<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1996
REGISTRATION NO. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
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> <C>
BERMUDA 2082 UNIT A1, 1/F, VITA TOWER 72-1323940
(JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL 29 WONG CHUK HANG (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION) CLASSIFICATION CODE NUMBER) ABERDEEN, HONG KONG
011-8522-580-2506
(ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
------------------------
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 664-1666
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
<TABLE>
<S> <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: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SECURITY(2) PRICE FEE
<S> <C> <C> <C> <C>
Common Stock, par value
US$0.01 per share........... 1,533,333(3) US$6.00 US$ 9,199,998.00 US$3,172.41
Redeemable Common Stock
Purchase Warrants........... 1,533,333(4) US$0.10 US$ 153,333.30 US$ 52.87
Common Stock, par value
US$0.01 per share,
underlying Redeemable Common
Stock Purchase Warrants..... 1,533,333 US$9.00 US$13,799,997.00 US$4,758.62
Representative's
Warrants(5)................. 133,333 US$0.0001 US$ 13.33 --
Common Stock, par value
US$0.01 per share,
underlying Representative's
Warrants(5)................. 133,333 US$9.00 US$ 1,199,997.00 US$ 413.79
Redeemable Common Stock
Purchase Warrants,
underlying Representative's
Warrants(5)................. 133,333 US$0.15 US$ 19,999.95 US$ 6.90
Common Stock, par value
US$0.01 per share,
underlying Redeemable Common
Stock Purchase Warrants,
underlying Representative's
Warrants(5)................. 133,333 US$9.00 US$ 1,199,997.00 US$ 413.79
------------
Total Registration Fee........ US$8,818.38
</TABLE>
(1) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution provisions
of the Redeemable Common Stock Purchase Warrants, the Representative's
Warrants (defined below) and the Redeemable Common Stock Purchase Warrants
underlying the Representative's Warrants.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act.
(3) Includes 200,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(4) Includes 200,000 Redeemable Common Stock Purchase Warrants that the
Underwriters have the option to purchase to cover over-allotments, if any.
(5) In connection with the Registrant's sale of the securities offered hereby,
the Registrant is granting to the representative of the several
Underwriters' warrants (the 'Representative's Warrants') to purchase 133,333
shares of Common Stock, par value US$0.01 per share, and/or 133,333
Redeemable Common Stock Purchase Warrants.
------------------------
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 Prospectus Summary; Risk Factors;
Charges.............................................................. 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 JUNE 14, 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 $ [150% 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 160% 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 for listing on the BSE and will trade separately immediately after the
Offering under the symbols and , respectively.
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 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 $ per share [150% of the initial
public offering price] and/or up to 133,333 warrants to purchase Common
Stock at US$0.15 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.
2
<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 Craft Brewing Holdings 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. 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.
3
<PAGE>
<PAGE>
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:
Shanghai, Tecate (Mexico), Warsaw, Zurich, Budapest, Singapore and Prague.
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 [150% 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 [160% 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.'
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
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.'
Proposed Nasdaq and BSE Symbols....................... Shares --
Warrants --
</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. 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>
THREE MONTHS
YEAR ENDED THREE MONTHS ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1995 JANUARY 31, 1996
---------------- ---------------------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $ 63,707 $ 56,952 $ 124,544
Cost of sales.......................................... (55,266) (35,620) (22,599)
---------------- ----------- ----------------
Gross profit....................................... 8,441 21,332 101,945
Selling, general and administrative expenses........... (276,582) (97,682) (89,810)
Interest expense, net.................................. (17,838) (15,377) (12,219)
Other expenses, net.................................... (2,265) (1,137) (379)
---------------- ----------- ----------------
Loss before income taxes........................... (288,244) (92,864) (463)
Income tax benefit..................................... 47,560 15,323 76
---------------- ----------- ----------------
Net loss............................................... $ (240,684) $ (77,541) $ (387)
Net loss per common share.............................. $ (0.12) $ (0.04) $ --
Number of shares outstanding(1)........................ 2,000,000 2,000,000 2,000,000
<CAPTION>
JANUARY 31, 1996
------------------------------------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA(1)(2) ADJUSTED(2)(3)
---------------- ---------------------- ----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets................................... $150,534 $ 615,334 $5,538,834
Total assets........................................... $885,146 $1,349,946 $6,273,446
Total current liabilities.............................. $249,754 $ 619,754 $ 67,754
Total liabilities...................................... $673,333 $1,043,333 $ 95,833
Total shareholders' equity............................. $211,813 $ 306,613 $6,177,613
</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 (i) the issuance of $370,000 principal amount of
Bridge Notes and (ii) the receipt in February 1996 of $94,800 of the
$300,000 of aggregate proceeds from the Hong Kong Placement. 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.'
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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. 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 period ended October 31, 1995 and a net loss of $387 for the
quarter ended January 31, 1996. The results of the Company for the three months
ended January 31, 1996 may not be indicative of the Company's results for the
fiscal year ended October 31, 1996 and the Company expects that it will have a
net loss for the six months ended April 30, 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 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 that strategic local partners will purchase minority
equity interests in certain of the proposed breweries and also intends to
utilize debt financing so that the expected aggregate equity investment in each
brewery is approximately 50% of the total capitalization. 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 19% of the South China Brewery's sales during
the quarter ended January 31, 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 address such changes. There can be no
assurance that the Company will be successful in
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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. 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 those sources, 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, Ake, Haines or of any other key management employee could have an
adverse effect on the Company's business. 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. 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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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.
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 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.'
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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
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 Memorandum of
Amalgamation authorizes 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.'
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
Common Stock 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 Common Stock 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 (13) months from
the date of this Prospectus without the prior written consent of the Company and
the
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Representative other than, in the case of such stockholders, (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
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 Common Stock and/or the Warrants. Upon expiration of this period, 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 150% 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 a price of
150% of the initial public offering price per share and up to 133,333 warrants
each entitling the holder thereof to purchase one share of Common Stock at a
price of 150% of the initial public offering price per Share, at an exercise
price of $0.15 per warrant, for a period of 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
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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.'
Relationship of Representative to Trading; 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. 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
14
<PAGE>
<PAGE>
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 160% 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 seven 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 was 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 to
be 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.
Immediate and Substantial Dilution. The purchasers of the Shares will
experience immediate and substantial dilution in pro forma net tangible book
value in the amount of $3.66 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
15
<PAGE>
<PAGE>
Common Stock pursuant to the terms of the Bridge Notes and the Bridge Warrants.
See 'Dilution,' 'Management -- Stock Option Plan.'
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. 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.
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.'
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 Unit A1,
1/F Vita Tower, 29 Wong Chuk Hang, Aberdeen, Hong Kong and its telephone number
is 011-8522-580-2506.
16
<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.
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; $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 of Citibank prime plus 0.5%; 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.
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 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 that
strategic local partners will purchase minority equity interests in certain of
the proposed breweries and also intends to utilize debt financing so that the
expected aggregate equity investment in each brewery is approximately 50% of
total capitalization. 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.
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.
17
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at January
31, 1996, (i) on an actual basis, (ii) on a pro forma basis giving effect to (a)
the issuance of $370,000 principal amount of Bridge Notes and (b) the receipt in
February 1996 of $94,800 of the $300,000 of aggregate proceeds from the Hong
Kong Placement 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>
JANUARY 31, 1996
-----------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA ADJUSTED
--------- ----------- -------------
<S> <C> <C> <C>
Current portion of long-term bank loan................................ $ 113,000 $ 113,000 $ --
Bridge Notes payable(1)............................................... 0 370,000 0
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.................................... 211,496 581,496 33,496
Long-term bank loan, net of current portion........................... 395,500 395,500 --
Capital lease obligations, net of current portion..................... 28,079 28,079 28,079
--------- ----------- -------------
Total non-current portion of debt................................ 423,579 423,579 28,079
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)......... 645 649 13,982
Additional paid-in capital....................................... 460,015 554,811 6,512,478
Preferred Stock, $0.01 par value, 500,000 shares authorized and
no shares outstanding.......................................... -- -- --
Accumulated deficit.............................................. (248,847) (248,847 ) (348,847)
--------- ----------- -------------
Total stockholders' equity....................................... 211,813 306,613 6,177,613
--------- ----------- -------------
Total capitalization................................... $ 846,888 $1,311,688 $ 6,239,188
--------- ----------- -------------
--------- ----------- -------------
</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).
18
<PAGE>
<PAGE>
DILUTION
The net tangible book value of the South China Brewery at January 31, 1996
was approximately $306,613, or $0.15 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 and the receipt of $94,800 in February
1996 pursuant to the Hong Kong Placement. 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 January 31, 1996
would have been $6,177,613 or $1.84 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 $3.66 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 January 31, 1996........................ $0.15
Increase per share attributable to new investors............................. $1.69
-----
Pro forma, as adjusted net tangible book value per share after the
Offering................................................................... $1.84
-----
Dilution per share to new investors.......................................... $3.66
-----
-----
</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 January 31, 1996
would have been $7,152,012 or $2.01 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.'
19
<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 January 31,
1996, and for the three month periods ended October 31, 1995 and January 31,
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>
THREE MONTHS
YEAR ENDED ENDED
OCTOBER 31, OCTOBER 31,
1995 1995
--------------- ---------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................................................... $ 63,707 $ 56,952
Cost of sales................................................................... (55,266) (35,620)
--------------- -----------
Gross profit................................................................ 8,441 21,332
Selling, general and administrative expenses.................................... (276,582) (97,682)
Interest expense, net........................................................... (17,838) (15,377)
Other expenses, net............................................................. (2,265) (1,137)
--------------- -----------
Loss before income taxes.................................................... (288,244) (92,864)
Income tax benefit.............................................................. 47,560 15,323
--------------- -----------
Net loss........................................................................ $ (240,684) $ (77,541)
Net loss per common share....................................................... $ (0.12) $ (0.04)
Number of shares outstanding(1)................................................. 2,000,000 2,000,000
<CAPTION>
JANUARY 31, 1996
----------------------------------------
ACTUAL PRO FORMA(1)(2)
--------------- ---------------------
<S> <C> <C>
BALANCE SHEET DATA:
Total current assets............................................................ $ 150,534 $ 615,334
Total assets.................................................................... $ 885,146 $ 1,349,946
Total current liabilities....................................................... $ 249,754 $ 619,754
Total liabilities............................................................... $ 673,333 $ 1,043,333
Total shareholders' equity...................................................... $ 211,813 $ 306,613
<CAPTION>
THREE MONTHS
ENDED
JANUARY 31,
1996
----------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................................................... $ 124,544
Cost of sales................................................................... (22,599)
----------------
Gross profit................................................................ 101,945
Selling, general and administrative expenses.................................... (89,810)
Interest expense, net........................................................... (12,219)
Other expenses, net............................................................. (379)
----------------
Loss before income taxes.................................................... (463)
Income tax benefit.............................................................. 76
----------------
Net loss........................................................................ $ (387)
Net loss per common share....................................................... $ --
Number of shares outstanding(1)................................................. 2,000,000
PRO FORMA, AS
ADJUSTED(2)(3)
----------------
<S> <C>
BALANCE SHEET DATA:
Total current assets............................................................ $5,538,834
Total assets.................................................................... $6,273,446
Total current liabilities....................................................... $ 67,754
Total liabilities............................................................... $ 95,833
Total shareholders' equity...................................................... $6,177,613
</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 (i) the issuance of $370,000 principal amount of
Bridge Notes and (ii) the receipt in February 1996 of $94,800 of the
$300,000 of aggregate proceeds from the Hong Kong Placement. 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.'
20
<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 Company expects that it will have a net
loss for the six months ended April 30, 1996.
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. 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
those sources, 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 three months ended January 31, 1996, 76.3% of net sales
were generated by sales to these customers. At January 31, 1996, the five
largest accounts receivable constituted 68% 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 three months ended October 31, 1995 with the three
months ended January 31, 1996. The following table sets forth for the periods
indicated certain line items from the South China Brewery's summary of
operations as a percentage of the South China Brewery's net sales for each of
the three months ended October 31, 1995 and January 31, 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
OCTOBER 31, 1995 JANUARY 31, 1996
------------------ ------------------
<S> <C> <C>
Net sales................................................... 100.0% 100.0%
Cost of sales............................................... 62.5% 18.1%
Gross profit................................................ 37.5% 81.9%
Selling, general and administrative expenses................ 171.5% 72.1%
Operating (loss) income..................................... (134.1)% 9.7%
Interest expense, net....................................... 27.0% 9.8%
Net loss.................................................... 136.2% 0%
</TABLE>
Net Sales. For the three months ended October 31, 1995 and January 31,
1996, the South China Brewery had net sales of $56,952 and $124,544,
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
21
<PAGE>
<PAGE>
brewed ales for consumption in two Hong Kong pubs. Private label sales have
accounted for approximately 70% of all of the South China Brewery's sales for
the quarter ending January 31, 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 three
months ended October 31, 1995 and January 31, 1996 was $35,620 and $22,599,
respectively. The decrease in the cost of sales 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 quarter ended January
31, 1996 and to more efficient use of brewery equipment.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended October 31, 1995 and January
31, 1996 were $97,682 and $89,810, respectively. The selling, general and
administrative expenses for the three months ended October 31, 1995 reflect
advertising and marketing costs of $18,883 compared to advertising and marketing
costs of $2,818 for the quarter ended January 31, 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
three months ended January 31, 1996 over the quarter ended October 31, 1995 by
$6,203. 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 three months ended
October 31, 1995 and January 31, 1996 was $15,377 and $12,219, respectively. The
Company intends to repay the Hibernia Note and the BPW Note out of the net
proceeds of this Offering.
LIQUIDITY AND CAPITAL RESOURCES
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 January 31, 1996, the South
China Brewery had $71,533 in cash on hand but a working capital deficit of
$99,220. At January 31, 1996, the Company had $40,115 in accounts receivable of
which $5,702 are past due by 90 days or more. At January 31, 1996, the South
China Brewery's five largest accounts receivable accounted for 68% of its total
accounts receivable as of such date.
At January 31, 1996, the South China Brewery had fixed capital lease
obligations of $17,179 per year for each of the three years ending January 31,
1999 relating to its delivery vehicles. At January 31, 1996, the South China
Brewery had $148,710 in operating lease commitments over the three year period
ending January 31, 1999 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% to certain investors in Singapore and Hong Kong.
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 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.
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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 bearing a Citibank prime
plus 0.5% interest rate. 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 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. The Company believes that the balance of the net proceeds of
this Offering will 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 that strategic local partners will purchase minority equity interests in
certain of the proposed breweries and also intends to utilize debt financing so
that the expected aggregate equity investment in each brewery is approximately
50% of total capitalization. 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. In
addition to the capital requirements of the proposed breweries, the Company has
entered into an employment agreement with its Executive Vice President and Chief
Operating Officer, James L. Ake, which provides for an annual base salary of
$72,000.00. 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. 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:
Shanghai, Tecate (Mexico), Warsaw, Zurich, Budapest, Singapore and Prague.
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
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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-premise 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: Shanghai, Tecate (Mexico), Zurich, Budapest,
Singapore, Warsaw and Prague. Preliminary work has commenced at two of the
proposed sites:
Shanghai. The Company has identified a prospective site for the Shanghai
expansion brewery, is currently conducting negotiations with prospective Chinese
joint venture partners and has commenced work for a preliminary site lay-out.
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.
The Company currently expects strategic local partners to invest in
minority equity interests in certain of the proposed breweries and also intends
to utilize debt financing so that the expected aggregate equity investment in
each brewery is approximately 50% of the total capitalization. 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. The Company believes that third
party financing, if obtained on acceptable terms, in
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conjunction with the net proceeds of this Offering, will enable the Company to
establish 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.
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 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.
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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
period from November 1, 1995 through March 31, 1996, approximately 81% 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 19% of the Company's sales during the quarter ended
January 31, 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.
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 quarter ending January 31, 1996, such sales to two customers, Dabeers
Distributors Limited and Delaney's (Wanchai) Limited, owner of Delaney's Irish
Pub, have accounted for approximately 70% 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.
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.
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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.
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
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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 a single British supplier and its premium-quality select hops
from a single United States supplier. The South China Brewery currently
maintains its own yeast supply. The South China Brewery currently purchases its
case boxes, bottles and crowns each from a single supplier and maintains
multiple competitive sources for its supply of labels. While the South China
Brewery believes that multiple sources of supply are available for all of its
ingredients and raw materials, 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).
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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).
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 has purchased liability insurance issued by New
Zealand 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 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 May 31, 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 and Chief Operating
Officer 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. 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.
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.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Company's directors and officers and
their ages as of the date hereof:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Peter W. H. Bordeaux......................... 47 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 and Chief Operating Officer
Joseph E. Heid(1)(3)......................... 50 Director
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
John Campbell(4)............................. 56 Director
Tonesan Amissah-Furbert(4)................... 30 Director
</TABLE>
Each of the directors was elected as of June 3, 1996. Each of the officers
was appointed to his respective position with the Company as of June 3, 1996,
the date of incorporation of American Craft Brewing 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 3, 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 and Chief Operating Officer
of AmBrew International since June 3, 1996 and has been associated with its
subsidiaries since August 9, 1994. Mr. Ake has been the Director of Financial
Analysis and Planning for Sazerac since 1993 where he is responsible for
expansion of operations overseas with emphasis on ventures in the Pacific Rim
countries. In addition, since November 1994, 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 3,
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 3, 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 Group since 1985. 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 3,
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 3, 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 3, 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 3, 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
the 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 3, 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 3, 1996
and an associate with the law firm of Appleby, Spurling & Kempe since 1989.
Directors of the Company were elected at a special meeting of the Company's
stockholders on June 3, 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].
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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 January 31, 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 a management agreement with Lunar Holdings,
Ltd. ('Lunar'), a Hong Kong company controlled by David K. Haines, the Company's
Managing Director for Hong Kong Operations. Pursuant to that agreement, Mr.
Haines will manage the South China Brewery on behalf of Lunar. Mr. Haines will
be paid approximately $54,000 plus 3% of net (after tax) income generated by the
South China Brewery for the current fiscal year. 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
$72,000.00. Mr. Ake's employment agreement will expire in June 1998.
STOCK OPTION PLAN
Prior to the effective date of the Registration Statement of which this
Prospectus is a part, 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 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).
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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.
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PRINCIPAL STOCKHOLDERS
As of the date of this Prospectus, 2,021,818 shares of Common Stock were
issued and outstanding including shares issuable pursuant to the Bridge Notes
assuming no conversion of convertible Bridge Notes and an initial public
offering price per Share of $5.50. 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
SHARES ---------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ---------------------------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
John F. Beaudette(2) ....................................................... 152,000 7.5% 4.5%
MHW, Ltd.
1165 Northern Boulevard
Manhasset, New York 11030
Peter W. H. Bordeaux ....................................................... 200,000 9.9% 6.0%
Unit A1, 1/F, Vita Tower
29 Wong Chuk Hang
Aberdeen, Hong Kong
Norman H. Brown, Jr. ....................................................... 152,000 7.5% 4.5%
277 Park Avenue
New York, New York 10172
Federico G. Cabo Alvarez(3) ................................................ 1,016,000 50.3% 30.3%
Pablo Neruda #2640 Suite 702
Guadalajara, Jalisco
Mexico, 44630
Richard Frederick Cabo(3) .................................................. 1,016,000 50.3% 30.3%
Pablo Neruda #2640 Suite 702
Guadalajara, Jalisco
Mexico, 44630
David K. Haines(4) ......................................................... 380,000 18.8% 11.3%
American Craft Brewing International Limited
Unit A1, 1/F, Vita Tower
29 Wong Chuk Hang
Aberdeen, Hong Kong
Edmund Piccolino(2) ........................................................ 152,000 7.5% 4.5%
124 Rowayton Avenue
Rowayton, Connecticut 06853
Peter Warren(2) ............................................................ 152,000 7.5% 4.5%
1030 Ridgefield Road
Wilton, Connecticut 06897
All executive officers and directors as a group (ten persons)(2)(3)(4)(5)... 1,900,000 94.0% 56.6%
</TABLE>
- ------------
(1) Assumes no exercise of the Over-allotment Option. Applicable percentage
ownership is based on 2,021,818 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) 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.
(3) Represents shares of Common Stock held of record by Stockwell Holdings
Limited, a Bahamas corporation ('Stockwell'). Mr. Federico Cabo and his son,
Richard Cabo, own 90% and 10%, respectively, of Stockwell. The Company's
largest stockholder, Mr. Federico Cabo, acquired shares of AmBrew
International's operating subsidiaries in 1994 and purchased additional
shares from Sazerac in June 1996. Mr. Cabo subsequently transferred
ownership of his shares to Stockwell Holdings Limited.
(4) Represents shares of Common Stock held of record by Lunar. David K. Haines,
Managing Director for Hong Kong Operations of the Company is the sole share
shareholder and director of Lunar.
(5) 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 was evidenced by a promissory note with principal
payments due on September 30, 1996 and March 31, 1997 bearing a Citibank prime
plus 0.5% interest rate. 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 AmBrew International.
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.
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 effective date of the Registration Statement of which this
Prospectus is a part, Sazerac, Lunar and 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 effective date of the Registration Statement of which this
Prospectus is a part, Craft, a British Virgin Islands Company, amalgamated into
AmBrew International, a Bermuda company. 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 and management
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 2,021,818 shares of
Common Stock outstanding held by 30 stockholders of record, assuming an initial
public offering price per Share of $5.50 and no conversion of the convertible
Bridge Notes.
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. 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 150% 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
$ [160% 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.
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.
A significant amount of the Securities offered hereby may be sold to
customers of the Representative. Such customers subsequently may engage in
transactions for the sale or purchase of such securities through or with the
Representative. Although it has no obligation to do so, the Representative
currently intends to make a market in the Securities and may otherwise effect
transactions in the Securities. If it participates in the market, the
Representative may exert a dominating influence on the market, if one develops,
for the securities described in this Prospectus. Such market-making activity may
be discontinued at any time. The price and liquidity of the Common Stock and the
Warrants may be significantly affected by the degree, if any, of the
Representative's participation in such market. See 'Underwriting.'
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
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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.
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, questions brought before a general
meeting of stockholders are decided by a majority vote of stockholders present
at the meeting (or by such majority as the Act or the Bye-Laws of the company
prescribe), each stockholder having one vote, irrespective of the number of
shares held, unless a poll is requested. 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
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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 constitute a
quorum.
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
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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 of the company's Memorandum of Association 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 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 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 U.S. source 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 would 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 would 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.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, 3,355,151 shares of the Common
Stock, 1,333,333 Warrants and Bridge Warrants entitling the holders thereof to
purchase 21,818 shares of Common Stock 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
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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.
47
<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 (5) percent 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'). The Representative's Warrants are initially
exercisable at a price of $ per share [150% of the initial public offering
price per Share] of Common Stock and $ [150% of the initial public
offering price per Warrant] per Warrant 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 Common Stock. The
Representative's Warrants grant to the holders thereof certain rights of
registration for the securities issuable upon exercise thereof.
48
<PAGE>
<PAGE>
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 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 Underwriting Agreement provides that the Representative has a right of
first refusal for a period of two (2) years from the effective date of the
Registration Statement with respect to any sale of securities by the Company or
any of its present or future affiliates or subsidiaries; provided, however, that
such right of first refusal shall earlier expire upon the date that Messrs.
Raymond L. Dirks and Michael K. Hsu terminate their association with the
Representative.
The Company has agreed for a period of [ ], 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 seven 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.
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
49
<PAGE>
<PAGE>
Company's securities for the period 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.' Howard, Darby & Levin has acted as United
States counsel to the Company in connection with this Offering. 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.
50
<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 January 31, 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 Three Months ended January 31, 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 Three Months ended January 31, 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 Three Months ended January 31,
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-16
Balance Sheet as of June 10, 1996..................................................................... F-17
Note to the Balance Sheet............................................................................. F-18
</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
JANUARY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, JANUARY 31,
1994 1995 1996
--------------- -------------- ---------------
(AUDITED) (AUDITED) (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 197,752 $102,248 $ 71,533
Accounts receivable, net............................................ -- 21,680 40,115
Inventories......................................................... -- 22,922 35,378
Other current assets................................................ -- 391 3,508
--------------- -------------- ---------------
Total current assets........................................ 197,752 147,241 150,534
Rental, utility and other deposits.................................... 9,433 35,174 35,174
Deferred tax assets................................................... 1,536 49,096 49,172
Equipment and capital leases, net..................................... 10,295 634,767 650,266
--------------- -------------- ---------------
Total assets................................................ $ 219,016 $866,278 $ 885,146
--------------- -------------- ---------------
--------------- -------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term bank loan, current portion................................ $ -- $113,000 $ 113,000
Capital lease obligations, current portion.......................... -- 13,284 12,858
Accounts payable.................................................... -- -- 387
Accrued liabilities................................................. 182 39,294 37,871
Shareholders' loans................................................. 2,490 85,638 85,638
--------------- -------------- ---------------
Total current liabilities................................... 2,672 251,216 249,754
Long-term bank loan................................................... -- 395,500 395,500
Capital lease obligations............................................. -- 30,221 28,079
--------------- -------------- ---------------
Total liabilities........................................... 2,672 676,937 673,333
--------------- -------------- ---------------
Commitments...........................................................
Shareholders' equity:
Common stock........................................................ 1 645 645
Additional paid-in capital.......................................... -- -- 460,015
Subscription monies received in advance............................. 224,119 437,156 --
Accumulated deficit................................................. (7,776) (248,460) (248,847)
--------------- -------------- ---------------
Total shareholders' equity.................................. 216,344 189,341 211,813
--------------- -------------- ---------------
Total liabilities and shareholders' equity.................. $ 219,016 $866,278 $ 885,146
--------------- -------------- ---------------
--------------- -------------- ---------------
</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
THREE MONTHS ENDED JANUARY 31, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED THREE MONTHS
PERIOD ENDED YEAR ENDED JANUARY ENDED
OCTOBER 31, OCTOBER 31, 31, JANUARY 31,
1994 1995 1995 1996
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
Net sales................................................ $ -- $ 63,707 $ -- $ 124,544
Cost of sales............................................ -- (55,266) -- (22,599)
------------ ------------ ---------- ------------
Gross profit........................................ -- 8,441 -- 101,945
Selling, general and administrative expenses............. (9,312) (276,582) (31,235) (89,810)
Interest income (expense), net........................... -- (17,838) 2,255 (12,219)
Other expenses, net...................................... -- (2,265) -- (379)
------------ ------------ ---------- ------------
Loss before income taxes............................ (9,312) (288,244) (28,980) (463)
Income tax benefit....................................... 1,536 47,560 4,782 76
------------ ------------ ---------- ------------
Net loss............................................ $ (7,776) $ (240,684) $ (24,198) $ (387)
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
Pro forma net loss per common share...................... $ -- $ (0.12) $ (0.01) $ --
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
Pro forma 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
THREE MONTHS ENDED JANUARY 31, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
PERIOD ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31, JANUARY 31,
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) $ (24,198) $ (387)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation................................ -- 21,997 -- 14,461
Deferred income tax......................... (1,536) (47,560) (4,782) (76)
Increase in operating assets:
Accounts receivable, net............... -- (21,680) -- (18,435)
Inventories............................ -- (22,922) -- (12,456)
Other current assets................... -- (391) -- (3,117)
Rental, utility and other deposits..... (9,433) (25,741) (8,000) --
Increase (Decrease) in operating
liabilities:
Accounts payable....................... -- -- -- 387
Accrued liabilities.................... 182 39,112 (182) (1,423)
------------ ----------- ------------ ------------
Net cash used in operating activities....... (18,563) (297,869) (37,162) (21,046)
------------ ----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment............................ (10,295) (595,037) (82,977) (29,960)
------------ ----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock........... 1 644 -- --
Subscription monies received in advance.......... 224,119 213,037 2 22,859
Shareholders' loan............................... 2,490 83,148 -- --
New bank loan.................................... -- 508,500 -- --
Repayment of capital lease obligations........... -- (7,927) -- (2,568)
------------ ----------- ------------ ------------
Net cash provided by financing activities... 226,610 797,402 2 20,291
------------ ----------- ------------ ------------
Increase (Decrease) in cash........................... 197,752 (95,504) (120,137) (30,715)
Cash at beginning of period........................... -- 197,752 197,752 102,248
------------ ----------- ------------ ------------
Cash at end of period................................. $197,752 $ 102,248 $ 77,615 $ 71,533
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS:
Cash paid for interest expense (net of amount
capitalized)................................... $ -- $ 15,977 $ -- $ 442
Cash received for interest income................ -- 3,201 2,255 1,006
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
THREE MONTHS ENDED JANUARY 31, 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)....................................... -- 22,859 --
Capitalization of subscription monies received
(unaudited)....................................... -- 460,015 (460,015) --
Net loss (unaudited)................................ -- -- -- (387)
------ ---------- ------------------ -----------------
Balance as of January 31, 1996 (unaudited).......... $645 $460,015 $ -- $(248,847)
------ ---------- ------------------ -----------------
------ ---------- ------------------ -----------------
</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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 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 3, 1996. On
[ ], 1996, Craft Brewing Holdings Limited, a British Virgin
Islands company ('Craft'), amalgamated into AmBrew International (the 'Merger').
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') effective as of [ ], 1996, 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. Effective as of [ ], Craft issued 1,250 shares of
capital stock to certain investors in Hong Kong. Effective as of
[ ], 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.
<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, Lunar Holdings Limited, a shareholder 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. 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.
2. BASIS OF PRESENTATION
The consolidated financial statements as of and for the period ended
October 31, 1994, for the three months ended January 31, 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
three months ended January 31, 1996 incorporate the financial statements of
Craft and the South China Brewery. All material inter-company balances and
transactions have been eliminated in consolidation.
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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 1995 AND 1996 ARE UNAUDITED)
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, three months ended January
31, 1995 and three months ended January 31, 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.
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 closing exchange
rates 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, three months ended January 31, 1995 and three months
ended January 31, 1996, aggregate loss
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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 1995 AND 1996 ARE UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
from foreign currency transactions included in the results of operations were
$0, $451, $0 and $117, respectively.
G. PRO FORMA NET LOSS PER COMMON SHARE
Pro forma 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 period on the basis that the Share Exchange, the Share Split and the
Merger (see Note 1 ) had been consummated prior to the 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, JANUARY 31,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Trade receivables........................................................ $ -- $22,236 $41,147
Less: Allowance for doubtful accounts.................................... -- (556) (1,032)
----------- ----------- -----------
Accounts receivable, net................................................. $ -- $21,680 $40,115
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
5. INVENTORIES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, JANUARY 31,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Raw materials............................................................ $ -- $16,682 $28,853
Work-in-process and finished goods....................................... -- 6,240 6,525
----------- ----------- -----------
$ -- $22,922 $35,378
----------- ----------- -----------
----------- ----------- -----------
</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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 1995 AND 1996 ARE UNAUDITED)
6. EQUIPMENT AND CAPITAL LEASES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, JANUARY 31,
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 55,177
Capital leases:
Motor vehicles...................................................... -- 56,556 56,555
----------- ----------- -----------
Cost................................................................ 10,295 656,764 689,724
Less: Accumulated depreciation
Equipment........................................................... -- (17,284) (28,211)
Capital leases...................................................... -- (4,713) (8,247)
----------- ----------- -----------
$10,295 $ 634,767 $ 650,266
----------- ----------- -----------
----------- ----------- -----------
</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, JANUARY 31,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Within one year..................................................... $ -- $ 113,000 $ 113,000
Over one year but not exceeding two years........................... -- 395,500 395,500
----------- ----------- -----------
$ -- $ 508,500 $ 508,500
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The long-term bank loan is evidenced by a promissory note, with repayment
of $113,000 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 0.5%, which was 9.25% per annum
as of October 31, 1995 and 9% per annum as of January 31, 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. Subsequent to January 31, 1996 and up to the
date of this report, $56,500 of the principal has been repaid.
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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 1995 AND 1996 ARE UNAUDITED)
8. CAPITAL LEASE OBLIGATIONS
Future minimum lease payments under the capital lease as of October 31,
1994, October 31, 1995 and January 31, 1996, together with the present value of
the minimum lease payments are:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, JANUARY 31,
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 17,179
Over three years but not exceeding four years....................... -- 6,025 3,163
----------- ----------- -----------
Total minimum lease payments............................................. -- 58,130 54,700
Less: Amount representing interest....................................... -- (14,625) (13,763)
----------- ----------- -----------
Present value of minimum lease payments.................................. -- 43,505 40,937
Less: Current portion.................................................... -- (13,284) (12,858)
----------- ----------- -----------
Noncurrent portion....................................................... $ -- $ 30,221 $ 28,079
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
9. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, JANUARY 31,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Accrued interest expense................................................. $ -- $ 5,050 $17,834
Accrued operating lease rental........................................... -- 13,755 --
Other accrued liabilities................................................ 182 20,489 20,037
----------- ----------- -----------
$ 182 $39,294 $37,871
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
10. SHAREHOLDERS' LOANS
During the year ended October 31, 1995, South China borrowed $65,000 from
BPW Holding Limited, 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 16f). For the period ended October 31, 1994, year ended October 31, 1995,
three months ended January 31, 1995 and three months ended January 31, 1996,
interest expense payable to the shareholder was approximately $0, $813, $0, and
$894, respectively. As of October 31, 1995, the remaining balance of the
shareholders loans was unsecured, non-interest bearing and without
pre-determined repayment terms. Subsequent to January 31, 1996 and up to the
date of this report, the entire $20,638 has been repaid.
11. COMMON STOCK
As of October 31, 1994, October 31, 1995 and January 31, 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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 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 THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31, JANUARY 31,
1994 1995 1995 1996
----------- ----------- ------------ ------------
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current................................................. $ -- $ -- $ -- $ --
Deferred -- Operating loss carryforwards................ 1,536 47,560 4,782 76
----------- ----------- ------------ -----
$ 1,536 $47,560 $4,782 $ 76
----------- ----------- ------------ -----
----------- ----------- ------------ -----
</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>
THREE THREE
PERIOD MONTHS MONTHS
ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31, JANUARY 31,
1994 1995 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% 18.6%
----------- ----------- ----------- -----------
Effective income tax rate................................... (16.5%) (16.5%) (16.5%) (16.4%)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The major component of deferred tax assets relates to the tax loss
carryforwards. As of October 31, 1994, October 31, 1995 and January 31, 1996,
tax losses of approximately $10,000, $298,000 and $298,000, respectively, can be
carried forward indefinitely.
13. COMMITMENTS
A. CAPITAL COMMITMENTS
As of October 31, 1994, October 31, 1995 and January 31, 1996, the Company
had purchase commitments for 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 and three months ended January 31,
1996 were approximately $0, $67,000 and $21,000, respectively. Future minimum
rental payments as of October 31, 1994, October 31, 1995 and January 31,
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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 1995 AND 1996 ARE UNAUDITED)
13. COMMITMENTS -- (CONTINUED)
1996, under agreements classified as operating leases with noncancelable terms
in excess of one year, are as follows:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, JANUARY 31,
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 62,194
Over two years but not exceeding three years........................ 48,258 13,548 6,774
----------- ----------- -----------
$ 153,548 $ 168,645 $ 148,710
----------- ----------- -----------
----------- ----------- -----------
</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 three months
ended January 31, 1996 are as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------------------
YEAR ENDED THREE MONTHS ENDED
OCTOBER 31, 1995 JANUARY 31, 1996
---------------- ------------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
DaBeers Distributors Limited.............................................. 27.1% 43.8%
Delaney's (Wanchai) Limited............................................... 10.5% 32.5%
</TABLE>
Concentration of accounts receivable as of October 31, 1995 and January 31, 1996
is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF ACCOUNTS RECEIVABLE
--------------------------------------
AS OF AS OF
OCTOBER 31, 1995 JANUARY 31, 1996
---------------- ------------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
Five largest accounts receivables......................................... 41% 68%
</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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 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, a number of factors 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, 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
('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>
THREE MONTHS THREE MONTHS
PERIOD ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31, JANUARY 31,
1994 1995 1995 1996
------------ ----------- ------------ ------------
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Depreciation of fixed assets
-- owned assets................................. $ -- $ 17,284 $ -- $ 10,927
-- assets held under capital leases............. -- 4,713 -- 3,534
Operating lease rental for rented premises............ -- 67,005 13,161 20,619
Advertising expenses.................................. -- 24,312 -- 2,818
Repairs and maintenance expenses...................... -- 1,155 -- 1,555
Interest expense incurred............................. -- 34,216 -- 13,225
Less: Amount capitalized as equipment................. -- (13,177) -- --
------------ ----------- ------------ ------------
-- 21,039 -- 13,225
Net foreign exchange loss............................. -- 451 -- 117
Interest income....................................... $ -- $ 3,201 $ 2,225 $ 1,006
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
16. SUBSEQUENT EVENTS
Subsequent to October 31, 1995, the following events took place:
a. On [ ], 1996, the stockholders of South China
and SCBC exchanged 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 JANUARY 31, 1996 AND FOR THE THREE MONTHS ENDED JANUARY
31, 1995 AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS -- (CONTINUED)
b. On [ ], Craft issued 1,250 shares of capital stock to
certain investors in Hong Kong for $300,000.
c. On [ ], 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. On [ ], 1996, the Company issued $370,000
principal amount of notes bearing interest at a rate of 12% per annum.
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
120,000 divided 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 are approximately $625,000.
F-15
<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-16
<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' equity:
Common stock........................................................................ $ 120
Less: Subscription receivable....................................................... (120)
--------
--
Accumulated deficit................................................................. (7,865)
--------
Total shareholders' equity..................................................... (7,865)
--------
Total liabilities and shareholders' equity..................................... $--
--------
--------
</TABLE>
The accompanying note is an integral part of this balance sheet.
F-17
<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 Craft Brewing
Holdings 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-18
<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.................................... 16
Use of Proceeds................................ 17
Dividend Policy................................ 17
Capitalization................................. 18
Dilution....................................... 19
Selected Consolidated Financial Data........... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 21
Business....................................... 24
Management..................................... 31
Principal Stockholders......................... 35
Certain Transactions........................... 36
Description of Securities...................... 37
Certain Foreign Issuer Considerations.......... 42
Taxation....................................... 43
Shares Eligible for Future Sale................ 46
Underwriting................................... 48
Legal Matters.................................. 50
Experts........................................ 50
Available Information.......................... 50
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................................................................ 1,435.33
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........................................................ 250,000.00
Accounting fees and expenses................................................... 130,000.00
Transfer agent and registrar fees.............................................. 8,500.00
Miscellaneous.................................................................. 43,496.29
-----------
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) Prior to the effective date of this Registration Statement, Craft
Brewing Holdings Limited, a British Virgin Islands company ('Craft') and a
predecessor company of the Registrant, issued 23,750 shares to its directors in
exchange for substantially all of the outstanding capital stock of each of the
South China Brewing Company Limited ('South China') and SCBC Distribution
Company Limited ('SCBC') pursuant to Section 4(2) of the Securities Act.
II-1
<PAGE>
<PAGE>
(ii) Prior to the effective date of this Registration Statement, Craft
issued and sold 1,250 shares 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.
(iii) 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.
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.
10.4 -- Management Agreement and Performance Guaranty between South China and Lunar Holdings
Limited dated as of April 1, 1995.
10.5 -- Distributors Limited Brewing Agreement between South China and Dabeers Distributors
Limited dated as of September 23, 1995.**
10.6 -- Brewing Agreement between South China and Delaney's (Wanchai) Limited dated as of
September 20, 1995.**
10.7 -- Promissory Note issued by South China in favor of Hibernia National Bank dated as of
March 31, 1995.
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).*
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).
24 -- Power of Attorney of Directors and Officers (set forth on signature page of this
Registration Statement).
27 -- Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
** 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>
II-2
<PAGE>
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) (1) For purposes of determining any liability under the Securities
Act of 1933 (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 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 of
1933 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-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this 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 June 14, 1996.
AMERICAN CRAFT BREWING INTERNATIONAL
LIMITED
By: /s/ Peter W.H. Bordeaux
...................................
NAME: Peter W.H. Bordeaux
TITLE: Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter W. H. Bordeaux and James L. Ake and each of
them as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any subsequent registration
statement filed by the Registrant pursuant to Rule 462(b) of the Securities Act,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the SEC, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS 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>
/s/ Peter W.H. Bordeaux Chairman of the Board of Directors and June 14, 1996
......................................... Director
PETER W. H. BORDEAUX
/s/ James L. Ake Executive Vice President and Chief Operating June 14, 1996
......................................... Officer (principal executive, accounting
JAMES L. AKE and financial officer)
/s/ John F. Beaudette Director June 14, 1996
.........................................
JOHN F. BEAUDETTE
/s/ Norman H. Brown, Jr. Director June 14, 1996
.........................................
NORMAN H. BROWN, JR.
/s/ Federico G. Cabo Alvarez Deputy Chairman of the Board of Directors June 14, 1996
......................................... and Director
FEDERICO G. CABO ALVAREZ
Director , 1996
.........................................
WYNDHAM H. CARVER
</TABLE>
II-4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ David K. Haines Director June 14, 1996
.........................................
DAVID K. HAINES
/s/ Joseph E. Heid Director June 14, 1996
.........................................
JOSEPH E. HEID
Director , 1996
.........................................
JOHN CAMPBELL
Director , 1996
.........................................
TONESAN AMISSAH-FURBERT
</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>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ ----
<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.........................................................
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.
10.4 -- Management Agreement and Performance Guaranty between South China and Lunar Holdings Limited
dated as of April 1, 1995....................................................................
10.5 -- Distributors Limited Brewing Agreement between South China and Dabeers Distributors Limited
dated as of September 23, 1995.**............................................................
10.6 -- Brewing Agreement between South China and Delaney's (Wanchai) Limited dated as of September
20, 1995.**..................................................................................
10.7 -- Promissory Note issued by South China in favor of Hibernia National Bank dated as of March
31, 1995.....................................................................................
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).*..........................................................................
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)......................................................................
24 -- Power of Attorney of Directors and Officers (set forth on signature page of this Registration
Statement)...................................................................................
27 -- Financial Data Schedule......................................................................
</TABLE>
- ------------
* To be filed by amendment.
** Confidential treatment requested.
<PAGE>
<PAGE>
[LOGO AND LETTERHEAD OF APPLEBY, SPURLING & KEMPE]
13th June, 1996
American Craft Brewing International Limited
Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
Dear Sirs:
Re: Offering of Shares of Common Stock
--------------------------------------
We have been requested by American Craft Brewing International Limited, a
Bermuda exempted company (the "Company"), to provide this opinion in connection
with its proposed offering (the "Offering") of 1,333,333 shares of common stock
in the Company of par value US$0.01 each and 1,333,333 redeemable common stock
purchase warrants (together the "Securities") pursuant to a registration
statement on Form S-1 which is to be filed with the United States Securities and
Exchange Commission under the United States Securities Act 1933 as amended on
14th June, 1996 (the "Registration Statement").
We have examined the Memorandum of Association and Bye-Laws of the Company,
a draft of the Registration Statement dated 6th June, 1996 and such other
corporate records and documents as we have deemed necessary as a basis for this
opinion. We have not reviewed any resolutions adopted by the Board of Directors
of the Company relating to the Offering. In such examination, we have assumed
the genuineness of all signatures and the authenticity of all documents
submitted to us as originals and the conformity with the originals of all
documents submitted to us as copies.
Based upon the foregoing, it is our opinion that the Company has the
corporate power to make the Offering as contemplated in the Registration
Statement.
No opinion is expressed herein as to any laws other than the laws of the
Islands of Bermuda.
<PAGE>
<PAGE>
-2-
We hereby consent to the references to our name in the Registration
Statement and to the filing of this opinion as an exhibit to the Registration
Statement.
Yours faithfully,
APPLEBY, SPURLING & KEMPE
<PAGE>
<PAGE>
A N A G R E E M E N T made the 12th day of December One
thousand nine hundred and ninety-
four
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 provided always that the Tenant shall not park
his
1.
<PAGE>
<PAGE>
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.
SECTION (II)
RENT AND OTHER CHARGES
The Tenant hereby agrees with the Landlord as follows:-
Rent (1) To pay the rent and management fee (which are unless the
and context otherwise requires hereinafter collectively included
management under the term "rent") without any deduction and set off on
fee 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, duties,
Taxes etc. 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 (3) To pay and discharge all charges for gas, water and
and electricity consumed in the said premises including charges
electricity for the running of any air-conditioning units installed
charges 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
2.
<PAGE>
<PAGE>
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.
SECTION III
TENANT'S OTHER OBLIGATIONS
The Tenant hereby agrees with the Landlord as follows:-
Good (1) To constantly maintain and keep the whole of the interior of
repair of the said premises and every part thereof in proper and
the tenantable repair and condition including all fixtures and
interior fittings therein.
Inspec- (2) To permit the Landlord and all persons authorised by it at
tion 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
3.
<PAGE>
<PAGE>
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 agents workmen
Landlord and others appointed by it at all reasonable times during the
to effect said term (but upon previous written notice save in cases of
work 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.
Replace- (4) To replace any broken or damaged window and glass or
ment of otherwise reimburse the Landlord for the cost of replacing
windows all broken and damaged windows and glass whether or not the
same be broken or damaged by the negligence of the Tenant.
Repair of (5) To repair or replace any electrical installation or wiring or
electrical any gas installation or piping of the Tenant if the same
and gas becomes dangerous or unsafe or if so reasonably required by
installations 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
4.
<PAGE>
<PAGE>
or the Tenant's gas installation and piping in the said
premises at any time upon request being made.
Altera- (6) To submit plans and details of any alteration in or additions
tions to the said premises for the approval of the Landlord prior
to any work being carried out.
Mach- (7) To mount and equip his machinery particularly machinery with
ineries 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 Regulations.
Good (9) To keep the sanitary and water apparatus used exclusively by
repair of the Tenant and its servants agents licencees and customers in
sanitary good clean and tenantable repair and condition to the
and satisfaction of the Landlord and in accordance with the
water regulations or byelaws of all Public Health and other
apparatus Government Authorities concerned.
Cleaning (10) To pay to the Landlord on demand all costs incurred by the
of drains Landlord in cleansing clearing repairing or
5.
<PAGE>
<PAGE>
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 (11) To be wholly responsible for and to indemnify the Landlord
and against any loss damage or injury caused to any person
insurance whomsoever or any property whatsoever whether directly or
against indirectly through the defective or damaged condition of any
loss/damage part of the interior of the said premises or any fittings
from fixtures wiring or piping therein for the repair of which the
interior Tenant is responsible hereunder or through or in any way
defects 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
6.
<PAGE>
<PAGE>
consent of the Landlord.
Pro- (12) To take all reasonable precautions to protect the interior of
tection the said premises against damage by storm typhoon heavy
from rainfall or the like and in particular to ensure that all
typhoons exterior doors and windows are securely fastened upon the
threat of such adverse weather conditions.
Inform (13) To give notice in writing to the Landlord or its agent of any
Landlord damage that may be suffered to the said premises or to
of damage 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 of
boards 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.
Regula- (16) To obey and comply with such Regulations as may from time to
tions time be adopted by the Landlord in accordance with the
provisions hereinafter contained.
Con- (17) To be responsible to the Landlord for the acts neglects
tractors omissions and defaults of all contractors servants agents
servants licencees and customers of the Tenant as if they were the
agents acts neglects omissions and defaults of the
licencees
customers
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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 normal
entrances business hours and through such service entrances and by such
and lifts service lifts as shall be designated by the Landlord for this
purpose from time to time.
Refuse (19) To be responsible for the removal of garbage and refuse from
and the said premises to such location as shall be specified by
garbage the Landlord from time to time and to use only that type of
removal 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 uniform
external external appearance for the said Building and shall not use
appearance 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 all
premises fixtures fittings and additions therein and thereto at
and
handover
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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.
Change (22) To obtain the Landlord's consent if the Tenant wishes to
of name 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 peaceably hold and enjoy the said
premises during the said period without any interruption by
the Landlord or any person lawfully
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claiming through or under it.
Crown (2) To pay the Crown rent and property tax which are now or may
Rent 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 the said
main building and every part of such main structure in proper and
structure 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.
Stair- (6) To keep the staircases and landings and other common portions
cases 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 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 thereon for the
Board Tenant's name to be affixed in such uniform lettering or
characters as shall be designated by the Landlord.
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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 things on
loading 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 excess of
capacity their maximum capacity and to be responsible for any damage
caused by any breach thereof.
Furnace, (3) Not to install any furnace, boiler, compressors, generators
boiler or other plant or equipment in the said premises or use any
etc. fuel that might in any circumstance produce smoke without
first obtaining permission in writing from the Commissioner
of Labour.
Instal- (4) (a) Not without the previous written consent of the Landlord
lation and to erect install or alter any fixtures partitioning or
alterations 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 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
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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 (5) Not without the previous written consent of the Landlord to
to main cut maim injure drill into mark or deface or permit or suffer
walls 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.
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Damage (6) Not without the previous written consent of the Landlord to
to walls lay or use any floor covering or do anything which may damage
ceilings or penetrate the existing flooring floor screed slab.
and floors
Damage (7) Not to damage injure or deface any part of the fabric or
to decorative features of the common areas stairs and lifts of
Common the said building including any trees plants or shrubs
Areas 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 (9) Not to install any supports or erect any iron brackets on any
to part of the exterior walls of the said building for any
exterior purpose including the installation of air-conditioners and
walls or if the Tenant wishes to install any air-conditioners he shall
windows 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 walls
the exterior of the said building.
walls
Nuisance (12) Not to do or permit or suffer to be done any act or thing
or which may be or become a nuisance or annoyance
annoyance
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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 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 of
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 qraphics
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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.
Illegal (16) Not to use or permit or suffer the said premises to be used
or for any illegal or immoral purpose or for any purpose which
immoral is in contravention of the terms and conditions contained in
use the Crown Lease under which the said premises are held from
the Crown.
Sleeping (17) Not to use or permit or suffer the said premises or any part
or thereof to be used as sleeping quarters or as domestic
domestic premises within the meaning of any landlord and tenant
use 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 the
store rooms said building except with the express consent of the
Landlord.
Com- (19) Not to keep or store or permit or suffer to be kept or
bustible stored in the said premises any arms ammunition gun-powder
or salt-petre kerosene or other explosive or combustible
dangerous substance or hazardous goods. Hazardous goods may be stored
goods in specified area with the prior consent of the Landlord
which may be granted or
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withheld at its discretion.
Obstruc- (20) Not to encumber or obstruct or permit or suffer to be
tions in encumbered or obstructed with any boxes packaging rubbish or
passages 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.
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 or
cables in other article or thing in or upon any of the entrances
common areas staircases landings passages lobbies or other parts of the
and from said building in common use nor to erect or hang any wire or
exterior walls aerial wirings from the windows or outside the exterior walls
of the said building.
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Prepara- (23) Not to prepare or permit or suffer to be prepared any food
tion of in the said premises with exception of normal and seasonable
food and odours associated from preparing of brewing-related or to
prevention cause or permit any odours which shall in the sole
of odours opinion of the 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 to be
service brought onto or removed from the said premises except by way
entrances of the specified lifts, entrances and exits.
Animals (25) Not to keep or permit or suffer to be kept any animals or
pets and pets inside the said premises and at the Tenant's expense to
infestation 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 may require and at such intervals as the Landlord
may direct and to the exclusion of all others.
Sub- (26) Not to assign underlet part with the possession of or
letting transfer the said premises or any part thereof or any
assigning 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
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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 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
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the previous written consent of the Landlord as required by
Section III Clause (22) hereof.
Breach (27) Not to do or permit or suffer to be done any act deed matter
of Crown or thing whatosever which amounts to a breach of any of the
Lease terms and conditions under which the said Lot is held from
the Crown and to indemnify the Landlord against any such
breach.
Breach (28) Not to do or permit or suffer to be done any act deed
of matter or thing whatsoever whereby the insurance on
insurance the said building against loss or damage by fire
policy 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
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Regulations from time to time made by the Landlord.
Use of (31) Not without the previous written consent of the Landlord
building to use or permit to be used the name/logo or
name 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 IV
EXCLUSIONS
The Landlord shall not in any circumstances be liable to the
Tenant or any other person whomsoever:-
Lifts (1) in respect of any loss or damage to person or property
etc. 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
airconditioning plant (if any) and other facilities of
the said building or
Elect- (2) in respect of any loss or damage to person or property
ricity/ sustained by the Tenant or any such other person caused by or
gas/water through or in any way owing to any failure malfunction
supply 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 property
overflow of sustained by the Tenant or any such other person caused
water vermin
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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 or any
persons or contents 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
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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
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 reenter 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
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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 Tenant in
of right 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 neglect or
contractors omission of any contractor servant agent customer or licencee
servants (as hereinbefore defined) of the Tenant shall be deemed to be
agents the act default neglect or omission of the Tenant.
licensees
customers
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.
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SECTION IX
DEPOSIT
Deposit (1) The Tenant shall on the signing hereof deposit or/and
the tenancy agreement for the renewed term (as the
case may) 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 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 lose 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 Agreement in which event the deposit may be
forfeited to the Landlord as hereinbefore provided.
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Repayment (2) Subject as aforesaid the said deposit shall be
of deposit 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
Intro- (1) The Landlord shall have power from time to time to
duction make, revoke and amend Rules regulating the use
of operation and maintenance of the said building and
Regulations 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
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and conditions of this Agreement shall prevail.
SECTION XI
INTERPRETATION AND MISCELLANEOUS
Marginal (1) The marginal notes headings and index are intended
notes for guidance only and do not form part of this
headings Agreement nor shall any of the provisions of this
and index Agreement be construed or interpreted by reference
thereto or in any way affected or limited thereby.
Use of (2) The specified lifts as installed in the said building
Lifts 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
fighting Premises shall be and remain the property of the
equipment Landlord and the Tenant shall take due care thereof
and in particular the Tenant shall not allow such
equipment to be moved to any other position.
Con- (4) No condoning excusing or overlooking by the Landlord
donation of any default breach or non-observance or
not a non-performance by the Tenant at any time or times of
waiver 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
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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 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
notices expiration of 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 (6) Any notice required to be served hereunder shall if
of to be served on the Tenant be sufficiently served if
notices 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
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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 (8) This Agreement sets out the full agreement reached
of between the parties and no other representations have
warranties 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 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 (11) The costs for and incidental to the preparation and
Duty signing of this Agreement together with all stamp
and duties payable under the Stamp Duty Ordinance and all
costs 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
28.
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<PAGE>
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.
29.
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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 C2, First Floor,
Vita Tower, 29 Wong Chuk Hang Road, Hong Kong.
PART II
TENANT : SOUTH CHINA BREWING COMPANY LIMITED ([CHINESE
LANGUAGE CHARACTERS]) whose registered office is
situate at 11th Floor, Tower II, The Gateway,
25-27 Canton Road, Kowloon, Hong Kong.
PART III
TERM : Three years from 1st day of October 1994 to 30th
day of September 1997.
The Tenant shall have an option to renew the tenancy hereby
granted for two further terms, each consists of three 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 the rent-free period hereby granted
and this clause for option in the second renewal of the tenancy
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.
30.
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<PAGE>
PART IV
RENT : ,
Period Rent per calendar month (exclusive
of rates and management fee)
(1) The term of Three DOLLARS THIRTY FOUR THOUSAND ONLY
YEARS hereby granted ($34,000.00)
(2) The renewed terms of The rental for each renewed term
Three Years and Three shall be agreed between the parties
Years 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 terms of three years, and
three 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
31.
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<PAGE>
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
first renewed term of three years
shall not be less than Dollars
THIRTY FOUR THOUSAND per month and
the rental for the second renewed
term of three years shall not be
less than the rental for the first
renewed term 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 terms
shall be final and binding on the
parties and that the cost of such
valuation shall be borne by them in
equal shares.
Rent shall be paid in advance without any deduction and set
off whatsoever 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
32.
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<PAGE>
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.
(3) Rent Free Period
The first one month from the commencement date, namely, from
1st October 1994 to 31st October 1994, 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.
PART V
MANAGEMENT FEE
(l) Subject to (2) below the management fee throughout
the said term shall be DOLLARS TWO THOUSAND FIVE
HUNDRED AND FORTY NINE ONLY ($2,549.00) 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
33.
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<PAGE>
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 (l) of Section IX:=
DOLLARS SEVENTY THREE THOUSAND AND NINETY EIGHT ONLY
($73,098.00).
Deposit for the renewed terms of three years and three years:-
Two months' Rental and Management fee for the renewed terms.
34.
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THE SECOND SCHEDULE ABOVE REFERRED TO
ALL THAT PORTION A1 on the FIRST 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.
SIGNED by Mr. Lo Kwee Seong )
Director ) for and on behalf of
Ping Ping Investment Co, Ltd.) PING PING INVESTMENT COMPANY LIMITED
for and on behalf of the ) [CHINESE LANGUAGE CHARACTERS]
Landlord whose signature is )
verified by:- ) [SIGNATURE]
...................................
Director
LEE SAK HUNG TOBY
Estate Manager
SIGNED BY )
)
)
)
)
for and on behalf of the )
Tenant in the presence of:- )
)
LEE SAK HUNG TOBY
35.
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<PAGE>
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 SEVENTY THREE THOUSAND AND NINETY EIGHT ONLY ) $73,098.00
being the deposit money above expressed to be paid )
by the Tenant to the Landlord.
VERIFYING THE SIGNATURE:=
for and on behalf of
PING PING INVESTMENT COMPANY LIMITED
[CHINESE LANGUAGE CHARACTERS]
[SIGNATURE]
...................................
Director
LEE SAK HUNG TOBY
36.
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<PAGE>
[BLOCK PLAN]
[FLOOR PLAN]
[SIGNATURE]
1 st 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>
To: Ping Ping Investment Co. Ltd.
Re : 7 A2 Vita Tower,
29 Wong Chuk Hang Road, Hong Kong
We refer to the joint handover inspection of the captioned
premises on 26th April, 1995 between our Mr. David Haines and
your Mr. Toby Lee. We confirm that we have obtained vacant
possession of the above premises on 26th April, 1995 prior to
the commencement of tenancy. By virtue of this, we hereby
agreed to comply with all terms and conditions as stipulated
in the Tenancy Agreement and shall be responsible and liable
for any damages caused within the premises during the period
from 26th April, 1995 to 30th April, 1995.
The reading of meters are as follows:
Electricity: NIL
Water: To be shared
with all Unit at 7/F
We further acknowledge receipt of 1 set(s) of 3 key(s) giving
access to the premises.
For and on behalf of
South China Brewing Co. Ltd.
[SIGNATURE]
Date: 26th April, 1995
<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.
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<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.
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<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.
3.
<PAGE>
<PAGE>
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.
4.
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<PAGE>
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
5.
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<PAGE>
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.
6.
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<PAGE>
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.
7.
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<PAGE>
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
8.
<PAGE>
<PAGE>
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
9.
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<PAGE>
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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<PAGE>
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
11.
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<PAGE>
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.
19.
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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
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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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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
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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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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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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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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
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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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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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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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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
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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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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
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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
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CONFIDENTIAL TREATMENT REQUESTED
DABEERS DISTRIBUTERS LIMITED
BREWING AGREEMENT
THIS AGREEMENT is made the 23rd September 1995
BETWEEN
SOUTH CHINA BREWING COMPANY LIMITED ("SCBC"), a company
incorporated in Hong Kong
AND
DABEERS DISTRIBUTERS LIMITED ("DDL"), a company incorporated in
Hong Kong
THE PARTIES AGREE AS FOLLOWS:
1. APPOINTMENT
DDL hereby appoints and engages SCBC to prepare, brew and
deliveries commencing Nov. 17th 1995 supply four (4) private
label beers exclusively for DDL for a period of
twelve (12) months from September 23 1995 to 22 September 1996.
The parties undertake to commence negotiations in good faith for
the replacement of this contract no later than June 22, 1996. DDL
agrees not to engage any other company to supply exclusive beers
for its Hong Kong outlets for the term of this contract.
2. PRODUCT
(a) SCBC will supply three (3) house beers (House Beers) which
will be a stout, an ale and a lager as well as one (1)
monthly specialty beer (Specialty Beer).
(b) The Beer will be supplied in 30 litre lightweight kegs
("Kegs").
(c) SCBC and DDL will work together to develop and agree the
style and recipe for the Beers.
(d) DDL will be entitled to determine the name of the Beer and
to design a label and motif under which the Beer shall be
distributed. DDL will own the copyright in and other
intellectual rights pertaining to the name and the label and
motif.
(e) SCBC will own all rights pertaining to the recipe for the
Beer (the "Recipe").
(f) During the term of this contract and any future contract for
the supply of the Beers by SCBC to DDL beer brewed in
accordance with the Recipe will be supplied by SCBC only to
DDL or its nominee.
(g) SCBC guarantees the Beers against spoilage for a period of
three months from its production and will replace at its
cost any Beer that spoils within that time.
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CONFIDENTIAL TREATMENT REQUESTED
*(h) SCBC will provide DDL with Crooked Island Ale and
Dragon's Back, in addition to the house beers in cumulation
with the house beers minimum orders.
3. ORDERS
(a) DDL shall order at least [REDACTED] Kegs of each House Beer
and [REDACTED] Kegs of each Specialty Beer per month for the
length of the contract. Total [REDACTED] kegs per month
(i) Sales will be reviewed on a quarterly basis and
adjustments in costs be made forthwith.
(b) In response to particular orders by DDL, SCBC shall supply
Beer to DDL within three (3) weeks after DDL places such
order. This shall not apply to the first order placed by DDL
which shall be satisfied within six (6) weeks.
(c) SCBC shall use its best endeavors to supply the amount of
Beer ordered by DDL. Nevertheless SCBC shall be entitled to
supply and DDL shall be required to accept a delivery of
Beer that is 7.5% more or less than the amount of Beer
ordered by DDL in respect of a particular order.
4. PRICE AND PAYMENT
(a) When it places an order DDL shall pay to SCBC an amount
equal to the price for that order and SCBC shall not be
required to accept any order until such payment is received
by it. On delivery and acceptance of Beer in response to a
particular order:
(i) if any amount of Beer delivered exceeds the amount of
Beer ordered by DDL, DDL shall pay to SCBC an amount
equal to the difference between the price of the Beer
ordered and the price of the Beer delivered but such
amount shall not exceed [REDACTED] of the price of the
Beer ordered.
(ii) if any amount of Beer delivered is less than the amount
of Beer ordered by DDL, SCBC shall pay to DDL an amount
equal to the difference between the price of the Beer
ordered and the price of the beer delivered.
(b) The price of the Beer shall be determined in accordance with
the amount of Beer ordered (not amount delivered) as
described in this Contract and shall be:
(i) HK [REDACTED] per Keg for each of the Beers ordered
per calendar month.
(ii) DDL Shall pay a [REDACTED] premium per keg for failure
to meet minimum order amounts as detailed in Section 3
(a).
(c) The parties shall negotiate in good faith to determine the
price for extraordinary beer orders such as specialty
bottling, exceptional beer styles and recipes and the
production of beer for special events.
5. DISTRIBUTION AND DELIVERY
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CONFIDENTIAL TREATMENT REQUESTED
(a) SCBC shall deliver the Beer to DDL at locations within
Hong Kong Island as designated by DDL.
(b) SCBC shall deliver to DDL in minimum consignments of 25
kegs to DDL's Wanchai location and the remainders of
each order to its Ap Lei Chau location.
(c) DDL shall provide cold storage (between 5 and 10
degrees celcius) for the Beers at both of these
location.
(d) DDL shall be responsible to provide all systems
required to deliver Beer from kegs to glasses. SCBC
shall consult with DDL to assist DDL to design, install
and maintain such systems.
6. TRAINING
A DDL's request, SCBC will provide training to DDL's staff
or assignees in relation to the Beer, its delivery and how
best to serve and sell it. Such training shall be conducted
in sessions to be held not more than once per month.
7. DEPOSIT
DDL shall forthwith pay to SCBC a deposit of HK$133,900 (the
"Deposit") which shall be refundable on June 22nd 1996 on
the expiration of this Agreement unless this Agreement is
terminated in accordance with Clause 8.
8. TERMINATION OF THE AGREEMENT
DDL may terminate this Agreement at any time by providing
to SCBC no less than one month's notice in writing of its
intention to do so. In the event DDL so terminates this
Agreement it shall not be entitled to receive a refund of
the Deposit which shall be forfeited to SCBC.
9. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with Hong Kong law.
10. INTERPRETATION
This Agreement constitutes the entire agreement between the
parties relating to the subject matter contained herein and
supersedes all prior agreements. It may be waived, modified
or varied only in writing signed on behalf of both parties.
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CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS whereof the parties have executed this Agreement on the day
and year first written above.
Executed for and on the behalf of )
SOUTH CHINA BREWING )
COMPANY LIMITED )
DAVID K HAINES
---------------------------------
name: DAVID K HAINES
title: Managing Director
chop:
Executed for and on the behalf of )
DABEERS DISTRIBUTERS )
LIMITED )
McINTYRE MICHAEL
--------------------------------
name: McINTYRE MICHAEL
title: Director
chop:
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CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT TO DABEERS DISTRIBUTORS
LIMITED AGREEMENT
DATED: 15th December 1995
It is hereby agreed by the parties of the above captioned
agreement to amend the Agreement as follows:
SCBC will provide DDL with Crooked Island as part of their
minimum order of [REDACTED] kegs per calendar month at the
identical price of the House Beers. (see *h)
Executed for and on the behalf of )
SOUTH CHINA BREWING )
COMPANY LIMITED )
DAVID K HAINES
---------------------------------
name: DAVID K HAINES
title: Managing Director
chop:
Executed for and on the behalf of )
DABEERS DISTRIBUTORS )
LIMITED )
McINTYRE MICHAEL
--------------------------------
name: McINTYRE MICHAEL
title: Director
chop:
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CONFIDENTIAL TREATMENT REQUESTED
DELANEY'S
BREWING AGREEMENT
THIS AGREEMENT is made the 20th September 1995
BETWEEN
SOUTH CHINA BREWING COMPANY LIMITED ("SCBC"), a company incorporated in Hong
Kong
AND
DELANEY'S (WANCHAI) LIMITED ("DWL"), a company incorporated in Hong Kong
WHEREAS
(A) DWL is licensed to sell alcoholic beverages in Hong Kong and wishes to
engage SCBC to prepare and supply a private label beer for its outlets in
Hong Kong; and
(B) SCBC is willing to prepare and supply a private label beer to DWL
THE PARTIES AGREE AS FOLLOWS:-
1. APPOINTMENT
DWL hereby appoints and engages SCBC to prepare, brew and supply a private label
beer exclusively for DWL for a period of 12 months from 20 September 1995 to 19
September 1996. The Parties undertake to commence negotiations in good faith for
the replacement of this contract no later than 19 June 1966.
2. PRODUCT
(a) SCBC will supply a specially-brewed beer for DWL which will be an
Irish-style ale with an alcohol content of about 3.5% to 4% by volume (the
"Beer").
(b) The Beer will be supplied in 30 litre lightweight kegs ("Kegs").
(c) SCBC and DWL will work together to develop and agree the style and recipe
for the Beer.
(d) DWL will be entitled to determine the name of the Beer and to design a label
and motif under which the Beer shall be distributed. DWL will own the
copyright in and other intellectual rights pertaining to the name and the
label and motif.
(e) SCBC will own all rights pertaining to the recipe for the Beer (the
"Recipe").
(f) During the term of this contract and any future contract for the supply of
the Beer by SCBC to DWL beer brewed in accordance with the Recipe will be
supplied by SCBC only to DWL or its delegate.
(g) SCBC guarantees the Beer against spoilage for a period of two (2) months
from its
1
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CONFIDENTIAL TREATMENT REQUESTED
production and will replace at its own cost any Beer that spoils within that
time.
3. ORDERS
(a) DWL shall order at least [REDACTED] Kegs of Beer per month.
(b) In response to a particular order by DWL, SCBC shall supply Beer to DWL
within 3 weeks after DWL places such order. This shall not apply to the
first order placed by DWL which shall be satisfied within 6 weeks.
(c) SCBC shall use its best endeavours to supply the amount of Beer ordered by
DWL. Nevertheless SCBC shall be entitled to supply and DWL shall be required
to accept 7.5% more or less of the amount of Beer ordered by DWL in respect
of a particular order. DWL shall not be required to accept an order that is
more than 7.5% less than the amount of Beer ordered by DWL.
4. PRICE AND PAYMENT
(a) When it places an order DWL shall pay to SCBC an amount equal to the price
for that order. On delivery and acceptance of Beer in response to a
particular order:
(i) if the amount of Beer delivered exceed the amount of Beer ordered by
DWL, DWL shall pay to SCBC an amount equal to the difference between the
price of the Beer ordered and the price of the Beer delivered but such
amount shall not exceed 7.5% of the price of the Beer ordered; or
(i) if the amount of Beer delivered is less than the amount of Beer ordered
by DWL, SCBC shall pay to DWL, an amount equal to the difference between
the price of the Beer ordered and the price of the Beer delivered.
(b) The price of the Beer shall be:
(i) HK[REDACTED] per Keg if DWL orders only [REDACTED] Kegs in a particular
calendar month;
(ii) HK[REDACTED] per Keg if DWL orders [REDACTED] to [REDACTED] Kegs in a
particular calendar month; and
(ii) HK[REDACTED] per Keg if DWL orders [REDACTED] or more Kegs in a
particular calendar month.
(c) The parties shall negotiate in good faith to detemine the price for
extraordinary beer orders such as specialty bottling, exceptional beer
styles and recipes and the production of beer for special events.
5. DISTRIBUTION AND DELIVERY
(a) SCBC shall deliver the Beer to DWL to no more than two locations within Hong
Kong designated by DWL.
(b) SCBC shall deliver Beer to DWL in minimum consignments of 10 Kegs per
location at DWL's request. Until Beer is delivered it shall be stored
without charge by SCBC.
2
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CONFIDENTIAL TREATMENT REQUESTED
(c) DWL shall be responsible to provide all systems required to deliver Beer
from the Kegs to glasses. SCBC shall consult with DWL to assist DWL to
design, install and maintain such systems.
6. TRAINING
At DWL's request, SCBC will provide training to DWL staff in relation to the
Beer, its delivery and how best to sell it. Such training shall be conducted in
sessions to be held not more than once per month.
7. DEPOSIT
DWL shall forthwith pay to SCBC a deposit of HK$46,875 (the "Deposit") which
shall be refundable on 19 September 1996 on the expiration of this Agreement but
which shall not be refundable if this Agreement is terminated in accordance with
Clause 8.
8. TERMINATION OF THE AGREEMENT
DWL may terminate this Agreement at any time by providing to SCBC no less than
one month's notice in writing of its intention to do so. In the event that DWL
so terminate this Agreement it shall not be entitled to received a refund of the
Deposit which shall be forfeited to SCBC.
9. GOVERING LAW
This Agreement shall be governed by and construed in accordance with Hong Kong
law.
10. INTERPRETATION
(a) This Agreement constitutes the entire agreement between the parties relating
to the subject matter contained herein and supersedes all prior agreements.
It may be waived, modified or varied only in writing signed on behalf of
both parties.
(b) In this Agreement words constituting the singular include the plural and
vice versa and words signifying the masculine gender include the feminine
gender and vice versa.
IN WlTNESS whereof the parties have executed this Agreement on the day and year
first written above.
Executed for and on behalf of
SOUTH CHINA BREWING
COMPANY LIMITED
DAVID K. HAINES
.....................................
Name: DAVID K. HAINES
Title: Managing Director
for and on behalf of
SOUTH CHINA BREWING COMPANY LIMITED
3
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CONFIDENTIAL TREATMENT REQUESTED
Executed for and on behalf of )
DELANEY'S (WANCHAI) )
LIMITED )
G.D. Willis
------------------------------------
Name: G.D. Willis
Title: Chairman
Chop:
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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
------------------------------
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[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
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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.
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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
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William P. Herrington
Vice President
ACCEPTED THIS________________ DAY OF MARCH, 1995
South China Brewing Company, Ltd.
By:
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Title:
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Sazerac Company, Inc.
By:
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Title:
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Limited Recourse
Promissory Note
FOR VALUE RECEIVED, SOUTH CHINA BREWING COMPANY LIMITED, a Hong Kong
corporation (the "Maker") promises to pay to BPW Limited, LLC. (the "Payee") the
principal sum of SIXTY FIVE THOUSAND DOLLARS ($65,000.00), plus such Additional
Payments (as defined below), as follows:
(a) The amount of $65,000.00 shall be paid by Maker to Payee within
the lesser of March 31, 1997 or within ten (10) days of Maker
securing permanent financing, and
(b) Interest in the amount of five and one half percent (5.5%)
on the principal amount.
(c) This Promissory Note (Note) is made and issued on and subject
to the further terms and conditions specified below.
1. Definitions.
"Payment Date" shall mean the lesser of 31 March, 1997 or ten
(10) days from the date of Maker securing permanent financing.
"Security Agreement" shall mean the Security Agreement (SA),
dated March 1, 1996, of the Maker relating to this Note and the Asset
Purchase Agreement.
2. This Note is issued and delivered by the Maker pursuant to
the terms of the Security Agreement. Maker shall register this Note and the
Security Agreement in the proper registry established for such documents, in
Hong Kong, within five (5) days of the date of 15 March 1996.
3. All payments of principal and interest in respect of this
Note shall be made in lawful money of the United States of America by bank
or certified check to the Payee at its office located at 1165 Northern Blvd.,
Manhasset, New York 11030, or at such other place as shall be designated in
writing by the Payee.
4. (a) This Note shall be non-recourse to the Maker and the
Payee, for itself and its representatives, successors, endorsees and
assigns, agrees, by acceptance hereof, that the Maker shall not be personally
liable on this Note and that it shall not seek to enforce any liability or
obligation of the Maker to perform the obligations contained in this Note by any
action or proceeding wherein a money judgment shall be sought against the Maker,
and that any judgment or decree shall be
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enforceable against the Maker only to the extent of, and the Payee shall
look for payment hereof solely to, the security of the Maker's interest in its
assets and the equipment;
(b) Under no circumstances shall any director, officer
or employee of the Maker be personally liable for any obligation of the
Maker arising pursuant to the provisions of this Note.
5. This Note is secured, and payment hereof is assured by
the Security Agreement.
6. Except as provided in the next succeeding sentence, this
Note is not assignable by either the Maker or the Payee without the written
consent of the other. The Payee may assign its rights hereunder to a
wholly-owned subsidiary of Payee or, with the prior consent of Maker, which
consent shall not be unreasonably withheld, to the shareholders of the Payee.
7. This Note and the rights and obligations of the Maker
and the Payee shall be governed by and construed in accordance with the
laws of the State of New York without regard to conflict of laws principles.
8. Any dispute arising under this Note shall be settled by
final binding arbitration before a single arbitrator in the manner provided
in the Security Agreement with respect to the arbitration of disputes arising
under the Security Agreement.
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IN WITNESS WHEREOF, the Maker has executed this Note as
of the date first above written.
SOUTH CHINA BREWING COMPANY LIMITED
By: PETER W.H. BORDEAUX
______________________________________
Name:
Title:
Dated March 5, 1996
On the 5th day of March 1996, before me came Peter W. H. Bordeaux to me
known, who being by me duly sworn, did depose and say that he resides at New
Orleans, Louisiana USA that he is the Chairman of South China Brewing Company
Limited, the corporation described in, and which executed the foregoing
instrument; that he knows the seal of the said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
STEPHEN E. CAMISA
Notary Public
Stephen E. Camisa
Accepted and Agreed Notary Public - State of Louisiana
My commission is for life
BPW Limited, LLC. Payee
By: JOHN BEAUDETTE
_______________________________________
Name: John Beaudette
Title: Pres.
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SECURITY AGREEMENT
Security Agreement, dated as of March 1, 1996, made by and between South
China Brewing Company Limited, a Hong Kong corporation (the "Grantor"), and BPW
Limited, L.L.C., a New York entity (the "Secured Party") whose address is 1165
Northern Blvd., Manhasset, New York 11030.
W I T N E S S E T H :
WHEREAS, the Grantor has agreed to grant a continuing security interest in
and to its interest (including any common law rights in and with respect
thereto), if any, in the assets (the "Collateral") to secure its obligations
under the Promissory Note of the Grantor, dated the date hereof (the "Promissory
Note") issued pursuant thereto;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. The Grantor, for valuable consideration
receipt of which is hereby acknowledged, hereby grants to the Secured Party, in
order to secure the payment when due of the payments due to the Secured Party
pursuant to the Promissory Note (the "Obligations"), a security interest in, and
agrees and acknowledges that the Secured Party has and shall continue to have a
security interest in, the Collateral.
2. Warranties, Covenants and Agreements of Grantor. Grantor warrants,
covenants and agrees that:
a. Grantor shall pay and perform all of the Obligations secured by this
Agreement in accordance with their terms;
b. Except for the security interest granted hereby, without the prior
written approval of the Secured Party the Collateral will be and shall remain
free of all future adverse claims, security interests or other liens or
encumbrances created by acts or omissions of Grantor as long as any Obligations
remain outstanding; Grantor has full power and lawful authority to sell, assign
and transfer its interest in the Collateral to the Secured Party and to grant to
the Secured Party a security interest therein as herein provided;
c. Upon reasonable demand of the Secured Party, Grantor shall do the
following: furnish further assurance of title, execute any written agreement or
do any other acts reasonably requested by the Secured Party to effectuate the
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purposes and provisions of this Agreement, execute any instrument or
statement required by law or otherwise in order to effect, continue or terminate
the security of the Secured Party in the Collateral and pay all costs of filing
in connection therewith;
d. As long as any Obligation remains due, the Grantor will take all
reasonable and necessary steps, including, without limitation, in any proceeding
before the Hong Kong Patent and Trademark Office to maintain and pursue each
application and to maintain each registration of the Trademarks, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability;
e. As long as any Obligation remains unpaid, in the event that any of the
Collateral is infringed, misappropriated or diluted by a third party, the
Grantor promptly shall notify the Secured Party after it learns thereof and
shall, unless the Grantor reasonably shall determine that such Collateral is of
negligible economic value to the Grantor (which determination the Grantor
promptly shall report to the Secured Party), promptly sue for infringement,
misappropriation of dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution,
or take such other actions as the Grantor reasonably shall deem appropriate
under the circumstances to protect such Collateral; provided, however, that the
Grantor shall not be obligated to take any action that would, in the reasonable
judgment of the Grantor, either require the incurrence of unduly burdensome
expenses or expose the Grantor to increased legal liability.
3. General Provisions.
a. Waiver of or acquiescence in any failure of the Secured Party to insist
upon strict performance by the Grantor of any warranties or agreements in the
Agreement, shall not constitute a waive of any subsequent failure.
b. Notices to either party shall be in writing and shall be delivered
personally or by mail addressed to the party at the address set forth herein or
otherwise designated by such party in writing.
c. This Security Agreement shall be construed in accordance with, and
governed by, the laws of the State of New York without giving effect to any
principles of conflict of laws thereof.
d. The invalidity of all or any part of any paragraph of this Security
Agreement shall render invalid that paragraph of this Security Agreement. If any
provision of this Security Agreement is unenforceable, such provision shall be
interpreted and enforced only to the extent that the provision is
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enforceable.
e. The paragraph headings used in this Security Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
f. Either party may enforce in a court its respective injunctive rights
regarding allegedly infringing activities with respect to the protection and
preservation of the Collateral. Otherwise, however, should any dispute arise
between the parties to this Agreement regarding the subject matter hereof, to
enforce the terms of this Agreement, to seek a declaration of rights in
conjunction herewith, or otherwise relating hereto, such dispute shall be
settled by final, binding arbitration before a single arbitrator. The arbitrator
shall be chosen by the American Arbitration Association, from a list of
impartial arbitrators who are experts in the field of commercial law. Disputes
brought by either party shall be referred to and finally resolved by arbitration
before, and under rules of, the Commercial Arbitration Rules of the American
Arbitration Association, with such arbitration to be held in New York, New York.
Judgment upon the award of the arbitrator may be entered in any court having
jurisdiction thereof. In conjunction with any such arbitration, depositions may
be taken and other discovery obtained to the extent authorized and provided by
the Federal Rules of Civil Procedure. Each party shall be responsible for its
own expenses related to travel and attendance (i.e., air fare or other
transportation, hotel, meals). The costs and expense of the arbitration
proceeding shall be borne by the losing party, or if responsibility is
apportioned between the parties, then such costs shall be apportioned between
the parties by the arbitrator. Provided, however, a finding of default on the
part of the Grantor shall, among any other award, mandate the return of the
Collateral to the Secured Party.
4. Defaults: Remedies.
a. If any Obligation becomes payable pursuant to the terms of the
Promissory Note and remains unpaid for a period of 30 days the Secured Party may
exercise, in addition to all other rights and remedies granted to it in this
Security Agreement, all rights and remedies of a secured party under the Uniform
Commercial Code in effect in the State of New York or under the laws of Hong
Kong.
b. If the Grantor shall default in the performance of any of the provisions
of this Agreement, which on the Grantor's part are to be performed (except for
payments of amounts due on Obligations), the Secured Party may perform same for
the Debtor's account and any monies expended in so doing, including the Secured
Party's reasonable attorneys fees and the other expenses
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incurred to protect, preserve or maintain the Collateral, shall be
chargeable to the Grantor and added to the indebtedness secured hereby, provided
that the Grantor shall be personally liable only for such expenses incurred on
or prior to the earlier of the Termination Date (as defined in the Promissory
Note) and the Enforcement Date (as defined in the Promissory Note).
5. Non-recourse. Except as explicitly provided in paragraph 4 of the
Promissory Note or paragraph 4 (a) hereof, the Promissory Note and the
obligations of the Grantor hereunder shall be non-recourse to the Grantor and
the Secured Party, for itself and its representatives, successors, endorsees and
assigns, agrees, by acceptance of the Promissory Note, that the Grantor shall
not be personally liable on the Promissory Note ,or this Security Agreement and
that it shall not seek to enforce any liability or obligation of the Grantor to
perform the obligations contained in the Promissory Note or this Security
Agreement by any action or proceeding wherein a money judgment or decree shall
be enforceable against the Grantor only to the extent of, and the Secured Party
shall look for payment hereof solely to, the security of the Grantor's interest
in the Collateral.
6. Assignment. This Security Agreement shall be binding on and shall inure
to the benefit of the Grantor and the Secured Party and their respective legal
representatives and successors and shall be assignable with respect to the
parties hereto to the same extent and in the same manner as the Promissory Note.
IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to be
duly executed and delivered by its duly authorized officer as of the date first
above written.
BPW LIMITED, L.L.C.
By: JOHN BEAUDETTE
____________________________________________
Name:
Title: Pres
SOUTH CHINA BREWING COMPANY LTD
By: PETER W.H. BORDEAUX
________________________________________
Name:
Title:
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AGREEMENT dated as of June 14, 1996, between American Craft
Brewing International Limited, a Bermuda company having its principal address at
Unit 1A, 1F, Vita Tower, 29 Wong Chuck Hang, Aberdeen, HONG KONG, and James L.
Ake, whose principal home address is listed beneath his signature below (the
"Executive").
The Company and the Executive desire to set forth the terms upon
which the Executive will be employed by the Company during the term of this
Agreement and agree as follows:
1. Working Relationship
1.1 Employment. The Company shall employ the Executive, and the
Executive shall serve as Executive Vice President and Chief Operating Officer,
during the term of this Agreement. The Executive shall use his best efforts,
skill and abilities to faithfully and effectively manage the Company as directed
by the Company's Board of Directors (the "Board"). The Executive shall perform
such supervisory and management functions as may be commensurate with the
Executive's position and such other duties as may from time to time reasonably
be delegated to the Executive by the Board, subject to the terms and conditions
of the organizational documents of the Company.
1.2 Term. The term of this Agreement shall commence on June 14,
1996 (the "Commencement Date"), and shall continue until the second anniversary
hereof or until terminated by the Company or the Executive as hereinafter
provided.
1.3 Full Time. The Executive shall devote his full and exclusive
business time and energies to the performance of his duties under this
Agreement, except that the Executive shall be free to devote reasonable time and
attention to public and charitable affairs and to his personal affairs,
consistent with his duties hereunder.
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2. Compensation
2.1 Base Compensation. As compensation for his services
hereunder, the Company shall pay the Executive each month, payable in arrears,
US$5,000.00 until the closing date of the Company's initial public offering
of common stock and warrants and US$6,000.00 of each month after such closing
date. If this Agreement is terminated, for any reason, during a calendar month
the Company shall pay the Executive on the last business day of such month an
amount equal to the amount specified in the preceding sentence reduced by
multiplying such amount by a quotient, the numerator of which is the number of
days during such month prior to the termination of this Agreement and the
denominator of which is the number of days in such month.
2.2 Bonuses and Profit Sharing. The Company and the Executive
shall negotiate in good faith the participation of the Executive in any bonus
and profit sharing plans provided that the nature and extent of such
participation shall be based upon the success of the Executive and the Company
in meeting performance goals, also to be negotiated in good faith.
2.3 1996 Stock Option Plan. The Executive shall be entitled to
participate in the Company's 1996 Stock Option Plan on the basis described
therein.
3. Fringe Benefits.
3.1 Participation in Benefit and Insurance Plans; Vacation. The
Company will pay premiums of up to $750.00 per month, in the aggregate, for
life, health and disability insurance for the Executive. During his employment
hereunder, the Executive shall be entitled to fifteen calendar days of paid
vacation and holidays in accordance with applicable policies from time to time
adopted by the Company.
3.2 Company Car. The Company will select and provide to the
Executive, free of charge, one automobile of reasonably current model and year
to be used solely by the Executive in performing his duties hereunder. The
Company will provide comprehensive collision, property damage, and public
liability insurance for such automobile and will replace such automobile in the
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event it is lost, destroyed or damaged beyond repair unless the same is caused
by the Executive's negligence, recklessness or willful malfeasance. The Company
will also pay all ad valorum taxes and license fees for such automobile and will
provide for all routine maintenance therefore. Upon the termination of this
Agreement for any reason, the Executive shall promptly return such automobile to
the Company in the same condition as when received by the Executive, ordinary
wear and tear alone excepted.
4. Business Expenses. The Company shall reimburse the Executive
for all travel, lodging, entertainment and other expenses actually incurred by
him in connection with the performance of his duties hereunder, against vouchers
and receipts or other appropriate written evidence of such expenditures, all in
accordance with the policies of the Company applicable thereto. The Executive
shall be reimbursed for coach class airfare on domestic flights and business
class airfare on international flights.
5. Termination of Agreement. Notwithstanding anything contained
in Section 2, 3 or 4 to the contrary and except as provided in Section 6, this
Agreement and all of the obligations hereunder (other than Sections 8, 9 and 10
which shall remain in full force and effect in accordance with the terms
thereof) shall immediately terminate upon the earliest to occur of the
following:
(a) 10 days after written notice of termination to the Company by
the Executive;
(b) immediately upon written notice of termination for cause to
the Executive by the Company; "cause" shall mean (i) fraud or any
other intentional wrongful act, any violation of law (excluding
minor traffic violations), conviction thereof or plea of guilty
or nolo contendre thereto, moral turpitude or other willful
misconduct by the Executive or (ii) the Executive's failure or
refusal to perform, carry out or comply with the Executive's
duties or obligations hereunder in any material respect;
(c) immediately upon written notice of termination without cause
to the Executive by the Company;
(d) upon the death or permanent disability of the Executive;
"permanent disability" shall mean the inability of the Executive
to perform his duties hereunder by reason of
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physical or mental disability during any continuous period of
four months or for periods aggregating eight months during any
period of twelve consecutive months; and
(e) On the second anniversary of the date hereof; provided,
however, that the term of this Agreement shall be automatically
renewed and extended for successive two-year terms on June 14,
1998 and on each June 14 falling on a year whose number is
divisible by two without remainder unless either the Company or
the Executive gives written notice that this Agreement shall not
be renewed, not less than 20 days prior to any such June 14.
6. Termination Payment. If this Agreement is terminated pursuant
to Section 5(c) or 5(d), the Executive or his beneficiary in accordance with the
laws of descent shall be entitled to an amount equal to the product of two and
the Executive's annual compensation as determined in accordance with the first
sentence of Section 2.1 and 12 months of continuous health, life and disability
coverage, as provided in Section 3.1; provided, however, that the Executive
shall be entitled to receive such payments only if he is in full compliance with
Sections 8, 9 and 10.
7. Change in Control.
7.1 If within two years of a change in control, as defined in
Section 7.2, the Executive experiences a reduction of his responsibilities or
compensation, or is terminated, the Executive shall be entitled to receive an
amount equal to the product of two and the Executive's annual compensation as
determined in accordance with the first sentence of Section 2.1 and 12 months
of continuous health, life and disability coverage, as provided in Section 3.1
7.2 As used in Section ,7.1 "Change in Control" means a change in
control of the Company which will be deemed to have occurred if (i) the
acquisition by any person or entity not controlled by the Company's stockholders
of more than 50% 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 any merger,
continuation, reorganization or similar transaction with or into American Craft
Brewing International Limited, a British Virgin Islands company).
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8. Cooperation with the Company After Termination of this
Agreement. Following any notice of termination of employment by the Executive,
the Executive shall fully cooperate with the Company in all matters relating to
the winding up of his pending work on behalf of the Company and the orderly
transfer of any such pending work to other employees of the Company as may be
designated by the Company.
9. Confidentiality; Return of Property. The Executive
acknowledges that during the term of this Agreement he will receive confidential
information from the Company and subsidiaries of the Company and the respective
clients thereof (each a "Relevant Entity"), accordingly the Executive agrees
that during the term of this Agreement (as it may be extended pursuant to
Section 5(e)) and thereafter for a period of two years, the Executive and his
affiliates shall not, except in the performance of his obligations to the
Company hereunder or as may otherwise be approved in advance by the Company,
directly or indirectly, disclose or use (except for the direct benefit of the
Company) any confidential information that he may learn or has learned by reason
of his association with any Relevant Entity. Upon termination of this Agreement,
the Executive shall promptly return to the Company any and all properties,
records or papers of any Relevant Entity, that may have been in his possession
at the time of termination, whether prepared by the Executive or others,
including, but not limited to, confidential information and keys. For purposes
of this Agreement, "confidential information" includes all data, analyses,
reports, interpretations, forecasts, documents and information concerning a
Relevant Entity and its affairs, including, without limitation, with respect to
clients, products, policies, procedures, methodologies, trade secrets and other
intellectual property, systems, personnel, confidential reports, technical
information, financial information, business transactions, business plans,
prospects or opportunities, (i) that the Company reasonably believes are
confidential or (ii) the disclosure of which could be injurious to a Relevant
Entity or beneficial to competitors of a Relevant Entity, but shall exclude any
information that the Executive is required to disclose under any applicable
laws, regulations or directives of any government agency, tribunal or authority
having jurisdiction in the matter or under subpoena or other process of law. For
purposes of this Agreement, "affiliate" means any entity that, directly or
indirectly, is controlled by, or under common control with, the Executive; for
purposes of this definition, the terms "controlled by" and "under common control
with" means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of such person, whether through the
ownership of voting stock, by contract or otherwise.
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10. Non-Competition
10.1 Non-Competition. During the term of this Agreement (as it
may be extended pursuant to Section 5(e)) and thereafter for a period of two
years the Executive agrees that he and his affiliates shall not, anywhere in
Hong Kong or any other location defined by the Company as an area in which the
Company or any of its subsidiaries (the "AmBrew Companies") has operations,
directly or indirectly, (i) engage in any activity competitive with the business
of any of the AmBrew Companies for or on behalf of himself or any other person
or entity engaged in a line of business which competes with the AmBrew
Companies; (ii) solicit or attempt to solicit the business of any clients or
customers of any of the AmBrew Companies for products that are the same or
similar to those offered, sold or produced at any time by any of the AmBrew
Companies; (iii) otherwise divert or attempt to divert from any of the AmBrew
Companies any business whatsoever; (iv) hire or attempt to hire for any business
endeavor any employee or prior employee of any of the AmBrew Companies; or (v)
interfere with any business relationship between any of the AmBrew Companies and
any other person or entity.
10.2 Severability and Reform. If any portion of Section 10.1
shall for any reason be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions of Section 10.1, but Section 10.1 shall be construed as if such
invalid, illegal or unenforceable provision had never been contained therein. It
is the intention of the parties hereto that if any of the restrictions or
covenants contained in Section 10.1 is held to cover a geographic area or to be
for a length of time that is not permitted by applicable law, or in any way
construed to be too broad or invalid, such provision shall not be construed to
be null, void and of no enforceable effect, but to the extent such provision
would be valid or enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform Section 10.1 to provide for
a covenant having the maximum enforceable geographic area, time period and other
provisions (not greater than those contained herein) as shall be valid and
enforceable under such applicable law.
11. Miscellaneous
11.1 Notices. Any notice or communication required or permitted
to be given under this Agreement shall be (a) in writing, (b) delivered by hand,
Federal Express, facsimile transmission or by registered or certified mail
postage prepaid, if to the Company, to the attention of Peter W.H. Bordeaux at
the address set forth above, or if to the Executive at his address set forth
below, or at such other addresses as the respective parties may
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designate by such notice and (c) deemed to have been given on the date delivered
by hand or sent by facsimile, two business days after deposit with Federal
Express and upon receipt after being deposited with a governmental postal
service.
11.2 Governing Law; Consent to Jurisdiction. This Agreement, and
the application or interpretation hereof, shall be governed by and construed in
accordance with the laws of New York applicable to agreements made and to be
performed entirely therein. The Executive irrevocably submits to the
non-exclusive jurisdiction of courts in New York.
11.3 Amendments. This Agreement may be amended only pursuant to
an instrument in writing signed by each of the parties hereto.
11.4 Headings. The headings in this Agreement are for convenience
only and are in no way intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any of its provisions.
11.5 Waivers; Rights and Remedies Cumulative. The failure of any
party to pursue any remedy for breach, or to insist upon the strict performance,
of any covenant or condition contained in this Agreement shall not constitute a
waiver thereof or of any other right with respect to any subsequent breach.
Except as otherwise expressly set forth herein, rights and remedies under this
Agreement are cumulative, and the pursuit of any one right or remedy by any
party shall not preclude, or constitute a waiver of, the right to pursue any or
all other remedies. All rights and remedies provided under this Agreement are in
addition to any other rights the parties may have by law, in equity or
otherwise.
11.6 Severability. Except as otherwise provided in Section 10, if
any provision, or portion thereof, of this Agreement, or its application to any
person or entity or circumstance, shall be invalid, illegal or unenforceable to
any extent, the remainder of this Agreement, such provision and their
application shall not be affected thereby, but shall be interpreted without such
unenforceable provision or portion thereof so as to give effect, insofar as is
possible, to the original intent of the parties, and shall otherwise be
enforceable to the fullest extent permitted by law.
-7-
<PAGE>
<PAGE>
11.7 Successors and Assigns. All of the covenants, terms,
provisions and agreements contained in this Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and, in the case of the Company, its
respective successors and assigns.
11.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
11.9 No Third-Party Beneficiaries. Other than as set forth in
Section 6 above, the covenants, obligations and rights set forth in this
Agreement are not intended to benefit any third person or entity.
11.10 Entire Agreement. This Agreement embodies the entire
understanding and agreement between the parties hereto and concerning the
subject matter hereof and supersedes any and all prior negotiations,
understandings or agreements between the parties hereto with respect hereto.
-8-
<PAGE>
<PAGE>
11.11 Withholding. The payment of any amount pursuant to this
Agreement shall be subject to applicable withholding and payroll taxes, and such
other deductions as may be required under the Company's employee benefit plans,
if any, or under applicable law.
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By: ______________________________
Name: Peter W. H. Bordeaux
Title: Chairman of the Board
of Directors
_____________________________
James L. Ake
Address:
_____________________________
_____________________________
_____________________________
_____________________________
-9-
<PAGE>
<PAGE>
American Craft Brewing International Limited
Unit A1, 1/F Vita Tower
29 Wong Chuk Hang
Aberdeen, Hong Kong
May __, 1996
Noah Shaffer
(Address)
Dear Sir:
American Craft Brewing International Limited, a British Virgin Islands
company (the "Company"), or its successor, hereby agrees to issue and sell, and
Noah Shaffer (the "Purchaser"), hereby agrees to purchase (the "Issuance and
Sale") US$40,000 principal amount (the "Principal Amount") of a Redeemable
Convertible Note. "Redeemable Convertible Note" shall mean a note issued by the
Company or its successor in the form attached hereto as Exhibit A with the
following terms: interest on the Redeemable Convertible Note shall accrue at the
rate of 12% per annum; provided, that if the Company, or its successor, does not
consummate an initial public offering of its shares of capital stock, par value
US$0.01 per share (the "Shares"), in the United States (the "IPO") prior to
September 1, 1996, interest on the Redeemable Convertible Note shall accrue at
the rate of 14% per annum for the period from but excluding September 1, 1996 to
but including September 1, 1997 (the "Conversion Date"); provided further that
if the IPO is not consummated prior to the Conversion Date, the Purchaser shall
have the right to convert the Redeemable Convertible Note into that number of
Shares so that immediately after such conversion the Purchaser shall hold 1% of
the issued and outstanding Shares. Upon the date of the consummation of the IPO
(the "Closing Date"), the Purchaser shall have the right to convert the
Redeemable Convertible Note into that number of Shares equal to the quotient
obtained by dividing the Principal Amount by the product of 0.5 and the
<PAGE>
<PAGE>
2
price per Share of the price to public in the IPO (the "IPO Price"). In
addition, upon the Closing Date, the Company or its successor shall issue to the
Purchaser a redeemable warrant (the "Redeemable Warrant"), in the form attached
to the Convertable Note as Exhibit A, entitling the Purchaser to purchase up to
the number of Shares issued to it in accordance with the immediately preceding
sentence at a price per Share equal to the product of 1.5 and the IPO Price on
one or more occasions during the period commencing thirteen months (the
"Commencement Date") from the date of the prospectus relating to the IPO (the
"Effective Date") and terminating on the fifth anniversary of the Commencement
Date. Commencing 18 months after the Effective Date, the Company or its
successor shall be entitled to redeem the Redeemable Warrant at a price equal to
the product of the number of Shares into which the Redeemable Warrant is
convertable and US$0.10 on 30 days prior written notice to the holder of the
Redeemable Warrant if the per Share closing bid quotation on the Nasdaq SmallCap
Market equals or exceeds 160% of the IPO Price for any 20 trading days within a
period of 30 consecutive trading days, ending on the fifth trading day prior to
the notice of redemption. The Redeemable Convertible Note shall mature on the
earlier of the Closing Date and the Conversion Date and shall be redeemable by
the Company or its successor at any time.
2. Lock-Up Agreement. The Purchaser agrees that, for a period of six months
following the effective date of the Company's or its successor's registration
statement on Form S-1 relating to the IPO, he will not, without the prior
written consent of the Company, or its successor, and the representative of the
underwriter(s) of the IPO, directly or indirectly, issue, offer, agree to offer
to sell, sell, grant an option for the purchase or sale of, transfer, pledge,
assign, hypothecate, distribute or otherwise encumber or dispose of the
Redeemable Convertible Note, the Shares or the Redeemable Warrant (or the Shares
underlying the Redeemable Warrant) or options, rights, warrants or other
securities convertible into exchangeable or exercisable for or evidencing any
right to purchase or subscribe for the Redeemable Convertible Note, the Shares
or the Redeemable Warrant (or the Shares underlying the Redeemable Warrant)
(whether or not beneficially owned), or any beneficial interest therein, other
than (i) Shares 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.
3. Registration and Transfer of the Redeemable Convertible Note, the Shares
or the Redeemable Warrant (or the Shares underlying the Redeemable Warrant). The
Company shall not register any transfer of the Redeemable Convertible Note, the
Shares or the Redeemable Warrant (or the Shares underlying the Redeemable
Warrant) unless there are effective registrations under the Securities Act of
1933 (the "Act"), pursuant to Regulation S promulgated under the Act
("Regulation S") or pursuant to another exemption under the Act.
4. Resale of the Redeemable Convertible Note, the Shares or the Redeemable
Warrant (or the Shares underlying the Redeemable Warrant). The Purchaser shall
not resell or otherwise transfer either the Redeemable Convertible Note, the
Shares or the Redeemable Warrant (or the Shares underlying the Redeemable
Warrant) unless (i) there are effective registrations under the Act, pursuant to
Regulation S or pursuant to another exemption under the Act and (ii) if
requested by the Company, or its successor, the Purchaser delivers to the
<PAGE>
<PAGE>
3
Company an opinion of counsel, in form and substance satisfactory to counsel for
the Company, to the effect that such sale is in conformance with the
registration requirements of the Act, pursuant to Regulation S or pursuant to
another exemption under the Act.
5. Legend on Share Certificates. The certificates evidencing the Shares
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A LETTER AGREEMENT, DATED AS OF MAY __, 1996 BETWEEN
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND NOAH SHAFFER, 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 AND SECRETARY OF AMERICAN CRAFT BREWING INTERNATIONAL
LIMITED.
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THESE SHARES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT 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."
6. Representations and Warranties. The Purchaser hereby represents and
warrants to, and expressly agrees with, the Company that:
(a) he is not a U.S. person (as defined in Regulation S) and is not
acquiring the Redeemable Convertible Note, the Shares or the Redeemable
Warrant (or the Shares underlying the Redeemable Warrant) for the account
or benefit of any U.S. person;
(b) the Redeemable Convertible Note, the Shares and the Redeemable
Warrant (and the Shares underlying the Redeemable Warrant) will be acquired
by him for his own account, for investment purposes only, and not with a
view to the resale or distribution thereof, unless there are effective
registrations under the Act, pursuant to Regulation S or pursuant to
another exemption under the Act;
(c) he is not, and does not intend to become, a "distributor" (as
defined in Regulation S) of the Redeemable Convertible Note, the Shares or
the Redeemable Warrant (or the Shares underlying the Redeemable Warrant)
provided that if he does become a distributor, he shall promptly notify the
Company, or its successor, and he shall comply with all applicable
requirements of Regulation S;
(d) he is an "accredited investor" (as defined in Regulation D
promulgated under the Act);
<PAGE>
<PAGE>
4
(e) he is a sophisticated investor with such knowledge and experience
in business and financial matters as will enable him to evaluate the merits
and risks of an investment in the Company; and
(f) he understands that the Redeemable Convertible Note, the Shares
and the Redeemable Warrant (and the Shares underlying the Redeemable
Warrant), have not been, and will not be, registered under the Act or any
U.S. state securities laws, and are being offered and sold in reliance upon
U.S. federal and state exemptions and the Purchaser recognizes that
reliance upon such exemptions is based in part upon his representations
contained herein.
7. Understanding Among the Parties. The determination of the Purchaser to
enter into this Agreement and to purchase the Redeemable Convertible Note, the
Shares and the Redeemable Warrant (and the Shares underlying the Redeemable
Warrant) has been made by the Purchaser independently of the Company and its
subsidiaries and their respective representatives, agents and employees and
independently of any statement or opinion as to the advisability of executing
this Agreement or as to the properties, business, prospects or conditions
(financial or otherwise) of the Company, which may have been made or given by
the Company or any of its subsidiaries or their respective representatives,
agents or employees. The Purchaser further acknowledges and agrees that he will
acquire the Redeemable Convertible Note, the Shares and the Redeemable Warrant
(and the Shares underlying the Redeemable Warrant) "as is," without any express
or implied representations or warranties.
8. Modification or Waiver in Writing. This Agreement shall not be modified
or amended except by a writing signed by both of the parties hereto. No waiver
of this Agreement or of any promises, obligations or conditions contained herein
shall be valid unless in writing and signed by the party against whom said
waiver is to be enforced and any party hereto that shall be adversely affected
by said waiver. No delay on the part of any person in exercising any right,
remedy or power hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any person of such right, remedy or power, nor any single
or partial exercise of any such right, remedy or power, preclude any further
exercise thereof or the exercise of any other right, remedy or power.
9. Survival. All representations, warranties, covenants and agreements
shall survive the execution and delivery of this Agreement, the Redeemable
Convertible Note and the Redeemable Warrant and the consummation of the
transactions contemplated hereby and thereby, regardless of any investigation
made by any party hereto or on behalf of such party.
10. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their affiliates and their respective
predecessors, successors, assigns, heirs, executives, administrators and
personal representatives, and each of them, whether so expressed or not. This
Agreement is not assignable by the Purchaser, and any attempted assignment of
this Agreement without the prior written consent of the Company, or its
successor, and any attempted assignment of this Agreement, without such prior
written consent, shall be void. This Agreement shall inure to the benefit of and
constitute an obligation of any successor to the Company's business.
<PAGE>
<PAGE>
5
11. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law, rule or regulation in any jurisdiction,
such provision will be ineffective only to the extent of such invalidity,
illegality or unenforceability in such jurisdiction, without invalidating the
remainder of this Agreement in such jurisdiction or any provision hereof in any
other jurisdiction.
12. Entire Agreement. This Agreement embodies the complete agreement and
understanding among the parties with respect to the subject matter hereof and
supersedes any prior understandings, agreements or representations, written or
oral, which may have related to the subject matter hereof in any way.
13. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be an original and both of which shall constitute one and the
same instrument when a counterpart hereof has been signed by both parties
hereto.
14. Governing Law. This Agreement, the Redeemable Convertible Note and the
Redeemable Warrant shall be governed by the laws 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.
15. Headings. The section headings in this Agreement are for convenience of
reference only and shall in no event affect the meaning or interpretation of
this Agreement.
If the terms of this Agreement have been correctly set forth herein, please
confirm this by signing and returning to us the enclosed copy of this Agreement.
Very truly yours,
AMERICAN CRAFT BREWING
HOLDINGS LIMITED
by
-----------------------------------
David K. Haines
Managing Director for Hong Kong
Agreed to and accepted this
_____________ day of May 1996.
- ---------------------------
<PAGE>
<PAGE>
American Craft Brewing International Limited
Unit A1, 1/F Vita Tower
29 Wong Chuk Hang
Aberdeen, Hong Kong
May __, 1996
Long Term Partners, Ltd.
- ------------------------
- ------------------------
(Address)
- ------------------------
- ------------------------
Dear Sir:
American Craft Brewing International Limited, a British Virgin Islands
company (the "Company"), or its successor, hereby agrees to issue and sell, and
Long Term Partners, Ltd. (the "Purchaser"), hereby agrees to purchase (the
"Issuance and Sale") US$120,000 principal amount (the "Principal Amount") of a
Redeemable Convertible Note. "Redeemable Convertible Note" shall mean a note
issued by the Company or its successor in the form attached hereto as Exhibit A
with the following terms: interest on the Redeemable Convertible Note shall
accrue at the rate of 12% per annum; provided, that if the Company, or its
successor, does not consummate an initial public offering of its shares of
capital stock, par value US$0.01 per share (the "Shares"), in the United States
(the "IPO") prior to September 1, 1996, interest on the Redeemable Convertible
Note shall accrue at the rate of 14% per annum for the period from but excluding
September 1, 1996 to but including September 1, 1997 (the "Conversion Date");
provided further that if the IPO is not consummated prior to the Conversion
Date, the Purchaser shall have the right to convert the Redeemable Convertible
Note into that number of Shares so that immediately after such conversion the
Purchaser shall hold 3% of the issued and outstanding Shares. Upon the date of
the consummation of the IPO (the "Closing Date"), the Company or its successor
shall issue that number of Shares equal to the quotient obtained by dividing the
Principal Amount by the price per Share of the price to the public in the IPO.
In addition, upon
<PAGE>
<PAGE>
2
the Closing Date, the Company or its successor shall issue to the Purchaser a
redeemable warrant (the "Redeemable Warrant"), in the form attached to the
Convertable Note as Exhibit A, entitling the Purchaser to purchase up to the
number of Shares issued to it in accordance with the immediately preceding
sentence at a price per Share equal to the product of 1.5 and the IPO Price on
one or more occasions during the period commencing thirteen months (the
"Commencement Date") from the date of the prospectus relating to the IPO (the
"Effective Date") and terminating on the fifth anniversary of the Commencement
Date. Commencing 18 months after the Effective Date, the Company or its
successor shall be entitled to redeem the Redeemable Warrant at a price equal to
the product of the number of Shares into which the Redeemable Warrant is
convertable and US$0.10 on 30 days prior written notice to the holder of the
Redeemable Warrant if the per Share closing bid quotation on the Nasdaq SmallCap
Market equals or exceeds 160% of the IPO Price for any 20 trading days within a
period of 30 consecutive trading days, ending on the fifth trading day prior to
the notice of redemption. The Redeemable Convertible Note shall mature on the
earlier of the Closing Date and the Conversion Date and shall be redeemable by
the Company or its successor at any time.
2. Lock-Up Agreement. The Purchaser agrees that, for a period of six months
following the effective date of the Company's or its successor's registration
statement on Form S-1 relating to the IPO, he will not, without the prior
written consent of the Company, or its successor, and the representative of the
underwriter(s) of the IPO, directly or indirectly, issue, offer, agree to offer
to sell, sell, grant an option for the purchase or sale of, transfer, pledge,
assign, hypothecate, distribute or otherwise encumber or dispose of the
Redeemable Convertible Note, the Shares or the Redeemable Warrant (or the Shares
underlying the Redeemable Warrant) or options, rights, warrants or other
securities convertible into exchangeable or exercisable for or evidencing any
right to purchase or subscribe for the Redeemable Convertible Note, the Shares
or the Redeemable Warrant (or the Shares underlying the Redeemable Warrant)
(whether or not beneficially owned), or any beneficial interest therein, other
than (i) Shares 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.
3. Registration and Transfer of the Redeemable Convertible Note, the Shares
or the Redeemable Warrant (or the Shares underlying the Redeemable Warrant). The
Company shall not register any transfer of the Redeemable Convertible Note, the
Shares or the Redeemable Warrant (or the Shares underlying the Redeemable
Warrant) unless there are effective registrations under the Securities Act of
1933 (the "Act"), pursuant to Regulation S promulgated under the Act
("Regulation S") or pursuant to another exemption under the Act.
4. Resale of the Redeemable Convertible Note, the Shares or the Redeemable
Warrant (or the Shares underlying the Redeemable Warrant). The Purchaser shall
not resell or otherwise transfer either the Redeemable Convertible Note, the
Shares or the Redeemable Warrant (or the Shares underlying the Redeemable
Warrant) unless (i) there are effective registrations under the Act, pursuant to
Regulation S or pursuant to another exemption under the Act and (ii) if
requested by the Company, or its successor, the Purchaser delivers to the
Company an opinion of counsel, in form and substance satisfactory to counsel for
the Company,
<PAGE>
<PAGE>
3
to the effect that such sale is in conformance with the registration
requirements of the Act, pursuant to Regulation S or pursuant to another
exemption under the Act.
5. Legend on Share Certificates. The certificates evidencing the Shares
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A LETTER AGREEMENT, DATED AS OF MAY __, 1996 BETWEEN
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND LONG TERM PARTNERS,
LTD., 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 AND SECRETARY OF AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED.
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THESE SHARES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT 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."
6. Representations and Warranties. The Purchaser hereby represents and
warrants to, and expressly agrees with, the Company that:
(a) he is not a U.S. person (as defined in Regulation S) and is not
acquiring the Redeemable Convertible Note, the Shares or the Redeemable
Warrant (or the Shares underlying the Redeemable Warrant) for the account
or benefit of any U.S. person;
(b) the Redeemable Convertible Note, the Shares and the Redeemable
Warrant (and the Shares underlying the Redeemable Warrant) will be acquired
by him for his own account, for investment purposes only, and not with a
view to the resale or distribution thereof, unless there are effective
registrations under the Act, pursuant to Regulation S or pursuant to
another exemption under the Act;
(c) he is not, and does not intend to become, a "distributor" (as
defined in Regulation S) of the Redeemable Convertible Note, the Shares or
the Redeemable Warrant (or the Shares underlying the Redeemable Warrant)
provided that if he does become a distributor, he shall promptly notify the
Company, or its successor, and he shall comply with all applicable
requirements of Regulation S;
(d) he is an "accredited investor" (as defined in Regulation D
promulgated under the Act);
<PAGE>
<PAGE>
4
(e) he is a sophisticated investor with such knowledge and experience
in business and financial matters as will enable him to evaluate the merits
and risks of an investment in the Company; and
(f) he understands that the Redeemable Convertible Note, the Shares
and the Redeemable Warrant (and the Shares underlying the Redeemable
Warrant), have not been, and will not be, registered under the Act or any
U.S. state securities laws, and are being offered and sold in reliance upon
U.S. federal and state exemptions and the Purchaser recognizes that
reliance upon such exemptions is based in part upon his representations
contained herein.
7. Understanding Among the Parties. The determination of the Purchaser to
enter into this Agreement and to purchase the Redeemable Convertible Note, the
Shares and the Redeemable Warrant (and the Shares underlying the Redeemable
Warrant) has been made by the Purchaser independently of the Company and its
subsidiaries and their respective representatives, agents and employees and
independently of any statement or opinion as to the advisability of executing
this Agreement or as to the properties, business, prospects or conditions
(financial or otherwise) of the Company, which may have been made or given by
the Company or any of its subsidiaries or their respective representatives,
agents or employees. The Purchaser further acknowledges and agrees that he will
acquire the Redeemable Convertible Note, the Shares and the Redeemable Warrant
(and the Shares underlying the Redeemable Warrant) "as is," without any express
or implied representations or warranties.
8. Modification or Waiver in Writing. This Agreement shall not be modified
or amended except by a writing signed by both of the parties hereto. No waiver
of this Agreement or of any promises, obligations or conditions contained herein
shall be valid unless in writing and signed by the party against whom said
waiver is to be enforced and any party hereto that shall be adversely affected
by said waiver. No delay on the part of any person in exercising any right,
remedy or power hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any person of such right, remedy or power, nor any single
or partial exercise of any such right, remedy or power, preclude any further
exercise thereof or the exercise of any other right, remedy or power.
9. Survival. All representations, warranties, covenants and agreements
shall survive the execution and delivery of this Agreement, the Redeemable
Convertible Note and the Redeemable Warrant and the consummation of the
transactions contemplated hereby and thereby, regardless of any investigation
made by any party hereto or on behalf of such party.
10. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their affiliates and their respective
predecessors, successors, assigns, heirs, executives, administrators and
personal representatives, and each of them, whether so expressed or not. This
Agreement is not assignable by the Purchaser, and any attempted assignment of
this Agreement without the prior written consent of the Company, or its
successor, and any attempted assignment of this Agreement, without such prior
written consent, shall be void. This Agreement shall inure to the benefit of and
constitute an obligation of any successor to the Company's business.
<PAGE>
<PAGE>
5
11. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law, rule or regulation in any jurisdiction,
such provision will be ineffective only to the extent of such invalidity,
illegality or unenforceability in such jurisdiction, without invalidating the
remainder of this Agreement in such jurisdiction or any provision hereof in any
other jurisdiction.
12. Entire Agreement. This Agreement embodies the complete agreement and
understanding among the parties with respect to the subject matter hereof and
supersedes any prior understandings, agreements or representations, written or
oral, which may have related to the subject matter hereof in any way.
13. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be an original and both of which shall constitute one and the
same instrument when a counterpart hereof has been signed by both parties
hereto.
14. Governing Law. This Agreement, the Redeemable Convertible Note and the
Redeemable Warrant shall be governed by the laws 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.
15. Headings. The section headings in this Agreement are for convenience of
reference only and shall in no event affect the meaning or interpretation of
this Agreement.
If the terms of this Agreement have been correctly set forth herein, please
confirm this by signing and returning to us the enclosed copy of this Agreement.
Very truly yours,
AMERICAN CRAFT BREWING
HOLDINGS LIMITED
by
-------------------------------
David K. Haines
Managing Director for Hong Kong
Agreed to and accepted this
_____________ day of May 1996.
- ---------------------------
<PAGE>
<PAGE>
ARTHUR
ANDERSEN
__________________________________
Arthur Andersen & Co.
Certified Public Accountants
__________________________________
25/F., Wing On Centre
111 Connaught Road Central
Hong Kong
852 2852 0222
June 14, 1996 852 2815 0548 Fax
Direct Fax:
The Directors
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,
Arthur Andersen & Co.
<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 January 31, 1996 and the related
consolidated statements of operations, cash flows and changes in shareholders'
equity for the year ended October 31, 1995 and the three months ended January
31, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> OCT-31-1995 JAN-31-1996
<PERIOD-START> NOV-01-1994 NOV-01-1995
<PERIOD-END> OCT-31-1995 JAN-31-1996
<CASH> 102,248 71,533
<SECURITIES> 0 0
<RECEIVABLES> 22,236 41,147
<ALLOWANCES> 556 1,032
<INVENTORY> 22,922 35,378
<CURRENT-ASSETS> 147,241 150,534
<PP&E> 656,764 689,724
<DEPRECIATION> 21,997 36,458
<TOTAL-ASSETS> 866,278 885,146
<CURRENT-LIABILITIES> 251,216 249,754
<BONDS> 552,005 549,437
<COMMON> 645 645
0 0
0 0
<OTHER-SE> 188,696 211,168
<TOTAL-LIABILITY-AND-EQUITY> 866,278 885,146
<SALES> 63,707 124,544
<TOTAL-REVENUES> 63,707 124,544
<CGS> 55,266 22,599
<TOTAL-COSTS> 631,848 112,409
<OTHER-EXPENSES> 23,304 13,604
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 21,039 13,225
<INCOME-PRETAX> (288,244) (463)
<INCOME-TAX> (47,560) (76)
<INCOME-CONTINUING> (240,684) (387)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (240,684) (387)
<EPS-PRIMARY> (.12)<F1> (0)<F1>
<EPS-DILUTED> (.11)<F2> (0)<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>
</TABLE>
