
intends to utilize the same type and scale of equipment at the other breweries
and to generally pattern future brewery operations on the South China Brewery.
Brewing Process. The South China Brewery's products are crafted from pale
and specialty malted barley produced in Great Britain by high-quality malters.
The South China Brewery acquires its hops from micro-brewery quality sources in
the United States. The first step in the South China Brewery's brewing process
is to crack malted barley in a roller mill (milled barley is called grist) and
store it in a grist case. Hot water (called 'liquor') and grist are mixed in a
mash/lauter tun producing the mash. A
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sweet, clear liquid called wort is filtered out of the mash and transferred to
the kettle. The wort is brought to a rolling boil in the kettle. Some hops are
added early to provide bitterness; other hops (finishing hops) are put in later
to give a fine aroma. The hot wort is cooled to termination temperature (about
40[d] F) through a heat exchanger. The cold liquor tank provides the water to
cool the wort in the heat exchanger and the resulting heated water is
transferred to the hot liquor tank for use in the next brew.
The cooled wort is then transferred to the fermentation tanks ('unitanks'),
yeast is added and fermentation begins. Fermentation is the process by which
yeast transforms the sweet wort into a flavor solution containing alcohol and
carbon dioxide. After fermentation, the beer is aged to develop its final smooth
taste. The fermentation and aging process can last 14 days for ales and 21 days
and longer for lagers.
The conditioned product is filtered and stored in a bright beer tank where
it is carbonated and then packaged. Packaged beer is stored in a refrigerated
walk-in cooler and delivered in refrigerated vehicles and containers.
Quality Control. The South China Brewery employs an experienced head
brewer who hand crafts all of the brewery's beer. The Company will seek to
employ a similarly qualified head brewer at each of the Company's proposed
breweries by conducting a head brewer personnel search for each proposed
brewery. The Company plans to monitor production and exercise quality control at
each of its breweries. Each brewery will have equipment for on-site yeast
propagation, to monitor product quality, to test products and to measure color
and bitterness. The breweries will also utilize independent laboratories for
further product analysis. The Company's policy is to meet the highest quality
standards, with the goal of assuring the purity and safety of each of its beers.
Management believes that its ability to engage in constant product
innovation and its control over product quality are critical competitive
advantages. Accordingly, the Company does not hire third parties to perform
contract brewing of any of its products, and plans to operate its own breweries
in each of the proposed initial expansion locations and at any subsequent sites.
In addition, AmBrew International believes that its ownership of a number of
micro-breweries will enable it to shift production among breweries giving it
greater operating flexibility while reducing the risk of producing all of its
products at a single location. This strategy would also permit the Company to
produce its brands that achieve widespread market-acceptance at any of its
proposed breweries for local consumption.
PRODUCTS
The South China Brewery currently produces two styles of full-flavored
craft beers using traditional brewing methods, high quality ingredients and
state-of-the-art American-manufactured brewing equipment that the Company
intends to replicate at each of its proposed breweries. The Company's beers are
marketed on the basis of freshness and distinctive flavor profiles. Like most
other micro-brewed brands, the South China Brewery's products are not
pasteurized. Accordingly, they should be kept cool so that oxidation and
heat-induced aging will not adversely affect the original taste, and should be
distributed and served within 90 days after brewing to maximize freshness and
flavor. The South China Brewery distributes its products in kegs and glass
bottles. The bottles are freshness-dated for the benefit of consumers. For the
six months ended April 30, 1996, approximately 79% of the South China Brewery's
sales were generated by sales of kegged products.
Proprietary Brands. The South China Brewery presently produces two branded
products, each with its own distinctive combination of flavor, color and
clarity:
Crooked Island Ale. The flagship brand, Crooked Island Ale, accounted
for approximately 23% of the Company's sales during the quarter ended April
30, 1996. This Ale is produced from pale malted barley from Great Britain
and hops from the United States. Crooked Island Ale is a light, golden ale
with a fresh clean nose and crisp finish. It is brewed light, with all the
flavor and uniqueness of a full-bodied ale. The Company believes that this
Ale's distinctive malt flavor comes from a careful balance of bittering and
aroma hops. Crooked Island Ale is available in both kegs and bottles.
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Dragon's Back India Pale Ale. Brewed to reflect the essence of a
traditional oak barrel British India Pale Ale, Dragon's Back gets its amber
hue from a blend of premium British malted barley. This Ale is heavily
hopped maintaining all of the qualities of the quintessential cask ale.
Currently, Dragon's Back is brewed for distribution only in kegs.
Specialty Brewing. In addition to its branded products, the South China
Brewery custom brews beers for local Hong Kong establishments in accordance with
their individual product specifications to market under their own labels. For
the six months ended April 30, 1996, such sales to two customers, Dabeers
Distributors Limited and Delaney's (Wanchai) Limited, owner of Delaney's Irish
Pub, have accounted for 72% of the South China Brewery's sales. The Company's
contracts with these customers both expire in September 1996. While the Company
has no reason to believe that such contracts will not be renewed, there is no
assurance that either contract will be renewed or renewed on favorable terms.
One of the Company's specialty brewed products, Delaney's Ale, won a Gold
Award at the Association of Brewers' World Beer Cup in June 1996. AmBrew
International retains the proprietary rights to the recipes of its specialty
brewed beers.
The Company believes that continual development of new products is the
hallmark of micro-breweries. In an effort to be responsive to varying consumer
style and flavor preferences, the South China Brewery is continually engaged in
the development and testing of new products. The South China Brewery has the
capability of producing all distinct styles of beer, including ale, lager, stout
and porter, and has a single production batch size of 260 cases. The Company
intends to construct its proposed breweries with similar versatility. The
Company intends to expand sales by entering into specialty brewing arrangements
with local bars, clubs, hotel, restaurant and airline partners in Hong Kong and
in each of the locales of the proposed breweries.
SOUTH CHINA FACILITY
Plant. The South China Brewery's brewing facility is located in Aberdeen,
Hong Kong, on the south side of the island. The Company believes, based on its
experience in the industry, that the South China Brewery is the first and only
independent micro-brewery established outside the United States using
state-of-the-art, American-made brewing equipment. The selection of this site
enabled the South China Brewery to be located near its primary markets in the
Hong Kong Central district and Kowloon while not incurring the high lease costs
of downtown Hong Kong. The primary operations are in a 3,600 gross square foot
space on the second floor of a 23 story building. An additional 2,000 square
foot storage facility for dry package goods (bottles, caps, labels) is also
located in the same building. Both the brewing facility and the storage facility
are leased.
The Hong Kong 20-barrel brewery is an adaptable facility that is able to
produce 9 different products simultaneously. The capacity of this brewery can be
increased by 50% with the addition of five fermentation tanks at an installed
cost of approximately $150,000. The configuration and space of the brewery
allows the Company to achieve this 50% expansion with no modification to either
the facility or equipment currently installed. For these reasons, the South
China Brewery will serve as a prototype for the proposed breweries, allowing the
Company to modify the basic configuration at each location to achieve optimum
brewery capacity and capability.
Equipment. The equipment for the brewery was designed and fabricated by
JVNW. JVNW was established in 1981 and is considered one of the premiere
fabricators of micro-brewery systems. The Company's state-of-the-art equipment
allows the head brewer to control the brewing process to achieve a consistent
hand-crafted, high-quality product. The Company intends to enter into a contract
with Micro Brew Systems (a distributor of JVNW brewing equipment) or another
comparable provider of brewing equipment, to purchase, at discounted prices, the
necessary brewing equipment for its proposed new breweries.
The plant is a 20-barrel system which means that it is capable of brewing
20 barrels of product with each brewing cycle. Twenty barrels (each barrel is 31
gallons) equates to approximately 260 cases of 24-355 ml bottles or 75 30-liter
kegs. Annual capacity is approximately 70,000 cases. The 10 fermentation vessels
allow the plant to make different products at the same time.
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The South China Brewery also utilizes several pieces of ancillary equipment
such as a boiler to make steam for heating the hot liquor and boiling in the
brew kettle, a glycol refrigeration unit to provide cooling for the cold liquor
tank, fermentation tanks and a bright beer tank, fixed and movable pumps to
transfer the liquid, filters, soft piping, for transferring liquid to and from
the fermentation tanks and labeling, bottling and kegging equipment.
SALES AND MARKETING
The South China Brewery presently markets its products by educating
consumers as to the distinctive qualities of its products and by emphasizing
localized promotions designed to enhance the South China Brewery's word-of-mouth
reputation. The Company intends to adopt sales and marketing strategies targeted
for each individual local market it serves, but generally will seek to identify
its products with local markets. Management believes that by locating the
proposed breweries in proximity to the local markets they serve, AmBrew
International will be able to enjoy distinct competitive advantages, including
established consumer identification with the Company's brands and enhanced
familiarity with local consumer tastes. By pursuing this strategy, the Company
believes that it will be able to develop its reputation and prestige as a local
craft brewer, while selectively introducing new and existing products into new
regional markets.
The South China Brewery devotes considerable effort to the promotion of
on-premises consumption at participating pubs and restaurants, and currently
engages in limited media advertising. Among other things, the South China
Brewery participates in and sponsors cultural and community events, local music
and other entertainment venues, local festivals and cuisine events, and local
professional sporting events in Hong Kong. The Company believes that educating
retailers about the freshness and quality of its products will in turn allow
retailers to assist in educating consumers. The Company considers on-premises
product sampling and education to be among its most effective tools for building
brand identity with consumers and establishing word-of-mouth reputation. The
South China Brewery achieves additional on-premises marketing through a variety
of other point-of-sale tools, such as tap handles, coasters, table tents, neon
signs, banners, posters and menu guidance. The South China Brewery also markets
its products through sales and give-aways of T-shirts, polo shirts, baseball
hats and glasses. Sales of merchandise could develop as an independent source of
revenue for the Company. In addition, the South China Brewery offers guided
tours of its facility to further increase consumer awareness of its products and
is considering offering tasting sessions.
The South China Brewery presently distributes its own products and does not
use independent distributors. To expand distribution of proprietary brands, the
South China Brewery has recently hired two local sales representatives. The
Company intends to reevaluate its distribution strategy for each market as its
business develops.
COMPETITION
The beer industry is intensely competitive. While there are no other craft
brewers in Hong Kong, the South China Brewery competes directly with premium
import beers as well as with mass-produced beers marketed by a number of much
larger producers. Some much larger United States beer producers are currently
marketing their beers in the United States as craft beers. There can be no
assurance that, in the future, the Company will not face competition from
mass-produced beer marketed internationally as craft beer. Similarly, the
Company may face competition from brewers or other investors who wish to
establish American-style micro-breweries in Hong Kong or in other areas in which
the Company plans to locate proposed breweries.
SUPPLIERS
The South China Brewery currently purchases all of its pale and specialty
malted barley from Hugh Baird & Sons, Limited, located in Essex, England. The
Company purchases its premium-quality select hops from Hop Union, located in
Yakima, Washington in the United States and regularly renews its yeast supply by
purchasing yeast from Wyeast Laboratories, Inc. The South China Brewery
currently purchases its case boxes, bottles and crowns each from a single
supplier and maintains multiple
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competitive sources for its supply of labels. While the South China Brewery
believes that at least two comparable sources of malted barley, five comparable
sources of hops and multiple sources of yeast are available, there can be no
assurance that political, economic or other factors will not limit or restrict
the availability of supplies. The Company expects that future breweries will
adopt similar practices for obtaining supplies.
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, various plant diseases
and pests. If any of the foregoing were to occur, no assurance can be given that
such condition would not have an adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company's
results of operations are dependent upon its ability to accurately forecast its
demand for raw materials. Any failure by the Company to accurately forecast its
demand for 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 business, results of
operations and financial condition.
GOVERNMENT REGULATION
Hong Kong Regulation. The South China Brewery was granted a brewery
license pursuant to the Dutiable Commodities Ordinance and the Dutiable
Commodities Regulations (Chapter 109 of the Laws of Hong Kong). Such license
will expire on June 6, 1997.
The South China Brewery is required to comply with the terms and conditions
of a license for the environmental discharge originating from the South China
Brewery in the Western Buffer Water Control Zone of Hong Kong which has been
obtained pursuant to Section 20 of the Water Pollution Control Ordinance
(Chapter 358 of the Laws of Hong Kong) (which will expire on February 28, 1997).
The South China Brewery's premises is connected, directly or indirectly, to
a communal drain or a communal sewer which is vested in and maintained by the
Hong Kong government, and produces trade effluent that is discharged into a
communal drain or communal sewer. Accordingly the South China Brewery, in
addition to a sewer charge, pays to the Hong Kong government a trade effluent
surcharge under the Sewage Services Ordinance (Chapter 463 of the Laws of Hong
Kong). The Water Pollution Control Ordinance regulates the parts per million in
the Company's discharge into this communal sewer of substances that create
Biological Oxygen Demand ('BOD') through PH imbalance. The Company must monitor
and regulate the PH of its discharge to maintain an acceptable level of BODs by
mixing high PH caustics with low PH sanitizers before discharging such
substances. While the Company is subject to spot checks of its BOD levels under
the Ordinance and maintains levels in accordance with the Ordinance, no such
monitoring by the Environmental Protection Department has occurred to date.
Other Regulation. The Company will conduct a preliminary feasibility study
for each of the proposed expansion brewery locations including analyses of
brewery licensing requirements and other local operating costs. In addition, the
Company will seek the assistance and expertise of local joint venture partners
in complying with local regulatory requirements.
INSURANCE
The South China Brewery maintains a public liability insurance policy
(coverage limit approximately $1.3 million) to protect against damage to third
party property. In addition, the South China Brewery maintains a total of
$800,000 commercial all risks coverage and approximately $390,000 of business
interruption coverage. The South China Brewery also maintains employee
compensation insurance as required by local law. The Company plans to purchase
comparable insurance, and any additional insurance necessitated by local
conditions or regulations, for each of the proposed breweries.
INTELLECTUAL PROPERTY
The Company regards the trademarks it adopts and uses in connection with
the sale of its products as having substantial value and as being an important
factor in the marketing of its products. The Company's policy is to pursue
registration of the trademarks it adopts and uses in connection with the sale of
its products whenever possible, and to oppose vigorously any infringement of its
marks. The
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Company has applied to register the marks CROOKED ISLAND and DRAGON'S BACK INDIA
PALE ALE in Hong Kong, China and Taiwan. The Crooked Island Ale application was
accepted for registration in Taiwan, and is pending in Hong Kong. The
application was rejected in China because of its similarity to a prior
registered mark; the Company has appealed this rejection. The Company is not
aware of any infringing uses of its trademarks by third parties that could
materially affect its current business.
While it has not obtained patents on its recipes, AmBrew International
believes that it is not standard practice in the industry to obtain such
patents.
EMPLOYEES
As of June 30, 1996, the South China Brewery had seven full-time employees.
The Company's future success will depend, in part, on its ability to continue to
attract, retain and motivate highly qualified marketing and managerial
personnel. Each of James L. Ake, Executive Vice President, Chief Operating
Officer and Secretary of the Company, David K. Haines, Managing Director for
Hong Kong Operations, and Edward Cruise Miller, the head brewer of the South
China Brewery, have employment agreements. The employment agreements of Messrs.
Ake and Haines contain non-competition clauses which provide, in pertinent part,
that during the term of the agreements, as they may be extended, and for a
period of two years thereafter, Mr. Ake or Mr. Haines, as the case may be, shall
not engage in any activity competitive with the business of the Company in any
region in which the Company does business, shall not solicit or attempt to
solicit customers or employees of the Company and shall not otherwise interfere
with the Company's business relationships. None of the South China Brewery's
employees are represented by a collective bargaining agreement, nor has the
South China Brewery experienced work stoppages. The South China Brewery believes
that relations with its employees are satisfactory.
LEASES
The South China Brewery leases brewing and storage space in the Vita Tower
at 29 Wong Chuk Hang, Aberdeen, Hong Kong under two leases at a current monthly
rent of $8,200. The leases expire in September 1997 and April 1998. The South
China Brewery has the option to extend each of the leases six years beyond their
original term at a rent to be agreed by the parties.
The brewing operations are in a 3,600 gross square foot space on the second
floor of a 23-story building. The storage facility is a 2,000 square foot space
for dry package goods (bottles, caps, labels). The plant is a 20-barrel system
which means that it is capable of brewing 20 barrels of product with each
brewing cycle. Twenty barrels (each barrel is 31 gallons) equates to
approximately 260 cases of 24-355 ml. bottles or 75 30-liter kegs. Annual
capacity is approximately 70,000 cases.
LEGAL PROCEEDINGS
The South China Brewery is not currently involved in any material pending
legal proceedings and is not aware of any material legal proceedings threatened
against it.
THE MERGER
Prior to the date of this Prospectus, Craft, a British Virgin Islands
company holding substantially all of the capital stock of South China and SCBC,
the companies that operate the South China Brewery, amalgamated with AmBrew
International, a newly formed company. AmBrew International is the surviving
company as a result of the Merger. Each stockholder of Craft received one share
of Common Stock of AmBrew International for each share of Craft capital stock
previously held by such stockholder so that the holders and amounts held of
Common Stock are identical to the former holders and amounts held of Craft
capital stock. AmBrew International's current sole activity is to act as a
holding company for substantially all of the shares of capital stock of South
China and SCBC. It is intended that AmBrew International will also hold the
interests in wholly-owned subsidiaries and majority-owned joint ventures that
the Company plans to form to operate the proposed expansion breweries. See
'--Proposed Expansion Breweries.'
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Company's directors, officers and
significant employee and their ages as of the date hereof:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Peter W. H. Bordeaux......................... 48 Chairman of the Board of Directors
Federico G. Cabo Alvarez..................... 51 Deputy Chairman of the Board of Directors
James L. Ake................................. 51 Executive Vice President, Chief Operating Officer and
Secretary
Norman H. Brown, Jr.(1)(2)................... 49 Director
John F. Beaudette(2)(3)...................... 39 Director
Wyndham H. Carver(1)(2)...................... 52 Director
David K. Haines.............................. 30 Director and Managing Director for Hong Kong Operations
Joseph E. Heid(1)(3)......................... 50 Director
John Campbell(4)............................. 56 Director
Tonesan Amissah-Furbert(4)................... 30 Director
Edward C. Miller............................. 26 Head Brewer
</TABLE>
Each of the directors was elected as of June 5, 1996. Each of the officers
was appointed to his respective position with the Company as of June 5, 1996,
the date of incorporation of AmBrew International.
(1) Messrs. Brown, Carver and Heid are members of the Stock Option Committee.
See ' -- Stock Option Plan.'
(2) Messrs. Brown, Beaudette and Carver are members of the Compensation
Committee.
(3) Messrs. Beaudette and Heid are members of the Audit Committee.
(4) Mr. Campbell and Ms. Furbert, attorneys in the law firm acting as the
Company's Bermuda counsel, have been appointed directors of the Company in
accordance with Bermuda local requirements applicable to non-publicly traded
Bermuda companies. They will resign as directors upon consummation of this
Offering.
Mr. Bordeaux has been Chairman of the Board of Directors of AmBrew
International since June 5, 1996 and has been associated with its subsidiaries
since August 9, 1994. Mr. Bordeaux joined New Orleans-based Sazerac Company,
Inc. ('Sazerac'), the tenth largest United States producer, importer and
exporter of spirits as well as a large U.S. distributor of wine, beer and
non-alcoholic beverages, in 1980. Since 1982, Mr Bordeaux has been the Chief
Executive Officer and President of Sazerac. In addition, Mr. Bordeaux has served
as Chairman of Concorde Holdings Limited (Beijing), a distributor of alcohol and
non-alcohol beverages ('Concorde'), since November 1994 and as President, since
1992, of Leestown Company, Inc., which owns the world's largest bourbon
distillery. Mr. Bordeaux is Vice Chairman of the Board of the National
Association of Beverage Importers, a Board Member and member of the Executive
Committee of the Board of the World Trade Center, New Orleans, Chairman of the
International Advisory Council of Hibernia National Bank (New Orleans) and a
member of the Executive Commitee of the Board and Treasurer of Episcopal Housing
for Seniors, Inc.
Mr. Ake has been the Executive Vice President, Chief Operating Officer and
Secretary of AmBrew International since June 5, 1996 and has been associated
with its subsidiaries since August 9, 1994. From 1993 to July 1996, Mr. Ake
served as the Director of Financial Analysis and Planning for Sazerac and was
responsible for expansion of operations overseas with emphasis on ventures in
the Pacific Rim countries. In addition, from 1994 to July 1996, Mr. Ake has
seved as Managing Director of Concorde. Prior to joining Sazerac, Mr. Ake was
the Director of Planning of Zapata-Haynie Corporation in Hammond, Louisiana, the
largest fishing company in the United States, where Mr. Ake was responsible for
corporate planning and oversaw profitability and development of various
departments. Mr. Ake is a registered engineer and is a member of the Board of
Directors of the Japan-Louisiana Friendship Foundation.
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Mr. Beaudette has been a director of AmBrew International since June 5,
1996 and has been associated with its subsidiaries since April 27, 1995. Mr.
Beaudette has been President of BPW Holding LLC, a beverage investment and
consulting company, and its predecessor, since February 1995. Mr Beaudette has
also been Executive Vice President and General Manager of MHW, Ltd., a beverage
alcohol importer, distributor and service company located in Manhasset, New
York, since 1994. From 1992 to 1994, Mr. Beaudette was Vice President and Chief
Financial Officer of Monsieur Henri Wines, Ltd. and from 1988 to 1992, he was
Director of Planning at PepsiCo Wines and Spirits International. Both companies
were involved in the United States and Canadian marketing and distribution of
imported wines and spirits from around the world.
Mr. Brown has been a director of AmBrew International since June 5, 1996
and has been associated with its subsidiaries since August 9, 1994. Mr. Brown
has been a Managing Director of Donaldson, Lufkin & Jenrette in the Investment
Banking Division since 1985. In this capacity, Mr. Brown acts as Head of the
Metals and Mining Industrial Coverage Group and as Co-Head of Industrial New
Business in Canada. Mr. Brown is a director of Gaylord Container Corporation, a
manufacturer of paper, box board and corrugated cardboard.
Mr. Cabo has been Deputy Chairman of the Board of Directors since June 5,
1996 and has been associated with its subsidiaries since August 9, 1994. Since
1970, Mr. Cabo has been Chief Executive Officer and President of Cabo
Distributing Company, Inc., formerly a distributor of Mexican beers in the
United States and currently a producer of beer and spirits.
Mr. Carver has been a director of AmBrew International since June 5, 1996.
Since 1995, Mr. Carver has been on a two-year secondment from Grand Metropolitan
PLC ('Grand Met'), an international producer, distributor, wholesaler and
retailer of spirits, wines and foods, to the British Department of Trade and
Industry where Mr. Carver is a Latin American export promoter. Mr. Carver has
served in a variety of capacities on behalf of International Distillers &
Vintners, Ltd., an international producer and distributor of spirits and wine
and a subsidiary of Grand Met ('IDV'), since 1965, including Managing Director
of Wyvern International, the marketing division of IDV, and Regional Director
for IDV in the Caribbean and Central America.
Mr. Haines has been the Managing Director of Hong Kong Operations of AmBrew
International since June 5, 1996. Since August 9, 1994, Mr. Haines has devoted
his efforts to establishing and developing the South China Brewery. Before his
involvement with the Company, Mr. Haines practiced clinical psychology for one
year in Vail, Colorado and was in private practice as a psychologist for two
years in Hong Kong.
Mr. Heid has been a director of AmBrew International since June 5, 1996.
Mr. Heid has been Senior Vice President of Sara Lee Corporation ('Sara Lee'), an
international food and consumer products company, and Chief Executive Officer of
Sara Lee Personal Products -- North and South America, a line of business
responsible for Sara Lee's brands in apparel and accessories in North and South
America, since 1996, President and Chief Executive Officer of Sara Lee Personal
Products -- Pacific Rim, a line of business responsible for Sara Lee's brands in
apparel and accessories in the Pacific Rim, since 1994 and Vice President of
Sara Lee since 1992. From 1988 to 1992, Mr. Heid served as President of Guinness
America, Inc. ('Guinness'), a holding company of Guinness PLC's United States
ventures, and Executive Vice President and Chief Operating Officer of United
Distillers North America, Inc., a subsidiary of Guinness that imports, produces,
markets and sells alcoholic beverages.
Mr. Campbell has been a director of AmBrew International since June 5, 1996
and a partner of the law firm of Appleby, Spurling & Kempe since 1972.
Ms. Furbert has been a director of AmBrew International since June 5, 1996
and an associate with the law firm of Appleby, Spurling & Kempe since 1989.
Edward Cruise Miller has been the Head Brewer at the South China Brewery
since May 15, 1995. From June 1994 through May 1995, Mr. Miller was one of five
brewers at the Thomas Kemper Brewery, a subsidiary of Hart Brewing Company, in
Poulsbo, Washington. From November 1990 through May 1994, Mr. Miller was
employed at Broad Ripple Brew Company, a brew pub in Indianapolis, Indiana. He
was an Assistant Brewer at Broad Ripple from November 1990 through December 1992
and was Head Brewer from January 1993 through May 1994.
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Directors of the Company were elected at a special meeting of the Company's
stockholders on June 5, 1996, and thereafter will be elected annually at a
general meeting of stockholders. The next annual meeting of stockholders is
scheduled for the second Tuesday of March, 1997.
DIRECTORS' COMPENSATION
Messrs. Bordeaux and Cabo will receive an annual fee of $20,000 and the
remaining directors will receive an annual fee of $10,000. No directors' fees
have been paid to date.
EXECUTIVE COMPENSATION
Other than pursuant to the agreements described in the next paragraph and
other than directors' fees, none of the officers of AmBrew International has
received any salary, bonus or long-term incentive or other compensation from the
Company's inception through April 30, 1996. The Company has no long-term
incentive compensation plans other than the Stock Option Plan. No options have
been granted to the Company's officers or directors under the plan to date.
Although the Company has no formal bonus plan, the Compensation Committee of the
Board, in its discretion, may award bonuses to executive officers of the
Company. The Company has not paid bonuses in the past but in the future may pay
bonuses based on individual and Company performance. The Company does not
provide for deferred awards.
The Company has entered into an employment agreement with David K. Haines,
the Company's Managing Director for Hong Kong Operations. Pursuant to that
agreement, Mr. Haines will manage the South China Brewery. Mr. Haines' annual
salary will be approximately $60,000. From September 1994 through April 30, 1996
Mr. Haines has received approximately $71,927 in salary. Mr. Haines' employment
agreement will expire in July 1998. The Company has entered into an employment
agreement with James L. Ake, the Company's Executive Vice President and Chief
Operating Officer. Pursuant to that agreement, Mr. Ake will manage the Company
as directed by the Board of Directors. Mr. Ake's annual salary will be $72,000.
Mr. Ake's employment agreement will expire in June 1998. Each of the employment
agreements of Messrs. Ake and Haines contain non-competition clauses which
provide, in pertinent part, that during the term of the agreements, as they may
be extended, and for a period of two years thereafter, Mr. Ake or Mr. Haines, as
the case may be, shall not engage in any activity competitive with the business
of the Company in any region in which the Company does business, shall not
solicit or attempt to solicit customers or employees of the Company and shall
not otherwise interfere with the Company's business relationships.
STOCK OPTION PLAN
Prior to the date of this Prospectus, the Stock Option Plan was adopted by
the Company's Board of Directors and approved by its stockholders. The Company
has reserved 300,000 authorized but unissued shares of Common Stock for issuance
under the Stock Option Plan. The purpose of the Stock Option Plan is to provide
key employees (including officers and directors) and independent contractors of
AmBrew International (including its subsidiaries) with additional incentives by
increasing their equity ownership in the Company.
Options granted under the Stock Option Plan are intended to qualify as
incentive stock options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the 'Code') ('ISOs'). The Plan is intended to satisfy the
conditions of Section 16 of the Exchange Act pursuant to Rule 16b-3.
The Stock Option Plan will be administered by a committee of the Company's
Board of Directors comprised of at least two non-employee directors who are
'disinterested' within the meaning of Rule 16b-3 (the 'Stock Option Committee').
Subject to the terms of the Stock Option Plan, the committee administering the
plan has the sole authority and discretion to grant options, construe the terms
of the plan and make all other determinations and take all other action with
respect to the Stock Option Plan.
Options will be exercisable during the period specified by the Stock Option
Committee, except that options will become immediately exercisable in the event
of a Change in Control (as defined in the Stock Option Plan) of the Company and
in the event of certain mergers and reorganizations of the
36
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<PAGE>
Company. Generally, options will vest over a five-year period. No option will be
exercisable more than 10 years from the date of grant (or five years in the case
of ISOs granted to holders of more than 10% of the Common Stock) or after the
option holder ceases to be an employee or independent contractor of the Company;
provided that the Stock Option Committee may permit an employee or independent
contractor to exercise options after such employee or independent contractor
ceases to be an employee or independent contractor, as the case may be, in the
event of certain circumstances specified in the documentation of the grant of
the option, but in no event will any option be exercisable after its expiration
date. Options are nontransferable, except by will or the laws of intestate
succession. Shares underlying options that terminate unexercised are available
for reissuance under the Stock Option Plan.
The per share exercise price of options granted under the Stock Option Plan
may not be less than 100% of the Fair Market Value (as defined in the Stock
Option Plan) of a share of the Company's Common Stock on the date of grant (or
110% in the case of ISOs granted to employees owning more than 10% of the Common
Stock).
The Company has agreed not to grant options without the prior written
consent of the Representative for a period of thirteen (13) months following the
date of this Prospectus. See 'Shares Eligible for Future Sale' and
'Underwriting.'
INDEMNIFICATION; LIMITATION OF LIABILITY
Bermuda law permits a company to indemnify its directors and officers,
except for any act of willful negligence, willful default, fraud or dishonesty.
The Company has provided in its Bye-Laws that the directors and officers of the
Company will be indemnified and held harmless against any expenses, judgments,
fines, settlements and other amounts incurred by reason of any act or omission
in the discharge of their duty, other than in the case of willful negligence,
willful default, fraud or dishonesty.
Bermuda law and the Bye-Laws of the Company also permit the Company to
purchase insurance for the benefit of directors and officers against any
liability incurred by them for the failure to exercise the requisite care,
diligence and skill in the exercise of their powers and the discharge of their
duties, or indemnifying them in respect of any loss arising or liability
incurred by them by reason of negligence, default, breach of duty or breach of
trust. The Company intends to purchase a directors' and officers' liability
insurance policy upon consummation of this Offering.
The Company intends to enter into indemnification agreements with the
Company's officers and directors. To the extent permitted by law, the
indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature) and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
At present, there is no pending material litigation or proceeding involving
a director or officer of the Company where indemnification will be required or
permitted. In addition, the Company is not aware of any threatened material
litigation or proceeding that may result in a claim for such indemnification.
37
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PRINCIPAL STOCKHOLDERS
As of the date of this Prospectus, 2,000,000 shares of Common Stock were
issued and outstanding. The following table sets forth certain information with
respect to the beneficial ownership of the Common Stock prior to this Offering
and after giving effect to this Offering (i) of each person (or group of
affiliated persons) who is known by the Company to own beneficially more than 5%
of the Common Stock, (ii) of the Company's directors and (iii) of all directors
and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL(1)
SHARES ---------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING(2)
- ---------------------------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
John F. Beaudette(3) ....................................................... 152,000 7.6% 4.56%
MHW, Ltd.
1165 Northern Boulevard
Manhasset, New York 11030
Peter W. H. Bordeaux ....................................................... 200,000 10.0% 6.0%
1 Galleria Boulevard
Metairie, Lousiana 70001
Norman H. Brown, Jr. ....................................................... 152,000 7.6% 4.5%
277 Park Avenue
New York, New York 10172
Federico G. Cabo Alvarez ................................................... 914,400 45.7% 27.3%
Cabo Distributing Co.
9657 East Rush Street
South Elmonte, California 91733
Richard Frederick Cabo ..................................................... 101,600 5.1% 3.0%
Cabo Distributing Co.
9657 East Rush Street
South Elmonte, California 91733
David K. Haines ............................................................ 380,000 19.0% 11.3%
J. P. Walsh & Co. Ltd.
Block F. (8th Floor)
3-3G Robinson Road
Hong Kong
Edmund Piccolino(3) ........................................................ 152,000 7.6% 4.5%
124 Rowayton Avenue
Rowayton, Connecticut 06853
Peter Warren(3) ............................................................ 152,000 7.6% 4.5%
1030 Ridgefield Road
Wilton, Connecticut 06897
All executive officers and directors as a group (ten persons)(3)(4)......... 1,900,000 95.0% 56.6%
</TABLE>
- ------------
(1) Assumes no exercise of the Over-allotment Option. Applicable percentage
ownership is based on 2,000,000 shares of Common Stock outstanding as of the
date hereof. Beneficial ownership is determined in accordance with the rules
of the Commission and generally includes voting or investment power with
respect to securities, subject to community property laws, where applicable.
(2) Includes 21,818 shares of Common Stock issuable pursuant to the Bridge
Notes assuming no conversion of the convertible Bridge Notes and an initial
public offering price per Share of $5.50.
(3) Represents shares of Common Stock held of record by BPW Holding LLC, a New
York limited liability company ('BPW'). Messrs. Beaudette (a director of the
Company), Edmund Piccolino (former Vice President of Human Resources for
Pepsi-Co International, a division of PepsiCo Inc.) and Peter Warren (former
President of Pepsi-Co International and a former director of Pepsi-Co Inc.)
each own one third of the membership interest of BPW.
(4) None of Messrs. Campbell, Carver and Heid and Ms. Amissah-Furbert, directors
of AmBrew International, beneficially own any shares of Common Stock.
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CERTAIN TRANSACTIONS
The following summary is qualified in its entirety by the agreements that
have been filed as exhibits to the Registration Statement, of which this
Prospectus forms a part.
On March 31, 1995, the South China Brewery borrowed $565,000 from Hibernia
National Bank. The loan is evidenced by a promissory note with remaining
principal payments due on September 30, 1996 and March 31, 1997 and an interest
rate equal to Citibank prime plus 0.5%. Sazerac provided a $250,000 guarantee
for the Hibernia Note. Norman H. Brown, Jr. and Federico G. Cabo Alvarez, each
directors of AmBrew International, provided standby letters of credit in the
total amount of $315,000. Peter W. H. Bordeaux is President and Chief Executive
Officer of Sazerac and Chairman of the Board of Directors of the Company as well
as Chairman of the International Advisory Council of Hibernia National Bank (New
Orleans). The amount due has been reduced to $452,000 through principal
repayments by the South China Brewery.
The South China Brewery borrowed $65,000 from BPW evidenced by a Limited
Recourse Promissory Note dated as of March 5, 1996 and due ten days after the
consummation of this Offering bearing an interest rate of 5.5%. John F.
Beaudette, a director of AmBrew International, is President of BPW, which owned
7.6% of the shares of Common Stock of the Company issued and outstanding as of
the date of this Prospectus.
In May 1996, Craft issued $370,000 principal amount of convertible Bridge
Notes to certain investors in Singapore and Hong Kong bearing an interest rate
of 12%. Holders of $250,000 principal amount of the Bridge Notes have the right
to convert such Bridge Notes, upon the consummation of this Offering, into a
maximum of that number of shares of Common Stock equal to the quotient obtained
by dividing 250,000 by the product of 0.5 and the initial public offering price
per Share. The holder of the remaining $120,000 principal amount of Bridge Notes
will be entitled to Common Stock at no cost, with the number of shares of Common
Stock equal to 120,000 divided by the initial public offering price per Share.
Each holder of a Bridge Note will receive a Bridge Warrant entitling such holder
to purchase that number of shares of Common Stock as such holder shall receive
upon the consummation of this Offering, pursuant to the terms of such Bridge
Note, at a price equal to $ [150% of the initial public offering price
per Share]. Micro-Brew Systems, from whom the Company intends to purchase
brewery equipment for its proposed expansion breweries, holds $20,000 principal
amount of the Bridge Notes. Assuming no conversion of the convertible Bridge
Notes and an initial public offering price per Share of $5.50, a total of 21,818
shares of Common Stock will be issued to the holders of the Bridge Notes
(112,727 shares of Common Stock assuming full conversion of the convertible
Bridge Notes) and 21,818 shares of Common Stock will be issued pursuant to the
Bridge Warrants (112,727 shares of Common Stock assuming full conversion of the
convertible Bridge Notes).
Prior to the date of this Prospectus, Sazerac, Lunar Holdings Ltd. (the
previous holder of shares currently held by David K. Haines, Managing Director
of Hong Kong Operations for the Company), BPW and Messrs. Cabo and Brown, the
holders of all of the issued and outstanding shares of South China and SCBC,
exchanged such shares for 23,750 shares of capital stock of Craft. This Share
Exchange had the effect of consolidating ownership of the South China Brewery's
operating companies in Craft.
Prior to the date of this Prospectus, Craft, a British Virgin Islands
company, amalgamated into AmBrew International. AmBrew International is the
surviving company and its officers and directors remained in office after the
Merger.
In addition, see 'Management' for a discussion of employment contracts with
Messrs. Ake and Haines.
In connection with this Offering, the Company has adopted a policy whereby
any further transactions between the Company and its officers, directors,
principal stockholders and any affiliates of the foregoing persons will be on
terms no less favorable to the Company than could reasonably be obtained in an
arm's length transaction with independent third parties, and that any such
transactions also be approved by a majority of the Company's disinterested
outside directors.
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DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of 10,000,000 shares of
Common Stock, par value $0.01 per share and 500,000 shares of preferred stock,
par value $0.01 per share. As of the date hereof, there were 2,000,000 shares of
Common Stock outstanding held by 29 stockholders of record.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the shareholders. The holders of
Common Stock are entitled to receive ratably the dividends, if any, that may be
declared from time to time by the Board of Directors out of funds legally
available for such dividends. The holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities. Holders of Common
Stock have no preemptive rights and no right to convert their Common Stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All the outstanding shares of Common Stock are,
and the shares of Common Stock to be issued in this Offering will be, validly
issued, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, without further stockholder approval,
to issue up to 500,000 shares of 'blank check' preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
or imposed upon unissued shares of preferred stock and to fix the number of
shares constituting any series and designations of such series.
The issuance of preferred stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of preferred stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. As of the closing of this Offering, no shares of
preferred stock will be outstanding and the Company currently has no plans to
issue any shares of preferred stock.
WARRANTS
The following is a brief summary of certain provisions of the Warrants, but
such summary does not purport to be complete and is qualified in all respects by
reference to the actual text of the warrant agreement (the 'Warrant Agreement')
among the Company, the Representative, and the Bank of New York (the 'Warrant
Agent'). A copy of the Warrant Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. As of the date
hereof, there are no Warrants outstanding. See 'Available Information.'
Exercise Price and Terms. Each Warrant entitles the registered holder
thereof to purchase, at any time over a fifty-four month period commencing six
(6) months after the date of this Prospectus, one share of Common Stock at a
price of 125% of the initial public offering price per Share, subject to
adjustment in accordance with the anti-dilution and other provisions referred to
below. The holder of any Warrant may exercise such Warrant by surrendering the
certificate representing the Warrant to the Warrant Agent, with the subscription
form thereon properly completed and executed, together with payment of the
exercise price. The Warrants may be exercised at any time in whole or in part at
the applicable exercise price until expiration of the Warrants. No fractional
shares will be issued upon the exercise of the Warrants.
The exercise price of the Warrants bears no relationship to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of the securities offered hereby.
Adjustments. The holders of the Warrants are protected against dilution of
their interests by adjustments, as set forth in the Warrant Agreement, of the
exercise price and the number of shares of Common Stock purchasable upon the
exercise of the Warrants upon the occurrence of certain events,
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including stock dividends, stock splits, combinations or reclassification of the
Common Stock, or sale by the Company of shares of its Common Stock or other
securities convertible into Common Stock at a price below the then-applicable
exercise price of the Warrants. Additionally, an adjustment would be made in the
case of a reclassification or exchange of Common Stock, consolidation or merger
of the Company with or into another corporation (other than a consolidation or
merger in which the Company is the surviving corporation) or sale of all or
substantially all of the assets of the Company in order to enable warrantholders
to acquire the kind and number of shares of stock or other securities or
property receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon the exercise of the Warrant.
Redemption Provisions. Commencing eighteen (18) months after the date of
this Prospectus, all, but not less than all, of the Warrants are subject to
redemption at $0.10 per Warrant on not less than thirty (30) days' prior written
notice to the holders of the Warrants provided the per share closing bid
quotation of the Common Stock as reported on Nasdaq equals or exceeds
$ [300% of the initial public offering price per Share] for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
on the fifth trading day prior to the date on which the Company gives notice of
redemption. The Warrants will be exercisable until the close of business on the
day immediately preceding the date fixed for redemption in such notice. If any
Warrant called for redemption is not exercised by such time, it will cease to be
exercisable and the holder will be entitled only to the redemption price.
Transfer, Exchange and Exercise. The Warrants are in registered form and
may be presented to the Warrant Agent for transfer, exchange or exercise at any
time on or prior to their expiration date five (5) years from the date of this
Prospectus, at which time the Warrants become wholly void and of no value. If a
market for the Warrants develops, the holder may sell the Warrants instead of
exercising them. There can be no assurance, however, that a market for the
Warrants will develop or continue.
The Warrants are not exercisable unless, at the time of the exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Warrants. Although the Company will use its best
efforts to have all the shares of Common Stock issuable upon exercise of the
Warrants registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
there can be assurance that it will be able to do so.
The Warrants are separately transferable immediately upon issuance.
Although the Warrants will not knowingly be sold to purchasers in jurisdictions
in which the Warrants are not registered or otherwise qualified for sale or
exemption, purchasers may buy Warrants in the after-market in, or may move to,
jurisdictions in which Warrants and the Common Stock underlying the Warrants are
not so registered or qualified or exempt. In this event, the Company would be
unable lawfully to issue Common Stock to those persons desiring to exercise
their Warrants (and the Warrants would not be exercisable by those persons)
unless and until the Warrants and the underlying Common Stock are registered, or
qualified for sale in jurisdictions in which such purchasers reside, or an
exemption from registration or qualification exists in such jurisdiction.
Warrantholder Not a Stockholder. The Warrants do not confer upon holders
any voting, dividend or other rights as stockholders of the Company.
Modification of Warrants. The Company and the Warrant Agent may make such
modifications to the Warrants as they deem necessary and desirable that do not
adversely affect the interests of the warrantholders. The Company may, in its
sole discretion, lower the exercise price of the Warrants for a period of not
less than thirty (30) days on not less than thirty (30) days' prior written
notice to the warrantholders and the Representative. Modification of the number
of securities purchasable upon the exercise of any Warrant, the exercise price
and the expiration date with respect to any Warrant requires the consent of
two-thirds of the warrantholders. No other modifications may be made to the
Warrants, without the consent of two-thirds of the warrantholders.
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BERMUDA LAW
The following discussion is based upon the advice of Appleby, Spurling &
Kempe, Bermuda counsel for the Company.
Prior to the effective date of the Registration Statement of which this
Prospectus is a part, Craft, a British Virgin Islands holding company, was
amalgamated into the Company and continues as an exempted company under the
Companies Act 1981 of Bermuda (the 'Act'). The rights of the Company's
stockholders, including those persons who will become stockholders of the
Company in connection with this Offering, are governed by Bermuda law and the
Company's Memorandum of Amalgamation and Bye-Laws. The following is a summary of
certain provisions of Bermuda law and the Company's organizational documents.
This summary is not a comprehensive description of such laws and documents and
is qualified in its entirety by appropriate reference to Bermuda law and to the
organizational documents of the Company which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
Dividends. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.
Voting Rights. Under Bermuda law, save as otherwise provided in the Act or
the Bye-laws of the Company, questions brought before a general meeting of
stockholders are decided by a majority vote of stockholders present at the
meeting, each stockholder having one vote for each share held by him save where
a question is to be decided on a show of hands in which case (subject to any
rights or restrictions for the time being lawfully attached to a class of
shares) every stockholder present shall be entitled to one vote, irrespective of
the number of shares held. The Company's Bye-Laws provide that, subject to the
provisions of the Act, any questions proposed for the consideration of the
stockholders will be decided by a simple majority of the votes cast, with each
stockholder present, or person holding proxies for any stockholder, entitled to
one vote. If a poll is requested, each stockholder present in person or by proxy
has one vote for each share held. A poll may only be requested under the
Company's Bye-Laws by (i) the Chairman of the meeting, (ii) at least three
stockholders present in person or by proxy, (iii) any stockholder or
stockholders, present in person or by proxy, holding between them not less than
10% of the total voting rights of all stockholders having the right to vote at
such meeting or (iv) a stockholder or stockholders present in person or by proxy
holding voting shares in the company on which an aggregate sum has been paid
equal to not less than 10% of the total sum paid up on all such voting shares.
Rights in Liquidation. Under Bermuda law, in the event of liquidation,
dissolution or winding up of a company, after satisfaction in full of all claims
of creditors and subject to the preferential rights accorded to any series of
preferred stock, the proceeds of such liquidation, dissolution or winding up are
distributed pro rata among the holders of common stock.
Meetings of Stockholders. Under Bermuda law, a company is required to
convene at least one general stockholders' meeting per calendar year. The
Company will hold its annual meeting in the United States. Bermuda law provides
that a special general meeting may be called by the board of directors and must
be called upon the request of stockholders holding not less than 10% of such of
the paid-up capital of the company carrying the right to vote. Bermuda law also
requires that stockholders be given at least five days' advance notice of a
general meeting but the accidental omission of notice to any person does not
invalidate the proceedings at a meeting. Under the Bye-Laws of the Company, at
least ten days' notice of the annual general meeting and of any special general
meeting must be given to each stockholder.
Under Bermuda law, the number of stockholders constituting a quorum at any
general meeting of stockholders is determined by the bye-laws of a company. The
Company's Bye-Laws provide that the presence in person or by proxy of the
holders of more than 50% of the voting capital stock of the Company constitutes
a quorum.
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Access to Books and Records and Dissemination of Information. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include a company's Certificate of Incorporation, its Memorandum of
Association (including its objects and powers) and any alteration to a company's
Memorandum of Association. The stockholders have the additional right to inspect
the bye-laws of the company, minutes of general meetings and a company's audited
financial statements, which must be presented at the annual general meeting. The
register of stockholders of a company is also open to inspection by stockholders
without charge and to members of the general public on the payment of a fee. A
company is required to maintain its share register in Bermuda but may, subject
to the provisions of the Act, establish a branch register outside Bermuda. The
Company intends to maintain a share register in New York, New York. A company is
required to keep at its registered office a register of its directors and
officers which is open for inspection for not less than two hours in each day by
members of the public without charge. Bermuda law does not, however, provide a
general right for stockholders to inspect or obtain copies of any other
corporate records.
Election or Removal of Directors. Under Bermuda law and the Company's
Bye-Laws, directors are elected at the annual general meeting and shall serve
until re-elected or until their successors are elected or appointed, unless they
are earlier removed or resign.
Under Bermuda law and the Bye-Laws of the Company, a director may be
removed at a special general meeting of stockholders specifically called for
that purpose, provided that the director was served with at least 14 days'
notice. The director has a right to be heard at the meeting. Any vacancy created
by the removal of a director at a special general meeting may be filled at such
meeting by the election of another director in his or her place or, in the
absence of any such election, by the Board of Directors.
Amendment of Memorandum of Amalgamation and Bye-Laws. Bermuda law provides
that the Memorandum of Amalgamation of a company may be amended by a resolution
passed at a general meeting of stockholders of which due notice has been given.
An amendment to the Memorandum of Amalgamation other than an amendment which
alters or reduces a company's share capital as provided in the Act, also
requires the approval of the Bermuda Minister of Finance, who may grant or
withhold approval at his discretion. The Bye-Laws may be amended by a resolution
passed by a majority of shares cast at a general meeting.
Under Bermuda law, the holders of an aggregate of no less than 20% in par
value of a company's issued share capital have the right to apply to the Bermuda
Court for an annulment of any amendment of the Memorandum of Amalgamation
adopted by stockholders at any general meeting, other than an amendment which
alters or reduces a company's share capital as provided in the Act. Where such
an application is made, the amendment becomes effective only to the extent that
it is confirmed by the Bermuda Court. An application for amendment of the
Memorandum of Amalgamation must be made within 21 days after the date on which
the resolution altering the company's memorandum is passed and may be made on
behalf of the persons entitled to make the application by one or more of their
number as they may appoint in writing for the purpose. No such application may
be made by persons voting in favor of the amendment.
Appraisal Rights and Stockholder Suits. Under Bermuda law, in the event of
an amalgamation of two Bermuda companies, a stockholder who is not satisfied
that fair value has been paid for his shares may apply to the Bermuda Court to
appraise the fair value of his shares. The amalgamation of a company with
another company (except where the amalgamation is between a holding company and
one or more of its wholly-owned subsidiaries or between two or more wholly-owned
subsidiaries of the same holding company), requires the amalgamation agreement
to be approved by the board of directors and by a meeting of the holders of
shares of the amalgamating company of which they are directors and of the
holders of each class of such shares. Under Bermuda law, an amalgamation also
requires the consent of the Bermuda Minister of Finance, who may grant or
withhold consent at his discretion.
Class actions and derivative actions are generally not available to
stockholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a stockholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of is alleged to
be beyond the corporate power of the company or is illegal or would result in
the violation
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of the company's Memorandum of Amalgamation or Bye-Laws. Furthermore,
consideration would be given by the Court to acts that are alleged to constitute
a fraud against the minority stockholders or, for instance, where an act
requires the approval of a greater percentage of the company's stockholders than
those who actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or ordering the purchase of the
shares by any shareholder, by other shareholders or by the company.
TRANSFER AGENT AND WARRANT AGENT
The Transfer Agent and Registrar for the Common Stock and the Warrant Agent
for the Warrants is the Bank of New York.
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CERTAIN FOREIGN ISSUER CONSIDERATIONS
The following discussion is based on the advice of Appleby, Spurling &
Kempe, Bermuda counsel to the Company.
The Company has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority ('BMA'). In addition, prior to this
Offering, this Prospectus will be filed with the Registrar of Companies in
Bermuda in accordance with Bermuda law.
IT MUST BE DISTINCTLY UNDERSTOOD THAT, IN GRANTING SUCH PERMISSION AND UPON
ACCEPTING THIS PROSPECTUS FOR FILING, THE BMA AND THE REGISTRAR OF COMPANIES IN
BERMUDA WILL ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF ANY SCHEMES
OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED WITH
REGARD TO THEM.
There are no limitations on the rights of non-Bermuda owners of the Common
Stock to hold or vote their shares. Because the Company has been designated as a
non-resident for Bermuda exchange control purposes, there are no restrictions on
its ability to transfer funds in and out of Bermuda or to pay dividends to
United States residents who are holders of the Company's Common Stock, other
than in respect of local Bermuda currency.
In the case of an applicant acting in a special capacity (for example, as
an executor or trustee), certificates may, at the request of the applicant,
record the capacity in which the applicant is acting. Notwithstanding the
recording of any such special capacity, the Company is not bound to investigate
or incur any responsibility in respect of the proper administration of any such
estate or trust. The Company will take no notice of any trust applicable to any
of its shares whether or not it had notice of such trust.
Under Bermuda law, the Company is an exempted company (that is, it is
exempted from the provisions of Bermuda law which stipulate that at least 60% of
the equity must be beneficially owned by Bermudians). Consents under The
Exchange Control Act 1972 of Bermuda and the regulations made thereunder have
been obtained for the issue and subsequent transfer of the shares of Common
Stock and Warrants offered by this Prospectus to and among persons not resident
in Bermuda for exchange control purposes. Persons regarded as residents of
Bermuda for exchange control purposes require specific consent under The
Exchange Control Act 1972 to purchase such Securities. The Act permits companies
to adopt bye-law provisions relating to the transfer of securities. Neither
Bermuda law, the Memorandum of Amalgamation nor the Bye-Laws of the Company
impose limitations on the right of foreign nationals or nonresidents of Bermuda
to hold the Securities or vote the Shares. Pursuant to the provisions of Section
28 of the Companies Act 1981 of Bermuda, there is no minimum subscription which
must be raised by the issue of the Securities to provide the funds required to
be provided in respect of the matters set forth in that section.
As an exempted company, the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted company the Company may not participate in certain business
transactions, including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years) without the express authorization of the
Bermuda legislature; (2) the taking of mortgages on land in Bermuda to secure an
amount in excess of $50,000 without the consent of the Bermuda Minister of
Finance; (3) the acquisition of securities created or issued by, or any interest
in, any local company or business, other than certain types of Bermuda
government securities or securities of another exempted company, partnership or
other corporation resident in Bermuda but incorporated abroad or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or under a license granted by
the Bermuda Minister of Finance. In addition, no more than 20% of the share
capital of an exempted Company may be held by Bermudians.
The Bermuda government actively encourages foreign investment in exempted
entities like the Company that are based in Bermuda but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign ownership, the Company is subject neither to taxes on its
income or dividends nor to any foreign exchange controls in Bermuda. In
addition, there is no capital gains tax in Bermuda, and profits can be
accumulated by the Company, as required, without limitation.
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TAXATION
This discussion of certain tax considerations is based upon applicable
laws, treaties, regulations and interpretations thereof as currently in effect.
This summary does not consider all aspects of taxation which may be relevant to
a particular investor and which may depend upon the investor's particular
circumstances. Prospective investors should consult with their own professional
advisors about the tax consequences to them of an investment in the Company
under the laws of the jurisdictions in which they are subject to taxation.
The following discussion of federal tax laws is based upon the opinion of
Howard, Darby & Levin, U.S. counsel to the Company. The summary of certain
Bermuda tax consequences is based upon the opinion of Appleby, Spurling & Kempe,
Bermuda counsel to the Company.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general description of the principal material United
States federal income tax consequences of the purchase, ownership, and sale of
the Securities. This description is for general information purposes only and is
based on the Code, Treasury Regulations promulgated thereunder and judicial and
administrative interpretations thereof, all as in effect on the date hereof and
all of which are subject to change, possibly retroactively. The tax treatment of
a holder of Securities may vary depending upon the holder's particular
situation. Certain holders (including, but not limited to, insurance companies,
tax-exempt organizations, financial institutions, persons subject to the
alternative minimum tax, dealers in the Securities, persons that have a
'functional currency' other than the U.S. dollar, persons that receive
Securities as compensation for services, and persons owning, directly or
indirectly, including by rules of attribution, 5% or more of the stock of the
Company measured by vote or value) may be subject to special rules not discussed
below. Except as discussed below with regard to persons who are not U.S.
Holders, the following summary is limited to U.S. Holders who will hold the
Securities as 'capital assets' within the meaning of Section 1221 of the Code
and not as part of a 'straddle' or 'conversion transaction' within the meaning
of Sections 1092 and 1258 of the Code. The discussion below does not address the
effect of any state or local tax law on a holder of the Securities. Persons
considering the purchase of Securities should consult their own tax advisors
concerning the application of United States federal, state and local tax laws to
their investments and any consequences arising under the laws of any other
jurisdiction.
TAXATION OF THE COMPANY
Currently, most of the Company's income is and, according to the Company's
plans set forth in 'Business' above, will be from sources outside the United
States and will not be effectively connected with the conduct by the Company of
a trade or business within the United States ('Foreign Income'). The Company
generally will not be subject to United States federal income tax on its income
from sources outside the United States that is not effectively connected with
the conduct of a trade or business within the United States. The Company will be
subject to United States federal income tax at regular corporate rates on the
Company's taxable income that is effectively connected with the conduct by the
Company of a trade or business within the United States ('U.S. Income'). In
addition, the Company will be subject to United States federal branch profits
tax (currently 30%) on actual or deemed withdrawals of U.S. Income from the
United States.
TAXATION OF U.S. HOLDERS
As used herein, the term 'U.S. Holder' means an individual who is a citizen
or resident of the United States, a corporation organized in or under the laws
of the United States or any state thereof, or an estate or trust that is subject
to United States federal income taxation without regard to the source of its
income.
Distributions. A distribution with respect to the Common Stock will be
treated as a dividend taxable to a U.S. Holder as ordinary income, to the extent
of the Company's current and accumulated earnings and profits as determined for
United States federal income tax purposes. Distributions in excess of such
current and accumulated earnings and profits will constitute a nontaxable return
of capital to the extent of, and will be applied against and reduce, such
holder's tax basis in such Common Stock. Any remaining excess over the holder's
tax basis will be a capital gain. Such capital gain will be long-term or
short-term depending on whether the Common Stock has been held longer than one
year. Corporations will not be allowed a deduction for dividends received on the
Common Stock.
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Sale of Securities. The sale of Securities by a U.S. Holder will generally
result in the recognition of gain or loss in an amount equal to the difference
between the amount realized on the sale and the holder's adjusted basis in the
sold Securities. This will result in a long-term or short-term capital gain or
loss, depending on whether the sold Securities have been held for more than one
year. The redemption of Warrants by the Company will generally be treated as a
sale of the redeemed Warrants by the U.S. Holder.
Exercise of Warrants. The exercise of a Warrant will not generally be a
taxable event to the holder. The tax basis of Common Stock purchased on exercise
of a Warrant will include the holder's tax basis in the exercised Warrant plus
the price paid for the Common Stock.
Passive Foreign Investment Company Status. The foregoing discussion
assumes that the Company is not currently, and will not in the future be, a
'passive foreign investment company' ('PFIC'). A PFIC is a foreign corporation
(i) 75% or more of whose income is passive income or (ii) 50% or more of whose
assets produce or are held to produce passive income. The Company believes that
it has not been and will not become a PFIC. Although the Company expects to earn
sufficient active business income to avoid PFIC status, the Company may earn
passive income such as interest on working capital. Furthermore, the extent and
timing of the Company's non-passive income and of its ownership of assets that
produce non-passive income cannot be predicted with certainty. In a year in
which the Company is a PFIC, a U.S. Holder would be subject to increased tax
liability in respect of gain realized on the sale of the Securities and upon the
receipt of certain distributions on the Common Stock. A U.S. Holder holding
Common Stock can avoid this increased tax liability by making an election to be
taxed currently on its pro rata portion of the Company's income, whether or not
such income is distributed. The election can be made only if certain required
information is made available by the Company to the U.S. Internal Revenue
Service and to the U.S. Holder of Common Stock. Although there can be no
assurance, the Company currently intends to make available the information
necessary for holders to make such election in the event the Company is
classified as a PFIC.
Foreign Personal Holding Company Status. The Company believes that it has
not been and will not become a foreign personal holding company ('FPHC'). In
general terms, a foreign corporation is an FPHC if at least 60% of its gross
income for the taxable year is FPHC income and more than 50% of either the total
combined voting power of all classes of stock or the total value of all stock in
such corporation is owned (directly or indirectly) by or for five or fewer
individuals who are United States persons. FPHC income generally includes the
same items of income as passive income but the two terms are not identical.
After its initial year as an FPHC, a corporation may remain an FPHC even if only
50% of its gross income is FPHC income.
For a year in which a corporation is an FPHC, stockholders who are United
States persons are required to include in their taxable income a deemed dividend
equal to their share of the corporation's 'undistributed FPHC' income. In
general, a corporation's undistributed FPHC income is the corporation's total
taxable income (which is gross income minus allowable deductions such as
ordinary and necessary business expenses), with certain adjustments, less
dividends paid by the corporation. For any year in which it is an FPHC, the
Company presently intends to distribute sufficient dividends so that it will
have no undistributed FPHC income, to the extent practicable. Nevertheless, if
the Company is an FPHC and has undistributed FPHC income, U.S. Holders will
recognize deemed dividend income regardless of whether they receive cash
distributions from the Company.
TAXATION OF NON-U.S. HOLDERS
The following discussion of the United States federal income tax
consequences of ownership of Securities by a person that is not a U.S. Holder (a
'Non-U.S. Holder') and has no connection with the United States other than
holding its Securities assumes that the Non-U.S. Holder is not engaged in the
conduct of a trade or business within the United States for United States
federal income tax purposes. Each prospective Non-U.S. Holder should consult
with its individual tax advisor to determine the effect that its conduct of a
trade or business within the United States or the applicability of a tax treaty
may have upon its ownership of Securities.
Distributions. Dividends by the Company to Non-U.S. Holders would be
subject to United States federal income tax only if 25% or more of the gross
income of the Company (from all sources for the three-year period ending with
the close of the taxable year preceding the declaration of the dividend) was
effectively connected with the conduct of a trade or business in the United
States by the Company.
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If the 25% threshold for such period is exceeded, a portion of any dividend paid
by the Company to a Non-U.S. Holder could be subject to federal income tax
withholding at the rate of 30%, unless a lower treaty rate is applicable; the
portion of the dividend that could be subject to withholding would correspond to
the portion of the Company's gross income for the period that is effectively
connected to its conduct of a trade or business within the United States.
Sale of Securities. A Non-U.S. Holder generally will not be subject to
United States federal income tax on gain from the sale of Securities or the
redemption of Warrants.
UNITED STATES BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments in respect of the Securities may be subject to information
reporting to the United States Internal Revenue Service and to a 31% United
States backup withholding tax. In general, backup withholding will not apply,
however, to a holder who furnishes a correct taxpayer identification number or
certificate of foreign status and makes any other required certification or who
is otherwise exempt from backup withholding. Currently, in general, a U.S.
Holder will provide such certification on Form W-9 (Request for Taxpayer
Identification Number and Certification) and a Non-U.S. Holder will provide such
certification on Form W-8 (Certification of Foreign Status).
BERMUDA TAX CONSIDERATIONS
At the present time, there is no Bermuda income or profits tax, withholding
tax, capital gains tax, capital transfer tax, estate duty or inheritance tax
payable by a Bermuda company or its stockholders, other than stockholders
ordinarily resident in Bermuda. The Company has obtained an assurance from the
Minister of Finance under the Exempted Undertakings Tax Protection Act 1966
that, in the event that any legislation is enacted in Bermuda imposing any tax
computed on profits or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of an estate duty or inheritance tax,
such tax shall not, until March 28, 2016, be applicable to the Company or to any
of its operations or to the shares, warrants, debentures or other obligations of
the Company except insofar as such tax applies to persons ordinarily resident in
Bermuda and holding such shares, warrants, debentures or other obligations of
the Company or any land leased or let to the Company. Therefore, there will be
no Bermuda tax consequences with respect to the sale or exchange of the Common
Stock or the Warrants or with respect to distributions in respect of the Common
Stock or the Warrants. As an exempted company, the Company is liable to pay in
Bermuda a registration fee of $1,680 based upon its initial authorized share
capital upon amalgamation, 12,000 shares, and the premium on its shares which
fee will not exceed $25,000.00. The registration fee payable by the Company in
1996 will be $1,680.00.
OTHER COUNTRIES
The Company will likely be subject to tax on income earned in each of the
countries in which it does business (directly or through subsidiaries or joint
ventures). The Company has not to date analyzed the tax consequences of doing
business in any jurisdiction other than those described above.
48
<PAGE>
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, 3,355,151 shares of Common Stock,
1,333,333 Warrants and 21,818 Bridge Warrants will be outstanding (3,821,817
Shares and 1,666,666 Warrants if the Over-allotment Option and the
Representative's Warrants are exercised in full) including shares of Common
Stock issuable pursuant to the Bridge Notes assuming no conversion of the
convertible Bridge Notes and an initial public offering price per Share of
$5.50. The 1,333,333 Shares and 1,333,333 Warrants sold in this Offering
(1,533,333 shares of Common Stock and 1,533,333 Warrants if the Over-allotment
Option is exercised in full) will be freely tradeable without restrictions or
further registration under the Securities Act unless acquired by an 'affiliate'
of the Company (as that term is defined in the Securities Act) which Securities
will be subject to the resale limitations of Rule 144 under the Securities Act
('Rule 144').
The remaining 2,000,000 shares of Common Stock which will be outstanding
upon the consummation of this Offering, excluding shares of Common Stock issued
pursuant to the terms of the Bridge Notes and the Bridge Warrants, were issued
by the Company's subsidiaries in private transactions in reliance upon the
'private placement' exception under Section 4(2) of the Securities Act at
various times between August 1994 and February 1996, and are therefore
'restricted securities' within the meaning of Rule 144 ('Restricted
Securities'). The Company and the existing stockholders (and any holders of
outstanding securities exercisable for or convertible into Common Stock) have
agreed not to, directly or indirectly, issue, agree or offer to sell, sell,
transfer, assign, distribute, grant an option for purchase or sale of, pledge,
hypothecate or otherwise encumber or dispose of any beneficial interest in such
securities for a period of thirteen (13) months from the date of this Prospectus
without the prior written consent of the Company and the Representative other
than (i) shares of Common Stock transferred pursuant to bona fide gifts where
the transferee agrees in writing to be similarly bound or (ii) securities
transferred through the laws of descent. Upon expiration of this period, all
such shares may be sold subject to the limitations of and in accordance with
Rule 144. Beginning 13 months after the date of this Prospectus, these 2,000,000
shares will be available for sale in the public market subject to certain volume
and resale restrictions, as described below. Additional shares of Common Stock,
including shares issuable upon exercise of options issued in accordance with the
Stock Option Plan and upon the exercise of the Warrants and the Representative's
Warrants will also become eligible for sale in the public market from time to
time in the future.
In addition to the shares described in the preceding paragraphs, additional
shares of Common Stock will become eligible for sale in the public market from
time to time pursuant to the Bridge Notes and the Bridge Warrants. Holders of
$250,000 principal amount of the Bridge Notes have the right to convert such
Bridge Notes, upon the consummation of this Offering, into a maximum of that
number of shares of Common Stock equal to the quotient obtained by dividing
250,000 by the product of 0.5 and the initial public offering price per Share.
The holder of the remaining $120,000 principal amount of Bridge Notes shall be
issued that number of shares of Common Stock equal to 120,000 divided by the
initial public offering price per Share. Each holder of a Bridge Note shall
receive a Bridge Warrant entitling such holder to purchase that number of shares
of Common Stock as such holder shall receive upon the consummation of this
Offering pursuant to the terms of such Bridge Note. The Company and the holders
of the Bridge Notes and the Bridge Warrants have agreed not to, directly or
indirectly, issue, agree or offer to sell, sell, transfer, assign, distribute,
grant an option for purchase or sale of, pledge, hypothecate, or otherwise
encumber or dispose of any beneficial interest in the Bridge Notes or the Bridge
Warrants or the shares underlying the Bridge Notes or the Bridge Warrants for a
period of six (6) months from the date of this Prospectus without the prior
written consent of the Company and the Representative other than (i) shares of
Common Stock transferred pursuant to bona fide gifts where the transferee agrees
in writing to be similarly bound or (ii) shares transferred through the laws of
descent.
Upon the expiration of this period, all such shares may be sold subject to
the limitations and in accordance with Rule 144.
The Company has agreed not to, directly or indirectly, without the prior
written consent of the Representative, issue, sell, agree or offer to sell,
grant an option for the purchase or sale of, or otherwise transfer or dispose of
any of its securities for a period of thirteen (13) months following the date of
this Prospectus, except (x) pursuant to options existing on the date of this
Prospectus and pursuant to the exercise of the Warrants and the Representative's
Warrants or pursuant to the terms of
49
<PAGE>
<PAGE>
the Bridge Notes and the Bridge Warrants or (y) debt securities issued to
non-affiliated third parties in connection with bona fide business acquisitions
and/or expansions consistent with the Company's business plans as generally
described in this Prospectus.
The Company has further agreed that it will not, other than with respect to
the Stock Option Plan, without the Representative's prior written consent, for a
period of thirteen (13) months from the effective date of the Registration
Statement: (i) adopt, propose to adopt, or otherwise permit to exist any
additional equity compensation plans or similar arrangements providing for the
grant, sale, or issuance of stock options, warrants, or other rights to acquire
the Company's securities to any of the Company's executive officers, directors,
employees, consultants or holders of 5% or more of the Company's Common Stock;
(ii) grant, sell or issue any option, warrant or other right to acquire the
Company's securities or enter into any agreement to grant, sell, or issue any
option, warrant or other right to acquire the Company's securities at an
exercise price that is less than the fair market value on the date of grant or
sale; (iii) allow for the maximum number of shares of Common Stock or other
securities of the Company purchasable pursuant to options or warrants issued by
the Company, together with the shares of Common Stock acquired upon exercise of
outstanding options, to exceed the aggregate 800,000 shares described in
footnote one (1) to the 'Prospectus Summary -- The Offering' section of this
Prospectus (excluding the Warrants and the Representative's Warrants); (iv)
allow for the payment for such securities with any form of consideration other
than cash; or (v) allow for the existence of stock appreciation rights, phantom
options or similar arrangements.
In general, under Rule 144 as currently in effect, a stockholder who has
beneficially owned for at least two years shares privately acquired, directly or
indirectly, from the Company or from an affiliate of the Company, and persons
who are affiliates of the Company, will be entitled to sell within any three-
month period a number of shares that does not exceed the greater of (i) 1% of
the outstanding shares of Common Stock (33,552 shares immediately after
completion of this Offering or 38,218 shares if the Over-allotment Option is
exercised in full, in each case including 21,218 shares of Common Stock issued
pursuant to the Bridge Notes assuming no conversion of the convertible Bridge
Notes and an initial public offering price per Share of $5.50), or (ii) the
average weekly trading volume of shares during the four calendar weeks preceding
such sale. Sales under 144 are also subject to certain requirements relating to
the manner and notice of sale and the availability of current public information
about the Company.
The Company has reserved 300,000 shares of Common Stock for issuance under
the Stock Option Plan. At appropriate times subsequent to completion of the
Offering, the Company may file registration statements under the Securities Act
to register the Common Stock to be issued under this plan. After the effective
date of such registration statement, and subject to the lock-up agreement
executed by existing shareholders, shares issued under this plan will be freely
tradeable without restriction or further registration under the Securities Act,
unless acquired by affiliates of the Company.
Prior to this Offering, there has been no market for the Common Stock or
Warrants. No predictions can be made with respect to the effect, if any, that
public sales of shares of the Common Stock or Warrants or the availability of
shares or Warrants for sale will have on the market price of the Common Stock or
Warrants after this Offering. Sales of substantial amounts of the Common Stock
or Warrants in the public market following this Offering, or the perception that
such sales may occur, could adversely affect the market price of the Common
Stock and Warrants or the ability of the Company to raise capital through sales
of its equity securities.
50
<PAGE>
<PAGE>
UNDERWRITING
The Underwriters named below (the 'Underwriters'), for whom National
Securities Corporation is acting as Representative, have severally agreed,
subject to the terms and conditions of the Underwriting Agreement (the
'Underwriting Agreement') to purchase from the Company and the Company has
agreed to sell to the Underwriters on a firm commitment basis, the respective
number of Shares and Warrants set forth opposite their names:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNDERWRITER SHARES WARRANTS
- ------------------------------------------------------------------------------ --------- ---------
<S> <C> <C>
National Securities Corporation...............................................
--------- ---------
Total.................................................................... 1,333,333 1,333,333
--------- ---------
--------- ---------
</TABLE>
The Underwriters are committed to purchase all the Shares and Warrants
offered hereby, if any of such Securities are purchased. The Underwriting
Agreement provides that the obligations of the several Underwriters are subject
to conditions precedent specified therein.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities to the public at the initial public
offering prices set forth on the cover page of this Prospectus and to certain
dealers at such prices less concessions not in excess of $ per Share and
$ per Warrant. Such dealers may re-allow a concession not in excess of
$ per Share and $ per Warrant to certain other dealers. After the
commencement of the Offering, the public offering prices, concession and
reallowance may be changed by the Representative.
The Representative has informed the Company that it does not expect sales
to discretionary accounts by the Underwriters to exceed five percent (5%) of the
Securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make. The Company has also
agreed to pay to the Representative a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds derived from the sale of the Securities
underwritten, of which $50,000 has been paid to date.
The Company has granted to the Underwriters an over-allotment option,
exercisable during the forty-five (45) day period from the date of this
Prospectus, to purchase up to an additional 200,000 shares of Common Stock
and/or 200,000 Warrants at the initial public offering price per Share and
Warrant, respectively, offered hereby, less underwriting discounts and the
non-accountable expense allowance. Such option may be exercised only for the
purpose of covering over-allotments, if any, incurred in the sale of the
Securities offered hereby. To the extent such option is exercised in whole or in
part, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the number of the additional Securities proportionate to
its initial commitment.
In connection with this Offering, the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase from the Company
up to 133,333 shares of Common Stock and/or 133,333 warrants. The
Representative's Warrants are initially exercisable at a price of $ per
share [125% of the initial public offering price per Share] of Common Stock and
$ [125% of the initial public offering price per Warrant] per warrant each
entitling the holder thereof to purchase one share of Common Stock at an
exercise price of 165% of the initial public offering price per share. The
Representative's Warrants may be exercised for a period of four (4) years,
commencing at the beginning of the second year after their issuance and sale and
are restricted from sale, transfer, assignment or hypothecation for a period of
twelve (12) months from the date hereof, except to officers of the
Representative. The Representative's Warrants provide for adjustment in the
number of shares of Common Stock and Warrants issuable upon the exercise thereof
and in the exercise price of the Representative's Warrants as a result of
certain events, including subdivisions and combinations of the
51
<PAGE>
<PAGE>
Common Stock. The Representative's Warrants grant to the holders thereof certain
rights of registration for the securities issuable upon exercise thereof.
All officers, directors and stockholders of the Company and all holders of
any options, warrants or other securities convertible, exercisable or
exchangeable for or convertible into shares of Common Stock have agreed not to,
directly or indirectly, issue, offer, agree or offer to sell, sell, transfer,
assign, encumber, grant an option for the purchase or sale of, pledge,
hypothecate or otherwise dispose of any beneficial interest in such securities
for a period of thirteen (13) months (six months in the case of holders of
Bridge Notes) following the date of this Prospectus without the prior written
consent of the Company and the Representative other than (x) shares of Common
Stock transferred pursuant to bona fide gifts where the transferee agrees in
writing to be similarly bound or (y) securities transferred through the laws of
descent. An appropriate legend shall be marked on the face of certificates
representing all such securities.
The Company has agreed not to, directly or indirectly, without the prior
written consent of the Representative, issue, sell, agree or offer to sell,
grant an option for the purchase or sale of, or otherwise transfer or dispose of
any of its securities for a period of thirteen (13) months following the date of
this Prospectus, except (x) pursuant to options existing on the date of this
Prospectus and pursuant to the exercise of the Warrants and the Representative's
Warrants or pursuant to the terms of the Bridge Notes and the Bridge Warrants or
(y) debt securities issued to non-affiliated third parties in connection with
bona fide business acquisitions and/or expansions consistent with the Company's
business plans as generally described in this Prospectus.
The Company has agreed until December 31, 1997, if requested by the
Representative, to use its best efforts to nominate for election to the
Company's Board of Directors one person designated by the Representative. In the
event the Representative elects not to exercise such right, the Representative
may designate a person to receive all notices of meetings of the Company's Board
of Directors and all other correspondence and communications sent by the Company
to its Board of Directors and to attend all such meetings of the Company's Board
of Directors. The Company has agreed to reimburse designees of the
Representative for their out-of-pocket expenses incurred in connection with
their attendance of meetings of the Company's Board of Directors.
Although the Representative has been in business for over 40 years, the
Representative has participated in only nine public offerings as an underwriter
during the last five years. Prospective purchasers of the Securities offered
hereby should consider the Representative's limited experience in evaluating an
investment in the Company.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. Consequently, the initial public offering prices of the
Securities have been determined by negotiation between the Company and the
Representative and do not necessarily bear any relationship to the Company's
asset value, net worth, or other established criteria of value. The factors
considered in such negotiations, in addition to prevailing market conditions,
included the history of and prospects for the industry in which the Company
competes, an assessment of the Company's management, the prospects of the
Company, its capital structure, the market for initial public offerings and
certain other factors as were deemed relevant.
Upon the exercise of any Warrants more than one year after the date of this
Prospectus, which exercise was solicited by the Representative, and to the
extent not inconsistent with the guidelines of the National Association of
Securities Dealers, Inc. and the Rules and Regulations of the Commission, the
Company has agreed to pay the Representative a commission which shall not exceed
five percent (5%) of the aggregate exercise price of such Warrants in connection
with bona fide services provided by the Representative relating to any warrant
solicitation undertaken by the Representative. In addition, the individual must
designate the firm entitled to payment of such warrant solicitation fee. A
warrant solicitation fee will only be paid to the Representative or another NASD
member when such NASD member is specifically designated in writing as the
soliciting broker. However, no compensation will be paid to the Representative
in connection with the exercise of the Warrants if (a) the market price of the
Common Stock is lower than the exercise price, (b) the Warrants were held in a
discretionary account, or (c) the exercise of the Warrants is not solicited by
the Representative. Unless granted an exemption by the Commission from its Rule
10b-6 under the Exchange Act, the Representative will be prohibited from
engaging in any market-making activities with regard to the Company's securities
for the period
52
<PAGE>
<PAGE>
from nine (9) business days (or other such applicable periods as Rule 10b-6 may
provide) prior to any solicitation of the exercise of the Warrants until the
later of the termination of such solicitation activity or the termination (by
waiver or otherwise) of any right the Representative may have to receive a fee.
As a result, the Representative may be unable to continue to provide a market
for the Common Stock or Warrants during certain periods while the Warrants are
exercisable. If the Representative has engaged in any of the activities
prohibited by Rule 10b-6 during the periods described above, the Representative
undertakes to waive unconditionally its rights to receive a commission on the
exercise of such Warrants.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement that is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. See 'Available Information.'
LEGAL MATTERS
The validity of the Securities offered hereby and certain other matters of
Bermuda law will be passed upon for the Company by Appleby, Spurling & Kempe,
Bermuda counsel to the Company. Woo, Kwan, Lee & Lo has acted as Hong Kong
counsel to the Company to advise on certain matters of Hong Kong law in relation
to the Share Exchange and the section entitled 'Business -- Government
Regulation -- Hong Kong Regulation.' Certain United States tax matters described
under 'Taxation' will be passed upon for the Company by Howard, Darby & Levin,
New York, New York, United States counsel for the Company. Orrick, Herrington &
Sutcliffe, New York, New York, has acted as counsel to the Underwriters in
connection with this Offering.
EXPERTS
The financial statements and schedules included elsewhere in this
Registration Statement, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen & Co., independent public
accountants, as indicated in their reports with respect thereto and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
AVAILABLE INFORMATION
Pursuant to the requirements of the Act, the Company has filed with the
Commission a registration statement on Form S-1 (the 'Registration Statement')
relating to the Securities offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Additional information concerning the Company and the Securities may
be found in the Registration Statement, including the exhibits and schedules
thereto, which may be inspected at the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of all or any portion of the Registration Statement may be obtained from
the Public Reference Section of the Commission, upon payment of prescribed fees.
The Company will furnish its shareholders with annual reports within 90
days of the end of each fiscal year containing audited financial statements and
intends to furnish quarterly reports containing selected unaudited financial
data for the first three quarters of each fiscal year within 45 days of the end
of each such fiscal quarter (in each case prepared in accordance with United
States generally accepted accounting principles).
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
53
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
<PAGE>
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
Report of Independent Public Accountants.............................................................. F-2
Consolidated Balance Sheets as of October 31, 1994 and 1995 (Audited) and April 30, 1996
(Unaudited).......................................................................................... F-3
Consolidated Statements of Operations for the period from August 31, 1993 to October 31, 1994 and year
ended October 31, 1995 (Audited) and for the Six Months ended April 30, 1995 and 1996 (Unaudited).... F-4
Consolidated Statements of Cash Flows for the period from August 31, 1993 to October 31, 1994 and year
ended October 31, 1995 (Audited) and for the Six Months ended April 30, 1995 and 1996 (Unaudited).... F-5
Consolidated Statements of Changes in Shareholders' Equity for the period from August 31, 1993 to
October 31, 1994 and year ended October 31, 1995 (Audited) and for the Six Months ended April 30,
1996 (Unaudited)..................................................................................... F-6
Notes to Consolidated Financial Statements............................................................ F-7
BALANCE SHEET OF
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
Report of Independent Public Accountants.............................................................. F-19
Balance Sheet as of June 10, 1996..................................................................... F-20
Note to the Balance Sheet............................................................................. F-21
</TABLE>
F-1
<PAGE>
<PAGE>
To the Shareholders and Board of Directors of American Craft Brewing
International Limited:
After the reorganization transaction discussed in Note 1 to the American Craft
Brewing International Limited's consolidated financial statements is effected,
we expect to be in a position to render the following audit report.
ARTHUR ANDERSEN & CO.
Certified Public Accountants
Hong Kong
Hong Kong,
June 10, 1996.
'REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of American Craft Brewing
International Limited:
We have audited the accompanying consolidated balance sheets of American
Craft Brewing International Limited (incorporated in Bermuda) and its
subsidiaries (see Note 2 to the accompanying financial statements for the basis
of presentation) as of October 31, 1994 and 1995 and the related consolidated
statements of operations, cash flows and changes in shareholders' equity for the
period from August 31, 1993 (the earliest date of incorporation of the companies
now comprising the Group) to October 31, 1994 and the year ended October 31,
1995. These financial statements are the responsibility of the management of
American Craft Brewing International Limited and its subsidiaries. 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 in the United States of America. Those standards require that we plan
and perform the audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Craft Brewing International Limited and its subsidiaries as of October 31, 1994
and 1995, and the results of their operations and their cash flows for the
period from August 31, 1993 to October 31, 1994 and the year ended October 31,
1995, in conformity with generally accepted accounting principles in the United
States of America.
Hong Kong,
[ ], 1996.'
F-2
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 1994 AND 1995 (AUDITED) AND
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
---------------- -------------- ---------------
(AUDITED) (AUDITED) (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 197,752 $102,248 $ 6,232
Accounts receivable, net............................................ -- 21,680 61,162
Inventories......................................................... -- 22,922 29,585
Other current assets................................................ -- 391 43,871
--------------- -------------- ---------------
Total current assets........................................ 197,752 147,241 140,850
Rental, utility and other deposits.................................... 9,433 35,174 35,174
Deferred tax assets................................................... 1,536 49,096 54,243
Equipment and capital leases, net..................................... 10,295 634,767 662,746
--------------- -------------- ---------------
Total assets................................................ $ 219,016 $866,278 $ 893,013
--------------- -------------- ---------------
--------------- -------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term bank loan, current portion................................ $ -- $113,000 $ 452,000
Capital lease obligations, current portion.......................... -- 13,284 12,858
Accrued liabilities................................................. 182 39,294 36,698
Shareholders' loans................................................. 2,490 85,638 85,638
--------------- -------------- ---------------
Total current liabilities................................... 2,672 251,216 587,194
Long-term bank loan................................................... -- 395,500 --
Capital lease obligations............................................. -- 30,221 24,864
--------------- -------------- ---------------
Total liabilities........................................... 2,672 676,937 612,058
--------------- -------------- ---------------
Commitments...........................................................
Shareholders' equity:
Common stock........................................................ 1 645 645
Additional paid-in capital.......................................... -- -- 554,815
Subscription monies received in advance............................. 224,119 437,156 --
Accumulated deficit................................................. (7,776) (248,460) (274,505)
--------------- -------------- ---------------
Total shareholders' equity.................................. 216,344 189,341 280,955
--------------- -------------- ---------------
Total liabilities and shareholders' equity.................. $ 219,016 $866,278 $ 893,013
--------------- -------------- ---------------
--------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM AUGUST 31, 1993 TO OCTOBER 31, 1994 AND
YEAR ENDED OCTOBER 31, 1995 (AUDITED) AND FOR THE
SIX MONTHS ENDED APRIL 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
PERIOD ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30, APRIL 30,
1994 1995 1995 1996
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
Net sales................................................ $ -- $ 63,707 $ -- $ 244,753
Cost of sales............................................ -- (38,960) -- (43,055)
------------ ------------ ---------- ------------
Gross profit........................................ -- 24,747 -- 201,698
Selling, general and administrative expenses............. (9,312) (292,888) (97,042) (207,094)
Interest expense, net.................................... -- (17,838) (1,779) (24,908)
Other expenses, net...................................... -- (2,265) -- (888)
------------ ------------ ---------- ------------
Loss before income taxes............................ (9,312) (288,244) (98,821) (31,192)
Income tax benefit....................................... 1,536 47,560 16,305 5,147
------------ ------------ ---------- ------------
Net loss............................................ $ (7,776) $ (240,684) $ (82,516) $ (26,045)
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
Net loss per common share................................ $ -- $ (0.12) $ (0.04) $ (0.01)
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
Weighted average number of shares outstanding............ 2,000,000 2,000,000 2,000,000 2,000,000
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM AUGUST 31, 1993 TO OCTOBER 31, 1994 AND
YEAR ENDED OCTOBER 31, 1995 (AUDITED) AND FOR THE
SIX MONTHS ENDED APRIL 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
PERIOD ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30, APRIL 30,
1994 1995 1995 1996
------------ ----------- ------------ ------------
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $ (7,776) $(240,684) $ (82,516) $(26,045)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation................................ -- 21,997 -- 31,119
Deferred income tax......................... (1,536) (47,560) (16,305) (5,147)
Increase in operating assets:
Accounts receivable, net............... -- (21,680) -- (39,482)
Inventories............................ -- (22,922) -- (6,663)
Other current assets................... -- (391) (2,744) (43,480)
Rental, utility and other deposits..... (9,433) (25,741) (8,000) --
Increase (Decrease) in operating
liabilities:
Accrued liabilities.................... 182 39,112 4,045 (2,596)
------------ ----------- ------------ ------------
Net cash used in operating activities....... (18,563) (297,869) (105,520) (92,294)
------------ ----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment............................ (10,295) (595,037) (543,004) (59,098)
------------ ----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock........... 1 644 -- --
Subscription monies received in advance.......... 224,119 213,037 24,905 117,659
Shareholders' loan............................... 2,490 83,148 258 --
New bank loan.................................... -- 565,000 565,000 --
Repayment of bank loan........................... -- (56,500) -- (56,500)
Repayment of capital lease obligations........... -- (7,927) -- (5,783)
------------ ----------- ------------ ------------
Net cash provided by financing activities... 226,610 797,402 590,163 55,376
------------ ----------- ------------ ------------
Increase (Decrease) in cash........................... 197,752 (95,504) (58,361) (96,016)
Cash at beginning of period........................... -- 197,752 197,752 102,248
------------ ----------- ------------ ------------
Cash at end of period................................. $197,752 $ 102,248 $ 139,391 $ 6,232
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS:
Cash paid for interest expense (net of amount
capitalized)................................... $ -- $ 15,977 $ -- $ 25,060
Cash received for interest income................ -- 3,201 2,447 1,123
Equipment purchased under capital leases......... -- 51,432 -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM AUGUST 31, 1993 TO OCTOBER 31, 1994 AND
YEAR ENDED OCTOBER 31, 1995 (AUDITED) AND FOR THE
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL SUBSCRIPTION
COMMON PAID-IN MONIES RECEIVED IN ACCUMULATED
STOCK CAPITAL ADVANCE DEFICIT
------ ---------- ------------------ -----------------
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C> <C>
Balance as of August 31, 1993....................... $ -- $ -- $ -- $ --
Issuance of common stock............................ 1 -- -- --
Subscription monies received in advance............. -- 224,119 --
Net loss............................................ -- -- -- (7,776)
------ ---------- ------------------ -----------------
Balance as of October 31, 1994 (audited)............ 1 -- 224,119 (7,776)
Issuance of common stock............................ 644 -- -- --
Subscription monies received in advance............. -- -- 213,037 --
Net loss............................................ -- -- -- (240,684)
------ ---------- ------------------ -----------------
Balance as of October 31, 1995 (audited)............ 645 -- 437,156 (248,460)
Subscription monies received in advance
(unaudited)....................................... -- -- 117,659 --
Capitalization of subscription monies received
(unaudited)....................................... -- 554,815 (554,815) --
Net loss (unaudited)................................ -- -- -- (26,045)
------ ---------- ------------------ -----------------
Balance as of April 30, 1996 (unaudited)............ $645 $554,815 $ -- $(274,505)
------ ---------- ------------------ -----------------
------ ---------- ------------------ -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
ORGANIZATION
American Craft Brewing International Limited, a Bermuda company ('AmBrew
International' or the 'Company'), was incorporated on June 5, 1996. On
[ ], 1996, American Craft Brewing International Limited, a British
Virgin Islands company formerly known as Craft Brewing Holdings Limited
('Craft'), amalgamated into AmBrew International (the 'Merger'). Ambrew
International is the surviving company and its officers and directors remained
in office after the amalgamation. Craft acquired its entire interests in South
China Brewing Company Limited ('South China'), a company incorporated in Hong
Kong and formerly known as Forever Smooth Investments Limited, and SCBC
Distribution Company Limited, a company incorporated in Hong Kong and formerly
known as Arizona Limited ('SCBC,' and collectively with South China, the 'South
China Brewery'), through the exchange (the 'Share Exchange'), of substantially
all of the issued and outstanding shares of capital stock of South China and
SCBC by the stockholders thereof for 23,750 shares of capital stock of Craft.
This Share Exchange had the effect of consolidating ownership of the South China
Brewery's operating companies into Craft. The Merger had the effect of
transferring all of the assets (including the capital stock of South China and
SCBC) and liabilities of Craft to AmBrew International, a company without
material assets or liabilities prior to the Merger. Concurrent with the Share
Exchange, Craft issued 1,250 shares of capital stock to certain investors in
Hong Kong. Effective as of June 19, 1996, Craft consummated an eighty-for-one
share split (the 'Share Split'). See Note 16.
Unless otherwise required by the context, the terms 'AmBrew International'
and the 'Company' include American Craft Brewing International Limited and its
subsidiaries. Details of these companies are:
<TABLE>
<CAPTION>
PERCENTAGE OF
EQUITY INTEREST
COUNTRY AND DATE ATTRIBUTABLE TO
NAME OF INCORPORATION THE GROUP PRINCIPAL ACTIVITIES
- ------------------------------------------------ ------------------ --------------- ---------------------
<S> <C> <C> <C>
American Craft Brewing International ........... Bermuda June 3, 100% Holding Company
Limited 1996
South China Brewing Company .................... Hong Kong 100%* Production of beer
Limited (formerly known as Forever May 26, 1994
Smooth Investments Limited)
SCBC Distribution Company Limited .............. Hong Kong 100%* Distribution of beer
(formerly known as Arizona Limited) August 31, 1993
</TABLE>
- ------------
* Pursuant to the requirement of a minimum of two registered shareholders for
companies incorporated in Hong Kong, David K. Haines, an officer of the
Company, holds one share of the capital stock of each of South China and SCBC
in trust for the benefit of AmBrew International.
PRINCIPAL ACTIVITIES
AmBrew International is a holding company for the capital stock of the
South China Brewery's operating companies: South China and SCBC. The South China
Brewery operates a micro-brewery in Hong Kong for the production of beer and ale
and distributes beer and ale produced to customers in Hong Kong. The South China
Brewery started to build its production facilities in October 1994, and
commenced commercial operations in June 1995.
F-7
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
2. BASIS OF PRESENTATION
The Merger and the Share Exchange have been accounted for as a pooling of
interest because each of AmBrew International, Craft, South China and SCBC have
at all times been under the common control, directly or indirectly, of the same
stockholders.
The consolidated financial statements as of and for the period ended
October 31, 1994, for the six months ended April 30, 1995 and as of and for the
year ended October 31, 1995 incorporate the financial statements of the South
China Brewery. The consolidated financial statements as of and for the six
months ended April 30, 1996 incorporate the financial statements of Craft and
the South China Brewery. All material inter-company balances and transactions
have been eliminated on consolidation.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. INVENTORIES
Inventories are stated at the lower of cost, on a first-in first-out basis,
or market. Costs of work-in-process and finished goods include direct materials,
direct labor and production overhead costs.
B. EQUIPMENT AND CAPITAL LEASES
Equipment and capital leases are recorded at cost. Depreciation for
financial reporting purposes is provided by the straight-line method over the
estimated useful lives of the assets as follows: brewing equipment -- 20 years;
furniture and equipment -- 4 years; and motor vehicles (capital leases) -- 4
years. Leasehold improvements are amortized by the straight-line method over the
terms of the leases or the estimated useful lives of the improvements, whichever
is shorter. All ordinary repair and maintenance costs are expensed as incurred.
Interest costs for the acquisition of certain equipment are capitalized and
amortized over the estimated useful lives of the related assets. For the period
ended October 31, 1994, year ended October 31, 1995, six months ended April 30,
1995 and six months ended April 30, 1996, interest costs capitalized were
approximately $0, $13,177, $0 and $0, respectively.
C. SALES
Sales represents the invoiced value of goods supplied to customers. Sales
are recognized upon delivery of goods and passage of title to customers.
D. INCOME TAXES
The Company accounts for income tax under the provisions of Statement of
Financial Accounting Standards No. 109, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
income taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases of assets and
liabilities.
F-8
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
E. OPERATING LEASES
Operating leases represent those leases under which substantially all the
risks and rewards of ownership of the leased assets remain with the lessors.
Rental payments under operating leases are charged to expense on the
straight-line basis over the period of the relevant leases.
F. FOREIGN CURRENCY TRANSLATION
The translation of financial statements of foreign subsidiaries into United
States dollars is performed for balance sheet accounts using the closing
exchange rate in effect at the balance sheet date and for revenue and expense
accounts using an average exchange rate during each reporting period. The gains
or losses resulting from translation are included in shareholders' equity
separately as cumulative translation adjustments. For the period ended October
31, 1994, year ended October 31, 1995, six months ended April 30, 1995 and six
months ended April 30, 1996, aggregate loss from foreign currency transactions
included in the results of operations were $0, $451, $0 and $271, respectively.
G. NET LOSS PER COMMON SHARE
Net loss per common share is computed by dividing net loss for each period
by 2,000,000 weighted average shares of capital stock outstanding during the
year or period, as the case may be, on the basis that the Share Exchange, the
Share Split and the Merger (see Note 1 ) had been consummated prior to the years
or periods presented.
H. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates.
4. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Trade receivables........................................................ $ -- $22,236 $62,730
Less: Allowance for doubtful accounts.................................... -- (556) (1,568)
----------- ----------- -----------
Accounts receivable, net................................................. $ -- $21,680 $61,162
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
5. INVENTORIES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Raw materials............................................................ $ -- $16,682 $25,932
Work-in-process and finished goods....................................... -- 6,240 3,653
----------- ----------- -----------
$ -- $22,922 $29,585
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-9
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
6. EQUIPMENT AND CAPITAL LEASES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Equipment:
Leasehold improvements.............................................. $ -- $ 52,123 $ 52,123
Brewing equipment................................................... 4,489 522,869 522,869
Furniture and equipment............................................. 5,806 25,216 84,315
Capital leases:
Motor vehicles...................................................... -- 56,556 56,555
----------- ----------- -----------
Cost................................................................ 10,295 656,764 715,862
Less: Accumulated depreciation
Equipment........................................................... -- (17,284) (41,334)
Capital leases...................................................... -- (4,713) (11,782)
----------- ----------- -----------
$10,295 $ 634,767 $ 662,746
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
7. LONG-TERM BANK LOAN
Maturities of long-term bank loan are as follows:
<TABLE>
<CAPTION>
Payable during the following period: OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Within one year..................................................... $ -- $ 113,000 $ 452,000
Over one year but not exceeding two years........................... -- 395,500 --
----------- ----------- -----------
$ -- $ 508,500 $ 452,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The long-term bank loan is evidenced by a promissory note, with repayment
of $56,500 of the principal due on September 30, 1996 and the remaining $395,500
of the principal due on March 31, 1997. It bears interest at variable rates
equal to the U.S. Citibank prime rate plus 0.50%, which was 9.25% per annum as
of October 31, 1995 and 8.75% per annum as of April 30, 1996, and is secured by
a letter of credit of $315,000 provided by two directors of the Company who are
also stockholders of the Company and a corporate guarantee of $250,000 given by
a stockholder of the Company.
F-10
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
8. CAPITAL LEASE OBLIGATIONS
Future minimum lease payments under the capital leases as of October 31,
1994, October 31, 1995 and April 30, 1996, together with the present value of
the minimum lease payments are:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Payable during the following period:
Within one year..................................................... $ -- $ 17,747 $ 17,179
Over one year but not exceeding two years........................... -- 17,179 17,179
Over two years but not exceeding three years........................ -- 17,179 16,047
Over three years but not exceeding four years....................... -- 6,025 --
----------- ----------- -----------
Total minimum lease payments............................................. -- 58,130 50,405
Less: Amount representing interest....................................... -- (14,625) (12,683)
----------- ----------- -----------
Present value of minimum lease payments.................................. -- 43,505 37,722
Less: Current portion.................................................... -- (13,284) (12,858)
----------- ----------- -----------
Non-current portion...................................................... $ -- $ 30,221 $ 24,864
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
9. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Accrued interest expense................................................. $ -- $ 5,050 $ 5,991
Accrued operating lease rental........................................... -- 13,755 7,471
Other accrued liabilities................................................ 182 20,489 23,236
----------- ----------- -----------
$ 182 $39,294 $36,698
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
10. SHAREHOLDERS' LOANS
During the year ended October 31, 1995, South China borrowed $65,000 from
BPW Holding Limited, ('BPW') a shareholder of the Company. The loan is evidenced
by a limited recourse promissory note dated as of March 5, 1996, bearing
interest at a rate of 5.5% per annum and is due ten days after the consummation
of an initial public offering of shares of common stock of AmBrew International.
(see Note 16). For the period ended October 31, 1994, year ended October 31,
1995, six months ended April 30, 1995 and six months ended April 30, 1996,
interest expense payable to the shareholder was approximately $0, $813, $0, and
$894, respectively.
The remaining balance of the shareholders' loans as of October 31, 1994,
October 31, 1995 and April 30, 1996 of $2,490, $20,638 and $20,638,
respectively, was unsecured, non-interest bearing and without pre-determined
repayment terms. Subsequent to April 30, 1996 and up to the date of this report,
shareholders' loans of $20,638 had been repaid.
11. COMMON STOCK
As of October 31, 1994, October 31, 1995 and April 30, 1996, the amount of
common stock recorded in the consolidated balance sheets represented the
aggregate amount of the common stock of the subsidiaries of the Company as of
those dates.
F-11
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
12. INCOME TAXES
The Company and its subsidiaries are subject to income taxes on an entity
basis on income arising in or derived from the tax jurisdiction in which they
are domiciled and operate. AmBrew International is exempted from income tax in
Bermuda until 2016. The Hong Kong subsidiaries are subject to Hong Kong profits
tax at a rate of 16.5%.
Significant components of income tax benefit are:
<TABLE>
<CAPTION>
PERIOD YEAR ENDED SIX MONTHS SIX MONTHS
ENDED OCTOBER 31, ENDED ENDED
OCTOBER 31, 1995 APRIL 30, APRIL 30,
1994 ----------- 1995 1996
----------- (AUDITED) ------------ ------------
(AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current................................................. $ -- $ -- $ -- $ --
Deferred -- Operating loss carryforwards................ 1,536 47,560 16,305 5,147
----------- ----------- ------------ ------------
$ 1,536 $47,560 $ 16,305 $5,147
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
The reconciliation of the United States federal income tax rate to the
effective income tax rate based on the loss before income tax benefit stated in
the consolidated statements of operations is as follows:
<TABLE>
<CAPTION>
PERIOD YEAR ENDED SIX MONTHS SIX MONTHS
ENDED OCTOBER 31, ENDED ENDED
OCTOBER 31, 1995 APRIL 30, APRIL 30,
1994 ----------- 1995 1996
----------- (AUDITED) ----------- -----------
(AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
United States federal income tax rate....................... (35%) (35%) (35%) (35%)
Aggregate effect of different tax rates in foreign
jurisdictions............................................. 18.5% 18.5% 18.5% 18.5%
----------- ----------- ----------- -----------
Effective income tax rate................................... (16.5%) (16.5%) (16.5%) (16.5%)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The major component of deferred tax assets relates to the tax loss
carryforwards. As of October 31, 1994, October 31, 1995 and April 30, 1996, tax
losses of approximately $10,000, $298,000 and $329,000, respectively, can be
carried forward indefinitely.
13. COMMITMENTS
A. CAPITAL COMMITMENTS
As of October 31, 1994, October 31, 1995 and April 30, 1996, the Company
had purchase commitments for the purchase of machinery and furniture of
approximately $0, $19,000 and $0, respectively.
B. LEASE COMMITMENTS
The Company leases various facilities under noncancelable operating leases
which expire at various dates through 1998. Rental expenses for the period ended
October 31, 1994, year ended October 31, 1995, six months ended April 30, 1995
and six months ended April 30, 1996 were approximately $0, $67,000, $27,000 and
$41,000, respectively. Future minimum rental payments as of October 31, 1994,
F-12
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
13. COMMITMENTS -- (CONTINUED)
October 31, 1995 and April 30, 1996, under agreements classified as operating
leases with noncancelable terms in excess of one year, are as follows:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Payable during the following period:
Within one year..................................................... $ 52,645 $ 79,742 $ 79,742
Over one year but not exceeding two years........................... 52,645 75,355 49,032
Over two years but not exceeding three years........................ 48,258 13,548 --
----------- ----------- -----------
$ 153,548 $ 168,645 $ 128,774
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
14. OPERATING RISK
A. BUSINESS RISK
The South China Brewery commenced commercial operations in June 1995. Its
operations are subject to all the risks inherent in an emerging business
enterprise. These include, but are not limited to, high expense levels relative
to production, complications and delays frequently encountered in connection
with the development and introduction of new products, the ability to recruit
and retain accomplished management personnel, competition from established
breweries, the need to expand production and distribution, and the ability to
establish and sustain product quality.
B. CONCENTRATION OF CREDIT RISK
A substantial portion of the South China Brewery's sales are made to a
small number of customers on an open account basis and generally no collateral
is required. Details of individual customers accounting for more than 10% of the
South China Brewery's sales for the year ended October 31, 1995 and six months
ended April 30, 1996 are as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------------------
YEAR ENDED SIX MONTHS ENDED
OCTOBER 31, 1995 APRIL 30, 1996
---------------- ------------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
DaBeers Distributors Limited.............................................. 27.1% 43.5%
Delaney's (Wanchai) Limited............................................... 10.5% 28.6%
</TABLE>
Concentration of accounts receivable as of October 31, 1995 and April 30, 1996
is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF ACCOUNTS RECEIVABLE
--------------------------------------
AS OF AS OF
OCTOBER 31, 1995 APRIL 30, 1996
---------------- ------------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
Five largest accounts receivables......................................... 41% 82%
</TABLE>
The South China Brewery performs ongoing credit evaluation of each
customer's financial condition. It maintains reserves for potential credit
losses and such losses in the aggregate have not exceeded management's
projections.
F-13
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
14. OPERATING RISK -- (CONTINUED)
C. CONCENTRATION OF SUPPLIERS
The South China Brewery relies upon a single supplier (other than for
labels) for each of the raw materials used to make and package its beers.
Although to date, the South China Brewery has been able to obtain adequate
supplies of these ingredients and other raw materials in a timely manner from
these sources, if the South China Brewery were unable to obtain adequate
supplies of ingredients or other raw materials, delays or reductions in product
shipments could occur which would have an adverse effect on the South China
Brewery's business, financial condition and results of operations. As with most
agricultural products, the supply and price of raw materials used to produce the
South China Brewery's beers can be affected by factors beyond the control of the
South China Brewery, such as drought, frost, other weather conditions, economic
factors affecting growing decisions, various plant diseases and pests. If any of
the foregoing were to occur, the Company's business, financial condition and
results of operations would be adversely affected.
D. POLITICAL RISK
Substantially all of the Company's assets are located in Hong Kong. As a
result, the Company's business, financial condition and results of operations
may be influenced by the political situation in Hong Kong and by the general
state of the Hong Kong economy. On July 1, 1997, sovereignty over Hong Kong will
be transferred from the United Kingdom to the People's Republic of China
('China'), and Hong Kong will become a Special Administrative Region of China.
15. OTHER SUPPLEMENTAL INFORMATION
The following items were included in the consolidated statements of
operations:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED SIX MONTHS SIX MONTHS
OCTOBER 31, OCTOBER 31, ENDED ENDED
1994 1995 APRIL 30, APRIL 30,
------------ ----------- 1995 1996
(AUDITED) (AUDITED) ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Depreciation of fixed assets
-- owned assets................................. $ -- $ 17,284 $ -- $ 24,050
-- assets held under capital leases............. -- 4,713 -- 7,069
Operating lease rental for rented premises............ -- 67,005 26,529 41,290
Advertising expenses.................................. -- 24,312 -- 12,298
Repairs and maintenance expenses...................... -- 1,155 -- 1,832
Interest expense incurred............................. -- 34,216 4,226 26,031
Less: Amount capitalized as equipment................. -- (13,177) -- --
------------ ----------- ------------ ------------
-- 21,039 4,226 26,031
Net foreign exchange loss............................. -- 451 -- 271
Interest income....................................... $ -- $ 3,201 $ 2,447 $ 1,123
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
16. SUBSEQUENT EVENTS
Subsequent to October 31, 1995, the following events took place:
a. On December 31, 1995, the stockholders of South China and SCBC
agreed to exchange all of the issued and outstanding shares of capital
stock of South China and SCBC for 23,750 shares of capital stock of Craft.
F-14
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS -- (CONTINUED)
b. On December 31, 1995, Craft agreed to issue 1,250 shares of capital
stock to certain investors in Hong Kong for $300,000.
c. On June 19, 1996, Craft consummated an eighty-for-one share split
of its capital stock.
d. On [ ], 1996, Craft amalgamated into AmBrew
International, which is the surviving company and its officers and
directors remained in office after the amalgamation.
e. In May 1996, the Company issued $370,000 principal amount of notes
bearing interest at a rate of 12% per annum (the 'Bridge Notes'). Holders
of $250,000 principal amount of these notes have the right to convert such
notes, upon consummation of a contemplated initial public offering, into a
maximum number of shares of common stock of AmBrew International equal to
the quotient obtained by dividing 250,000 by the product of 0.5 and the
initial public offering price per share of such offering. The holder of the
remaining $120,000 principal amount of such notes will be repaid in cash
with the entire principal amount upon consummation of the offering and will
be entitled to common stock of the Company at no cost, with the number of
shares of common stock equal to the quotient obtained by dividing 120,000
by the initial public offering price per share of such offering. Each
holder of these notes will receive a warrant entitling such holder to
purchase that number of shares of common stock of the Company as such
holder shall receive upon consummation of such offering pursuant to the
terms of such notes at a price equal to 150% of the initial public offering
price per share of such offering. If the offering is not consummated by
September 1, 1996, the interest rate of such notes will be increased from
12% per annum to 14% per annum.
f. The Company is planning for an initial public offering of 1,333,333
shares of its common stock and 1,333,333 redeemable common stock purchase
warrants. The estimated expenses before underwriting discounts and
commissions of the initial public offering are approximately $625,000.
The following unaudited pro forma consolidated financial statements have
been prepared on the basis described below. The pro forma unaudited condensed
consolidated balance sheet as of April 30, 1996, has been prepared to give
effect to the following events: (i) the aforementioned subsequent events and
(ii) the repayment of the Company's bank loan of $452,000 and the shareholder's
loan from BPW of $65,000. The unaudited pro forma consolidated statement of
operations for the year ended October 31, 1995, has been prepared to give effect
to the following: (i) the accrual of salary payable to the Company's Executive
Vice President, Chief Operating Officer and Secretary at an annual rate of
$72,000 as if such salary had become payable on and after November 1, 1994 and
(ii) the elimination of interest expense payable for the period in respect of
the bank loan and shareholder loan as if such loans had been repaid on November
1, 1994. The pro forma condensed financial statements are unaudited and have
been prepared using the historical qualified financial statements of the Company
set forth elsewhere in this Prospectus, and are qualified entirely by reference
to, and should be read in conjunction with, such historical financial
statements. These pro forma statements are provided for informational and
comparative purposes only. The pro forma adjustments are based on available
financial information and certain estimates and assumptions. The pro forma
statements do not purport to be indicative of the results of operations and
financial position of AmBrew International had such transactions in fact
occurred on November 1, 1994, or during the periods presented or during any
future period.
F-15
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS -- (CONTINUED)
a. Pro forma unaudited condensed balance sheet as of April 30, 1996:
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ----------
<S> <C> <C> <C>
Total current assets..................................... $140,850 $ 370,000(1) $5,494,850
(370,000)(2)
(517,000)(3)
5,871,000(5)
Total assets............................................. 893,013 370,000(1) 6,247,013
(370,000)(2)
(517,000)(3)
5,871,000(5)
(5)
Total current liabilities................................ 587,194 370,000(1) 70,194
(370,000)(2)
(517,000)(3)
Total liabilities........................................ 612,058 370,000(1) 95,058
(370,000)(2)
(517,000)(3)
Total shareholders' equity............................... 280,955 100,000(7) 6,151,955
(100,000)(7)
5,871,000(5)
</TABLE>
Pro forma unaudited statement of operations for year ended October 31, 1995:
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
--------- ----------- ----------
<S> <C> <C> <C>
Net sales.................................................. $ 63,707 $ 63,707
Cost of sales.............................................. (38,960) (38,960)
--------- ----------
Gross profit.......................................... 24,747 24,747
Selling, general and administrative expenses............... (292,888) $ (72,000)(6) (364,888)
Interest (expenses), income, net........................... (17,838) 18,228(4) 390
Other expenses, net........................................ (2,265) (100,000)(7) (102,265)
--------- ----------
Loss before income taxes.............................. (288,244) (442,016)
Income tax benefit......................................... 47,560 25,373(8) 72,933
--------- ----------
Net loss.............................................. $(240,684) 25,373 $ (369,083)
--------- ----------
--------- ----------
Net loss per common share.................................. (0.12) (0.11)
--------- ----------
--------- ----------
Weighted average number of shares outstanding.............. 2,000,000 3,355,151
--------- ----------
--------- ----------
</TABLE>
F-16
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS_--_(CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS--(CONTINUED)
Pro forma unaudited statement of operations for the six months ended April 30,
1996:
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
--------- ----------- ---------
<S> <C> <C> <C>
Net sales.................................................... $ 244,753 $ $ 244,753
Cost of sales................................................ (43,055) (43,055)
--------- ---------
Gross profit............................................ 201,698 201,698
Selling, general and administrative expenses................. (207,094) (36,000)(6) (243,094)
Interest expenses, net....................................... (24,908) 23,993(4) (915)
Other expenses, net.......................................... (888) (888)
--------- ---------
Loss before income taxes................................ (31,192) (43,199)
Income tax benefit........................................... 5,147 1,981(8) 7,128
--------- ---------
Net loss................................................ $ (26,045) $ 36,071
--------- ---------
--------- ---------
Net loss per common share.................................... (0.01) (0.01)
--------- ---------
--------- ---------
Weighted average number of shares outstanding................ 2,000,000 3,355,151
--------- ---------
--------- ---------
</TABLE>
F-17
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS_--_(CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS--(CONTINUED)
Notes to unaudited pro forma financial statements
(1) Represents the receipt of $370,000, the gross proceeds in connection with
the issuance of the Bridge Notes.
(2) Represents the repayment of the Bridge Notes with the proceeds of the
initial public offering.
(3) Represents the repayment of long-term bank loan of $452,000 and
shareholder's loan from BPW of $65,000.
(4) Represents the elimination of interest expense as a result of the repayment
of the long-term bank loan and the shareholder's loan from BPW as described
in note 3 above.
(5) Represents the estimated proceeds receivable from the initial public
offering of 1,333,333 shares of the Company's common stock and 1,333,333
redeemable common stock purchase warrants, net of underwriting discounts
and commissions and offering expenses.
(6) Represents additional salary expense, effective upon consummation of the
initial public offering payable to the Company's Executive Vice President,
Chief Operating Officer and Secretary totalling $72,000 for the year ended
October 31, 1995 and $36,000 for the six months ended April 30, 1996.
(7) Represents the recognition of a non-recurring, non-cash interest expense of
$100,000 representing the original issue discount relating to the Bridge
Notes.
(8) Represents the deferred tax effect related to the aforementioned pro forma
adjustments.
F-18
<PAGE>
<PAGE>
To the Shareholders and Board of Directors of American Craft Brewing
International Limited:
After the reorganization transaction discussed in Note 1 to American Craft
Brewing International Limited's consolidated financial statements is effected,
we expect to be in a position to render the following audit report.
ARTHUR ANDERSEN & CO.
Certified Public Accountants
Hong Kong
Hong Kong,
June 10, 1996.
'REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of American Craft Brewing
International Limited:
We have audited the accompanying balance sheet of American Craft Brewing
International Limited (incorporated in Bermuda) as of June 10, 1996. This
balance sheet is the responsibility of the management of American Craft Brewing
International Limited. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of American Craft Brewing
International Limited as of June 10, 1996, in conformity with generally accepted
accounting principles in the United States of America.
Hong Kong,
[ ], 1996.'
F-19
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
BALANCE SHEET
AS OF JUNE 10, 1996
<TABLE>
<CAPTION>
JUNE 10, 1996
------------------------
(AMOUNTS EXPRESSED IN
UNITED STATES DOLLARS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ --
--------
--------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities...................................................................... $ 7,865
--------
Shareholders' deficits:
Common stock........................................................................ $ 120
Less: Subscription receivable....................................................... (120)
--------
--
Accumulated deficits................................................................ (7,865)
--------
Total shareholders' deficits................................................... (7,865)
--------
Total liabilities and shareholders' deficits................................... $ --
--------
--------
</TABLE>
The accompanying note is an integral part of this balance sheet.
F-20
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
NOTE TO THE BALANCE SHEET
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
American Craft Brewing International Limited, a Bermuda company ('AmBrew
International'), was incorporated in Bermuda on June 3, 1996. AmBrew
International has issued 12,000 shares of common stock of US$0.01 each, which
are unpaid as of June 10, 1996. On [ ], 1996 American Craft
Brewing International Limited, a British Virgin Islands company ('Craft'),
amalgamated with AmBrew International, which is the surviving company and its
officers and directors remained in office after the amalgamation.
F-21
<PAGE>
<PAGE>
_____________________________________ _____________________________________
NO UNDERWRITER, DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE 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 OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
The Company.................................... 17
Use of Proceeds................................ 18
Dividend Policy................................ 19
Capitalization................................. 20
Dilution....................................... 21
Selected Consolidated Financial Data........... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 26
Management..................................... 34
Principal Stockholders......................... 38
Certain Transactions........................... 39
Description of Securities...................... 40
Certain Foreign Issuer Considerations.......... 45
Taxation....................................... 46
Shares Eligible for Future Sale................ 49
Underwriting................................... 51
Legal Matters.................................. 53
Experts........................................ 53
Available Information.......................... 53
Index to Financial Information................. F-1
</TABLE>
------------------------
UNTIL , 1996 (25 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 DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
_____________________________________ _____________________________________
_____________________________________ _____________________________________
[LOGO]
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
1,333,333 SHARES OF COMMON STOCK
AND
1,333,333 REDEEMABLE COMMON
STOCK PURCHASE WARRANTS
---------------------------
PROSPECTUS
---------------------------
NATIONAL SECURITIES
CORPORATION
, 1996
_____________________________________ _____________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
the securities being registered. All the amounts shown are estimates, except for
the registration fee with the Securities and Exchange Commission (the 'SEC'),
the filing fee with the National Association of Securities Dealers, Inc. (the
'NASD'), and the Nasdaq SmallCap Market ('Nasdaq') quotation and the Boston
Stock Exchange (the 'BSE') listing fees.
<TABLE>
<S> <C>
SEC Registration fee........................................................... $ 8,818.38
NASD filing fee................................................................ 3,057.33
Nasdaq fees.................................................................... 5,000.00
BSE fees....................................................................... 7,750.00
Blue Sky fees and expenses..................................................... 30,000.00
Printing and engraving expenses................................................ 140,000.00
Legal fees and expenses........................................................ 275,000.00
Accounting fees and expenses................................................... 130,000.00
Transfer agent and registrar fees.............................................. 8,500.00
Miscellaneous.................................................................. 16,874.29
-----------
Total..................................................................... $625,000.00
-----------
-----------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Bermuda law permits a company to indemnify its directors and officers,
except for any act of willful negligence, willful default, fraud or dishonesty.
The Registrant has provided in its Bye-Laws that its directors and officers will
be indemnified and held harmless against any expenses, judgments, fines,
settlements and other amounts incurred by reason of any act or omission in the
discharge of their duty, other than in the case of willful negligence, willful
default, fraud or dishonesty.
Bermuda law and the Bye-Laws of the Registrant also permit the Registrant
to purchase insurance for the benefit of its directors and officers against any
liability incurred by them for the failure to exercise the requisite care,
diligence and skill in the exercise of their powers and the discharge of their
duties, or indemnifying them in respect of any loss arising or liability
incurred by them by reason of negligence, default, breach of duty or breach of
trust.
The Registrant intends to enter into indemnification agreements with its
officers and directors. To the extent permitted by law, the indemnification
agreements may require the Registrant, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities arising
from willful misconduct of a culpable nature) and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
The Registrant intends to purchase upon consummation of the offering a
directors' and officers' liability insurance policy.
The underwriting agreement (the 'Underwriting Agreement') to be entered by
the Registrant and the several underwriters party thereto (the 'Underwriters'),
will contain provisions for the indemnification of, among others, controlling
persons, directors and officers of the Registrant for certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) (i) Pursuant to an agreement dated May 31, 1996, American Craft Brewing
International Limited, a British Virgin Islands company ('Craft') and a
predecessor company of the Registrant, issued 23,750 shares to the stockholders
of South China Brewing Company Limited ('South China') and SCBC Distribution
Company Limited ('SCBC') in exchange for substantially all of the outstanding
II-1
<PAGE>
<PAGE>
capital stock of each of South China and SCBC. The shares were issued pursuant
to an exemption from registration under Section 4(2) of the Securities Act of
1933 (the 'Securities Act'). Also pursuant to an agreement dated May 31, 1996,
Craft issued 1,250 shares of its capital stock to investors pursuant to
Regulation S promulgated under the Securities Act for an aggregate consideration
of $300,000. The shares were offered and sold in an overseas directed offering
in an off-shore transaction to non-United States persons. The shares of capital
stock of Craft issued pursuant to this share exchange and sale constitute all of
the shares of Craft outstanding. On June 19, 1996, Craft consummated an
eighty-for-one share split of its capital stock.
No other shares or other securities of Craft were issued prior to the
amalgamation of Craft with the Registrant. Prior to the consummation of this
offering, Craft was amalgamated under Bermuda law with the Registrant, which was
a newly formed company and which was the survivor. As a result of the
amalgamation, outstanding shares of Craft were converted into shares of the
Registrant's common stock, the convertible notes became convertible into shares
of the Registrant's common stock, and the warrants to purchase shares of Craft
became warrants to purchase shares of the Registrant's common stock, all on
identical terms. The amalgamation was, in effect, a reincorporation of Craft, in
Bermuda.
(ii) In May 1996, Craft issued $370,000 in principal amount of convertible
notes and warrants pursuant to Regulation S promulgated under the Securities
Act. The notes and warrants were offered and sold in an overseas directed
offering in an off-shore transaction to non-United States persons.
(b) There were no underwriters, brokers or finders employed in connection
with any of the transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<C> <S>
1.0 -- Form of Underwriting Agreement between the Registrant and National Securities
Corporation ('National Securities').*
3.1 -- Memorandum of Amalgamation of the Registrant.*
3.2 -- Bye-Laws of the Registrant.*
4.1 -- Specimen common stock certificate.*
4.2 -- Form of Warrant Agreement between the Registrant, National Securities and the Bank of
New York (including form of Redeemable Common Stock Purchase Warrant).*
4.3 -- Form of Representative's Warrant Agreement between the Registrant and National
Securities (including form of Representative's Warrant).*
5.0 -- Opinion of Appleby, Spurling & Kempe.**
8.1 -- Tax Opinion of Appleby, Spurling & Kempe.
8.2 -- Tax Opinion of Howard, Darby & Levin.
10.1 -- 1996 Stock Option Plan of the Registrant.
10.2 -- Agreement of Lease between Ping Ping Investment Company Limited ('Ping Ping') and
South China dated as of December 12, 1994.**
10.3 -- Agreement of Lease between Ping Ping and South China dated as of May 1, 1995.**`D'
10.4 -- Management Agreement and Performance Guaranty between South China and Lunar Holdings
Limited dated as of April 1, 1995.**`D'
10.5 -- Distributors Limited Brewing Agreement between South China and Dabeers Distributors
Limited dated as of September 23, 1995.**'B'
10.6 -- Brewing Agreement between South China and Delaney's (Wanchai) Limited dated as of
September 20, 1995.**'B'
10.7 -- Promissory Note issued by South China in favor of Hibernia National Bank dated as of
March 31, 1995.**`D'
10.8 -- Limited Recourse Promissory Note issued by South China in favor of BPW Holding LLC
dated as of March 5, 1996.**
10.9 -- Form of Employment Agreement dated as of June 14, 1996 between the Registrant and
James L. Ake.**
10.10 -- Forms of Bridge Financing Purchase Agreements.**
</TABLE>
(table continued on next page)
II-2
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<C> <S>
10.11 -- Forms of Bridge Financing Convertible Notes (including forms of Bridge Financing
Warrants attached thereto).
10.12 --Employment Agreement, dated as of April 27, 1995, between Edward Cruise Miller and
South China.
10.13 --Form of Plan and Agreement of Amalgamation between Craft and the Registrant.
10.14 --Ratification and Exchange Agreement.
10.15 --Form of Employment Agreement between David K. Haines and the Registrant.*
21.0 --Subsidiaries of the Registrant.
23.1 -- Consent of Arthur Andersen & Co.
23.2 -- Consent of Appleby, Spurling & Kempe (set forth in their Opinion filed as Exhibit 5.0
to this Registration Statement).**
23.3 -- Consent of Woo, Kwan, Lee & Lo.
23.4 -- Consent of Howard, Darby & Levin (set forth in their Opinion filed as Exhibit 8.2 to
this Registration Statement).
24 -- Power of Attorney of Directors and Officers (set forth on signature page of this
Registration Statement).
27 -- Financial Data Schedule.
99.1 -- Enforceability of Civil Liabilities Opinion of Appleby, Spurling & Kempe (set
forth in their Opinion filed as Exhibit 8.1 to this Registration Statement).
</TABLE>
- ------------
* To be filed by amendment.
** Previously filed.
`D' Filed with Amendment No. 1 to this Registration Statement due to
transmission error in previous filing.
'B' Confidential treatment requested.
(b) Financial Statement Schedules:
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
V. -- Indebtedness to Related Parties............................................. S-2
IX. -- Valuation and Qualifying Accounts........................................... S-3
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) (1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the
Securities 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
II-3
<PAGE>
<PAGE>
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 Securities Act and will be governed by the final adjudication of such
issue.
(c) To provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(d) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act if,
in the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
'Calculation of Registration Fee' table in the effective registration
statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(e) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(f) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on July 29, 1996.
AMERICAN CRAFT BREWING INTERNATIONAL
LIMITED
By: *
...................................
NAME: PETER W. H. BORDEAUX
TITLE: CHAIRMAN OF THE BOARD
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
* Chairman of the Board of Directors and July 29, 1996
......................................... Director
PETER W. H. BORDEAUX
/S/ JAMES L. AKE Executive Vice President and Chief Operating July 29, 1996
......................................... Officer (principal executive, accounting
JAMES L. AKE and financial officer)
* Director July 29, 1996
.........................................
JOHN F. BEAUDETTE
* Director July 29, 1996
.........................................
NORMAN H. BROWN, JR.
* Deputy Chairman of the Board of Directors July 29, 1996
......................................... and Director
FEDERICO G. CABO ALVAREZ
* Director July 29, 1996
.........................................
WYNDHAM H. CARVER
* Director July 29, 1996
.........................................
DAVID K. HAINES
* Director July 29, 1996
.........................................
JOSEPH E. HEID
* Director July 29, 1996
.........................................
JOHN CAMPBELL
* Director July 29, 1996
.........................................
TONESAN AMISSAH-FURBERT
As Attorney-in-Fact
/s/ JAMES L. AKE
*By ......................................
JAMES L. AKE
</TABLE>
II-5
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the shareholders and Board of Directors of
American Craft Brewing International Limited:
We have audited, in accordance with generally accepted auditing standards
in the United States of America, the consolidated financial statements of
American Craft Brewing International Limited ('the Company') and its
subsidiaries as of October 31, 1994 and 1995 and related consolidated statements
of operations, cash flows and changes in shareholders' equity for the period
from August 31, 1993 to October 31, 1994 and the year ended October 31, 1995,
included in this registration statement and have issued our report thereon dated
June 10, 1996. Our audit was conducted for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedules listed in the
index to the schedules are the responsibility of the Company's management and
are presented for the purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Certified Public Accountants
Hong Kong
Hong Kong,
June 10, 1996.
S-1
<PAGE>
<PAGE>
SCHEDULE V
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
INDEBTEDNESS TO RELATED PARTIES
<TABLE>
<CAPTION>
INDEBTEDNESS TO
BALANCE AT -----------------------
NAME OF PERSON BEGINNING ADDITIONS DEDUCTIONS BALANCE AT END
- ------------------------------------------------------------- ---------- --------- ---------- --------------
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C> <C>
Period ended October 31, 1994
Sazerac Company, Inc.................................... $ -- $ 2,490 $ -- $ 2,490
---------- --------- ---------- --------------
Year ended October 31, 1995
Sazerac Company, Inc.................................... 2,490 18,148 -- 20,638
BPW Holding Limited..................................... -- 65,000 -- 65,000
---------- --------- ---------- --------------
Total.............................................. $2,490 $ 85,638
---------- --------------
---------- --------------
</TABLE>
S-2
<PAGE>
<PAGE>
SCHEDULE IX
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS:
BALANCE AT CHARGED TO COSTS
DESCRIPTION BEGINNING AND EXPENSES DEDUCTIONS BALANCE AT END
- ------------------------------------------------------ ---------- ---------------- ---------- --------------
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C> <C>
Period ended October 31, 1994
Provision for doubtful accounts.................. $ -- $ -- $ -- $ --
---------- ------- ---------- --------------
Year ended October 31, 1995
Provision for doubtful accounts.................. $ -- $ 556 $ -- $ 556
---------- ------- ---------- --------------
</TABLE>
S-3
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------ ----------------------- -------------------
<S> <C> <C>
1.0 -- Form of Underwriting Agreement between the Registrant and National Securities
Corporation ('National Securities').*
3.1 -- Memorandum of Amalgamation of the Registrant.*
3.2 -- Bye-Laws of the Registrant.*
4.1 -- Specimen common stock certificate.*
4.2 -- Form of Warrant Agreement between the Registrant, National Securities and the Bank of
New York (including form of Redeemable Common Stock Purchase Warrant).*
4.3 -- Form of Representative's Warrant Agreement between the Registrant and National
Securities (including form of Representative's Warrant).*
5.0 -- Opinion of Appleby, Spurling & Kempe.**
8.1 -- Tax Opinion of Appleby, Spurling & Kempe.
8.2 -- Tax Opinion of Howard, Darby & Levin.
10.1 -- 1996 Stock Option Plan of the Registrant.
10.2 -- Agreement of Lease between Ping Ping Investment Company Limited ('Ping Ping') and
South China dated as of December 12, 1994.**
10.3 -- Agreement of Lease between Ping Ping and South China dated as of May 1, 1995.**`D'
10.4 -- Management Agreement and Performance Guaranty between South China and Lunar Holdings
Limited dated as of April 1, 1995.**`D'
10.5 -- Distributors Limited Brewing Agreement between South China and Dabeers Distributors
Limited dated as of September 23, 1995.**'B'
10.6 -- Brewing Agreement between South China and Delaney's (Wanchai) Limited dated as of
September 20, 1995.**'B'
10.7 -- Promissory Note issued by South China in favor of Hibernia National Bank dated as of
March 31, 1995.**`D'
10.8 -- Limited Recourse Promissory Note issued by South China in favor of BPW Holding LLC
dated as of March 5, 1996.**
10.9 -- Form of Employment Agreement dated as of June 14, 1996 between the Registrant and
James L. Ake.**
10.10 -- Forms of Bridge Financing Purchase Agreements.**
10.11 -- Forms of Bridge Financing Convertible Notes (including forms of Bridge Financing
Warrants attached thereto).
10.12 --Employment Agreement, dated as of April 27, 1995, between Edward Cruise Miller and
South China.
10.13 --Form of Plan and Agreement of Amalgamation between Craft and the Registrant.
10.14 --Ratification and Exchange Agreement.
10.15 --Form of Employment Agreement between David K. Haines and the Registrant.*
21.0 --Subsidiaries of the Registrant.
23.1 -- Consent of Arthur Andersen & Co.
23.2 -- Consent of Appleby, Spurling & Kempe (set forth in their Opinion filed as Exhibit 5.0
to this Registration Statement).**
23.3 -- Consent of Woo, Kwan, Lee & Lo.
23.4 -- Consent of Howard, Darby & Levin (set forth in their Opinion filed as Exhibit 8.2 to
this Registration Statement).
24 -- Power of Attorney of Directors and Officers (set forth on signature page of this
Registration Statement).
27 -- Financial Data Schedule.
99.1 -- Enforceability of Civil Liabilities Opinion of Appleby, Spurling & Kempe (set
forth in their Opinion filed as Exhibit 8.1 to this Registration Statement).
</TABLE>
- ------------
* To be filed by amendment.
** Previously filed.
`D' Filed with Amendment No. 1 to this Registration Statement due to
transmission error in previous filing.
'B' Confidential treatment requested.
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as......................... 'D'
The bullet symbol shall be expressed as..........................'B'
<PAGE>
<PAGE>
Exhibit 8.1
[LETTERHEAD OF APPLEBY, SPURLING & KEMPE]
Your Ref:
Our Ref: TAF/aes
29th July, 1996
American Craft Brewing International Limited
Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
Dear Sirs:
We have acted as legal advisers in Bermuda to American Craft Brewing
International Limited, a Bermuda exempted company (the 'Company'), in connection
with its proposed offer of 1,333,333 shares of common stock, par value US$0.01
each and 1,333,333 redeemable common stock purchase warrants, pursuant to a
Registration Statement on Form S-1 initially filed with the Securities and
Exchange Commission under the United States Securities Act 1933, on 14th June,
1996 and as amended, as at the date hereof (the 'Registration Statment').
In connection with the foregoing, we hereby conform:-
1. that the paragraph contained under the heading 'Bermuda Tax Considerations'
on page 45 of the Registration Statement, is an accurate summary of the
matters referred to therein; and
2. that the paragraph printed in bold which commences as the last paragraph on
page 6 of the Registration Statement, contains an accurate summary of the
Bermuda position in relation to the enforcement of US civil liability
provisions.
We hereby consent:-
1. to the reference to our name under the caption 'Taxation' on page 43 of the
Registration Statement;
2. to the reference to our name on page 6 of the Registration Statement; and
<PAGE>
<PAGE>
APPLEBY, SPURLING & KEMPE
2
3. to the filing of this opinion as an exhibit to the Registration Statement.
Yours faithfully,
/s/ Appleby, Spurling & Kempe
<PAGE>
<PAGE>
Exhibit 8.2
[LETTERHEAD OF HOWARD, DARBY & LEVIN]
July 29, 1996
American Craft Brewing International Limited
One Galleria Boulevard (Suite 912)
Metairie, Louisiana 70001
Gentlemen:
We have acted as United States counsel to American Craft Brewing
International Limited (the 'Company') in connection with the proposed issuance
by the Company of common stock and warrants pursuant to the Registration
Statement of the Company on Form S-1 (the 'Registration Statement'), filed on
June 14, 1996 with the Securities and Exchange Commission pursuant to the
Securities Act of 1933 (collectively, the 'Securities'). You have requested our
opinion regarding certain United States federal income tax consequences
applicable to the Company and purchasers of the Securities.
In formulating our opinion, we have examined such documents as we
have deemed appropriate, including the Registration Statement. In addition, we
have obtained such additional information as we have deemed relevant and
necessary through consultation with various officers and representatives of the
Company.
Based on the foregoing, we are of the opinion that the statements
in the Registration Statement under the caption 'United States Federal Income
Tax Considerations,' insofar as such statements constitute summaries of the
United States federal income tax law matters, are accurate in all material
respects.
The foregoing opinion is based on the Internal Revenue Code of
1986, as amended (the 'Code'), Treasury Regulations promulgated thereunder,
proposed Treasury Regulations interpreting the passive foreign investment
company provisions of sections 1291 through 1297 of the Code, Internal Revenue
Service rulings and pronouncements and judicial decisions now in effect, any of
which may be changed at any time with retroactive effect. No opinion is
expressed on any matters other than those specifically referred to herein.
<PAGE>
<PAGE>
American Craft Brewing International Limited 2
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and all references to our firm included in or made a part
of the Registration Statement.
Very truly yours,
HOWARD, DARBY & LEVIN
<PAGE>
<PAGE>
Exhibit 10.1
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
1996 STOCK OPTION PLAN
1. Purpose
The purpose of the American Craft Brewing International Limited 1996
Stock Option Plan, is to attract and retain employees (including officers),
directors and independent contractors of American Craft Brewing International
Limited, a Bermuda company (the 'Company'), or any subsidiary or affiliate of
the Company that now exists or hereafter is organized or acquired, and to
furnish additional incentives to such persons to enhance the value of the
Company over the long term by encouraging them to acquire a proprietary interest
in the Company.
2. Definitions
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) 'Affiliate' means any entity if, at the time of granting of
an Option (i) the Company directly owns at least 20% of the combined voting
power of all classes of stock of such entity or at least 20% of the ownership
interests in such entity or (ii) such entity, directly or indirectly, owns at
least 20% of the combined voting power of all classes of stock of the Company or
at least 20% of the ownership interests in the Company.
(b) 'Beneficiary' means the person, persons, trust or trusts
which have been designated by an Optionee in his or her most recent written
beneficiary designation filed with the Company to receive the Optionee's rights
under the Plan upon the Optionee's death, or, if there is no such designation or
no such designated person survives the Optionee, then the person, persons, trust
or trusts entitled by will or applicable law to receive such rights or, if no
such person has such right then the Optionee's executor or administrator.
(c) 'Board' means the Board of Directors of the Company.
(d) 'Change in Control' means any of the following: (i) the
acquisition by any person or entity not controlled by the Company's stockholders
of more than 80% of the Company's then outstanding Stock, (ii) the sale of all
or substantially all of the Company's assets, or (iii) the merger of the
Company with or into a corporation that is not an Affiliate (other than a
merger, continuation, reorganization or similar transaction with or into
American Craft Brewing International Limited, a British Virgin Islands company).
<PAGE>
<PAGE>
(e) 'Code' means the United States Internal Revenue Code of 1986,
as amended from time to time.
(f) 'Committee' means the committee, consisting of at least two
members of the Board, established by the Board to administer the Plan.
(g) 'Company' means American Craft Brewing International Limited,
a company organized under the laws of Bermuda, or any successor company.
(h) 'Effective Date' means the date on which the Board approves
the Plan.
(i) 'Fair Market Value' means, with respect to Stock or other
property, the fair market value of such Stock or other property determined by
such methods or procedures as shall be established from time to time by the
Board acting in its sole discretion and in good faith.
(j) 'ISO' means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(k) 'NQSO' means any Option not designated as an ISO.
(l) 'Option' means a right, granted to an Optionee under Section
6 of the Plan, to purchase shares of Stock, subject to the terms and conditions
of this Plan. An Option may be either an ISO or an NQSO, provided that ISOs may
be granted only to employees of the Company or a Subsidiary.
(m) 'Optionee' means a person who, as an employee, a director or
an independent contractor of the Company, a Subsidiary or an Affiliate, has been
granted an Option.
(n) 'Plan' means this American Craft Brewing International
Limited 1996 Stock Option Plan, as amended from time to time.
(o) 'Stock' means the common stock, par value $.01 per share, of
the Company.
(p) 'Stock Option Agreement' means any written agreement,
contract, or other instrument or document evidencing an Option.
(q) 'Subsidiary' means any corporation in which the Company,
directly or indirectly, owns stock possessing 50% or more of the total combined
voting power of all classes of stock of such corporation.
-2-
<PAGE>
<PAGE>
(r) 'Ten Percent Shareholder' means a person or persons who own,
directly or indirectly, more than 10% of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries.
3. Administration
The Plan shall be administered by the Committee which shall consist of
either (i) the entire Board or (ii) if so determined by the Board, a committee
of not less than two persons appointed by the Board. The Committee shall have
full power to construe and interpret the Plan, to establish rules for its
administration and to grant Options. The Committee may establish rules setting
forth terms and conditions for a specified group of Options. The Committee may
act by a majority of a quorum (a quorum being a majority of the members of such
Committee) present at a called meeting or by unanimous written consent of all of
its members. All actions taken and decisions made by the Board or the Committee
pursuant to the Plan shall be binding and conclusive on all persons interested
in the Plan.
4. Eligibility
Options may be granted in the discretion of the Committee to employees
(including officers), directors and independent contractors of the Company and
its present or future Subsidiaries and Affiliates. In determining the persons to
whom Options shall be granted and the type of Options granted (including the
number of shares to be covered by such Options), the Committee shall take into
account such factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
5. Stock Subject to the Plan
The maximum number of shares of Stock reserved for the grant of Options
under the Plan shall be 300,000 shares of Stock, subject to adjustment as
provided herein. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be reacquired by the
Company in private transactions or otherwise. The number of shares of Stock
available for issuance under the Plan shall be reduced by the number of shares
of Stock subject to outstanding Options. If any shares subject to an Option are
forfeited, canceled, exchanged or surrendered or if an Option otherwise
terminates or expires without a distribution of shares to the Optionee, the
shares of Stock with respect to such Option shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration, again
be available for Options under the Plan.
In the event that the Committee shall determine, in its sole discretion,
that any dividend or other distribution (whether in the form of cash, Stock, or
other property), recapitalization, stock split, reverse split, any
reorganization, merger, consolidation, spin-off, combination, repurchase,
-3-
<PAGE>
<PAGE>
share exchange, license arrangement, strategic alliance or other similar
corporate transaction or event, affects the Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of any
Optionees under the Plan, then the Committee shall make such equitable changes
or adjustments as it deems necessary or appropriate to any or all of (i) the
number and kind of shares of Stock which may thereafter be issued in connection
with Options, (ii) the number and kind of shares of Stock issued or issuable in
respect of outstanding Options, and (iii) the exercise price, grant price, or
purchase price relating to any Option; provided that, with respect to ISOs, such
adjustment shall be made in accordance with Section 424(h) of the Code.
6. Specific Terms of Options
(a) General Options may be granted at the discretion of the
Committee. The term of each Option shall be for such period as may be determined
by the Committee. The Committee may make rules relating to Options, and may
impose on any Option or the exercise thereof, at the date of grant or
thereafter, such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine.
(b) Options The Committee is authorized to grant Options to
Optionees on the following terms and conditions:
(i) Type of Option. The Stock Option Agreement evidencing the
grant of an Option under the Plan shall designate the Option as
an ISO (in the event its terms, and the individual to whom it is
granted, satisfy the requirements for ISOs under the Code) or an
NQSO.
(ii) Exercise Price The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee;
provided that, in the case of an ISO, (A) such exercise price
shall be not less than the Fair Market Value of a share of Stock
on the date of grant of such Option or such other exercise price
as may be required by the Code and (B) if the Optionee is a Ten
Percent Shareholder, such exercise price shall not be less than
110% of the Fair Market Value of a share of Stock on the date of
grant of such Option. In no event shall the exercise price for
the purchase of shares of Stock be less than par value. Options
shall be exercised by (I) giving written notice thereof to the
Company and (II) paying the exercise price. In addition to any
other method of payment which may be acceptable to the Committee,
payment may be effected, either in whole or in part, by the
surrender to the Company of outstanding Stock. Any Stock so
surrendered shall be valued at the Fair Market Value on the date
on which such shares are surrendered.
(iii) Term and Exercisability of Options The date on which the
Committee adopts a resolution expressly granting an Option shall
be considered the day on
-4-
<PAGE>
<PAGE>
which such Option is granted. Options shall be exercisable over
the exercise period which shall not exceed ten years (five years
in the case of an ISO granted to a Ten Percent Shareholder) from
the date of grant, at such times and upon such conditions as the
Committee may determine, as reflected in the Stock Option
Agreement.
(iv) Payment of Cash or Stock Upon Exercise Upon exercise of an
Option, the Company may, in the sole discretion of the Committee,
either (A) issue to the Optionee the shares of Stock subject to
the Option or (B) in lieu of issuing Stock, pay to the Optionee
in cash an amount equal to the excess, if any, of the aggregate
Fair Market Value of the shares of Stock subject to such Option
as of the close of the fiscal year in which exercise occurs over
the aggregate exercise price of the shares of Stock purchasable
under such Option. Notwithstanding the foregoing, if at the time
of exercise of the Option, the Company has issued Stock in a
public offering it will no longer have the right to pay cash to
an Optionee in lieu of issuing Stock.
(v) Termination of Employment, etc An Option may not be exercised
unless the Optionee is then in the employ of, or then maintains
an independent contractor relationship with, the Company or any
Subsidiary or Affiliate (or a company or a parent or subsidiary
company of such company issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies) and
unless the Optionee has continuously maintained any of such
relationships since the date of grant of the Option; provided
that, the Stock Option Agreement may contain provisions extending
the exercisability of Options, in the event of specified
terminations, to a date not later than the expiration date of
such Option. The Committee may establish a period during which
the Beneficiaries of an Optionee who died while an employee, a
director or an independent contractor of the Company or any
Subsidiary or Affiliate or during any extended period referred to
in the immediately preceding proviso may exercise those Options
which were exercisable on the date of the Optionees death;
provided that no Option shall be exercisable after its expiration
date.
(vi) Nontransferability Options shall not be transferable by an
Optionee except by will or the laws of descent and distribution
and shall be exercisable during the lifetime of an Optionee only
by such Optionee.
(vii) Other Provisions Options may be subject to such other
conditions as the Committee may prescribe in its discretion.
7. Change in Control Provisions
-5-
<PAGE>
<PAGE>
In the event of a Change in Control, any and all Options then
outstanding shall become fully exercisable and vested, whether or not
theretofore vested and exercisable.
8. General Provisions
(a) Fair Market Value of Common Stock. In determining the Fair
Market Value of the Stock for purposes of the Plan, the Board may rely on a
valuation report by an investment banking or valuation firm selected by the
Board. In the event the Stock becomes listed on any national stock exchange or
quoted on the national market quotations system, the Fair Market Value of the
Stock shall, as of any day, be the closing price for the immediately preceding
trading day.
(b) Compliance with Legal and Exchange Requirements The Plan, the
granting and exercising of Options thereunder, and the other obligations of the
Company under the Plan and any Stock Option Agreement, shall be subject to all
applicable laws, rules and regulations, and to such approvals by any regulatory
or governmental agency as may be required. The Company, in its discretion, may
postpone the issuance or delivery of Stock under any Option until completion of
such stock exchange listing or registration or qualification of such Stock or
other required action under any law, rule or regulation as the Company may
consider appropriate, and may require any Optionee to make such representations
and furnish such information as it may consider appropriate in connection with
the issuance or delivery of Stock in compliance with applicable laws, rules and
regulations.
(c) No Right to Continued Employment, etc Nothing in the Plan or
in any Option granted or Stock Option Agreement entered into pursuant to the
Plan shall confer upon any Optionee the right to continue as an employee or
director of, or as an independent contractor to, the Company, any Subsidiary or
any Affiliate, as the case may be, or to be entitled to any remuneration or
benefits not set forth in the Plan or such Stock Option Agreement or to
interfere with or limit in any way the right of the Company or any such
Subsidiary or Affiliate to terminate such Optionee's employment or independent
contractor relationship.
(d) Taxes The Company or any Subsidiary or Affiliate is
authorized to withhold from any Option granted, any payment relating to an
Option under the Plan (including from a distribution of Stock), or any other
payment to an Optionee, amounts of withholding and other taxes due in connection
with any transaction involving an Option, and to take such other action as the
Committee may deem advisable to enable the Company and an Optionee to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Option. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in respect thereof in
satisfaction of an Optionee's tax obligations.
(e) Amendment and Termination of the Plan The Board may at any
time and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part.
-6-
<PAGE>
<PAGE>
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Optionee, without such Optionee's consent, under any Option
theretofore granted under the Plan. Unless terminated earlier by the Board, the
Plan shall terminate ten years after the effective date and no Options shall be
granted under the Plan after such date.
(f) No Rights to Options; No Stockholder Rights No person shall
have any claim to be granted any Option under the Plan, and there is no
obligation for uniformity of treatment of Optionees. Except as provided
specifically herein, an Optionee or a transferee of an Option shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of the issuance of a stock certificate to such Optionee for such
shares.
(g) Unfunded Status of Options The Plan is intended to constitute
an "unfunded" plan for incentive and deferred compensation. Nothing contained in
the Plan or any Option shall give any such Optionee any rights that are greater
than those of a general creditor of the Company.
(h) Governing Law The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of New
York without giving effect to the conflict of laws principles thereof.
(i) Effective Date The Plan shall take effect upon the Effective
Date, but the Plan (and any grants of Options made prior to the stockholder
approval mentioned herein), shall be subject to the approval of the holder(s) of
a majority of the issued and outstanding shares of voting securities of the
Company entitled to vote, which approval must occur within twelve months of the
date the Plan is adopted by the Board. In the absence of such approval, such
Options shall be null and void.
-7-
<PAGE>
<PAGE>
DATED the day of 1996.
PING PING INVESTMENT COMPANY LIMITED
and
SOUTH CHINA BREWING COMPANY LIMITED
----------------------------------------------------------
TENANCY AGREEMENT
----------------------------------------------------------
REGISTERED in the Land Registry by
Memorial No. on
for Land Registrar.
----------------------------------------------------------
LO AND LO,
SOLICITORS &c.,
HONG KONG.
----------------------------------------------------------
LM:PL:CCY:31750 [LYN79-2356]
<PAGE>
<PAGE>
AN AGREEMENT made the day of One
thousand nine hundred and ninety-six
Parties BETWEEN the Landlord whose name address or registered office
and description are set out in Part I of the First Schedule
hereto (hereinafter called "the Landlord") of the one part and
the Tenant whose name address or registered office and
description are set out in Part II of the First Schedule
hereto (hereinafter called "the Tenant") of the other part
WHEREBY IT IS HEREBY MUTUALLY AGREED by and between the said
parties hereto as follows:
SECTION I
THE PREMISES AND THE TERM
Premises The Landlord shall let and the Tenant shall take all
that Portion on an "as is" basis (which Portion shall
hereinafter called "the said premises") of the Building
(hereinafter called "the said building") more particularly set
out in the Second Schedule hereto TOGETHER with (a) a right of
way for the Tenant his servants and agents (in common with the
Landlord and all other having the like right) from time to
time to pass and repass over and along the entrance halls,
staircases and landings erected in the said building and (b)
the right (in common as aforesaid) to use the specified lifts
installed in the said building whenever the same shall be
operating for the purpose of access to and egress from the
said premises and (c) the right for the Tenant his servants
and agents (in common as aforesaid) to use the specified
loading and unloading bays on the ground floor of the said
building for the loading and unloading of his vehicle or
vehicles provided always that the Tenant shall not park his
vehicles thereon or permit his vehicles to remain thereon
except when actually engaged in loading or unloading goods and
FOR THE TERM set out in Part III of the First Schedule hereto
at the rent and management fee respectively set out in Parts
IV and V of the First Schedule hereto and the first of such
payments to be paid on the signing of this Agreement.
1.
<PAGE>
<PAGE>
SECTION II
RENT AND OTHER CHARGES
The Tenant hereby agrees with the Landlord as follows:-
Rent and (1) To pay the rent and management fee (which are unless
management fee the context otherwise requires hereinafter
collectively included under the term "rent") without
any deduction and set off on the days and in the
manner hereinbefore provided for payment thereof and
in banknotes if so demanded.
Rates, (2) To pay and discharge all rates, taxes, assessments,
Taxes, etc. duties, charges, impositions and outgoings of an
annual or recurring nature now or hereafter to be
assessed, imposed or charged by the Government of
Hong Kong or other lawful authority upon the said
premises or upon the owner or occupier thereof
(Crown Rent and Property Tax excepted).
Gas water and (3) To pay and discharge all charges for gas, water and
electricity electricity consumed in the said premises including
charges charges for the running of any air-conditioning
units installed therein and operated from the
Tenant's own metered electricity supply and to make
all necessary deposits for the supply of electricity
gas and water to the said premises when required,
and to comply with all requirements of the
electricity gas and water authorities or suppliers
(including rewiring the said premises if so
required).
Interest (4) The Landlord shall have the right without prejudice
to any other right or remedy hereunder to charge
interest at four per cent over the best lending rate
from time to time of The Hongkong and Shanghai
Banking Corporation Limited in respect of any
payments to be made to the Landlord under Clauses
(1) (2) and (3) of this section as shall be more
than 14 days in arrears and such interest shall be
payable from the date upon which such payment in
arrears fell due and not fourteen days thereafter.
2.
<PAGE>
<PAGE>
SECTION III
TENANT'S OTHER OBLIGATIONS
The Tenant hereby agrees with the Landlord as follows:-
Good repair (1) To constantly maintain and keep the whole of the
of the interior of the said premises and every part thereof
interior in proper and tenantable repair and condition
including all fixtures and fittings therein.
Inspection (2) To permit the Landlord and all persons authorised by
it at all reasonable times to enter into the said
premises to inspect the condition thereof and to
give or leave notice in writing upon the said
premises for the Tenant of all defects and want of
repair there found and for which the Tenant shall be
liable hereunder and within one month after every
such notice well and sufficiently to repair and make
good such defects and want of repair whereof any
such notice shall have been so given or left.
Entry by (3) To permit the Landlord and its duly authorised
Landlord to agents workmen and others appointed by it at all
effect work reasonable times during the said term (but upon
previous written notice save in cases of emergency)
to enter into and upon the said premises and to
execute any works of renewal cleansing alteration or
repair to any adjacent or neighbouring premises or
to the building of which the said premises form
part, and so far as any defects remedied or works
done by the Landlord may be included in the Tenant's
liabilities hereunder then the costs thereof shall
be a debt due from the Tenant to the Landlord and be
forthwith recoverable by action PROVIDED that the
Landlord shall make good the damage to the said
premises caused by such work as aforesaid.
Replacement (4) To replace any broken or damaged window and glass or
of windows otherwise reimburse the Landlord for the cost of
replacing all broken and damaged windows and glass
whether or not the same be broken or damaged by the
negligence of the Tenant.
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Repair of (5) To repair or replace any electrical installation or
electrical wiring or any gas installation or piping of
and gas the Tenant if the same becomes dangerous or unsafe
installations or if so reasonably required by the Landlord or by
the relevant utility company and in so doing the
Tenant shall obtain the Landlord's approval
concerning such work to be carried out for that
purpose. The Tenant shall permit the Landlord or its
agents to test the Tenant's wiring or the Tenant's
gas installation and piping in the said premises at
any time upon request being made.
Alterations (6) To submit plans and details of any alteration in or
additions to the said premises for the approval of
the Landlord prior to any work being carried out.
Machineries (7) To mount and equip his machinery particularly
machinery with horizontal reciprocating action and
every part thereof with antivibration absorbers and
anti-dumping absorbers of such types and designs as
first approved of in writing by the Landlord's
architect and/or engineer and shall comply with all
directions or orders of the Landlord for eliminating
and reducing vibrations and dumping produced by the
operation and running of any of the machinery
installed at the said premises. And to cushion
machinery placed on or affixed to the said premises
and to submit drawings and details of such work for
approval by the Landlord.
Workers (8) To restrict the number of workers working or staying
in the said premises in accordance with Government
Requlations.
Good repair (9) To keep the sanitary and water apparatus used
of sanitary exclusively by the Tenant and its servants agents
and water licencees and customers in good clean and tenantable
apparatus repair and condition to the satisfaction of the
Landlord and in accordance with the regulations or
byelaws of all Public Health and other Government
Authorities concerned.
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Cleaning (10) To pay to the Landlord on demand all costs incurred
of drains by the Landlord in cleansing clearing repairing or
replacing any of the drains pipes or sanitary or
plumbing apparatus choked or stopped up owing to the
careless or improper use or neglect by the Tenant or
any employee agent licencee or customer of the
Tenant and to indemnify the Landlord against any
cost claim or damage caused by or arising therefrom.
Indemnity and (11) To be wholly responsible for and to indemnify the
insurance Landlord against any loss damage or injury caused to
against loss/ any person whomsoever or any property whatsoever
damage from whether directly or indirectly through the defective
interior or damaged condition of any part of the interior of
defects the said premises or any fittings fixtures wiring or
piping therein for the repair of which the Tenant is
responsible hereunder or through or in any way owing
to the spread of fire or smoke or the leakage or
overflow of water including storm or rain water from
the said premises or any part thereof or through the
act default or neglect of the Tenant its servants
agents licencees or customers and for the better
observance of this Clause to permit the Landlord at
the Tenant's expense to effect insurance cover in
respect of such risks with a reputable insurance
company to the satisfaction of the Landlord. The
policy of such insurance shall be in the name of the
Tenant and endorsed to show the Landlord as
registered owner of the said building and shall be
in such amount as the Landlord shall from time to
time stipulate and shall contain a clause to the
effect that the insurance cover thereby effected and
the terms and conditions thereof shall not be
cancelled modified or restricted without the prior
written consent of the Landlord.
Protection (12) To take all reasonable precautions to protect the
from typhoons interior of the said premises against damage by
storm typhoon heavy rainfall or the like and in
particular to ensure that all exterior doors and
windows are securely fastened upon the threat of
such adverse
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weather conditions.
Inform (13) To give notice in writing to the Landlord or its
Landlord agent of any damage that may be suffered to the said
of damage premises or to persons thereon and of any accident
to or defects in the water pipes gas pipes
electrical wiring or other facilities provided by
the Landlord.
Directory (14) To pay the Landlord immediately upon demand the cost
boards of affixing repairing altering or replacing as
necessary the Tenant's name on the directory boards
(if any) provided by the Landlord.
Viewing (15) To allow at all reasonable times within three
calendar months immediately preceding the expiration
of the said term prospective tenants or occupiers to
inspect the said premises and allow the Landlord to
exhibit where the Landlord shall think fit a notice
indicating that the said premises are to become
vacant which notice the Tenant shall not conceal.
Regulations (16) To obey and comply with such Regulations as may from
time to time be adopted by the Landlord in
accordance with the provisions hereinafter
contained.
Contractors (17) To be responsible to the Landlord for the acts
servants neglects omissions and defaults of all contractors
agents servants agents licencees and customers of the
licencees Tenant as if they were the acts neglects omissions
customers and defaults of the Tenant himself and for the
purposes of this Agreement "licencee" shall include
any persons present in using or visiting the said
premises with the consent of the Tenant express or
implied.
Service (18) To load and unload goods only at such times during
entrances normal business hours and through such service
and lifts entrances and by such service lifts as shall be
designated by the Landlord for this purpose from
time to time.
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Refuse and (19) To be responsible for the removal of garbage and
garbage refuse from the said premises to such location as
removal shall be specified by the Landlord from time to time
and to use only that type of refuse container as is
specified by the Landlord from time to time. In the
event of the Landlord providing a collection service
for garbage and refuse the same shall be used by the
Tenant to the exclusion of any other similar service
and the use of such service provided by the Landlord
shall be at the sole cost of the Tenant.
Uniform (20) To co-operate with the Landlord to maintain a
external uniform external appearance for the said building
appearance and shall not use or install anything in the inside
of the said premises which affects the external
appearance from the outside. In particular, but
without in any way limiting the foregoing, no
flag-pole may be erected and no flag or similar item
shall be flown or displayed from windows or from
elsewhere in or upon the said building.
Yield up (21) To quietly yield up the said premises together with
premises and all fixtures fittings and additions therein and
handover thereto at the expiration or sooner determination of
this tenancy in good clean and tenantable repair and
condition notwithstanding any rule of law or equity
to the contrary PROVIDED THAT all personal property
trade fixtures and fittings and additions therein
and thereto of the Tenant of a nonstructural nature
shall if so required by the Landlord be removed by
and at the expense of the Tenant at the expiration
or sooner determination of this tenancy and in such
event the Tenant shall make good all damage caused
by such removal AND thereupon to surrender to the
Landlord all keys giving access to all parts of the
said premises held by the Tenant and to permit the
Landlord to remove at the Tenant's expense all
lettering and characters from the directory boards
and from all the doors walls or windows of the said
premises and to make good any damage caused by such
removal.
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Change of (22) To obtain the Landlord's consent if the Tenant
name wishes to change the business name and the Landlord
shall have the absolute discretion to give or
withhold such consent.
SECTION IV
LANDLORD'S OBLIGATIONS
The Landlord agrees with the Tenant as follows:-
Quiet (1) That the Tenant paying the rent hereby reserved and
enjoyment performing and observing the agreements by the
Tenant hereinbefore contained may peaceable hold and
enjoy the said premises during the said period
without any interruption by the Landlord or any
person lawfully claiming through or under it.
Crown Rent (2) To pay the Crown rent and property tax which are now
or may hereafter during the said period be imposed
by Government upon the said premises.
Roof and (3) To maintain and keep the main structure and roof of
main the said building and every part of such main
structure structure in proper and tenantable repair and
condition.
Facilities (4) To keep the said lifts in good repair and in working
condition.
Pumps (5) To maintain the electric pumps for supplying
flushing water to the said building in good
condition.
Staircases (6) To keep the staircases and landings and other common
portions of the said building in a clean and
sanitary condition.
Lighting (7) To pay all charges in respect of electricity
consumed by the said lifts, the electric pumps and
lighting in the staircases and landings and other
common portions of the said building. Provided
always that the Landlord shall in no case be
responsible for failure
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of the said lifts, the electric pumps and/or
lighting for any reason whatsoever including
negligent or wrongful acts or omissions by
independent contractors or other causes beyond the
Landlord's control or for any damage whatsoever
caused thereby and that, in the event of such
failure the Tenant cannot claim rental abatement or
reduction.
Directory (8) To supply Directory Boards and to allot space
Board thereon for the Tenant's name to be affixed in such
uniform lettering or characters as shall be
designated by the Landlord.
SECTION V
RESTRICTIONS AND PROHIBITIONS
The Tenant hereby agrees with the Landlord as follows:-
Floor (1) Not to store or place any goods machinery or other
loading things on or in any part of the said premises which
impose a loading exceeding 200 lb. per sq. ft. for
first and second floors and 150 lb. per sq. ft. for
other floors.
Lift (2) Not to overload the lifts in the said building in
capacity excess of their maximum capacity and to be
responsible for any damage caused by any breach
thereof.
Furnace, (3) Not to install any furnace, boiler, compressors,
boiler etc. generators or other plant or equipment in the said
premises or use any fuel that might in any
circumstance produce smoke without first obtaining
permission in writing from the Commissioner of
Labour.
Installation (4) (a) Not without the previous written consent of the
and alterations Landlord to erect install or alter any
fixtures partitioning or other erection or
installation in the said premises or any part
thereof or without the like consent to make or
permit or suffer to be made alterations in or
additions to the
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electrical/gas wiring/piping and installations
or to install or permit or suffer to be
installed any equipment apparatus or machinery
which imposes a weight on any part of the
flooring in excess of that for which it is
designed or which requires any additional
electrical/gas mains wiring/piping or which
consumes electricity/gas not metered through
the Tenant's separate meter. The Landlord shall
be entitled to prescribe the maximum weight and
permitted location of safes and other heavy
equipment and to require that the same stand on
supports of such dimensions and material to
distribute the weight as the Landlord may deem
necessary.
(b) In carrying out any approved work hereunder the
Tenant shall and shall cause its servants
agents contractors and workmen to co-operate
fully with the Landlord and all servants agents
contractors and workmen of the Landlord and
with other tenants or contractors carrying out
any work on the said building. The Tenant its
servants agents contractors and workmen shall
obey and comply with all instructions and
directions which may be given by the Landlord's
Architect or other authorised representative in
connection with the carrying out of such work.
(c) In carrying out any work to the electrical or
gas installation and/or wiring and piping the
Tenant shall use only a contractor previously
approved by the Landlord in writing for the
purpose.
Injury to (5) Not without the previous written consent of the
main walls Landlord to cut maim injure drill into mark or
deface or permit or suffer to be cut maimed injured
drilled into marked or defaced any doors windows
walls beams structural members or any part of the
fabric of the said premises or any of the plumbing
or sanitary or installations included therein.
10.
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Damage to (6) Not without the previous written consent of the
walls ceilings Landlord to lay or use any floor covering or do
and floors anything which may damage or penetrate the existing
flooring floor screed slab.
Damage to (7) Not to damage injure or deface any part of the
Common Areas fabric or decorative features of the common areas
stairs and lifts of the said building including any
trees plants or shrubs therein or thereabout.
Locks (8) Not without the previous written consent of the
Landlord to alter the existing locks bolts and
fittings on the entrance doors to the said premises
nor to install any additional locks bolts or
fittings thereon. The Landlord is entitled to keep
duplicate keys to the entrance doors of the said
premises.
Damage to (9) Not to install any supports or erect any iron
exterior brackets on any part of the exterior walls of the
walls or said building for any purpose including the
windows installation of air-conditioners and if the Tenant
wishes to install any air-conditioners he shall
submit all drawings and plans for the previous
consent in writing of the Landlord and ensure that
the air-conditioners are safely installed without
damaging any part of or protruding from the exterior
walls or windows of the said building.
Blinds (10) Not to fix or erect any venetian blinds or sun
blinds of any description to or on the part of the
exterior walls of the said building.
Openings on (11) Not to make any openings on any part of the exterior
the exterior walls of the said building.
walls
Nuisance or (12) Not to do or permit or suffer to be done any act or
annoyance thing which may be or become a nuisance or annoyance
to the Landlord or to the tenants or occupiers of
other premises in the said building or in any
adjoining or neighbouring building and it is agreed
that a persistent breach by the Tenant of the terms
of
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this Clause shall amount to a breach of this
Agreement justifying the Landlord exercising its
rights of re-entry hereunder.
Noise (13) Not to produce or suffer or permit to be produced at
any time in the said premises any music or noise
including sound produced by broadcasting from
Rediffusion television radio or any other service or
by any equipment or instrument capable of producing
or reproducing music or sound so as to constitute in
the opinion of the Landlord (which opinion shall be
conclusive) a nuisance or to give cause for
reasonable complaint from the occupants of any other
premises in the said building or persons using or
visiting the same and it is agreed that a persistent
breach by the Tenant of the terms of this Clause
shall amount to a breach of this Agreement
justifying the Landlord exercising its right to
re-entry hereunder.
Signs (14) Not to affix exhibit or paint on any part of the
exterior walls common entrance halls staircases
landings lifts or passages in the said building or
in the windows of the said premises any trade,
professional or business signboard notice or
advertisement whatsoever save and except in such
space at the lobby entrances on the ground and upper
floors of the said building as the Landlord shall
designate and approve for such purpose provided that
all graphics and materials are firstly submitted for
Landlord's approval.
User (15) Not to use or permit or suffer the said premises to
be used for any purpose other than for Industrial
purpose only and any change in the use of the said
premises must be approved by the Landlord in writing
but in any event the Tenant shall not carry on any
trade or business of an oil refinery or of paint
spraying, dyeing, bleaching, weaving, spinning or
plastic injection moulding.
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Illegal or (16) Not to use or permit or suffer the said premises to
immoral use be used for any illegal or immoral purpose or for
any purpose which is in contravention of the terms
and conditions contained in the Crown Lease under
which the said premises are held from the Crown.
Sleeping or (17) Not to use or permit or suffer the said premises or
domestic use any part thereof to be used as sleeping quarters or
as domestic premises within the meaning of any
landlord and tenant legislation for the time being
in force nor to allow any person to remain in the
said premises overnight.
Roof and (18) Not to use the roof flat roofs or any store rooms of
store rooms the said building except within the express consent
of the Landlord.
Combustible (19) Not to keep or store or permit or suffer to be kept
or dangerous or stored in the said premises any arms ammunition
goods gun-powder salt-petre kerosene or other explosive
or combustible substance or hazardous goods.
Hazardous goods may be stored in specified area with
the prior consent of the Landlord which may be
granted or withheld at its discretion.
Obstructions (20) Not to encumber or obstruct or permit or suffer to
in passages be encumbered or obstructed with any boxes packaging
rubbish or other obstruction of any kind or nature
any of the entrances staircases landings passages
lifts lobbies or other parts of the said building in
common use and not to permit the Tenant's employees
to use the same for loitering and the Landlord shall
be entitled without notice and at the Tenant's
expense to remove and dispose of as it sees fit any
such material aforesaid and the Landlord shall not
thereby incur any liability to the Tenant or any
other person whomsoever and the Tenant shall
indemnify the Landlord against all losses claims
damages or expenses of and against the Landlord in
respect thereof.
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Toilet (21) Not to use or permit or suffer the toilet facilities
facilities provided by the Landlord in the said premises or in
the common areas of the said building to be used for
any purpose other than that for which they are
intended and not to throw or permit or suffer to be
thrown therein any foreign substance of any kind and
the Tenant shall pay to the Landlord on demand the
whole expense of any breakage blockage or damage
resulting from a violation of this Clause.
Wiring and (22) Not to lay install affix or attach any wiring cables
cables in or other article or thing in or upon any of the
common areas entrances staircases landings passages lobbies or
and from other parts of the said building in common use nor
exterior walls to erect or hang any wire or aerial wirings from the
windows or outside the exterior walls of the said
building.
Preparation (23) Not to prepare or permit or suffer to be prepared
of food and any food in the said premises or to cause or permit
prevention any odours which shall in the sole opinion of the
of odours Landlord be offensive or unusual to be produced upon
permeate through or emanate from the said premises
and it is agreed that a persistent breach by the
Tenant of the terms of this clause shall amount to a
breach of this Agreement justifying the Landlord
exercising its right of re-entry.
Food by (24) Not to permit or allow any food or food containers
service to be brought onto or removed from the said premises
entrances except by way of the specified lifts, entrances and
exits.
Animals (25) Not to keep or permit or suffer to be kept any
pets and animals or pets inside the said premises and at the
infestation Tenant's expense to take all such steps and
precautions as shall be required by the Landlord to
prevent the said premises or any part thereof from
becoming infested by termites rats mice cockroaches
or any other pests or vermin. The Tenant shall
employ at the Tenant's cost such pest extermination
contractors as the Landlord
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may require and at such intervals as the Landlord
may direct and to the exclusion of all others.
Sub-letting (26) Not to assign underlet part with the possession of
assigning or transfer the said premises or any part thereof or
any interest therein nor permit or suffer any
arrangement or transaction whereby any person who is
not a party to this Agreement obtains the use
possession occupation or enjoyment of the said
premises or any part thereof irrespective of whether
any rental or other consideration is given therefor.
The tenancy shall be personal to the Tenant named in
this Agreement and without in any way limiting the
generality of the foregoing the following acts and
events shall unless approved in writing by the
Landlord be deemed to be breaches of this clause:-
(a) In the case of a tenant which is a partnership
the taking in of one or more new partners
whether on the death or retirement of an
existing partner or otherwise.
(b) In the case of a tenant who is an individual
(including a sole surviving partner of a
partnership tenant) the death insanity or
other disability of that individual to the
intent that no right to use possess occupy or
enjoy the said premises or any part thereof
shall vest in the executors administrators
personal representatives next of kin trustee
or committee of any such individual.
(c) In the case of a tenant which is a corporation
any take-over reconstruction amalgamation
merger voluntary liquidation or change in the
person or persons who owns or own a majority
of its voting shares or who otherwise has or
have effective control thereof.
(d) The giving by the Tenant of a Power of
Attorney or similar authority whereby the
donee of the
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Power obtains the right to use possess occupy
or enjoy the said premises or any part
thereof or does in fact use possess occupy or
enjoy the same.
(e) The change of the Tenant's business name
without the previous writing consent of the
Landlord as required by Section III Clause
(22) hereof.
Breach of (27) Not to do or permit or suffer to be done any act
Crown Lease deed matter or thing whatsoever which amounts to a
breach of any of the terms and conditions under
which the said Lot is held from the Crown and to
indemnify the Landlord against any such breach.
Breach of (28) Not to do or permit or suffer to be done any act
insurance deed matter or thing whatsoever whereby the
policy insurance on the said building against loss or
damage by fire and/or other insurable perils and/or
claims by third parties for the time being in force
may be rendered void or voidable or whereby the
premium thereon may be increased Provided that if as
the result of any act deed matter or thing done
permitted or suffered by the Tenant the premium on
any such policy of insurance shall be increased the
Landlord shall be entitled without prejudice to any
other remedy hereunder to recover from the Tenant
the amount of any such increase.
Aerials (29) Not to erect any aerial on the roof or external
walls of the said building except with the prior
written consent of the Landlord.
Parking (30) Not to park in obstruct or otherwise use nor permit
any employee agent or licencee of the Tenant to park
in obstruct or otherwise use those areas of the said
building allocated to the parking other than the car
parking space (if any) let to the Tenant or movement
of or access for vehicles or designated as loading/
unloading areas otherwise than in accordance with
the Regulations from time to time made by the
Landlord.
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Use of (31) Not without the previous written consent of the
building Landlord to use or permit to be used the name/logo
name or any part of the name/logo of the Landlord or of
the said building or any picture representation or
likeness of the whole or any part of such name/logo
or of the said building or of the said premises in
connection with the business or operations of the
Tenant or for any purpose whatsoever other than to
indicate the address and place of business of the
Tenant.
SECTION VI
EXCLUSIONS
The Landlord shall not in any circumstances be
liable to the Tenant or any other person
whomsoever:-
Lifts etc. (1) in respect of any loss or damage to person or
property sustained by the Tenant or any such other
person caused by or through or in any way owing to
any defect in or breakdown of the lifts fire and
security services equipment air-conditioning plant
(if any) and other facilities of the said building
or
Electricity/ (2) in respect of any loss or damage to person or
gas/water property sustained by the Tenant or any such other
supply person caused by or through or in any way owing to
any failure malfunction explosion or suspension of
the electricity gas or water supply to the said
building or the said premises or
Fire and (3) in respect of any loss or damage to person or
overflow of property sustained by the Tenant or any such other
water vermin person caused by or through or in any way owing to
fire or the overflow or leakage of water from
anywhere within the said building or the influx of
rain water or sea water into the said building or
the said premises or the activity of rats or other
vermin in the said building or
Security (4) for the security or safekeeping of the said premises
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or any persons or contained therein nor shall the
rent or management fee or any part thereof abate or
cease to be payable on account thereof.
SECTION VII
ABATEMENT OF RENT
Abatement If the said premises or any part thereof shall be
destroyed or so damaged by fire typhoon Act of God Force
Majeure or other cause beyond the control of the Landlord
and not attributable directly or indirectly to any act or
default of the Tenant as to be rendered unfit for use and
occupation the rent hereby agreed to be paid or a part
thereof proportionate to the damage sustained shall cease
to be payable until the said premises shall have been
restored or reinstated Provided Always that the Landlord
shall be under no obligation to repair or reinstate the
said premises if in its opinion it is not reasonably
economical or practicable so to do and Provided Further
that if the whole or substantially the whole of the said
premises shall have been destroyed or rendered unfit for
use and occupation and shall not have been repaired and
reinstated within three months of the occurrence of the
destruction or damage either party shall be entitled at
any time before the same are so repaired and reinstated
to terminate this Agreement by notice in writing to the
other.
SECTION VIII
DEFAULT
It is hereby further expressly agreed and declared as
follows:-
Default (1) If the rent or any part thereof shall be unpaid for
fifteen days after the same shall become payable
(whether legally or formally demanded or not) or if
the Tenant shall fail or neglect to observe or
perform any of the agreements stipulations or
conditions herein contained and on the Tenant's part
to be observed and performed or if the Tenant shall
become bankrupt or being a corporation shall go into
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liquidation or if any petition shall be filed for
the winding up of the Tenant or if the Tenant shall
otherwise become insolvent or make any composition
or arrangement with creditors or shall suffer any
execution to be levied on the said premises or
otherwise on the Tenant's goods then and in any such
case it shall be lawful for the Landlord at any time
thereafter to re-enter on the said premises or any
part thereof in the name of the whole whereupon this
Agreement shall absolutely cease and determine but
without prejudice to any right of action by the
Landlord in respect of any outstanding breach or
non-observance or non-performance of any of the
agreements stipulations and conditions herein
contained and on the Tenant's part to be observed
and performed and to the Landlord's right to deduct
all loss and damage thereby incurred from the
deposit paid by the Tenant in accordance with
Section IX hereof and without prejudice to the
Landlord's right of forfeiture thereof.
Exercise (2) A written notice served by the Landlord on the
of right Tenant in manner hereinafter mentioned to the effect
that the Landlord thereby exercises the power of
re-entry herein contained shall be a full and
sufficient exercise of such power without physical
entry on the part of the Landlord.
Acceptance (3) Acceptance of rent by the Landlord shall not be
deemed to operate as a waiver by the Landlord of any
right to proceed against the Tenant in respect of
any breach non-observance or non-performance by the
Tenant of any of the agreements stipulations and
conditions herein contained and on the Tenant's part
to be observed and performed.
Acts of (4) For the purposes of these presents any act default
contractors neglect or omission of any contractor servant agent
servants agents customer or licencee (as hereinbefore defined) of
licensees the Tenant shall be deemed to be the act default
customers neglect or omission of the Tenant.
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Distraint (5) For the purposes of distress for rent in terms of
Part III of the Landlord and Tenant (Consolidation)
Ordinance (Cap.7) or any statutory modification or
re-enactment for the time being in force and of
these presents the rent payable in respect of the
said premises shall be and be deemed to be in
arrears if not paid in advance at the times and in
manner hereinbefore provided for payment thereof.
SECTION IX
DEPOSIT
Deposit (1) The Tenant shall on the signing hereof or/and upon
the signing of the tenancy agreement for the renewed
term (if option shall be exercised by the Tenant
pursuant to the provision of this Agreement) deposit
with the Landlord the sum specified in Part VI of
the First Schedule hereto to secure the due
observance and performance by the Tenant of the
agreements stipulations and conditions herein
contained and on the Tenant's part to be observed
and performed. The said deposit for the term hereby
created shall be retained by the Landlord throughout
the said term free of any interest to the Tenant and
in the event of any breach or non-observance or
non-performance by the Tenant of any of the
agreements stipulations or conditions aforesaid the
Landlord shall be entitled to terminate this
Agreement in which event the said deposit may be
forfeited to the Landlord by way of liquidated
damages. Notwithstanding the foregoing the Landlord
may in any such event at its option elect not to
terminate this Agreement but to deduct from the
deposit the amount of any monetary loss incurred by
the Landlord in consequence of the breach
non-observance or non-performance by the Tenant in
which event the Tenant shall as a condition
precedent to the continuation of the tenancy deposit
with the Landlord the amount so deducted and if the
Tenant shall fail so to do the Landlord shall
forthwith be entitled to re-enter on the said
premises or any part thereof in the name of the
whole and to determine this
20.
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Agreement in which event the deposit may be
forfeited to the Landlord as hereinbefore provided.
Repayment (2) Subject as aforesaid the said deposit for the term
of deposit hereby created shall be refunded to the Tenant by
the Landlord without interest within thirty days
after the expiration of this Agreement and the
delivery of vacant possession to the Landlord or
within thirty days of the settlement of the last
outstanding claim by the Landlord against the Tenant
in respect of any breach non-observance or
non-performance of any of the agreements
stipulations or conditions herein contained and on
the part of the Tenant to be observed and performed
whichever is the later.
SECTION X
REGULATIONS
Introduction (1) The Landlord shall have power from time to time to
of Regulations make, revoke and amend Rules regulating the use
operation and maintenance of the said building and
the land on which it is constructed and any of the
structures, facilities, services or amenities
thereof including the lifts and the parking, waiting
loading and unloading areas and the conduct of
persons occupying using or visiting the same and
such Rules shall be binding on all tenant and
occupiers of the said building, their licensees,
invitees, servants or agents. A copy of the Rules
from time to time in force shall be supplied to each
tenant on request free of charge.
Conflict (2) Such Regulations shall be supplementary to the terms
and conditions contained in this Agreement and shall
not in any way derogate from such terms and
conditions. In the event of conflict between such
Regulations and the terms and conditions of this
Agreement the terms and conditions of this Agreement
shall prevail.
21.
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<PAGE>
SECTION XI
INTERPRETATION AND MISCELLANEOUS
Marginal (1) The marginal notes headings and index are intended for
notes guidance only and do not form part of this Agreement nor
headings shall any of the provisions of this Agreement be construed or
and index interpreted by reference thereto or in any way affected or
limited thereby.
Use of Lifts (2) The specified lifts as installed in the said building shall
be permitted for use by the Tenant under the instructions
imposed by the Landlord at all reasonable times only. Should
the Tenant fail to observe the instructions as imposed by the
Landlord, he shall not be allowed to use the said lifts. The
Tenant shall indemnify the Landlord for all damage done to
the said lifts due to the mis-use by the Tenant of the said
lifts.
Fire (3) All fire-fighting equipment as installed in the said premises
fighting shall be and remain the property of the Landlord and the
equipment Tenant shall take due care thereof and in particular the
Tenant shall not allow such equipment to be moved to any
other position.
Condonation (4) No condoning excusing or overlooking by the Landlord of any
not a wavier default breach or non-observance or non-performance by the
Tenant at any time or times of any of the Tenant's
obligations herein contained shall operate as a waiver of the
Landlord's rights hereunder in respect of any continuing or
subsequent default breach or non-observance or
non-performance or so as to defeat or affect in any way the
rights and remedies of the Landlord hereunder in respect of
any such continuing or subsequent default or breach and no
waiver by the Landlord shall be inferred from or implied by
anything done or omitted by the Landlord unless expressed in
writing and signed by the Landlord. Any consent given by the
Landlord shall operate as a consent only for particular
matter to which it relates and in no way shall be considered
as
22.
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<PAGE>
a waiver or release of any of the provisions hereof nor
shall it be construed as dispensing with the necessity of
obtaining the specific written consent of the Landlord in
the future unless expressly so provided.
Letting (5) During the six months immediately preceding the expiration of
notices the said term the Landlord shall be at liberty to affix and
maintain without interference upon any external part of the
said premises a notice stating that the said premises are to
be let and such other information in connection therewith as
the Landlord shall reasonably require.
Service of (6) Any notice required to be served hereunder shall if to be
notices served on the Tenant be sufficiently served if addressed to
the Tenant and sent by prepaid post to or delivered at the
said premises or the Tenant's last known place of business or
residence in Hong Kong and if to be served on the Landlord
shall be sufficiently served if addressed to the Landlord and
sent by prepaid post to or delivered at the address given in
Part 1 of the Schedule hereto or any other address which the
Landlord may notify to the Tenant from time to time.
No fine (7) The Tenant acknowledges that no fine premium key money or
other consideration has been paid by the Tenant to the
Landlord for the grant of this tenancy.
Exclusion of (8) This Agreement sets out the full agreement reached between
warranties the parties and no other representations have been made or
warranties given relating to the Landlord or the Tenant or
the said building or the said premises and if any such
representation or warranty has been made given or implied the
same is hereby waived.
Name of (9) The Landlord reserves the right to name the said building
building with any such name or style as it in its sole discretion may
determine and at any time and from time
23.
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<PAGE>
to time to change alter substitute or abandon any such name
and without compensation to the Tenant provided that the
Landlord shall give the Tenant and the Postal and other
relevant Government Authorities not less than three months
notice of its intention so to do.
Gender (10) Unless the context otherwise requires words herein importing
the masculine gender shall include the feminine and neuter
and words herein in the singular shall include the plural and
vice versa.
Stamp duty (11) The costs for and incidental to the preparation and signing
and costs of this Agreement together with all stamp duties payable
under the Stamp Duty Ordinance and all other expenses in
connection therewith shall be borne by the Landlord and the
Tenant in equal shares. Should the Tenant instruct another
firm of solicitors in connection with the Tenancy Agreement,
then the Tenant will pay its own solicitors' costs but the
Landlord's solicitors' costs shall be borne and paid by the
Landlord and the Tenant in equal shares.
AS WITNESS the hands of the parties hereto the
day and year first above written.
24.
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<PAGE>
THE FIRST SCHEDULE ABOVE REFERRED TO
PART I
LANDLORD: PING PING INVESTMENT COMPANY LIMITED whose registered
office is situate at Unit C2, 1st Floor, Vita Tower, 29 Wong Chuk
Hang Road, Hong Kong.
PART II
TENANT: SOUTH CHINA BREWING COMPANY LIMITED whose registered
office is situate at Unit Al, 1st Floor, Vita Tower, 29 Wong Chuk
Hang Road, Aberdeen, Hong Kong.
PART III
TERM: Three years from the 1st day of May 1995 to the 30th day of
April 1998.
The Tenant shall have an option to renew the tenancy hereby granted for a
further term of two years from the expiration of the term hereby created on the
same terms and conditions contained in this Agreement and at the rental
calculated in accordance with Part IV of this First Schedule save and except
this clause for option and the rent-free period hereby granted Provided That the
Tenant shall be required to give to the Landlord not less than 6 months' prior
notice in writing before the expiration of the term hereby granted of such
desire to renew and if the Tenant shall have paid the rents hereby reserved and
shall have performed all terms and conditions herein contained on the part of
the Tenant to be observed and performed up to the termination of the tenancy
hereby created.
25.
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<PAGE>
PART IV
RENT:
Rent per calendar month (exclusive of rates and management
fee and other incidental outgoings payable on the said
Period premises)
- ------ --------------------------------------------------------
(1) The term of three DOLLARS SEVENTEEN THOUSAND AND FIVE HUNDRED ($17,500.00)
years hereby
granted
(2) The renewed term The rental for the renewed term shall be agreed between
of two years the parties hereto after the Tenant has given to the
Landlord notice of intention to renew or failing
agreement the rental for the renewed term shall be
settled by a single valuer to be agreed between the
parties or in default of agreement to be appointed at the
request of either party by the Chairman for the time
being of the Hong Kong Institute of Surveyors it being
further agreed and declared between the parties hereto
that it is their intention that the rental for the said
renewed term of two years shall be in accordance with the
then current open market rates for comparable
accommodation in the same area and that in the event of
valuation, the valuer shall have regard to the level of
rents at the date of valuation and also the level which
may reasonably be expected to be charged for comparable
accommodation in the same area for similar duration but
in any event the rental for the
26.
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<PAGE>
said renewed term of two years shall not be less than
Dollars Seventeen Thousand And Five Hundred Only per
month exclusive of rates and management fees. It is
expressly declared and agreed by both parties that the
valuer shall under no circumstance be considered as an
arbitrator and that the Arbitration Ordinance, Cap.341
shall not apply to such valuation aforesaid. It is
further agreed between the parties that the decision of
the valuer as to the rental for the renewed term shall be
final and binding on the parties and that the cost of
such valuation shall be borne by them in equal
shares.
(3) Rent Free Period
The first 15 days from the commencement date, namely, from 1st May 1995 to
15th May 1995 both days inclusive shall be rent free. During the Rent Free
Period the Tenant shall pay and discharge punctually rates, management fee
and all other outgoings now or at any time hereafter chargeable in respect
of the said premises.
Rent shall be paid in advance without any deduction and set off whatsoever
(whether legal or equitable) on the 1st day of each and every calendar month.
When the term of tenancy does not commence on the 1st day of the month, the
Landlord may at any time during the said term require the Tenant to pay rent for
a particular month on a pro-rata basis, namely, from the commencement day to the
end of the month, and thereafter the Tenant shall pay rent for each calendar
month (including the last month of the said term also on a pro-rata basis) on
the 1st day of each such calendar month.
27.
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<PAGE>
PART V
MANAGEMENT FEE
(1) Subject to (2) below the management fee throughout the said term shall
be DOLLARS ONE THOUSAND FIVE HUNDRED AND EIGHTY TWO ($1,582.00) per
calendar month.
(2) If at any time during the term of the tenancy hereby granted the cost
of management shall have risen by 10% or more over cost prevailing at
the beginning of such period, the Landlord shall be entitled to serve
a notice on the Tenant increasing the management fee by a percentage
equivalent to the percentage of increase in cost in management and
thereafter the Tenant shall pay the new management fee stipulated in
the said notice and further the management fee for the succeeding
period (if any) shall be increased (if necessary) so as not to be less
than the management fee prevailing on the expiration of the preceding
period. When any notice of increase shall be sent by the Landlord to
the Tenant, the notice shall be accompanied by an explanatory
memorandum but the Landlord's assessment of the appropriate increase
shall be conclusive.
PART VI
DEPOSIT
Amount of Deposit referred to in Clause (1) of Section IX:- DOLLARS THIRTY
EIGHT THOUSAND ONE HUNDRED AND SIXTY FOUR ($38,164.00).
Deposit for the renewed term of two years:-
Two months' Rental and Management fee for the renewed term.
28.
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<PAGE>
THE SECOND SCHEDULE ABOVE REFERRED TO
ALL THAT UNIT A2 on the SEVENTH FLOOR of VITA TOWER as shown and
coloured Pink on the Plan annexed hereto erected on All That piece or parcel of
ground situate, lying and being at Aberdeen Hong Kong and registered in the Land
Registry as Aberdeen Inland Lot No. 151.
29.
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<PAGE>
SIGNED by )
)
)
)
)
)
for and on behalf of the Landlord )
whose signature is verified by:- )
SIGNED by )
)
)
)
)
)
)
)
for and on behalf of the Tenant in )
the presence of:- )
R E C E I V E D on the day and year )
first above written of and from the Tenant )
the sum of DOLLARS THIRTY EIGHT THOUSAND ONE )$38,164.00
HUNDRED AND SIXTY FOUR ONLY being the deposit )
money above expressed to be paid by the )
Tenant to the Landlord. )
VERIFYING THE SIGNATURE:-
30.
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[FLOOR PLAN]
7th FLOOR PLAN SCALE 1:400 W. SZETO & PARTNERS
A.I.L. 151 WONG CHUK HANG ROAD ARCHITECTS & ENGINEERS
HONG KONG 1 HYSAN AVENUE
HONG KONG
<PAGE>
<PAGE>
[LETTERHEAD OF SAZERAC CO., INC.]
April 18, 1995
PERFORMANCE GUARANTEE
I, David K. Haines, hereby pledge and agree that I will at all times be the
sole acting manager, on behalf of LUNAR HOLDINGS LIMITED, of the SOUTH CHINA
BREWING COMPANY LIMITED (SCBC).
I further agree that in the event that I am no longer able, for any reason
whatsoever,to perform my responsibilities as Managing Director of LUNAR HOLDINGS
LIMITED and as sole manager of SCBC simultaneously, the Board of Directors of
SCBC may, in their sole discretion,immediately terminate the Management
Agreement between LUNAR HOLDINGS and SCBC with cause,as that term is defined in
the Management Agreement.
This Performance Guarantee is executed and dated simultaneously with the
Management Agreement, and shall not be effective until such time as the
Management Agreement is fully executed by the parties thereto.
Agreed to this 1st day of April, 1995
For and on behalf of
LUNAR HOLDINGS LIMITED
/s/ David K. Haines
.....................................
DAVID K. HAINES, MANAGING DIRECTOR
LUNAR HOLDINGS LIMITED
AUTHORIZED SIGNATORY
<PAGE>
<PAGE>
MANAGEMENT AGREEMENT
This Management Agreement (the 'Agreement') is entered into this 1st day of
April, 1995, by and between LUNAR HOLDINGS LIMITED (the 'Manager'), a Hong Kong
registered company, and SOUTH CHINA BREWING COMPANY LIMITED, a Hong Kong
registered company (the 'Company').
RECITALS
Company desires to employ a manager to operate its brewery business in Hong
Kong, including production for world-wide sales and distribution and sales in
Hong Kong.
Manager desires to accept employment with the Company as its manager.
Based upon the mutual covenants and promises set forth below, the parties agree
as follows:
1. APPOINTMENT. Company appoints Manager as the manager of its micro-brewery
located at Unit A1, 1/F., Vita Tower, 29 Wong Chuk Hang, Aberdeen, Hong Kong for
a period of two (2) years commencing April 1, 1995 and ending March 31, 1997.
This Agreement will automatically renew for a period of one (1) year, unless
either party gives notice of its intention not to renew at least three (3)
months prior to expiration of the initial term or any subsequent renewal term.
2. COMPENSATION. Manager will receive compensation for performance of its duties
and obligations, as set forth in this Agreement, in the following manner:
(a) a salary of HK$371,000, paid in 12 equal monthly installments for
the first year of this Agreement;
(b) a salary of HK$417,400 paid in 12 equal monthly installments for
the second year of this Agreement, provided that the original business plan
(the 'Plan'), as set forth in Attachment A and incorporated by reference
into this Agreement, is met in the first year. If Plan is not met, salary
will be no greater than that set forth above for year one;
(c) a bonus based upon meeting the Plan for net profit before taxes
and sales revenue based upon sales in the Hong Kong market, payable at the
end of each fiscal year, of;
(i) 2% of net income before income tax in year 1, and
(ii) 3% of net income before income tax in year 2.
If the Plan is not met as set forth in this section 2., no bonus will be paid.
In the event that this Agreement is renewed, for any
<PAGE>
<PAGE>
one year renewal term, Manager and Company shall negotiate in good faith annual
salary increases and bonuses for subsequent one year renewal terms.
3. COMPANY'S OBLIGATIONS. In furtherance of its obligations under this
Agreement, Company shall:
(a) make yearly reviews of Manager's performance and, in its sole
discretion, adjust Manager's compensation accordingly;
(b) pay Manager a salary and any bonuses due in a timely manner as
Prescribed by this Agreement; and
(c) timely re-imburse Manager for expenses reasonably incurred
pursuant to fulfilling its obligations under this Agreement and any
business or marketing plan setting forth such expenses that have been
submitted in accordance with policies established by the Company.
4. MANAGER'S OBLIGATIONS. In furtherance of its obligations under this
Agreement, Manager shall:
(a) manage the day-to-day affairs of the Company in a competent
manner, including but not limited to: the ordering of materials, scheduling
of production, administrative duties, regulatory compliance with Hong Kong
governmental regulations and laws, overseeing all employee issues,
marketing and distribution in the Hong Kong area (including all management
responsibilities of ARIZONA LIMITED), and general business responsibilities
associated with operation and management of a micro-brewery;
(b) maintain proper records of all transactions and correspondence,
and make all such documents available for inspection by the shareholders
and directors of the Company;
(c) make reports to the Board of Directors in a manner, and at the
times, prescribed by the Board in its sole discretion;
(d) immediately notify the Board of all actions, complaints or
activities which would have a negative impact on the business of Company or
any agent, employee, officer or director of Company.
5. TERMINATION. Either party may terminate this Agreement with or without cause
as follows:
(a) By Manager without cause;
(i) by giving Company not less than three (3) months
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<PAGE>
written notice prior to the expiration of any term of this Agreement, or
(ii) by payment of three (3) months salary in lieu of written
notice prior to the expiration of any term of this Agreement.
(b) By Company without cause;
(i) by giving Manager not less than three(3) months written notice
prior to the expiration of any term of this Agreement, or
(ii) by payment of three (3) months salary in lieu of written
notice prior to the expiration of any term of this Agreement.
(c) By Company with cause;
(i) at anytime, on immediate notice and without payment or
compensation, or
(ii) if, during any term of this Agreement, Manager accepts any
outside employment without the express written consent of Company,
(iii) for the purposes of this subsection 5(c), 'with cause' as it
relates to Manager is defined as, dishonesty of any kind, failure to
follow the directions of Company or the Board of Directors, failure to
fulfill its obligations as set forth in this Agreement, incompetence,
negligence, insolvency, bankruptcy, conviction of a crime, the use of
drugs not prescribed by a physician, medical disabilities continuing for
more than three (3) months, or activities that would have a materially
adverse impact on the reputation or business of Company.
(d) Except as specifically provided in this section 5., termination be
either party shall not require any payment by the Company other than for
any salary earned but unpaid as of the date of termination.
6. CONFIDENTIALITY. Manager shall not disclose or utilize directly or
indirectly, other than on behalf of Company, and will keep confidential both
during employment and thereafter all confidential and proprietary information
that comes to Manager's knowledge concerning Company, its clients, customers,
officers, directors, financial arrangements, and all other matters material to
the business of Company. Manager confirms that all financial projections,
product plans, customer lists and similar Company information that has not been
made public by the Company is confidential and Manager's unauthorized disclosure
of such
<PAGE>
<PAGE>
confidential information may be damaging to the Company, and as such, Manager
agrees to continue to keep such information confidential for a period of at
least two (2) years after termination of employment. Manager confirms that he
has delivered or will deliver to the Company by the effective date of
termination of employment, all property of the Company and all documents and
data, along with any reproductions thereof, containing or pertaining to any such
proprietary information. Further, Manager agrees that it will have delivered to
the Company all property belonging to the Company, including but not limited to
Company credit cards, keys, software, computers and other such materials in his
possession on termination of employment.
7. GOVERNING LAW. This Agreement will be construed and enforced in accordance
with the laws of Hong Kong.
8. MISCELLANEOUS. This Agreement:
(a) constitutes the entire agreement between the parties relating to
the subject matter contained herein and supersedes all prior agreements or
undertakings, written or oral, of any nature whatsoever;
(b) may not be amended nor shall any waiver, change, modification,
consent or discharge be effected except by an instrument in writing by, or
on behalf of, the party against whom enforcement is sought;
(c) may not be assigned by Manager, nor may any of the obligations of
Manager be performed by another individual or entity (this Agreement being
in the nature of a personal service agreement) without the express written
consent of the Board of Directors of Company;
(d) will be binding upon and will inure to the benefit of the parties
to this Agreement and their respective successors and permitted assigns;
and
(e) may be executed in counterparts.
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
first above written.
For and on behalf of
SOUTH CHINA BREWING COMPANY LIMITED
SOUTH CHINA BREWING COMPANY LIMITED By: /s/ Peter W. H. Bordeaux
...................................
PETER W. H. BORDEAUX
CHAIRMAN
FOR AND ON BEHALF OF
LUNAR HOLDINGS LIMITED
For and on behalf of
LUNAR HOLDINGS LIMITED
LUNAR HOLDINGS LIMITED By: /s/ David K. Haines
...................................
DAVID K. HAINES
AUTHORIZED SIGNATOR
<PAGE>
<PAGE>
MODIFICATION TO PROMISSORY NOTE
WHEREAS, South China Brewing Company, Ltd. ("Borrower") has
executed a promissory note dated March 31, 1995, payable to the order of
Hibernia National Bank ("Bank"), in the original principal amount of $565,000.00
bearing interest at the rate of Citibank, N.A. rate plus one half (.50%) percent
("the Note"); and
WHEREAS, Borrower and Bank desire to change the dates on
which payments are due, and they agree as follows:
AGREEMENT
1. The Note is hereby modified so that as of June 15, 1995,
Borrower's interest payments from March 31, 1995 to March 31, 1996, will be due
on a semi-annual basis, and shall be paid by Borrower on September 30, 1995 and
March 31, 1996. Interest payments after the March 31, 1996 interest payment will
be due on a quarterly basis beginning June 30, 1996. The final maturity date
shall remain March 31, 1997.
2. Paragraph 3 of the Note is hereby modified so that the
second principal payment shall be paid on March 31, 1996.
3. Except as expressly modified herein, all terms and
provisions of the Note and of all other documents securing, evidencing the
obligations under or related to the Note, are hereby ratified and confirmed, and
shall remain in full force and effect. Borrower represents and warrants that no
default has occurred as of the date hereof, and that Borrower has no defense,
offset compensation, counterclaim or reconventional demand with respect to the
Note and any related documents.
EXECUTED this 15th day of June, 1995.
BANK: HIBERNIA NATIONAL BANK BORROWER: South China Brewing Company, Ltd.
By Cheryl Denenea By P. Bordeaux
--------------------------- -----------------------------------------
Name Cheryl Denenea Name P. Bordeaux
------------------------- ---------------------------------------
Title Vice President Title Chairman
------------------------ --------------------------------------
<PAGE>
<PAGE>
PROMISSORY NOTE
$565,000.00 New Orleans, Louisiana
Date: March 31, 1995
FOR VALUE RECEIVED, the undersigned South China Brewing
Company, Ltd., a corporation organized and existing under the laws of Hong Kong
(the "Borrower") promises to pay to the order of Hibernia National Bank (TIN:
72-0210640) at its offices at 313 Carondelet Street, New Orleans, LA 70130 Attn:
Loan Administration (the "Lender"), or such other place as the holder hereof may
from time to time designate in writing, in lawful money of the United States of
America, the principal sum of FIVE HUNDRED SIXTY FIVE THOUSAND AND NO/100
($565,000.00) DOLLARS, together with interest payable in accordance with the
terms hereof.
This Note shall bear interest from date of execution until
paid, at a rate equal to the Prime Rate charged by the Citibank, N.A., plus one
half (.50%) percent per annum. The term "Prime Rate" shall mean a fluctuating
rate of interest equal at all time to the rate of interest announced from time
to time by Citibank, N.A. as its base or "prime" rate. The Prime Rate is not
necessarily the lowest rate charged by Lender on its loans. If the Prime Rate
becomes unavailable during the term of this Note, the Lender may designate a
substitute Prime Rate after notice to the Borrower. The Prime Rate on this Note
is subject to change from time to time based upon changes in the Prime Rate
which will not occur more often than each day. The current Prime Rate is 9.0%
per annum, resulting in an initial interest rate of 9.5% per annum. Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual interest over a
year of 360 days, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding.
Interest on this Note shall be payable in arrears on the
last day of each calendar quarter, commencing on June 30, 1995, and shall
continue until such time as all amounts due hereunder are fully paid. Principal
on this Note shall be paid in 3 semi-annual installments on the dates and the
amounts set forth below:
DATE AMOUNT
---- -------
1. September 30, 1995 $56,500.00
2. March 31, 1995 $56,500.00
3. September 30, 1996 $56,500.00
The entire remaining unpaid balance and all accrued and
unpaid charges due hereunder shall be due and payable on March 31, 1997.
This Note may be prepaid in part or in full at any time.
All payments shall be applied first to interest due and
accrued and then to principal.
The maker of this Note, and any endorser(s), guarantor(s),
and surety or sureties to this Note, hereby waive presentment for payment,
demand, notice of nonpayment, protest, notice of protest, dishonor, notice of
dishonor and all please of division and discussion, and agree that the payment
hereof may be extended from time to time, one or more times, without notice of
extension(s) and without previous consent hereby binding themselves, in solido,
unconditionally and as original promissors, for the payment hereof in principal,
interest, costs, and attorney's fees. All parties hereto further agree that they
hereby consent to all of the terms and conditions hereof, and that no
modification hereof shall be binding unless hereon endorsed in writing and
signed by the parties.
No delay on the part of the holder hereof in exercising any
rights hereunder shall operate as a waiver of such rights.
Should this Note not be paid at maturity or when due, as
herein provided, or should it become necessary to employ an attorney to enforce
the same or recover the amount thereof or any portion of same, or should this
Note be placed in the hands of an attorney for collection or compromise or other
<PAGE>
<PAGE>
action, for any reason, the maker(s), and any endorser(s),
surety or sureties and/or guarantor(s) of this Note agree to pay the reasonable
fees of the attorney who may be employed for that purpose.
Notwithstanding anything to the contrary set forth
hereinabove, it is hereby agreed, in the making and delivery of this Note, that
if any installment of principal and interest or any part thereof is not paid
within ten (10) days of the due date, then, at the option of the said payee or
holder of this Note, the whole principal and interest shall at once become due
and payable.
If Borrower fails to pay any payment under this Note in
full within ten days of when due, Borrower agrees to pay Lender a late payment
fee in the amount equal to 5% of the delinquent amount.
Borrower acknowledges that this Note will be secured by a
partial guaranty by Sazerac Company, Inc. ("Guarantor") and two Standby Letters
of Credit. This Note is further subject to the terms and conditions contained in
that certain commitment letter dated March 13, 1995 by and between Borrower,
Lender and Guarantor, as the same maybe modified or extended.
In addition to any failure to make any installment of
principal or interest when due, the following shall constitute events of default
under this Note:
A. If any representation, warranty or certification made by
Borrower or Guarantor herein or in any certificate or other writing delivered
pursuant hereto shall prove to be untrue in any material respect as of the date
upon which the same was made.
B. If a court or governmental authority of competent
jurisdiction shall enter an order, judgment or decree appointing, with or
without Borrower's or Guarantor's consent or acquiescence, a receiver,
custodian, liquidator, trustee or other officer with similar powers of Borrower
or Guarantor or of the whole or any substantial part of its properties and
assets, or approving a petition filed against Borrower or Guarantor seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the federal bankruptcy laws or any other applicable law
and said order, decree or judgment is not rescinded or vacated within 30 days
of entry.
C. If Borrower or Guarantor shall: (i) file a petition in
bankruptcy or a petition to take advantage of any insolvency act or other act
for the relief or aid of debtors; (ii) make an assignment for the benefit of its
creditors; (iii) consent to or acquiesce in the appointment of a receiver,
custodian, liquidator, trustee or other officer with similar powers of itself or
of the whole or any substantial part of its properties and assets, (iv) file a
petition or answer seeking for itself reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the federal
bankruptcy laws or any other applicable law; or (v) be adjudicated insolvent or
be liquidated; or admit in writing its inability to pay its debts as they become
due.
D. If for any reason, the Standby Letters of Credit issued
to Lender as beneficiary as security for this Note are revoked by the issuing
bank or if any bank issuing the Standby Letters of Credit fails or is otherwise
placed into receivership or conservatorship by any applicable federal or state
regulatory agency and the Standby Letter of Credit issued by the affected bank
is not substituted or other replaced within 30 days to the satisfaction of
Lender.
Borrower agrees that this Note and the loan evidenced
hereby shall be governed by, and construed and interpreted in accordance with,
the laws of the State of Louisiana, United States of America and shall
constitute a business or commercial Note as provided for in La. R.S. 9:3509. THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE EXTENT
PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATED TO THIS PROMISSORY NOTE AND AGREES THAT ANY
SUCH DISPUTE, SHALL, AT THE OPTION OF LENDER, BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY.
SOUTH CHINA BREWING COMPANY, LTD.
BY: Peter Bordeaux
-----------------------------
ITS: Chairman
------------------------------
<PAGE>
<PAGE>
[LOGO] HIBERNIA
POST OFFICE BOX 61540
NEW ORLEANS, LOUISIANA 70161
(504) 533-3333
March 13, 1995
Mr. Jim Ake
Sazerac Company, Inc.
P. O. Box 52821
New Orleans, LA 70152
Dear Jim,
On behalf of Hibernia National Bank ("Lender"), I am pleased to extend this
Commitment to South China Brewing Company, Ltd. subject to the basic terms and
conditions set forth below.
BORROWER: South China Brewing Company, Ltd.
AMOUNT
& TYPE: $565,000 two year term loan.
PURPOSE: To finance the purchase and installation of brewing
equipment.
COLLATERAL: An unconditional guaranty from Sazerac Company, Inc. in the
amount of $250,000 and two standby letters of credit from
the two other partners ("Partners"), from banks acceptable
to Hibernia, in the total amounts of $315,000. In the event
of a drawing under the letters of credit provided by the
Partners or a demand under the Sazerac guaranty, Hibernia
will rely on the letters of credit to cover 56% of the
Borrower's obligations to Lender and on the guaranty to
cover 44% of the Borrower's obligations to Lender.
GUARANTIES: As mentioned above, a $250,000 guaranty will be required
from Sazerac Company, Inc.
INTEREST
RATE: Citibank prime floating + .50%.
TERMS &
REPAYMENT: Interest payable quarterly. Principal payments payable
semi-annually based on a 5 year straight
HIBERNIA NATIONAL BANK
<PAGE>
<PAGE>
line amortization. Remaining principal due at maturity
(balloon payment).
FEES: No origination fees.
GENERAL
TERMS AND
CONDITIONS: -Annual financial statements of Borrower to be received
within 90 days after fiscal year end.
-Quarterly company-prepared financial statements of Borrower
to be received within 60 days of quarter end.
-Satisfactory documentation as required by
Lender's legal counsel.
-Guarantor will be in compliance with all other loan
agreements and covenants associated with its loans
outstanding.
MATERIAL
CHANGE: It is a condition to funding the Credit Facility that there
shall not have occurred, in the opinion of the Lender, any
material adverse change in Borrower's or Guarantor's
business operation or financial condition, and/or any other
facts, circumstances, or conditions upon which the Lender
has relied on or utilized in making its credit decision.
DOCUMENTATION: Borrower represents and warrants that all of the materials
it has submitted in connection with its loan request
together constitute a complete and accurate presentation of
all facts material to Lender's issuance of this Commitment
Letter.
The terms outlined in this letter will remain in place until
the Credit Facility has expired and all loans thereunder
have been repaid. The terms described herein provide a
substantive outline of the Lender's commitment rather than a
complete statement of all terms, conditions, and documents
which will be required in connection with the transaction
described above other than changes that may occur to account
for statutory or regulatory matters that may affect this
proposed transaction.
FEES &
EXPENSES All fees associated with this transaction will be paid by
the Borrower, whether or not the transaction closes.
Borrower understands that fees will begin upon acceptance of
this Commitment.
<PAGE>
<PAGE>
Jim, I hope that this Commitment meets with your approval. This Commitment will
expire if it is not accepted by March 13, 1995. If accepted, the loan must be
closed by March 17, 1995.
To indicate acceptance, please have Peter Bordeaux sign below. If you have any
questions, please do not hesitate to call me.
I am presently working on the language that needs to be included in the letters
of credit. As soon as it is completed, I will forward it to you so that the
issuing banks can finalize their documents. My documents will be drafted through
Adams & Reese locally. Luis Perez and Hank Arnold (585-0445) will be assigned to
the transaction.
Sincerely,
WILLIAM P. HERRINGTON
- ---------------------------
William P. Herrington
Vice President
ACCEPTED THIS________________ DAY OF MARCH, 1995
South China Brewing Company, Ltd.
By:
-------------------------------------------
Title:
----------------------------------------
Sazerac Company, Inc.
By:
-------------------------------------------
Title:
----------------------------------------
<PAGE>
<PAGE>
Exhibit 10.11
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE 'ACT')
OR QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939. THIS NOTE MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
THE ACT.
THIS NOTE IS SUBJECT TO THE PROVISIONS OF A PURCHASE AGREEMENT, DATED AS OF MAY
__, 1996 BETWEEN AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND MARK JOHN
GALLAGHER, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH. A
COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE EXECUTIVE VICE PRESIDENT
OF AMERICAN CRAFT BREWING INTERNATIONAL LIMITED.
Redeemable Convertible Note, Series A
May , 1996
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED, a British Virgin Islands
company (the 'Company') or its successor for value received, hereby promises to
pay to the order of
Mark John Gallagher
or registered assigns, the sum of (i) the principal amount of
US$30,000
(the 'Principal Amount') plus (ii) accrued interest thereon, on September 1,
1997 (or, if such day is not a Business Day (as hereinafter defined), the next
succeeding Business Day) (the 'Maturity Date'). The outstanding principal amount
of this Note shall bear interest from and including the date hereof to but
excluding the Maturity Date (or, if a Conversion Notice has been delivered
pursuant to Section 3(a), the Conversion Date (as hereinafter defined)), at a
rate per annum (calculated on the basis of the actual number of days elapsed
over a year of 360 days) of 12% provided that if the Company or its successor
has not consummated an initial public offering of its shares of US$0.01 in the
capital of the Company (the 'Shares') in the United States (the 'IPO') prior to
September 1, 1996, this Note shall bear interest from and including September 1,
1996 to but excluding the Maturity Date (or, if a Conversion Notice has been
filed pursuant to Section 3(a), the Conversion Date) at a rate per annum of 14%
(calculated on the basis of the actual number of days elapsed over a year of 360
days.
Except to the extent otherwise provided herein, the outstanding
principal amount of this Note (together with accrued interest thereon) shall be
payable to the holder of this Note (the 'Holder') on the Maturity Date in lawful
money of the United States by wire transfer of immediately available funds to
such account as the Holder shall specify in writing to the Company.
SECTION 1. The Notes. This Note is one of a duly authorized issue of
Notes
<PAGE>
<PAGE>
of the Company which are being issued in the aggregate principal amount of
US$250,000 and are designated as its 'Redeemable Convertible Notes, Series A'
(the 'Notes'). This Note was issued pursuant to the terms of a Purchase
Agreement, dated as of May __, 1996 (the 'Purchase Agreement') between the
Company and Mark John Gallagher (the 'Purchaser'), pursuant to which the Holder
is subject to restrictions on transferability of this Note.
SECTION 2. Redemption. (a) This Note may be redeemed at the option of
the Company or its successor in whole (but not in part), at any time prior to
the Maturity Date. The redemption price ('Redemption Price') shall be equal to
100% percent of the principal amount, together with accrued interest to the
Redemption Date (as hereinafter defined).
(b) Notice to redeem this Note shall be given to Holder in writing
mailed by overnight courier to the Holder at his address as it appears in the
register maintained by the Company or its successor, such mailing to be not more
than 60 days nor less than 30 days prior to the date fixed for redemption.
Neither the failure to give notice nor any defect in any notice given to any
particular holder of a Note shall affect the sufficiency of any notice with
respect to other Notes. Notices to redeem this Note shall specify the date fixed
for redemption (the 'Redemption Date'), the Redemption Price, the place or
places of payment, that payment will be made upon presentation and surrender of
the Note, that interest accrued to the date fixed for redemption will be paid as
specified in said notice and that on and after said date interest thereon will
cease to accrue.
(c) If notice of redemption has been given in the manner set forth in
this Section, upon presentation and surrender of this Note at the place or
places specified in such notice, this Note shall be paid and redeemed by the
Company or its successor by payment of the Redemption Price therefor together
with accrued interest thereon in lawful money of the United States. Such payment
shall be made to the Holder by wire transfer of immediately available funds to
such account as the Holder shall specify in writing to the Company or its
successor. If monies for the redemption of this Note shall have been available
for redemption on the Redemption Date, this Note shall cease to bear interest,
and the only right of the Holder shall be to receive payment of the Redemption
Price together with accrued interest to the Redemption Date.
SECTION 3. Conversion. (a) Subject to and upon compliance with the
provisions of this Section, at the option of the Holder, this Note, in whole but
not in part, may be converted:
(i) on the date that the Company or its successor consummates the
IPO (the 'Closing Date') into that number of Shares equal to the quotient
obtained by dividing the Principal Amount by the product of 0.5 and the
price per Share of the price to public in the IPO by giving notice to the
Company by facsimile and by overnight courier (a 'Conversion Notice') no
less than two Business Days prior to the Closing Date; and
(ii) on the Maturity Date into that number of Shares so that
immediately after such conversion the Holder shall hold 0.75% of the issued
and outstanding Shares by giving a Conversion Notice to the Company no less
than five Business Days prior to the Maturity Date; provided that the
Holder's conversion rights pursuant to this Section 3(a)(ii) shall
terminate upon the consummation of the IPO.
<PAGE>
<PAGE>
For purposes of this Note, the term Business Day shall mean any day
that is not a Saturday, Sunday or holiday in Hong Kong or the State of New York.
(b) The number of Shares into which this Note may be converted
pursuant to Section 3(a) shall be subject to the following adjustments:
(i) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Shares, the
number of Shares into which this Note may be converted pursuant to Section
3(a) shall be increased by multiplying such number by the quotient obtained
by dividing the number of Shares outstanding at the close of business on
the date fixed for the determination of members entitled to receive such
dividend or other distribution plus the total number of Shares constituting
such dividend or other distribution by the number of Shares outstanding at
the close of business on the date fixed for such determination, such
increase to become effective immediately after the opening of business on
the day following the date fixed for such determination;
(ii) In case outstanding Shares shall be subdivided into a
greater number of Shares the number of Shares into which this Note may be
converted pursuant to Section 3(a) shall be proportionately increased, and,
conversely, in case outstanding Shares shall be combined into a smaller
number of Shares, the number of Shares into which this Note may be
converted pursuant to Section 3(a) shall be proportionately reduced, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective;
(iii) In case the Company or its successor shall issue rights or
warrants to all holders of its Shares entitling them to subscribe for or
purchase shares at a price per Share less than the book value price per
Share (determined as provided in clause (vi) of this Section), the number
of Shares into which this Note may be converted pursuant to Section 3(a)
shall be increased by multiplying such number by the quotient obtained by
dividing the number of Shares outstanding at the close of business on the
date fixed for the determination of members entitled to receive such rights
or warrants plus the number of Shares so offered for subscription or
purchase by the number of Shares outstanding at the close of business on
the date fixed for such determination, such increase to become effective
immediately after the opening of business on the Business Day following the
date fixed for the determination of members entitled to receive such rights
or warrants;
(iv) In case the Company or its successor shall, by dividend or
otherwise, distribute to all holders of its Shares evidences of its
indebtedness or assets (including securities, but excluding any rights or
warrants referred to in clause (iii) of this Section or any dividend or
distribution paid in cash out of the retained earnings of the Company) the
number of Shares into which this Note may be converted pursuant to Section
3(a) shall be multiplied by the quotient obtained by dividing the book
value price per Share (determined as provided in clause (vi) of this
Section) of the Shares on the date fixed for the determination of members
entitled to receive such distribution plus the then fair market value of
the portion of the assets or evidences of indebtedness so distributed
applicable to one Share by such book value price per Share, such adjustment
to become effective immediately prior to the opening of business on the
Business Day following the date fixed for the determination of members
entitled to
<PAGE>
<PAGE>
receive such distribution;
(v) The reclassification of Shares into other securities shall be
deemed to involve a distribution of such securities other than Shares to
all holders of Shares (and the effective date of such reclassification
shall be deemed to be 'the date fixed for the determination of members
entitled to receive such distribution' within the meaning of clause (iv) of
this Section); and
(vi) For the purpose of any computation under clauses (iii) and
(iv) of this Section, the book value price per Share on any date shall be
deemed to be the quotient obtained by dividing the members' equity
(calculated in accordance with United States generally accepted accounting
principles) of the Company or its successor as of the end of the most
recent fiscal quarter by the number of Shares issued and outstanding on the
date in question.
(c) Whenever an adjustment is made pursuant to Section 3(b):
(i) the Company shall compute the number of Shares into which
this Note may be converted in accordance with Section 3(b) and shall
prepare a certificate signed by the Executive Vice President of the Company
or its successor setting forth the new number of Shares into which this
Note may be converted and showing in reasonable detail the facts upon which
such adjustment is based; and
(ii) a notice stating that the number of Shares into which this
Note may be converted has been adjusted and setting forth the new number of
Shares into which this Note may be converted shall forthwith be required,
and as soon as practicable after it is required, such notice (together with
a copy of the certificate referred to in clause (i) above) shall be mailed
by the Company to the Holders.
(d) No fractional Shares shall be issued upon conversion of this Note.
If more than one Note shall be surrendered for conversion at one time by the
same holder thereof, the number of full Shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Notes so surrendered. Instead of any fractional Share which would
otherwise be issuable upon conversion of this Note, the Company or its
successors shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the book value price per Share at the close of
business on the day of conversion.
(e) If the Holder shall have exercised his conversion right in
accordance with Section 3(a), this Note shall be deemed to have been converted
immediately prior to the close of business on the Closing Date or the Maturity
Date, as the case may be, and at such time the rights of the Holder of this Note
as a Holder shall cease, and the person or persons entitled to receive the
Shares issuable upon conversion shall be treated for all purposes as the record
holder or holders of such Shares at such time. As promptly as practicable on or
after the Closing Date or the Maturity Date, as the case may be, the Company or
its successor shall issue and shall deliver at the office or agency of the
Company or its successor maintained pursuant to Section 7(a) a certificate or
certificates for the number of full Shares issuable upon conversion, together
with payment in lieu of any fraction of a share.
(f) The Company shall at all times reserve and keep available, free
from pre-emptive rights, out of its authorized but unissued Shares, for the
purpose of effecting the
<PAGE>
<PAGE>
conversion of Notes, the full number of Shares then issuable upon the conversion
of all outstanding Notes.
(g) The Company will pay any and all transfer, documentary and similar
taxes or charges that may be payable in respect of the issue or delivery of
Shares on conversion of this Note pursuant hereto. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of Shares in a name other than that
of the Holder, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Company the amount of any such tax,
or has established to the satisfaction of the Company that such tax has been
paid.
(h) The Company covenants that all Shares which may be issued upon
conversion of Notes will upon issue be fully paid and nonassessable and, except
as provided in Section 3(g), the Company will pay all taxes, liens and charges
with respect to the issue thereof.
(i) All Notes that have been converted shall be promptly delivered to
the Company to be canceled by the Company.
SECTION 4. Redeemable Warrant. Upon the Holder's exercise of his
conversion right pursuant to Section 3(a)(i), the Company or its successor shall
issue to the Holder a redeemable warrant in the form attached hereto as Exhibit
A entitling the holder thereof to purchase the same number of Shares as may be
issued to the Holder pursuant to Section 3(a)(i).
SECTION 5. Exchange or Replacement of Notes. (a) The Holder, at his
option may in person or by duly authorized attorney surrender this Note for
exchange, at the office or agency of the Company maintained pursuant to Section
7(a), and receive in exchange therefor a new Note in the same principal amount
as the outstanding principal amount of this Note and bearing interest at the
same annual rate as the Note so surrendered each such new Note to be in such
outstanding principal amount and payable to such person or persons, or order, as
the Holder may designate in writing; provided, however, that the Company and its
successor shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any new Note in a name
other than that of the Holder; provided, further, however, that the Company and
its successor shall not be required to so register the transfer unless (i) the
conditions for transfer in the Purchase Agreement have been satisfied and (ii)
the transferee agrees to be bound by the terms of the Purchase Agreement. The
Holder shall give to the Company or its successor 10 days' prior written notice
of his intention to make such exchange.
(b) Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Note and (in case of loss, theft
or destruction) of indemnity satisfactory to it, and upon surrender and
cancellation of such Note, if mutilated, the Company or its successor will
execute and deliver in lieu of such Note a new Note of like tenor. The term
'outstanding' when used in this Note with reference to the Notes as of any
particular time shall not include (i) any Note in lieu of which a new Note has
been executed and delivered by the Company in accordance with the provisions of
this Section and (ii) any Note held or beneficially owned by the Company or any
of their respective subsidiaries or affiliates.
SECTION 6. Amendments and Waivers. With the written consent of the
<PAGE>
<PAGE>
holders of 51% of the aggregate outstanding principal amount of the Notes at the
time outstanding, any covenant, agreement or condition contained in the Notes
may be waived (either generally or in a particular instance and either
retroactively or prospectively), and such Holders and the Company may from time
to time enter into agreements for the purpose of amending any covenant,
agreement or condition of the Notes or changing in any manner the rights of the
holders of the Notes or the Company; provided, however, that:
(i) no such amendment or waiver shall change the Maturity Date of this
Note or reduce the rate or extend the time of payment of interest hereon,
or reduce the amount of the payment of interest hereon, or reduce the
Principal Amount, or modify any of the provisions of this Note with respect
to the payment hereof, without in any such case the consent of the Holder
of this Note; and
(ii) no such waiver shall extend or affect any obligation not
expressly waived or impair any right consequent thereon.
Any such amendment or waiver shall be binding upon each future holder of
this Note and upon the Company or its successor, whether or not such Note shall
have been marked to indicate such amendment or waiver, but any Note issued
thereafter shall bear a notation referring to any such amendment or continuing
waiver.
SECTION 7. Covenants. (a) So long as any Note remains outstanding, the
Company or its successor shall maintain an office or agency (which shall
initially be the principal place of business of the Company located at Unit A1,
1/F Vita Tower, 29 Wong Chuk Hang, Aberdeen, HONG KONG) where notices,
presentations and demands to or upon the Company or its successor in respect of
Notes, including those relative to conversion of the Notes, may be given.
(b) The Company shall keep at such office or agency a register which,
subject to such reasonable regulations as it may prescribe, but at its expense,
the Company shall provide for the registration and transfer of Notes. The
Company and any agent of the Company may treat the person in whose name any Note
is registered as the Holder of such Note for the purpose of receiving payment of
the principal and interest on such Note and for all other purposes, whether or
not such Note be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
SECTION 8. Extension of Maturity. Should the principal and interest on
this Note become due and payable on other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day, and interest
shall be payable thereon at the rate per annum (calculated on the basis of the
actual number of days elapsed over a year of 360 days) herein specified during
such extension.
SECTION 9. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
SECTION 10. CONSENT TO JURISDICTION. EACH OF THE HOLDER AND THE
COMPANY HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THE NOTES OR THE TRANSACTIONS
<PAGE>
<PAGE>
CONTEMPLATED HEREBY. EACH OF THE HOLDER AND THE COMPANY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH OF THE HOLDER AND THE COMPANY CONSENT TO THE
SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE DELIVERY (BY OVERNIGHT COURIER)
TO IT, IN THE CASE OF THE HOLDER, AT HIS ADDRESS AS IT APPEARS IN THE REGISTER
MAINTAINED BY THE COMPANY OR ITS SUCCESSOR, AND IN THE CASE OF THE COMPANY, AT
ITS ADDRESS SPECIFIED IN SECTION 7(a). EACH OF THE HOLDER AND THE COMPANY
FURTHER AGREES THAT A FINAL JUDGMENT IN ANY SUCH PROCEEDING SHALL BE CONCLUSIVE
AND BINDING AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT
OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 11. WAIVER OF JURY TRIAL. EACH OF THE HOLDER AND THE COMPANY
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By: ________________________________________
Name:
Title:
Agreed and accepted by:
___________________
Mark John Gallagher
<PAGE>
<PAGE>
[FORM OF TRANSFER NOTICE]
For value received ________________hereby sells, assigns and transfers
unto ___________________, whose social security or other identifying number is
_________________ and whose address (including postal zip code) is _________
________________________ and does hereby irrevocably constitute and appoint_____
attorney to transfer the said Note of the within named Company with full power
of substitution in the premises.
Dated:____________
__________________
Transferor
NOTICE: The Signature to this Notice must correspond with the name as written
upon the face of this Note and every particular, without alteration or
enlargement or any change whatever.
<PAGE>
<PAGE>
WARRANT SHARES
--------------------------- ---------------------------
No. WA-3
--------------------------- ---------------------------
THIS WARRANT AND THE WARRANT SHARES ARE SUBJECT TO THE PROVISIONS OF A PURCHASE
AGREEMENT, DATED AS OF MAY __, 1996 BETWEEN AMERICAN CRAFT BREWING INTERNATIONAL
AND MARK JOHN GALLAGHER, AND MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED
EXCEPT IN ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
OFFICE OF THE EXECUTIVE VICE PRESIDENT OF AMERICAN CRAFT BREWING INTERNATIONAL
LIMITED.
THIS WARRANT AND THE SHARES OF US$0.01 EACH IN THE CAPITAL OF AMERICAN CRAFT
BREWING INTERNATIONAL LIMITED PURCHASABLE HEREUNDER (THE 'WARRANT SHARES') HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE 'ACT'). THIS WARRANT
AND THE WARRANT SHARES MAY NOT BE OFFERED FOR SALE OR OTHERWISE TRANSFERRED
OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
PURSUANT TO REGULATION S PROMULGATED THEREUNDER OR PURSUANT TO ANOTHER EXEMPTION
FROM REGISTRATION UNDER THE ACT.
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
CLASS A WARRANT
For value received, American Craft Brewing International Limited,
a Bermuda company, (the 'Company'), hereby grants to Mark John
Gallagher, or its registered assigns in accordance with Section 6 hereof
(collectively, the 'Holder') the right to purchase from the Company
__________________ shares of US $0.01 each in the capital of the Company
(collectively referred to as 'Warrant Shares' and individually as a
'Warrant Share' as the same may be adjusted from time to time in
accordance with Sections 2 and 3 hereof), at a price per share of $_____
(the 'Initial Exercise Price'), subject to adjustment as provided
herein. Capitalized terms used herein are defined in Section 4 hereof.
The amount and kind of securities purchasable pursuant to the rights
granted hereunder and the purchase price for such securities are subject
to adjustment pursuant to the provisions contained in this Class A
Warrant (this 'Warrant'). Reference is hereby made to the further
provisions of this Warrant set forth below, and such further provisions
shall for all purposes have the same effect as though fully set forth
herein.
<PAGE>
<PAGE>
Exhibit 10.12
[LOGO] SOUTH CHINA BREWING COMPANY LIMITED
27/4/95
PRIVATE & CONFIDENTIAL
- ----------------------
Mr. Edward Cruise Miller
901 NE 43rd Street, Apt. 302
Seattle WA 98105
Dear Sir,
We at South China Brewing Company Ltd. have the pleasure in offering you an
appointment with our company as a Brewmaster on the following terms:
1. DEFINITIONS
In this letter, unless otherwise stated requires:
(a) 'Company' means South China Brewing Co. Ltd.
(b) 'Date of Termination' means:
(i) in the event of termination for cause, the date upon which notice is
served on you or the date stipulated in such notice, whichever is
later, or
(ii) in the event of termination other than cause where the Company
elects to make payment in lieu of notice, the last day upon which
you are required by the Company to attend position, or
(iii) in the event of termination other than for cause where the Company
elects not to make a payment in lieu of notice, the last day of that
notice period.
(c) 'Commencement Date' means the date on which you take up your employment
with the Company.
(d) 'Salary' means the salary payable to you in accordance with paragraph 3(a)
excluding any bonus or other benefits.
2. EMPLOYMENT
You will be employed as a Brewmaster for a period of two (2) years with effect
from the Commencement Date which is 1/5/95.
3. REMUNERATION
(a) Salary
The Company will pay you a salary of Hong Kong Dollars Three Hundred
Twelve Thousand (HK$312,000) per annum by monthly installments in arrears
from the Commencement Date. Your salary will be subject to review one
calendar year from Commencement Date.
<PAGE>
<PAGE>
2
(b) Bonus
Provided your employment has not been terminated for cause under paragraph
4(c), the Company will, about ten days before your salary review, pay you
a bonus, in respect of your employment during the previous year, equal to
one (1) month's salary at the rate prevailing at the end of the previous
year. Subsequent bonus amounts will be at the sole discretion of the
Company but will not equal less than one (1) month's salary at the rate
prevailing at the end of the previous year. In the event of termination
for cause by the Company or by you in accordance to paragraph 4(a)(c), no
bonus will be paid for the year in which termination occurs.
(c) Medical Benefits
You will be provided with a worldwide Medical Benefits Insurance Scheme
for the duration of your employment provided you are accepted for
coverage, which is at the sole discretion of the insurer.
(d) Leave & Travel
(i) You will be entitled to two weeks leave for your first complete
calendar year and three weeks for your second complete calendar
year which will taken as determined by the Company. Time at which
leave is taken is dependent on seniority, family circumstances and
the exigencies of the Company's business but subject thereto,
arrangements will be made in so far as practicable to suit your
convenience.
(ii) Your leave cannot be accumulated.
(iii) If your employment is terminated for cause under paragraph 4(c) you
will not be entitled to leave accrued prior to Date of Termination
unless the Company at its discretion otherwise determines.
(iv) You will be provided one (1) round trip 'Excursion' fare air ticket
for yourself for each calendar year for travel to the United States,
or passages up to the equivalent if you wish to take your leave
elsewhere.
4. TERMINATION
(a) By You
You may terminate your employment by giving to the Company not less than
three (3) months previous notice in writing or payment of three months'
salary in lieu of notice.
(b) by the Company without cause
The Company may terminate your employment without cause:
(i) At anytime by giving to you three (3) months' previous notice or by
paying you three (3) months' salary in lieu of notice.
(ii) For the avoidance of doubt, neither the Company nor you shall be
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3
obliged to make payment to the other in lieu of notice in respect of
allowances or benefits in the event of termination.
(c) By the Company with Cause
(i) For the purposes of this paragraph and all other provisions of this
letter relating to termination for cause, 'cause' shall mean:
Dishonesty, whether or not in connection with the employment;
willful disobedience or non-compliance with the terms of this letter
or any lawful orders or instructions given by the Company;
incompetence or negligence in the performance of duties; bankruptcy
or failure to pay debts within a reasonable time; conviction of a
crime; ill-health certified to be self-induced; the taking of drugs
prohibited by Hong Kong law; actions, which at the conclusion of the
Company, adversely affect your ability to perform properly in your
duties or your and/or the Company's standing and reputation in the
community.
(ii) The Company may at anytime terminate the employment for cause as
aforesaid on immediate notice and without payment or compensation
whatsoever.
(iii) If during your contract you take on any outside employment without
prior written permission of the Company you will be liable to
immediate dismissal.
(d) By the Company in the event of ill-health which is not self-induced
If a certified medical practitioner, as chosen by the Company, determines
that your health does not permit you to properly discharge your duties
and that your condition is not self-induced, the Company may terminate
your contract on terms no less favorable to you than set out in paragraph
4(a)(b).
5. CONFIDENTIALITY
You shall not disclose or utilize directly or indirectly, other than on the
behalf of the Company, and will keep confidential, both during your
employment with the Company and thereafter all confidential or proprietary
information which may come to your knowledge concerning the business affairs
of the Company and their respective customers, clients, principals and
agents.
6. GOVERNING LAW
The terms and conditions herein set out shall be construed in accordance
with the laws of Hong Kong.
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4
Please sign and return the attached copy of this letter to record your
acceptance of the above terms and conditions.
Yours faithfully,
South China Brewing Company Limited
/s/ David K. Haines
David K. Haines
Managing Director
I hereby accept employment on the terms of the above written letter.
Signed: /s/ Edward Cruise Miller Date: 1/5/95
------------------------------------------------------------
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EXHIBIT 10.13
PLAN AND AGREEMENT OF AMALGAMATION
This agreement dated as of July 18, 1996, among American Craft
Brewing International Limited, a British Virgin Islands company ('Craft'), and
American Craft Brewing International Limited, a Bermuda company ('American
Brewing International' and together with Craft, the 'Constituent Companies').
WHEREAS, Craft is a company duly organized and existing under the
laws of the British Virgin Islands, having been incorporated on December 6,
1995;
WHEREAS, American Brewing International is a company duly
organized and existing under the laws of Bermuda, having been incorporated on
June 3, 1996; and
WHEREAS, the Boards of Directors of the parties hereto deem it
desirable, upon the terms and subject to the conditions herein stated, that
Craft be amalgamated with and into American Brewing International (the
'Amalgamation') and that American Brewing International be the surviving
corporation with the outstanding shares of capital stock of Craft, par value
US$1.00 per share (the 'Craft Shares'), converted into common shares of US$0.01
each in the capital of the Company (the 'ABI Shares'), of American Brewing
International and that all of the Craft Shares in existence prior to the
Amalgamation be canceled so that after the Amalgamation all of the outstanding
ABI Shares, other than directors' qualifying shares, will be owned by those who
prior to the Amalgamation owned all of the outstanding Craft Shares.
NOW THEREFORE, it is agreed as follows:
ARTICLE I
1.1 On the effective date of the Amalgamation, Craft and American
Brewing International shall amalgamate and continue as one
company, with American Brewing International as the surviving
corporation. The Constituent Companies shall make the
appropriate filings with the Registrar of Companies of Bermuda
and the Registrar of Companies of the British Virgin Islands.
1.2 Upon the effective date of the Amalgamation:
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2
(i) each then outstanding Craft Share shall, by virtue of the
Amalgamation and without any action on the part of the
holder thereof, be converted into an ABI Share;
(ii) each holder of a share certificate or certificates
representing Craft Shares immediately prior to the
effective date of the Amalgamation (each an 'Old Craft
Share Certificate'), upon surrender of such certificate or
certificates to American Brewing International after the
effective date of the Amalgamation, shall be entitled to
receive a share certificate or certificates representing
the number of ABI Shares equal to the number of Craft
Shares held by such holder immediately prior to the
effective date of the Amalgamation;
(iii) if any certificate representing ABI Shares is to be issued
in a name other than that in which an Old Craft Share
Certificate is registered, it shall be a condition of such
issuance that the certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer
and that the person requesting such issuance shall either
pay to American Brewing International or its transfer
agent any transfer or other taxes required by reason of
the issuance of certificates representing ABI Shares in a
name other than that of the registered holder of the Old
Craft Share Certificate surrendered, or establish to the
satisfaction of American Brewing International or its
transfer agent that such tax has been paid or is not
applicable; and
(iv) any and all ABI Shares issued and outstanding prior to
such effective date, including the 12,000 ABI Shares
issued to Peter W. H. Bordeaux, shall be canceled, and
shall be null and void.
ARTICLE II
2.1 Each record holder of the 2,000,000 issued and outstanding
Craft Shares shall be entitled to vote on this Agreement and
the Amalgamation as provided by the applicable laws of the
British Virgin Islands. The record holder of the 12,000 issued
and outstanding ABI Shares shall be entitled to vote on this
Agreement and the Merger as provided by the applicable laws of
Bermuda. If this Agreement is duly adopted by the requisite
votes of such members and is not terminated as contemplated by
Article VI, a Certificate of Amalgamation, executed in
accordance with the law of Bermuda, shall be filed with the
Registrar of Companies of Bermuda. The Amalgamation shall
become effective on the time and date specified in the
Certificate of Amalgamation issued by the Registrar of
Companies of Bermuda, referred to herein as the 'effective
date of the Amalgamation.'
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3
2.2 Each of Craft and American Brewing International represent
and warrant to each other that they are in good standing under
the laws of the British Virgin Islands and Bermuda,
respectively.
ARTICLE III
As of the effective date of the Amalgamation, the separate
existence of Craft shall cease; American Brewing International shall
thereupon possess all the rights, privileges, immunities and franchises,
of a public as well as a private nature of Craft, and all property,
real, personal and mixed and all debts due on whatever accounts,
including subscriptions to shares, and all other choses in action, and
each and every other interest of or belonging to or due to Craft shall
be deemed to be the rights, privileges, immunities, franchises,
property, debts and interests of American Brewing International without
further act or deed, and the title to any real estate, or any interest
therein, vested in Craft shall not revert or in any way be impaired by
reason of the Amalgamation; and American Brewing International shall
thenceforth be responsible and liable for all liabilities and
obligations of Craft, and any claim existing or action or proceeding
pending by or against Craft may be prosecuted as if the Amalgamation had
not taken place, or American Brewing International may be substituted in
its place. Neither the rights of creditors nor any liens upon the
property of Craft shall be impaired by the Amalgamation.
ARTICLE IV
The Memorandum of Amalgamation with respect to the Amalgamation
shall be deemed to be the Memorandum of Association of American Brewing
International and the Certificate of Amalgamation with respect to the
Amalgamation shall be deemed to be the Certificate of Incorporation of
American Brewing International. The Bye-Laws of American Brewing
International shall not be affected by the Amalgamation.
ARTICLE V
This Agreement may be supplemented or amended in any manner at
any time and from time to time before the issue of the Certificate of
Amalgamation by the Constituent Companies without any action by the
members of Craft or American Brewing International save with respect to
the terms of conversion set forth in clause 1.2 above. Any variation,
modification or amendment to this Agreement must be made in writing and
executed by the Constituent Companies. This Agreement may be terminated
and the Amalgamation abandoned at any time prior to the issuance by the
Registrar of Companies in Bermuda of a Certificate of Amalgamation by
action taken by the respective Boards of Directors of the Constituent
Companies.
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4
ARTICLE VI
The names and addresses of the directors of American Brewing
International after giving effect to the Amalgamation are as follows:
(i) John P. Beaudette
MHW, Ltd.
1165 Northern Boulevard
Manhasset, New York 11030
UNITED STATES;
(ii) Peter W. H. Bordeaux
One Galleria Boulevard
Metairie, Louisiana 70001
UNITED STATES;
(iii) Norman H. Brown, Jr.
277 Park Avenue
New York, New York 10172
UNITED STATES;
(iv) Federico Guillermo Cabo Alvarez
Pablo Neruda #2640, Suite 702
Guadalajara, Jalisco
MEXICO 44630;
(v) John Campbell
Appleby, Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton HM EX
BERMUDA;
(vi) Wyndham H. Carver
Rondie Wood House
Near Milland
Liphook
Hampshire
UNITED KINGDOM;
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5
(vii) Tonesan Amissah-Furbert
Appleby, Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton HM EX
BERMUDA
(viii) David K. Haines
American Craft Brewing International Limited
Unit A1, 1/F, Vita Tower
29 Wong Chuk Hang
Aberdeen, HONG KONG; and
(ix) Joseph E. Heid
Sara Lee Corporation
3 First National Plaza
Chicago, IL 60602
ARTICLE VII
This Agreement shall be governed by the laws of Bermuda, but
without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction
would be required thereby.
IN WITNESS WHEREOF, Craft and American Brewing International have
each caused this Agreement to be executed by its authorized officer as
of the date first above written.
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED, a
British Virgin Islands company
-------------------------------
By:
Title:
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED, a
Bermuda company
-------------------------------
By:
Title:
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Exhibit 10.14
RATIFICATION AND EXCHANGE AGREEMENT
This Ratification and Exchange Agreement (this 'Agreement') is
dated and entered into as of the 31st day of May, 1996 by and among South China
Brewing Company Limited, a Hong Kong company (the 'Brewing Company'), SCBC
Distribution Company Limited, a Hong Kong company (the 'Distribution Company'),
Craft Brewing Holdings Limited, a British Virgin Islands company ('Craft'), and
each the persons listed on the signature pages hereto.
WHEREAS, the shareholders (the 'Brewing Company Shareholders')
and directors (the 'Brewing Company Directors') of the Brewing Company, and the
shareholders (the 'Distribution Company Shareholders') and directors (the
'Distribution Company Directors') of the Distribution Company and the members
(the 'Craft Members') and directors (the 'Craft Directors') of Craft desire to
ratify and confirm certain matters and to rescind the Shareholders' Agreement
(the 'Brewing Company Shareholders' Agreement') among the Brewing Company
Shareholders party thereto a copy of which is attached hereto as Annex A and the
Shareholders' Agreement (the 'Distribution Company Shareholders' Agreement')
among the Distribution Company Shareholders party thereto a copy of which is
attached hereto as Annex B;
WHEREAS, each of the Brewing Company Shareholders listed on
Schedule I hereto (the 'Brewing Company Shareholders') desires to sell and Craft
desires to purchase the number of shares of HK$1.00 each in the capital of the
Brewing Company (the 'Brewing Company Shares') set forth opposite each Brewing
Company Shareholder's name in column two of Schedule I in consideration of Craft
issuing and delivering the number of shares of US$1.00 each in the capital of
Craft (the 'Old Craft Shares') to each Brewing Company Shareholder set forth
opposite such Brewing Company Shareholder's name in column three of Schedule I;
WHEREAS, each of the Distribution Company Shareholders listed on
Schedule II hereto (the 'Distribution Company Shareholders') desires to sell and
Craft desires to purchase the number of shares of HK$1.00 each in the capital of
the Distribution Company (the 'Distribution Company Shares') set forth opposite
each Distribution Company Shareholder's name in column two of Schedule II hereto
in consideration of Craft issuing and delivering the number of Old Craft Shares
to each Distribution Company Shareholder set forth opposite such Distribution
Company Shareholder's name in column three of Schedule II;
WHEREAS, Craft desires to ratify and approve the sale by Sazerac
Company, Inc., a Louisiana corporation ('Sazerac'), to Federico Guillermo Cabo
Alvarez ('Cabo') of 7,600 Old Craft Shares, constituting all of the Old Craft
Shares beneficially owned by Sazerac;
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2
WHEREAS, to provide incentive to Pierre William Harrison Bordeaux
('Bordeaux'), who, as President of Sazerac, has considerable experience in the
alcohol beverage industry, to agree to act as Chairman of the Board of Directors
of Craft or any successor to the business of Craft incorporated in Bermuda
('Newco'), Craft desires to ratify and approve the sale by Cabo of 2,500 Old
Craft Shares beneficially owned by Cabo to Bordeaux;
WHEREAS, the Board of Directors of Craft desires to change its
name to American Craft Brewing International Limited;
WHEREAS, Craft desires to appoint Bordeaux Chairman of the Board
of Directors of Craft, to appoint James L. Ake ('Ake') Executive Vice President
and Secretary of Craft and to appoint David K. Haines ('Haines') Managing
Director for Hong Kong Operations of Craft;
WHEREAS, each of the persons having the right to acquire the Old
Craft Shares listed on Schedule III hereto (the 'Hong Kong Investors') desires
to consummate the acquisition of the number of Old Craft Shares set forth
opposite each Hong Kong Investor's name in column two of Schedule III hereto and
for which such Hong Kong Investor heretofore has remitted to the Brewing Company
the amount set forth opposite such Hong Kong Investor's name in column three of
Schedule III, and Craft desires to issue such number of Old Craft Shares to each
such Hong Kong Investor;
WHEREAS, Craft desires to engage in a share split whereby each
Craft Member would receive eighty shares of US$0.01 each in the capital of Craft
(the 'New Craft Shares') for each Old Craft Share held by such Craft Member;
WHEREAS, Craft desires to merge into Newco;
WHEREAS, Craft desires to borrow US$350,000 from certain lenders;
and
WHEREAS, the parties desire to take such other actions as
described herein;
NOW THEREFORE, the parties hereto agree and take corporate action
as follows:
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3
ARTICLE I
Authorization, Ratification, Confirmation and Rescission Matters
Relating to the Brewing Company
1. The undersigned Brewing Company Directors hereby:
1.1 acknowledge and confirm the allotment, dated as of
October 26, 1995, of that number of Brewing Company
Shares set forth opposite the name of each Brewing
Company Shareholder set forth on Schedule IV hereto;
1.2 approve the transfer of the number of Brewing Company
Shares set forth opposite each Brewing Company
Shareholder's name in column two of Schedule I from
each such Brewing Company Shareholder to Craft subject
to the relevant instruments of transfer and bought and
sold notes being properly stamped and confirm that the
resolution of the Board of Directors of the Brewing
Company dated December 31, 1995 authorizing the
transfer of 4,749 Brewing Company Shares to Craft was
erroneously recorded and that such transfer has not in
fact been consummated;
1.3 authorize, subject to the relevant instruments of
transfer and bought and sold notes being properly
stamped, the issuance and delivery of a share
certificate evidencing the Brewing Company Shares
being transferred to Craft pursuant to Article IV
hereof and the entry of Craft's name as the transferee
of such Brewing Company Shares in the Brewing
Company's register of members;
1.4 acknowledge and confirm that the Brewing Company's
fiscal year end shall be October 31;
1.5 acknowledge and confirm the resignation of Tengis
Limited as Secretary of the Brewing Company effective
as of May 25, 1995 and the appointment J. P. Walsh &
Co. as Secretary of the Brewing Company effective as
of June 20, 1995;
1.6 acknowledge and confirm the resignation of OnLine
Group Limited as a director of the Brewing Company
effective as of April 11, 1995;
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4
1.7 acknowledge and confirm that the registered office of
the Brewing Company, effective as of October 18, 1994,
is located at Unit A1, 1/F, Vita Tower, 29 Wong Chuk
Road, Aberdeen, Hong Kong;
1.8 acknowledge and confirm the resignation of Lunar
Holdings Limited ('Lunar') as a director of the
Brewing Company and the election of Haines pursuant to
Article 83 of the Brewing Company's Articles of
Association to fill the resulting vacancy, in each
case effective as of March 15, 1996;
1.9 elect Bordeaux Chairman of the Board of Directors of
the Brewing Company;
1.10 elect Haines Managing Director of the Brewing Company;
1.11 agree that by their execution of this Agreement all
resolutions, authorizations or approvals of the
Brewing Company Directors contained herein shall be
regarded as being resolved, authorized or approved by
the Brewing Company Directors by written resolution
pursuant to Article 107 of the Articles of Association
of the Brewing Company; and
1.12 approve this Agreement and authorize Bordeaux to
execute this Agreement on behalf of the Brewing
Company.
2. The undersigned Brewing Company Shareholders hereby:
2.1 agree that any and all bought notes and instruments of
transfer previously signed by each of them in escrow
in respect of the number of Brewing Company Shares set
forth opposite his name in column two of Schedule I
shall be regarded as null and void as of the date
hereof and shall cease to have any effect; and
2.2 rescind the Brewing Company Shareholders' Agreement
and agree that such agreement shall be void and no
longer of any force and effect.
ARTICLE II
Authorization, Ratification, Confirmation and Rescission Matters Relating to
the Distribution Company
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5
1. The undersigned Distribution Company Directors hereby:
1.1 acknowledge and confirm the allotment of October 26,
1995 of that number of Distribution Company Shares set
forth opposite the name of each Distribution Company
Shareholder set forth on Schedule V hereto;
1.2 approve the transfer of the number of Distribution
Company Shares set forth opposite each Distribution
Company Shareholder's name in column two of Schedule
II from each such Distribution Company Shareholder to
Craft subject to the relevant instruments of transfer
and bought and sold notes being properly stamped;
1.3 authorize, subject to the relevant instruments of
transfer and bought and sold notes being properly
stamped, the issuance and delivery of a share
certificate evidencing the Distribution Company Shares
being transferred to Craft pursuant to Article V
hereof and the entry of Craft's name as the transferee
of such Distribution Company Shares in the
Distribution Company's register of members;
1.4 acknowledge and confirm the resignation of Sovereign
Secretaries (HK) Limited as Secretary of the
Distribution Company effective as of July 11, 1995 and
the appointment of J. P. Walsh & Co. as Secretary of
the Distribution Company effective as of July 11,
1995;
1.5 acknowledge and confirm the election of Bordeaux,
Norman Herbert Brown, Jr., ('Brown') and John F.
Beaudette to the Board of Directors of the
Distribution Company effective as of October 16, 1995;
1.6 acknowledge and confirm the resignation of Lunar as a
director of the Distribution Company pursuant to
Article 15 of the Distribution Company's Articles of
Association and the election of Haines to fill the
resulting vacancy, in each case effective as of March
15, 1995;
1.7 acknowledge and confirm the resolutions of the
Distribution Company Directors passed at meetings of
the Board of Directors of the Distribution Company on
September 26, 1995 and January 31, 1996,
notwithstanding the fact that the directors
participated by telephone;
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6
1.8 elect Bordeaux Chairman of the Board of Directors of
the Distribution Company;
1.9 elect Haines Managing Director of the Distribution
Company;
1.10 adopt a seal, an impression of which is affixed hereto
as Exhibit A, as the common seal of the Distribution
Company;
1.11 agree that by their execution of this Agreement, all
resolutions, authorizations or approvals of the
Distribution Company Directors contained herein shall
be regarded as being resolved, authorized or approved
by the Distribution Company Directors by written
resolution pursuant to Article 20 of the Articles of
Association of the Distribution Company; and
1.12 approve this Agreement and authorize Bordeaux to
execute this Agreement on behalf of the Distribution
Company.
2. The undersigned Distribution Company Shareholders hereby:
2.1 agree that any bought and sold notes and instruments
of transfer previously signed by them in escrow in
respect of the number of Distribution Company Shares
set forth opposite his name in column two of Schedule
II shall be recorded as null and void as of the date
hereof and shall cease to have any effect;
2.2 rescind the Distribution Company Shareholders'
Agreement and agree that such agreement shall be void
and no longer of any force and effect;
2.3 Confirm that Bordeaux's name has appeared as Peter W.
H. Bordeaux in all records and documents of the
Distribution Company and that both the names Pierre
William Harrison Bordeaux and Peter W. H. Bordeaux
refer to him as the one and same person.
ARTICLE III
Authorization, Approval and Recommendation Matters Relating to Craft
1. The undersigned Craft Directors hereby:
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7
1.1 authorize the issuance and delivery, effective as of
the date hereof, of the Old Craft Shares (and
certificates evidencing such Shares) set forth
opposite each Brewing Company Stockholder's name in
column three of Schedule I in exchange for the
transfer and delivery of all of the Brewing Company
Shares in column two of Schedule I and the entry of
such Brewing Company Shareholder's name as the holder
of such Old Craft Shares in Craft's register of
members;
1.2 authorize the issuance and delivery, effective as of
the date hereof, of the Old Craft Shares (and
certificates evidencing such Shares) set forth
opposite each Distribution Company Stockholder's name
in column three of Schedule II in exchange for the
transfer and delivery of all of the Distribution
Company Shares in column two of Schedule II and the
entry of such Distribution Company Shareholder's name
as the holder of such Old Craft Shares in Craft's
register of members;
1.3 ratify and approve, effective as of the date hereof
immediately following consummation of the share
transfers authorized in Sections 1.1 and 1.2 of this
Article III, the sale by Sazerac of 7,600 Old Craft
Shares to Cabo and sale by Cabo of 2,500 Old Craft
Shares to Bordeaux pursuant to that certain agreement
among Sazerac, Cabo and Bordeaux dated as of June 1,
1995 attached hereto as Exhibit B;
1.4 authorize the issuance and delivery to the Hong Kong
Investors of the Old Craft Shares set forth opposite
each Hong Kong Investor's name in column two of
Schedule III and for which each Hong Kong Investor has
remitted the amount set forth opposite such Hong Kong
Investor's name in column three of Schedule III;
1.5 resolve that the Memorandum of Association and
Articles of Association of Craft be amended to change
the name of the company to American Craft Brewing
International Limited;
1.6 resolve that the Memorandum of Association of Craft be
amended by deleting Clause 9 in its entirety and
replacing it with the following;
'9. The authorized capital is made up of one class and
one series of shares divided into 5,000,000 shares of
US$0.01 par value.'
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8
1.7 resolve that immediately upon the effective date of
Articles IV and V, each Old Craft Share shall be split
into eighty (80) shares, US$0.01 par value of Craft
('New Craft Shares') so that each Craft Member will
receive the number of New Craft Shares set forth
opposite such Craft Member's name on Schedule VI
hereto and that any Old Craft Shares previously issued
shall be canceled and void as of such effective date
and shall no longer represent any right, title or
interest in any capital stock of Craft;
1.8 accept the resignation of Lunar as a director of Craft
pursuant to Article 85 of the Articles of Association
of Craft and the election of Haines pursuant to
Article 86 of the Articles of Association of Craft to
fill the resulting vacancy, in each case effective as
of March 15, 1995;
1.9 elect Bordeaux Chairman of the Board of Directors of
Craft;
1.10 elect Ake Executive Vice President and Secretary of
Craft;
1.11 elect Haines Managing Director for Hong Kong
Operations of Craft;
1.12 authorize and approve the merger (the 'Merger') of
Craft into Newco pursuant to which each Craft member
will receive one share of Newco for each New Craft
Share held by such Craft Member and resolve that the
Merger is in the best interest of the Craft Members;
1.13 approve the form, terms and provisions of the
Agreement and Plan of Merger, between Craft and Newco
attached hereto as Exhibit C (the 'Merger Agreement')
and authorize the Chairman of the Board of Craft, the
Executive Vice President and Secretary of Craft and
the Managing Director for Hong Kong Operations of
Craft (the 'Authorized Officers'), and each of their
designees, to execute and deliver, in the name and on
behalf of Craft, the Merger Agreement in substantially
the form attached hereto, with such additions,
deletions or changes as the Authorized Officer
executing the same shall approve (the execution
thereof by any Authorized Officer to be conclusive
evidence of his approval of any such additions,
deletions or changes);
1.14 authorize the Authorized Officers and their designees
to consummate the Merger in accordance with the Merger
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9
Agreement, and in connection therewith, to execute,
deliver, acknowledge, file and record, as appropriate,
any and all documents and instruments in the name of
and on behalf of Craft and, if so required, under its
corporate seal or otherwise as they shall deem
necessary or advisable, including but not limited to
filing of the appropriate certificate of merger in
accordance with the laws of the British Virgins
Islands;
1.15 authorize the Authorized Officers, in the name and on
behalf of Craft, to pay all necessary, appropriate or
advisable fees incurred by Craft or any of its
directors, officers or agents in connection with the
Merger and to execute, acknowledge, deliver and file
all statements, applications, certificates,
undertakings, notices, consents and other agreements
with appropriate persons (including governmental
agencies) and to appear before officials of any
foreign or domestic governmental agencies,
authorities, commissions or other similar bodies in
connection with the Merger;
1.16 adopt the form of any and all resolutions required by
such agencies, authorities, commissions or similar
bodies to be adopted in connection with the Merger;
and the Secretary of Craft shall evidence such
adoption by filing with the records of Craft copies of
such resolutions, which shall thereupon be deemed to
have been duly adopted by the Board of Directors of
Craft;
1.17 authorize the Authorized Officers to execute and
deliver any and all agreements, instruments and
documents and to do any and all acts and things, and
to pay such expenses and taxes, including without
limitation, legal fees and expenses, as they, or any
of them, deem necessary or advisable to carry out
fully the Merger Agreement (and the execution and
delivery thereof) and the Merger;
1.18 authorize the Authorized Officers, by a written
power-of-attorney, to authorize any other officer,
employee, agent or counsel of Craft to take any action
and to execute and deliver any agreement, instrument
or other document referred to in the foregoing
resolutions in place of or on behalf of such officer,
with full power as if such officer were taking such
action himself;
1.19 recommend that the Craft Members' vote for approval
and adoption of the Merger Agreement and the Merger;
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10
1.20 ratify and approve the bridge financing (the 'Bridge
Financing') provided by Harry Allen Friedberg, John
Arvanitis, Mark John Gallagher, Mark Youts, Noah
Shaffer and Long Term Partners, Ltd. (collectively,
the 'Bridge Lenders') pursuant to which the Bridge
Lenders have loaned or will lend, in the aggregate,
US$350,000 to Craft in return for the issuance of
Redeemable Convertible Notes, Series A (the
'Redeemable Convertible Notes') in favor of each of
the Bridge Lenders;
1.21 approve the form, terms and provisions of (i) purchase
agreements between Craft, on the one hand, and each of
the Bridge Lenders, on the other hand, attached hereto
as Exhibits D, E, F G, H and I (the 'Purchase
Agreements') and (ii) the Redeemable Convertible Notes
attached hereto as Exhibits J, K, L, M, N and O and
approve and authorize the execution and delivery of,
in the name of and on behalf of Craft, the Purchase
Agreements and the Redeemable Convertible Notes by the
Authorized Officers in substantially the form attached
hereto, with such additions and deletions or changes
as the Authorized Officers executing the same shall
approve (the execution thereof by any Authorized
Officer to be conclusive evidence of his approval of
any such additions, deletions or changes);
1.22 authorize the Authorized Officers to execute and
deliver any and all agreements, instruments and
documents and to do any and all acts and things, and
to pay such expenses and taxes, including without
limitation legal fees and expenses, as they, or any of
them, deem necessary or advisable to carry out fully
the Purchase Agreements and the Redeemable Convertible
Notes;
1.23 authorize the Authorized Officers, by a written power
of attorney, to authorize any other officer, employee,
agent or counsel of Craft to take any action and to
execute and deliver any agreement, instrument or other
document referred to in the foregoing resolutions in
place of or on behalf of such officer, with full power
as if such officer were taking such action himself;
1.24 reserve for issuance pursuant to the terms of the
Convertible Notes and the warrants issued pursuant to
the terms thereof 500,000 New Craft Shares; and
1.25 approve this Agreement and authorize Bordeaux to
execute this Agreement on behalf of Craft.
<PAGE>
<PAGE>
11
2. The undersigned members of Craft hereby:
2.1 agree that any and all share certificates purporting
to evidence Old Craft Shares in their hands prior to
the date of this Agreement which were not considered
duly issued due to lack of consideration given shall
be delivered to Craft for cancellation upon execution
of this Agreement and are null and void and do not
represent any right, title or interest in any Old
Craft Shares;
2.2 authorize the Merger of Craft into Newco pursuant to
which the Craft Members would receive one share of
Newco for each New Craft Share and approve the form,
terms and provisions of the Merger Agreement; and
2.3 agree that any and all stock certificates representing
Old Craft Shares held by each Craft Member shall be
delivered to Craft upon execution of this Agreement
and shall be canceled and void as of the effective
date of Articles IV and V and shall no longer
represent any right, title or interest in any capital
stock of Craft.
ARTICLE IV
The Brewing Company Exchange
1. Each of the Brewing Company Shareholders hereby agrees to sell
to Craft, and Craft hereby, agrees to purchase and acquire, the Brewing Company
Shares set forth opposite each Brewing Company Shareholder's name in column two
of Schedule I, and in consideration for each such purchase and acquisition,
Craft shall issue and deliver the number of Old Craft Shares set forth opposite
such Brewing Company Shareholder's name in column three of Schedule I to each
such Brewing Company Shareholder.
2. Each of the Brewing Company Shareholders and Craft agrees
that:
2.1 completion of the sale and purchase of the number of
the Brewing Company Shares set forth opposite each
Brewing Company Shareholder's name in column two of
Schedule I pursuant to paragraph 1 above shall take
place upon execution of this Agreement when all of the
following conditions shall have been satisfied by each
such Brewing Company Shareholder and Craft:
(i) each Brewing Company Shareholder shall have
delivered a duly executed bought note and instrument
of transfer in favor of
<PAGE>
<PAGE>
12
Craft in respect of the number of the Brewing Company
Shares set forth opposite his name in column two of
Schedule I;
(ii) a declaration of trust duly executed by Lunar in
favor of Craft in respect of one Brewing Company Share
shall have been delivered to Craft; and
(iii) any and all share certificates representing
Brewing Company Shares, other than Certificate No. 4
held by Lunar, held by such Brewing Company
Shareholder shall have been delivered to Craft;
2.2 any stamp duty payable in connection with the sale and
purchase of the number of the Brewing Company Shares
set forth opposite each Brewing Company Shareholder's
name in column two of Schedule I pursuant to this
Article IV hereof shall be borne by Craft; and
2.3 upon the relevant instruments of transfer and bought
and sold notes being properly stamped, Craft shall
tender to the Brewing Company all such share
certificates delivered by the Brewing Company
Shareholders under paragraph 2.1(iii) above for
cancellation together with the relevant duly stamped
instruments of transfer and bought and sold notes
whereupon Craft shall be issued a certificate in
respect of 4,749 Brewing Company Shares, thereafter,
each such Brewing Company Shareholder shall have no
right, title or interest in any Brewing Company
Shares.
ARTICLE V
The Distribution Company Exchange
1. Each of the Distribution Company Shareholders hereby agrees to
sell to Craft, and Craft hereby agrees to purchase and acquire, the Distribution
Company Shares set forth opposite each Distribution Company Shareholder's name
in column two of Schedule II, and in consideration for each such purchase and
acquisition, Craft shall issue and deliver the number of Craft Shares set forth
opposite such Distribution Company Shareholder's name in column three of
Schedule II to each such Distribution Company Shareholder.
2. Each of the Distribution Company Shareholders and Craft agrees
that:
2.1 completion of the sale and purchase of the number of
the Distribution Company Shares set forth opposite
each Distribution Company Shareholder's name in column
two of Schedule II
<PAGE>
<PAGE>
13
pursuant to paragraph 1 above shall take place upon
execution of this Agreement by each such Distribution
Company Shareholder and Craft when all of the
following conditions shall have been satisfied:
(i) each Distribution Company Shareholder shall have
delivered to Craft a duly executed bought note and
instrument of transfer in favor of Craft in respect of
the number of the Distribution Company Shares set
forth opposite his name in column two of Schedule II;
(ii) a declaration of trust duly executed by Lunar in
favor of Craft in respect of one Distribution Company
Share shall have been delivered to Craft; and
(iii) any and all share certificates representing
Distribution Company Shares held by each such
Distribution Company Shareholder shall have been
delivered to Craft;
2.2 any stamp duty payable in connection with the sale and
purchase of the number of the Distribution Company
Shares set forth opposite each such Distribution
Company Shareholder's name in column two of Schedule
II pursuant to this Article V hereof shall be borne by
Craft; and
2.3 upon the relevant instruments of transfer and bought
and sold notes being properly stamped Craft shall
tender to the Distribution Company all such share
certificates delivered by the Distribution Company
Shareholders under paragraph 2.1(iii) above for
cancellation together with the relevant duly stamped
instruments of transfer and bought and sold notes
where upon Craft shall be issued a certificate in
respect of 249 Distribution Company Shares and Lunar
shall be issued a certificate in respect of one
Distribution Company Share. Thereafter, each such
Distribution Company Shareholder shall have no right
title or interest in any Distribution Company Shares.
<PAGE>
<PAGE>
14
ARTICLE VI
Effectiveness of Agreement
This Agreement shall become effective when (i) counterparts
hereof shall have been executed and delivered by persons entitled to receive a
majority of the Old Craft Shares issued pursuant to Article III, Article IV and
Article V and by each of the Craft Directors, the Brewing Company Directors and
the Distribution Company Directors and (ii) a majority of the Old Craft Shares
authorized to be issued under Article III, Article IV and Article V have been
issued pursuant to such Articles to the person or persons described herein.
ARTICLE VII
Miscellaneous
1. This Agreement embodies the complete agreement and
understanding among the parties hereto with respect to
the subject matter hereof and supersedes any prior
understandings, agreements, resolutions or
representations, written or oral, that may have
related to the subject matter in any way. Each of the
parties hereto confirms and acknowledges that he is
not entitled to any shares of capital stock in the
Brewing Company, the Distribution Company or Craft or
any interest therein other than pursuant to this
Agreement and all previous documents signed by any
such party with respect to any of the matters referred
to herein shall cease to have any effect unless
otherwise provided herein.
2. This Agreement may be executed in counterparts, each
of which shall be an original and all of which shall
constitute one and the same instrument when a
counterpart hereof has been signed by each of the
parties hereto.
3. This Agreement shall be governed by the laws of the
State of New York, but without giving effect to
applicable principles of conflicts of law to the
extent that the application of the laws of another
jurisdiction would be required thereby.
4. The article headings in this Agreement are for
convenience of reference only and shall in no event
affect the meaning or interpretation of this
Agreement.
<PAGE>
<PAGE>
15
5. In this Agreement, words importing the singular
include the plural and vice versa, words importing a
gender include every gender and references to persons
include bodies corporate or unincorporate.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date set forth above.
SOUTH CHINA BREWING COMPANY LIMITED
/s/ Pierre William Harrison Bordeaux
------------------------------------------
By: Pierre William Harrison Bordeaux
SCBC DISTRIBUTION COMPANY LIMITED
/s/ Pierre William Harrison Bordeaux
------------------------------------------
By: Pierre William Harrison Bordeaux
CRAFT BREWING HOLDINGS LIMITED
/s/ Pierre William Harrison Bordeaux
------------------------------------------
By: Pierre William Harrison Bordeaux
SAZERAC COMPANY, INC.
/s/ Pierre William Harrison Bordeaux
------------------------------------------
By: Pierre William Harrison Bordeaux
/s/ Federico Guillermo Cabo Alvarez
-----------------------------
Federico Guillermo Cabo Alvarez
LUNAR HOLDINGS LIMITED
/s/ David K. Haines
------------------------------------------
By: David K. Haines
<PAGE>
<PAGE>
16
BPW HOLDING, LTD.
/s/ John F. Beaudette
------------------------------------------
By: John F. Beaudette
/s/ Norman Herbert Brown, Jr.
------------------------------------------
Norman Herbert Brown, Jr.
------------------------------------------
Harry Friedberg
------------------------------------------
Jonathan Julian Ashby Gurnsey
------------------------------------------
Sheldon Kasowitz
------------------------------------------
Michael MacKenzie
------------------------------------------
Jeremy Muller
------------------------------------------
P.M.H. Carr-Smith
------------------------------------------
James Craig Chapman
------------------------------------------
Steven Marzo
------------------------------------------
Danny L. Quant
------------------------------------------
Rajesh Sharma
------------------------------------------
Philip Teed
------------------------------------------
Susan Sisko Teed
<PAGE>
<PAGE>
17
------------------------------------------
Geoffrey Carolan
------------------------------------------
David Cody
------------------------------------------
Thomas D. Schroeder
------------------------------------------
C. Porter Shutt
------------------------------------------
Niall Shiner
------------------------------------------
Darryl Tang
------------------------------------------
Michael Novogratz
------------------------------------------
Cyril Yap
------------------------------------------
Alvin Khoo
------------------------------------------
Eric Green
------------------------------------------
Peter Hirschman
------------------------------------------
Adam Aston
------------------------------------------
Joel Abramson
<PAGE>
<PAGE>
18
Schedule I
<TABLE>
<CAPTION>
- ------------------------------------- --------------------------- --------------------------
South China Brewing Craft Brewing Holdings
Company Limited Shares Limited Shares
- ------------------------------------- --------------------------- --------------------------
(1) (2) (3)
<S> <C> <C>
Sazerac Company, Inc. 1,520 3,800
Federico Guillermo Cabo Alvarez 1,520 3,800
Lunar Holdings Limited 949 2,375
BPW Holding, Ltd. 380 950
Norman Herbert Brown, Jr. 380 950
</TABLE>
<PAGE>
<PAGE>
19
Schedule II
<TABLE>
<CAPTION>
- ------------------------------------- ---------------------------- --------------------------
SCBC Distribution Company Craft Brewing Holdings
Limited Shares Limited Shares
- ------------------------------------- ---------------------------- --------------------------
(1) (2) (3)
<S> <C> <C>
Sazerac Company, Inc. 80 3,800
Federico Guillermo Cabo Alvarez 80 3,800
Lunar Holdings Limited 49 2,375
BPW Holdings, Ltd. 20 950
Norman Herbert Brown, Jr. 20 950
</TABLE>
<PAGE>
<PAGE>
20
Schedule III
<TABLE>
<CAPTION>
- --------------------------------- ----------------------------- -----------------------------
Hong Kong Investor Craft Brewing Holdings Consideration
Limited Shares
- --------------------------------- ----------------------------- -----------------------------
(1) (2) (3)
<S> <C> <C>
Harry Friedberg 135 US$32,400
Jonathan Julian Ashby Gurnsey 100 US$24,000
Sheldon Kasowitz 100 US$24,000
Michael MacKenzie 90 US$21,600
Jeremy Muller 90 US$21,600
P.M.H. Carr-Smith 50 US$12,000
James Craig Chapman 50 US$12,000
Steven Marzo 50 US$12,000
Danny L. Quant 50 US$12,000
Rajesh Sharma 50 US$12,000
Philip & Susan Sisko Teed 50 US$12,000
Geoffrey Carolan 45 US$10,800
David Cody 45 US$10,800
Thomas D. Schroeder 45 US$10,800
C. Porter Shutt 45 US$10,800
Niall Shiner 45 US$10,800
Darryl Tang 45 US$10,800
Michael Novogratz 40 US$9,600
Cyril Yap 40 US$9,600
Alvin Khoo 25 US$6,000
Eric Green 20 US$4,800
Peter Hirschman 20 US$4,800
Adam Aston 15 US$3,600
Joel Abramson 5 US$1,200
</TABLE>
<PAGE>
<PAGE>
21
Schedule IV
<TABLE>
<CAPTION>
- ----------------------------------------- -----------------------------------------------
South China Brewing Company Limited
Shares Allotted on October 26, 1995
- ----------------------------------------- -----------------------------------------------
<S> <C>
Sazerac Company, Inc. 1,519
Francisco Guillermo Cabo Alvarez 1,519
Lunar Holdings Limited 948
BPW Holding, Ltd. 380
Norman Herbert Brown, Jr. 379
</TABLE>
<PAGE>
<PAGE>
22
Schedule V
<TABLE>
<CAPTION>
- --------------------------------------------- -------------------------------------------
SCBC Distribution Company Limited
Shares Allotted on October 26, 1995
- --------------------------------------------- -------------------------------------------
<S> <C>
Francisco Guillermo Cabo Alvarez 80
Sazerac Company, Inc. 79
Lunar Holdings Limited 49
BPW Holding, Ltd. 20
Norman Herbert Brown, Jr. 20
</TABLE>
<PAGE>
<PAGE>
23
Schedule VI
<TABLE>
<CAPTION>
- --------------------------------------------- -------------------------------------------
Craft Brewing Holdings Limited Shares
Craft Brewing Holdings Limited Members Allotted Upon Share Split
- --------------------------------------------- -------------------------------------------
<S> <C>
Federico Guillermo Cabo Alvarez 1,016,000
Lunar Holdings Limited 380,000
BPW Holding LLC 152,000
Norman Herbert Brown, Jr. 152,000
Peter W. H. Bordeaux 200,000
Harry Friedberg 10,800
Jonathan Julian Ashby Gurnsey 8,000
Sheldon Kasowitz 8,000
Michael MacKenzie 7,200
Jeremy Muller 7,200
P.M.H. Carr-Smith 4,000
James Craig Chapman 4,000
Steven Marzo 4,000
Danny L. Quant 4,000
Rajesh Sharma 4,000
Philip & Susan Sisko Teed 4,000
Geoffrey Carolan 3,600
David Cody 3,600
Thomas D. Schroeder 3,600
C. Porter Shutt 3,600
Niall Shiner 3,600
Darryl Tang 3,600
Michael Novogratz 3,200
Cyril Yap 3,200
Alvin Khoo 2,000
Eric Green 1,600
Peter Hirschman 1,600
Adam Aston 1,200
Joel Abramson 400
</TABLE>
Doc. 4812
<PAGE>
<PAGE>
Exhibit 21.0
Subsidiaries of the Registrant
The Registrant has two wholly owned subsidiaries:
(1) The South China Brewing Company Limited, a Hong Kong Company, and
(2) SCBC Distribution Company Limited, a Hong Kong Company.
Both of the Company's above-named subsidiaries do business under the names
listed above.
<PAGE>
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN]
____________________________
Arthur Andersen & Co.
Certified Public Accountants
July 30, 1996 ____________________________
23/F., Wing On Centre
111 Connaught Road Central
Hong Kong
852 2852 0222
852 2815 0548 Fax
The Directors Direct Fax:
American Craft Brewing International Limited
41 Cedar Avenue
P O Box HM 1179
Hamilton HM EX
Bermuda
Dear Sirs,
As independent public accountants, we hereby consent to the use of our reports,
and to all references to our Firm included in or made a part of this
Registration Statement.
Very truly yours,
/s/ Arthur Andersen & Co.
<PAGE>
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF WOO, KWAN, LEE & LO]
<TABLE>
<S> <C>
Your Ref. Direct Line:
Direct Fax:
Our Ref. Date:
</TABLE>
The Directors
American Craft Brewing International Limited
41 Cedar Avenue
P.O. Box HM 1179
Hamilton HM EX
Bermuda
Dear Sirs,
CONSENT OF COUNSEL
We hereby consent to the reference to our firm under the caption 'Legal
Matters' contained in the Prospectus which forms a part of the Registration
Statement of American Craft Brewing International Limited filed with the United
States Securities and Exchange Commission.
Yours faithfully,
/s/ Woo, Kwan, Lee & Lo
Woo, Kwan, Lee & Lo
Hong Kong
26th July, 1996
[LETTERHEAD OF WOO, KWAN, LEE & LO]
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets of American Craft Brewing International Limited and
its subsidiaries as of October 31, 1995 and April 30, 1996 and the related
consolidated statements of operations, cash flows and changes in shareholders'
equity for the year ended October 31, 1995 and the six months ended April
30, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> OCT-31-1995 APR-30-1996
<PERIOD-START> NOV-01-1994 NOV-01-1995
<PERIOD-END> OCT-31-1995 APR-30-1996
<CASH> 102,248 6,232
<SECURITIES> 0 0
<RECEIVABLES> 22,236 62,730
<ALLOWANCES> 556 1,568
<INVENTORY> 22,922 29,585
<CURRENT-ASSETS> 147,241 140,850
<PP&E> 656,764 715,862
<DEPRECIATION> 21,997 53,116
<TOTAL-ASSETS> 866,278 893,013
<CURRENT-LIABILITIES> 251,216 587,194
<BONDS> 594,138 594,138
<COMMON> 645 645
0 0
0 0
<OTHER-SE> 188,696 280,310
<TOTAL-LIABILITY-AND-EQUITY> 866,278 893,013
<SALES> 63,707 244,753
<TOTAL-REVENUES> 63,707 244,753
<CGS> 38,960 43,055
<TOTAL-COSTS> 292,888 207,094
<OTHER-EXPENSES> 2,265 888
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 17,838 24,908
<INCOME-PRETAX> (288,244) (31,192)
<INCOME-TAX> (47,560) (5,147)
<INCOME-CONTINUING> (240,684) (26,045)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (240,684) (26,045)
<EPS-PRIMARY> (.12)<F1> (0.01)<F1>
<EPS-DILUTED> (.11)<F2> (0.01)<F2>
<FN>
<F1>Refer to Footnotes 3.g. and 16. a., b. and c. for discussion of total common
shares used in primary EPS.
<F2>Refer to Footnote 16.d. for discussion of items considered for fully diluted
EPS calculation.
</FN>
<PAGE>
