<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1996
REGISTRATION NO. 333-6033
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO THE
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
BERMUDA 2082 72-1323940
(JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
CT CORPORATION SYSTEM 1 GALLERIA BOULEVARD (SUITE 912)
1633 BROADWAY METAIRIE, LOUISIANA 70001
NEW YORK, NEW YORK 10019 (504) 849-2739
(212) 664-1666 (ADDRESS, INCLUDING ZIP CODE, AND
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
AGENT FOR SERVICE)
</TABLE>
------------------------
<TABLE>
<S> <C> <C>
LAWRENCE A. DARBY, III, ESQ. COPIES TO: LAWRENCE B. FISHER, ESQ.
HOWARD, DARBY & LEVIN ORRICK, HERRINGTON & SUTCLIFFE
1330 AVENUE OF THE AMERICAS 666 FIFTH AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10103
(212) 841-1000 (212) 506-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the 'Securities Act') check the following box: [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
----------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page of Outside Front Cover Page
Prospectus...........................................................
2. Inside Front and Outside Back Cover Pages of Prospectus................ Inside Front and Outside Back Cover
Pages
3. Summary Information, Risk Factors and Ratio of Earnings to Fixed 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 AUGUST 23, 1996
PROSPECTUS
[LOGO]
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
1,333,333 SHARES OF COMMON STOCK AND
1,333,333 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to an offering (the 'Offering') of 1,333,333 shares
(the 'Shares') of common stock, par value US$0.01 per share ('Common Stock'),
and 1,333,333 Redeemable Common Stock Purchase Warrants (the 'Warrants') of
American Craft Brewing International Limited, a Bermuda corporation (the
'Company' or 'AmBrew International'). The Shares and Warrants are sometimes
hereinafter collectively referred to as the 'Securities.' The Shares and
Warrants may be purchased separately and will be transferable separately
immediately following completion of this Offering. Each Warrant entitles the
registered holder thereof to purchase one share of Common Stock at an exercise
price of $ [125% of the initial public offering price] per share at any
time during the period commencing six months from the date of this Prospectus
and terminating five (5) years from the date of this Prospectus. The Warrant
exercise price is subject to adjustment under certain circumstances. Commencing
eighteen (18) months after the date of this Prospectus, the Company may redeem
all, but not less than all, of the Warrants at $0.10 per Warrant on thirty (30)
days' prior written notice to the warrantholders, if the per share closing bid
quotation of the Common Stock as reported on the Nasdaq SmallCap Market
('Nasdaq') equals or exceeds 300% of the initial public offering price per Share
for any twenty (20) trading days within a period of thirty (30) consecutive
trading days ending on the fifth trading day prior to the notice of redemption.
The Warrants will be exercisable until the close of business on the day
immediately preceding the date fixed for redemption. See 'Description of
Securities -- Warrants.'
Prior to this Offering, there has been no public market for the Common Stock
or the Warrants, and there can be no assurance that such a market will develop
after the consummation of this Offering or, if developed, that it will be
sustained. It is currently anticipated that the initial public offering prices
will be between US$5.00 and US$6.00 per Share and US$0.10 per Warrant. For
information regarding the factors considered in determining the initial public
offering prices of the Shares and Warrants and the terms of the Warrants, see
'Risk Factors' and 'Underwriting.' It is anticipated that upon consummation of
this Offering, the Shares and Warrants will be included for quotation on Nasdaq
and listing on the Boston Stock Exchange (the 'BSE') and will trade separately
immediately after the Offering under the symbols 'ABRE' and 'ABREW' on Nasdaq,
and 'BRW' and 'BRWW' on the BSE, respectively.
THESE ARE SPECULATIVE SECURITIES. THE SECURITIES OFFERED
HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE 'RISK FACTORS'
COMMENCING ON PAGE 8 AND 'DILUTION.'
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[CAPTION]
<TABLE>
PRICE TO PUBLIC UNDERWRITING DISCOUNT(1) PROCEEDS TO COMPANY(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................. $ $ $
Per Warrant............................... $0.10 $ $
Total(3).................................. $ $ $
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include additional compensation to National Securities Corporation,
the representative of the several Underwriters (the 'Representative'), in
the form of (i) a non-accountable expense allowance of 3% of the gross
proceeds of this Offering, (ii) warrants (the 'Representative's Warrants')
to purchase up to 133,333 shares of Common Stock at an exercise price of $
per share [125% of the initial public offering price] and/or up to 133,333
warrants to purchase Common Stock at an exercise price of US$0.125 per
warrant. In addition, see 'Underwriting' for information concerning
indemnification and contribution arrangements with the Underwriters and
other compensation payable to the Representative.
(2) Before deducting estimated expenses of $625,000 payable by the Company,
excluding the non-accountable expense allowance payable to the
Representative.
(3) The Company has granted to the Underwriters an option exercisable within 45
days after the date of this Prospectus to purchase up to an aggregate of
200,000 additional shares of Common Stock and/or 200,000 additional Warrants
upon the same terms and conditions as set forth above, solely to cover
over-allotments, if any (the 'Over-allotment Option'). If such
Over-allotment Option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See 'Underwriting.'
The Securities are being offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, and subject to
approval of certain legal matters by their counsel and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
this Offering and to reject any order in whole or in part. It is expected that
delivery of the Securities offered hereby will be made against payment at the
offices of National Securities Corporation, Seattle, Washington on or about
, 1996.
NATIONAL SECURITIES CORPORATION
The date of this Prospectus is , 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
[Inside front and outside back cover pages of Prospectus contain two labeled
advertisements used by the Company, one picture of the Company's South China
Brewery and one picture of the Company's products and raw materials used therein
accompanied by the following text: 'AT LAST...Hong Kong has its own Independent
Micro-Brewery. South China Brewery is proud to introduce its Flagship Beer,
CROOKED ISLAND ALE, a light, golden ale with a fresh clean nose and crisp
finish. The ale is hand-crafted in small batches in Hong Kong with pale malted
barley from Great Britain and hops from the United States.']
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
SEE PAGES 6, 11 AND 12 FOR DISCUSSION OF THE RISKS ASSOCIATED WITH THE
COMPANY'S INCORPORATION IN BERMUDA, THE LOCATION OF ASSETS IN FOREIGN
JURISDICTIONS AND THE DIFFICULTIES ASSOCIATED WITH SERVICE OF PROCESS AND OTHER
MATTERS.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Consolidated Financial Statements of American Craft
Brewing International Limited, which include the results of operations of the
South China Brewing Company Limited, a Hong Kong company ('South China'), and
SCBC Distribution Company Limited, a Hong Kong company ('SCBC,' and collectively
with South China, the 'South China Brewery'), and Notes thereto included
elsewhere in this Prospectus. Except as set forth in the Consolidated Financial
Statements and unless otherwise indicated in this Prospectus, all information in
this Prospectus reflects, effective prior to the date of this Prospectus, (i)
the exchange (the 'Share Exchange'), of substantially all of the issued and
outstanding shares of capital stock of South China and SCBC, by the stockholders
thereof for 23,750 shares of capital stock of American Craft Brewing
International Limited, a British Virgin Islands company ('Craft'), (ii) the
issuance of 1,250 shares of capital stock of Craft to certain investors in Hong
Kong (the 'Hong Kong Placement'), (iii) the eighty-for-one stock split by Craft
(the 'Share Split') and (iv) the amalgamation of Craft into the Company (the
'Merger', and together with the Share Exchange, the Hong Kong Placement and the
Share Split, the 'Reorganization'). The information in this Prospectus also
assumes that none of the Over-allotment Option, the Warrants or the
Representative's Warrants will be exercised. See 'The Company' and Note 16 of
Notes to the Consolidated Financial Statements. Unless otherwise required by the
context, the terms 'AmBrew International' and the 'Company' refer to American
Craft Brewing International Limited and its subsidiaries. All references in this
Prospectus to '$' shall mean United States dollars.
The Securities offered hereby involve a high degree of risk and immediate
substantial dilution. See 'Risk Factors' and 'Dilution.'
THE COMPANY
AmBrew International owns and operates the South China Brewery, the first
in a series of international breweries based on the concept of American-style
micro-breweries. The South China Brewery, the first American-style micro-brewery
in Hong Kong, produces fresh, high-quality, preservative-free, hand-crafted
beers using state-of-the-art American-manufactured brewing equipment.
Hand-crafted beers are distinguishable by their full flavor which results from
traditional brewing styles. The Company believes that American-style
micro-brewing has growth potential in other key world markets and that the South
China Brewery is a model that can be adapted to other markets.
The American-style micro-brewery concept has developed over the past ten
years into the fastest growing segment of the American beer industry.
American-style micro-breweries produce less than 15,000 barrels per year of
hand-crafted beers in a variety of styles. The Company believes that the growing
demand for micro-brewed beers in the United States is part of a broader shift in
preferences on the part of a certain segment of consumers away from
mass-produced products and toward high-quality, distinctive foods and beverages.
While craft beers currently account for less than 2% of total United States beer
consumption, sales volume of these beers grew by 50% in 1995 and had an annual
growth rate of approximately 47% during the period from 1985 through 1994.
AmBrew International believes that the demand for craft beers is not limited to
the United States and is committed to the production of a variety of craft beers
designed to appeal to a growing number of consumers in global markets.
The Company exported the American-style micro-brewery concept to Hong Kong
with the establishment of the South China Brewery in June 1995. With only one
head brewer and six other employees, the South China Brewery produces,
distributes and markets two full-flavored beers marketed under South China's own
brand names, Crooked Island Ale and Dragon's Back India Pale Ale, and custom
produces beers for local Hong Kong establishments in accordance with their
individual specifications to market under their own labels. One of these
custom-produced beers, Delaney's Ale, won a Gold Award at the Association of
Brewers' World Beer Cup in June 1996. The South China Brewery is designed to
permit small and economical production runs of differentiated products to meet
special tastes or other custom requirements and for sale in niche markets.
Increased consumer demand for high quality, full-flavored beers has allowed the
South China Brewery to achieve a price premium
3
<PAGE>
<PAGE>
relative to mass-produced domestic beer producers and to set its prices at the
upper end of the premium import market.
The Company's senior management and Board of Directors have extensive
experience in the international beverage alcohol industry. The Company expects
to utilize this experience to identify new markets receptive to the
American-style micro-brewery concept and to seek out strategic local partners to
co-invest in new micro-breweries in such markets. The Company plans to establish
and operate, either through wholly-owned subsidiaries or through majority-owned
joint venture arrangements with strategic local partners, a series of
micro-breweries similar in concept to the South China Brewery. The Company
expects that these partners will use their knowledge of local regulation and
markets to facilitate the establishment and acceptance of the Company's
micro-breweries and their products. In pursuing its expansion strategy, the
Company will move into both markets dominated by mass-market breweries and
markets in which high-quality beer producers will be the Company's primary
competition. In markets where mass-produced beers are sold to a broad consumer
profile, AmBrew International intends to develop craft beers as locally produced
premium product alternatives. In markets in which there are already a number of
traditional high-quality beer producers, the Company intends to produce
distinctive micro-brewed products for niche market segments. The Company has
preliminarily identified seven locations in which it is considering establishing
breweries by the end of 1997, subject to more extensive feasibility studies:
Zurich, Dublin, Shanghai, Tecate (Mexico), Budapest, Singapore and Warsaw.
The Company expects to achieve greater economies of scale as it expands.
For example, the Company intends to enter into a contract with Micro Brew
Systems Company, Limited ('Micro Brew Systems') which supplied the equipment for
the South China Brewery, or another comparable provider of state-of-the-art
brewing equipment, to purchase, at discounted prices, the necessary brewing
equipment for its proposed new breweries. In addition, the Company believes that
it can benefit from volume discounts on purchases of equipment and ingredients.
Based on the growth of its South China Brewery to date, the Company believes it
is well-positioned to establish similar American-style micro-breweries in other
markets.
4
<PAGE>
<PAGE>
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
AND IMMEDIATE DILUTION TO NEW INVESTORS. SEE 'RISK FACTORS' AND 'DILUTION.'
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.................................... 1,333,333 Shares and 1,333,333 Warrants. Each Warrant
entitles the registered holder thereof to purchase one
share of Common Stock. The Shares and the Warrants may be
purchased separately and will be transferable separately
immediately following completion of this Offering. See
'Description of Securities' and 'Underwriting.'
Offering Price........................................ $[ ] per Share and $[ ] per Warrant
Common Stock Outstanding:
Prior to the Offering(1)......................... 2,000,000 shares of Common Stock
After the Offering(2)............................ 3,446,060 shares of Common Stock
Warrant Exercise Price................................ $ per Share [125% of the initial public offering
price per Share], subject to adjustment in certain
circumstances. See 'Description of Securities --
Warrants.'
Warrant Exercise Period............................... The period commencing six months after the date of this
Prospectus and terminating five years from the date of
this Prospectus.
Redemption............................................ Commencing 18 months after the date of this Prospectus,
the Company may redeem all, but not less than all, of the
Warrants at a price of $0.10 per Warrant, on not less
than 30 days' prior written notice to current holders, if
the per Share closing bid quotation as reported on Nasdaq
equals or exceeds $ per Share [300% of the initial
public offering price per Share] for any twenty (20)
trading days within a period of thirty (30) consecutive
trading days ending on the fifth trading day prior to the
date on which the Company gives notice of redemption. The
Warrants will be exercisable until the close of business
on the day immediately preceding the date fixed for
redemption in such notice. See 'Description of
Securities -- Warrants.'
Use of Proceeds....................................... To repay up to $637,000 in debt; for capital expenditures
of approximately $5 million relating to the establishment
of proposed expansion breweries, including $2.8 million
for the purchase of micro-brewing equipment; and for
working capital and general corporate purposes. See 'Use
of Proceeds,' 'Business -- Proposed Expansion Markets'
and 'Certain Transactions.'
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Proposed Nasdaq Symbols............................... Shares -- 'ABRE'
Warrants -- 'ABREW'
Proposed BSE Symbols.................................. Shares -- 'BRW'
Warrants -- 'BRWW'
</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 112,727 shares of Common Stock upon the
consummation of this Offering assuming an initial public offering price per
Share of $5.50 pursuant to the terms of the 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 112,727 shares
of Common Stock reserved for future issuance pursuant to the Bridge Warrants
assuming an initial public offering price per Share of $5.50. See 'Certain
Transactions.'
------------------------
THE COMPANY IS ORGANIZED UNDER THE LAWS OF THE ISLANDS OF BERMUDA. CERTAIN
OF THE COMPANY'S DIRECTORS, OFFICERS AND CONTROLLING PERSONS, AS WELL AS CERTAIN
OF THE EXPERTS NAMED IN THIS PROSPECTUS, RESIDE OUTSIDE THE UNITED STATES. ALL
OR A SUBSTANTIAL PORTION OF THEIR ASSETS AND THE ASSETS OF THE COMPANY ARE
LOCATED OUTSIDE THE UNITED STATES. AS A RESULT, IT MAY NOT BE POSSIBLE FOR
INVESTORS TO EFFECT SERVICE OF PROCESS WITHIN THE UNITED STATES UPON SUCH
PERSONS OR TO ENFORCE JUDGMENTS AGAINST THE COMPANY OR SUCH PERSONS OBTAINED IN
UNITED STATES COURTS PREDICATED UPON THE CIVIL LIABILITY PROVISIONS OF THE
FEDERAL OR STATE SECURITIES LAWS OF THE UNITED STATES. THE COMPANY HAS BEEN
ADVISED BY APPLEBY, SPURLING & KEMPE, BERMUDA COUNSEL TO THE COMPANY, THAT THE
ENFORCEMENT OF JUDGMENTS OF UNITED STATES COURTS OBTAINED IN ACTIONS AGAINST THE
COMPANY OR SUCH PERSONS PREDICATED UPON THE CIVIL LIABILITY PROVISIONS OF THE
FEDERAL OR STATE SECURITIES LAWS AND THE ENFORCEABILITY, IN ORIGINAL ACTIONS, OF
LIABILITIES AGAINST THE COMPANY OR SUCH PERSONS PREDICATED SOLELY UPON THE
FEDERAL OR STATE SECURITIES LAWS OF THE UNITED STATES WOULD REQUIRE THE
COMMENCEMENT OF A SEPARATE ACTION IN THE BERMUDA COURTS. THERE IS UNCERTAINTY AS
TO WHETHER THE COURTS OF BERMUDA WOULD (I) ENFORCE JUDGEMENTS OF UNITED STATES
COURTS OBTAINED AGAINST THE COMPANY OR SUCH PERSONS PREDICATED UPON THE CIVIL
LIABILITY PROVISIONS OF THE FEDERAL SECURITIES LAWS OF THE UNITED STATES OR (II)
ENTERTAIN ORIGINAL ACTIONS BROUGHT IN BERMUDA COURTS AGAINST THE COMPANY OR SUCH
PERSONS PREDICATED UPON THE FEDERAL SECURITIES LAWS OF THE UNITED STATES. THE
COMPANY HAS IRREVOCABLY APPOINTED CT CORPORATION SYSTEM, 1633 BROADWAY, NEW
YORK, NEW YORK 10019, AS ITS AUTHORIZED AGENT TO RECEIVE SERVICE OF PROCESS IN
ANY LEGAL ACTION OR PROCEEDING AGAINST IT BASED UPON THE FEDERAL OR STATE
SECURITIES LAWS OF THE UNITED STATES AND/OR ARISING OUT OF OR RELATING TO THIS
OFFERING, AND WILL IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK, NEW YORK.
6
<PAGE>
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents summary consolidated financial data of the
Company. For a description of the Consolidated Financial Statements from which
the following financial data have been derived, see the introduction to
'Selected Consolidated Financial Data.' The summary consolidated financial data
set forth below should be read in conjunction with 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, 1995 OCTOBER 31, 1995 APRIL 30, 1996
---------------- ---------------------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $ 63,707 $ 63,707 $ 244,753
Cost of sales.......................................... (38,960) (38,960) (43,055)
---------------- ----------- ----------------
Gross profit....................................... 24,747 24,747 201,698
Selling, general and administrative expenses........... (292,888) (195,846) (207,094)
Interest expense, net.................................. (17,838) (16,059) (24,908)
Other expenses, net.................................... (2,265) (2,265) (888)
---------------- ----------- ----------------
Loss before income taxes........................... (288,244) (189,423) (31,192)
Income tax benefit..................................... 47,560 31,255 5,147
---------------- ----------- ----------------
Net loss........................................... $ (240,684) $ (158,168) $ (26,045)
Net loss per common share.............................. $ (0.12) $ (0.08) $ (0.01)
Number of shares outstanding(1)........................ 2,067,273 2,067,273 2,067,273
Pro forma net loss per common share(2)................. $ (0.13) $ -- $ (0.02)
Pro forma number of shares outstanding(2).............. 2,184,773 -- 2,184,773
<CAPTION>
APRIL 30, 1996
------------------------------------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA(3) ADJUSTED(3)(4)
---------------- ---------------------- ----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets................................... $109,382 $ 479,382 $5,713,382
Total assets........................................... $893,013 $1,263,013 $6,497,013
Total current liabilities.............................. $587,194 $ 957,194 $ 70,194
Total long-term liabilities............................ $ 24,864 $ 24,864 $ 24,864
Total liabilities...................................... $612,058 $ 982,058 $ 95,058
Total shareholders' equity............................. $280,955 $ 280,955 $6,401,955
</TABLE>
- ------------
(1) Assumes the consummation of the Reorganization and excludes (i) 300,000
shares of Common Stock reserved for future issuance pursuant to options
available for grant under the Stock Option Plan and (ii) 500,000 shares of
Common Stock reserved for future issuance pursuant to the Bridge Notes and
the Bridge Warrants. See 'Management -- Stock Option Plan,' 'Certain
Transactions' and 'Underwriting.'
(2) Pro forma net loss per common share is computed by dividing pro forma net
loss for each period by 2,184,773 which is based on the historical weighted
average number of shares outstanding plus the additional number of shares
required to be issued at the assumed net offering price of $4.40 per share
to obtain funds for the repayment of the outstanding principal amounts of
indebtedness aggregating $517,000. See Note 16 of Notes to Consolidated
Financial Statements.
(3) Gives pro forma effect to the issuance of $370,000 principal amount of
Bridge Notes. See 'Certain Transactions.'
(4) 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, (ii) the repayment of $120,000 of Bridge Notes
from the net proceeds of this Offering, (iii) the issuance to a Bridge Note
holder of 21,818 shares of Common Stock and Bridge Warrants to purchase an
equal number of shares of Common Stock at no additional cost (in accordance
with the terms of such note), (iv) the conversion of $250,000 principal
amount of Bridge Notes into 90,909 shares of Common Stock (in accordance
with the terms of such notes) and the issuance of Bridge Warrants to
purchase an equal number of shares of Common Stock, and (v) the recognition
of a non-recurring, non-cash interest expense of $265,000 for the
unamortized portion of the original issue discount relating to the repayment
of the Bridge Notes. See 'Use of Proceeds' and 'Certain Transactions.'
7
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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; Net Loss; Accumulated Deficit. Since the South
China Brewery commenced commercial operations in June 1995, investors will not
have a full fiscal year of results on which to base an investment decision. The
Company had a net loss of $240,684 for the year ended October 31, 1995 and a net
loss of $26,045 for the six months ended April 30, 1996. The Company had an
accumulated deficit of $248,460 as of October 31, 1995 and an accumulated
deficit of $274,505 as of April 30, 1996. The results of the Company for the six
months ended April 30, 1996 may not be indicative of the Company's results for
the fiscal year ended October 31, 1996. The Company's operations are subject to
all the risks inherent in an emerging business enterprise. These include, but
are not limited to, high expense levels relative to production, complications
and delays frequently encountered in connection with the development and
introduction of new products, the ability to recruit and retain accomplished
management personnel, competition from established breweries, the need to expand
production and distribution and the ability to establish and sustain product
quality. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.
No Assurance of Ability to Establish Additional Breweries. The Company's
strategy includes the development of micro-breweries in the Pacific Rim, Europe
and Mexico through wholly-owned subsidiaries or through majority-owned joint
venture arrangements. Successful expansion will require management of various
factors associated with the construction of new facilities in geographically and
politically diverse locations. Factors include site selection, local land use
requirements, obtaining governmental permits and approvals, adequacy of
municipal infrastructure, environmental uncertainties, possible cost estimation
errors or overruns, additional financing, construction delays, weather problems
and other factors, many of which are beyond the Company's control. There can be
no assurance that the Company will be successful in establishing and operating
additional breweries. See 'Business -- Proposed Expansion Markets.'
No Assurance of Ability to Finance Additional Breweries; Effect of Start-Up
Expenses. Based on current estimates, the Company believes that the net
proceeds of this Offering, after the repayment of certain debt, will be
sufficient to establish only five of seven micro-breweries the Company intends
to develop and operate by the end of 1997. The Company currently plans to
obtain, if possible, additional financing for these breweries from third
parties. The Company intends to propose to strategic local partners that they
purchase minority equity interests in certain of the proposed breweries and also
intends to utilize debt financing for these breweries if available. There is no
assurance that the Company will be successful in locating local joint venture
partners and debt financing may not be available when needed or on terms
acceptable to the Company. Moreover, such debt financing will likely contain
restrictive covenants and result in security interests being granted in the
assets of the Company and its subsidiaries. If adequate financing is not
available, the Company may be required to delay expansion beyond that funded by
the net proceeds of this Offering. The Company anticipates that salaries, other
overhead costs and capital expenditures associated with such capacity expansion
will be significant. The Company does not expect that such additional capacity,
when available, will immediately be fully utilized. As a result, the Company's
results of operations are likely to be adversely affected in future periods as
it incurs start-up expenses in connection with new facilities that are operating
below maximum capacity. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and 'Business -- Proposed Expansion
Markets.'
Brand Concentration; Development of New Brands. The sale of one brand of
beer accounted for approximately 23% of the South China Brewery's sales during
the quarter ended April 30, 1996. There can be no assurance that this brand will
achieve market acceptance or maintain its customer following. The Company
believes that its future growth will depend, in part, on its ability to
anticipate changes in consumer preferences and develop and introduce, in a
timely manner, new brands that adequately
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address such changes. There can be no assurance that the Company will be
successful in developing, introducing and marketing new brands on a timely and
regular basis. If the Company is unable to introduce new brands or if the
Company's new brands are not successful, the Company's sales may be adversely
affected as customers seek competitive products. In addition, the introduction
or announcement of new brands by the Company could result in reduction of sales
of the Company's existing brands, requiring the Company to manage carefully
product introductions in order to minimize disruption in sales of existing
beers. There can be no assurance that the introduction of new product offerings
by the Company will not cause consumers to reduce purchases or consumption of
existing Company products. Such reduction of purchases or consumption could have
a material adverse effect on the Company's business, results of operations and
financial condition. See 'Business -- Products.'
No Assurance of Market Acceptance; Unpredictable Trends in Consumer
Preferences and Spending. The products of micro-breweries are generally not
established in the consumer markets of the Pacific Rim, Europe and Mexico. No
assurance can be given that specialty beers will be accepted in the markets into
which the Company intends to expand. Changes in consumer spending can affect
both the quality and the price of the Company's products and may therefore
affect the Company's operating results. For example, reduced consumer confidence
and spending may result in reduced demand for the Company's products,
limitations on its ability to increase or maintain prices and increases in
required levels of selling, advertising and promotional expenses. Demographics
of a market area may also affect spending patterns. In addition, consumer tastes
may change over time or may vary in the markets which the Company plans to enter
and there is no assurance that the same level of sales and operating margins can
be maintained in the Company's existing market or achieved in new markets.
Similarly, there can be no assurance that the Company's products will be
successful in its existing market or will penetrate new markets. See
'Business -- Proposed Expansion Markets.'
Risk of Third Party Claims of Infringement of Intellectual Property. The
Company will rely on a combination of trade secret, copyright and trademark
laws, non-disclosure and other arrangements to protect its proprietary rights.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy or obtain and use information that the Company
regards as proprietary. There can be no assurance that the steps taken by the
Company to protect its proprietary information will prevent misappropriation of
such information and such protections may not preclude competitors from
developing confusingly similar brand names or promotional materials or
developing products with taste and other qualities similar to the Company's
beers. See 'Business -- Intellectual Property.'
No Assurance of Availability of Raw Materials. The South China Brewery
relies upon a single supplier (other than for labels) for each of the raw
materials used to make and package its beers. While the South China Brewery
believes that multiple sources of supply are available for all of its
ingredients and raw materials, if the South China Brewery were unable to obtain
adequate quantities of ingredients or other raw materials, delays or reductions
in product shipments could occur which would have an adverse effect on the South
China Brewery's business, results of operations and financial condition. As with
most agricultural products, the supply and price of raw materials used to
produce the South China Brewery's beers can be affected by factors beyond the
control of the South China Brewery, such as drought, frost, other weather
conditions, economic factors affecting growing decisions, various plant diseases
and pests. If any of the foregoing were to occur, the Company's business,
results of operations and financial condition would be adversely affected. In
addition, the Company's results of operations are dependent upon its ability to
accurately forecast its requirements of raw materials. Any failure by the
Company to accurately forecast its demand for raw materials could result in the
Company either being unable to meet higher than anticipated demand for its
products or producing excess inventory, either of which may adversely affect the
Company's business, results of operations and financial condition. See
'Business -- Brewing Operations' and ' -- Suppliers.'
Highly Competitive Market. The beer industry is intensely competitive.
While there are no other craft brewers in Hong Kong, the South China Brewery
competes directly with premium import beers as well as with mass-produced beers
marketed by a number of much larger producers. Some much larger United States
beer producers are currently marketing their beers in the United States as craft
beers. There can be no assurance that, in the future, the Company will not face
competition from mass-
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produced beer marketed internationally as craft beer. Similarly, the Company may
face competition from brewers or other investors who wish to establish
American-style micro-breweries in Hong Kong or in areas in which the Company
plans to locate proposed breweries. See 'Business -- Competition.'
Dependence on Key Personnel. Management of the Company's business is at
this time substantially dependent on the services of the Company's Chairman,
Peter W. H. Bordeaux, its Deputy Chairman, Federico G. Cabo Alvarez, its
Executive Vice President and Chief Operating Officer, James L. Ake, and its
Managing Director for Hong Kong Operations, David K. Haines. Competition for
qualified executive personnel in the beverage alcohol industry is intense and
the Company will compete with public and private organizations and other
companies for the services of such personnel. Although the Company has
employment agreements with Messrs. Ake and Haines, there can be no assurance
that they will remain with the Company. Loss of the services of Messrs.
Bordeaux, Cabo, Ake, Haines or of any other key management employee could have
an adverse effect on the Company's business. The Company does not carry key man
life insurance for any of these executives and while it is investigating the
cost and availability of purchasing such insurance, it has made no decision as
to whether to obtain it. Expansion will require recruiting and hiring additional
key employees, including sales representatives. There can be no assurance that
the Company will be able to hire such persons when needed or on favorable terms
or that any such new employees will be successfully assimilated into the
Company's management. See 'Management.'
Product Liability Risk. The Company's operations are subject to certain
hazards and liability risks faced by all brewers, such as potential
contamination of ingredients or products by bacteria or other external agents
that may be wrongfully or accidentally introduced into products or packaging.
There can be no assurance that any such contamination will not occur. The
occurrence of such a problem could result in a costly product recall and serious
damage to the Company's reputation for product quality. In addition, the
Company's products are not pasteurized and have a 90-day shelf life. The
Company's operations are also subject to certain injury and liability risks
normally associated with the operation and possible malfunction of brewing and
other equipment. Although the Company maintains insurance against certain risks
under various general liability and product liability insurance policies, there
can be no assurance that the Company's insurance will be adequate. See
'Business -- Brewing Operations,' ' -- South China Facility' and
' -- Insurance.'
Single Wholesale Production Facility and Uninsured Losses. The Company
currently utilizes one production facility for which it has obtained
comprehensive insurance, including liability, fire and extended coverage, as is
customarily obtained for businesses similar to the Company's. Certain types of
losses of a catastrophic nature, however, such as losses resulting from floods,
tornadoes, thunderstorms and earthquakes, are either uninsurable or not
economically insurable to the full extent of potential losses. No assurance can
be given that such 'Acts of God,' work stoppages, regulatory actions or other
events interrupting production would not have an adverse effect on the Company's
business, financial condition and results of operations. See
'Business -- Insurance.'
Variability of Margins and Operating Results; Seasonality. The Company
anticipates that in the future its profit margins will fluctuate and may decline
as a result of many factors, including disproportionate depreciation and other
fixed and semi-variable operating costs during periods when the Company's
breweries are producing below maximum designed production capacity; increased
shipping, sales personnel and marketing costs as the Company penetrates
additional markets; fluctuating prices; increasing competition; possible
increases in the cost of packaging materials and brewing ingredients; changes in
product sales mix; potential increases in Hong Kong excise taxes or taxes in
other jurisdictions in which the Company expands or distributes products; and
start-up, overhead and other costs resulting from establishment of new breweries
and distribution of the Company's products. In addition, the Company has
historically operated with little or no backlog, and its ability to predict
sales for an upcoming quarter is limited. Due to its reliance on Company-owned
and/or operated breweries, a significant portion of the Company's overhead will
not be susceptible to short-term adjustment in response to sales below
management's expectations, and an excess of production capacity could therefore
have a significant negative impact on the Company's operating results. A variety
of other factors may also lead to significant fluctuations in the Company's
quarterly results of operations, including timing of new brewery introductions,
seasonality of demand, and general economic conditions.
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To date, demand for the Company's products has been generally higher from
September to January and has been generally lower from May to July.
RISKS OF INTERNATIONAL OPERATIONS
The Company currently intends to establish its micro-breweries only in
locations outside the United States. Accordingly, the Company will be subject to
various political, economic and other risks present in conducting international
operations. Such risks include the following:
Hong Kong -- Transfer of Sovereignty. Substantially all the Company's
assets are currently located in Hong Kong. As a result, the Company's
business, results of operations and financial condition may be influenced
by the political situation in Hong Kong and by the general state of the
Hong Kong economy. On July 1, 1997, sovereignty over Hong Kong will be
transferred from the United Kingdom to the People's Republic of China, and
Hong Kong will become a Special Administrative Region of China (an 'SAR').
As provided in the Sino-British Joint Declaration on the Question of Hong
Kong and the Basic Law of the Hong Kong SAR of China (the 'Basic Law'), the
Hong Kong SAR will have a high degree of autonomy except in foreign and
defense affairs. Under the Basic Law, the Hong Kong SAR is to have its own
legislature, legal and judicial system and full economic autonomy for 50
years. However, there can be no assurance that the transfer of sovereignty
and changes in political or other conditions will not result in an adverse
impact on the Company's business, results of operations or financial
condition.
Risks Relating to China. The Company plans to establish a
micro-brewery in China either through a wholly-owned subsidiary or a
majority-owned joint venture and to increase direct sales in China of beer
brewed at its Hong Kong facility. As a consequence, the Company's results
of operations and financial condition may be influenced by the economic,
political, legal and social conditions in China. China is in the process of
implementing a 'socialist market economy' in which market forces are
expected to have a significant role, subject to policies and macro-economic
regulations established by the Chinese government. Economic growth in China
has been uneven among various sectors of the economy and among geographic
regions. Many of the economic reform measures which have been implemented
are experimental and may be subject to change or repeal. Other political,
economic and social factors can also lead to further readjustment of the
reform measures. There is no assurance that the current government and
economic system will remain stable. The legislative trend in China over the
past decade has been to enhance the protection afforded to foreign
investment and allow for more active control by foreign parties of foreign
invested enterprises. There can be no assurance, however, that legislation
directed towards promoting foreign investment and experimentation will
continue.
Foreign Exchange and Exchange Rate Risks. If the Company successfully
acquires interests in joint ventures or establishes new breweries located
in the Pacific Rim, Europe or Mexico, the Company expects that a
substantial portion of the revenues of such breweries, as well as revenues
generated by its South China Brewery, will be denominated in local
currency. A portion of such revenues will need to be converted to U.S.
dollars in order for the Company to pay dividends in U.S. dollars. Both the
conversion of local currencies into U.S. dollars and the remittance of
local currencies abroad, depending on the local laws where such brewery
operates, may require government approval. There can be no assurance that
the breweries will be able to obtain expatriate currency for such purposes
or that the Company will be able to convert such currency into U.S.
dollars. See 'Business -- Proposed Expansion Markets.'
Risk of Governmental Regulation. The Company's operations require and
will require various licenses, permits and approvals in Hong Kong and in
other locations. The loss or revocation of any existing licenses, permits
or approvals or the failure to obtain any necessary licenses, permits or
approvals in new jurisdictions where the Company intends to do business
would have an adverse effect on the ability of the Company to conduct its
business and/or on its ability to expand into such jurisdictions.
Authorization to commence brewing operations will be required in each
country in which the Company intends to operate breweries. No assurance can
be given that the Company will obtain such authorization, licenses or other
necessary approvals. In addition, countries in which the Company wishes to
operate breweries may have regulatory schemes that impose other
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impediments on the operation of breweries. There can be no assurance that
the Company will be able to profitably operate breweries in light of these
restrictions. See 'Business -- Government Regulation.'
Risks of Foreign Legal Systems. Many of the countries where the
Company plans to operate have legal systems that differ from the United
States legal system and may provide substantially less protection for
foreign investors.
STRUCTURAL, MARKET AND CORPORATE GOVERNANCE RISKS
Management's Broad Discretion in Use of Proceeds. Although the Company
intends to apply the net proceeds of this Offering in the manner described under
'Use of Proceeds,' it has broad discretion within such proposed uses as to the
precise allocation of the net proceeds, the timing of expenditures and all other
aspects of the use thereof. For example, approximately $5 million, or 85.2% of
the net proceeds of this Offering will be allocated and used to make capital
expenditures in connection with the establishment of certain of the Company's
proposed breweries in the Pacific Rim, Europe and Mexico. The Company reserves
the right to reallocate the net proceeds of this Offering among the various
categories set forth under 'Use of Proceeds' as it, in its sole discretion,
deems necessary or advisable.
Rights of Stockholders under Bermuda Law. The Company is incorporated
under the laws of the Islands of Bermuda. Principles of law relating to such
matters as the validity of corporate procedures, the fiduciary duties of the
Company's management, directors and controlling stockholders, and the rights of
its stockholders, including those persons who will become stockholders of the
Company in connection with this Offering, are governed by Bermuda law and the
Company's Memorandum of Amalgamation and Bye-laws. Such principles of law may
differ from those that would apply if the Company were incorporated in a
jurisdiction in the United States. In addition, the Company has been advised by
Appleby, Spurling & Kempe, its Bermuda counsel, that there is uncertainty as to
whether the courts of Bermuda would enforce (i) judgments of United States
courts obtained against the Company or its officers and directors resident in
foreign countries predicated upon the civil liability provisions of the
securities laws of the United States or any state or (ii) in original actions
brought in Bermuda, liabilities against the Company or such persons predicated
upon the securities laws of the United States or any state. See 'Description of
Securities -- Bermuda Law.'
Effect of Issuance of Preferred Stock. The Company's Bye-laws permit the
issuance of 500,000 shares of 'blank check' preferred stock, with designations,
rights and preferences that may be determined from time to time by the Board of
Directors. At the time of this Offering, none of the shares of preferred stock
will be issued and outstanding. However, the Board of Directors is empowered,
subject to the consent of the Representative for a period of thirteen (13)
months from the date of this Prospectus, to issue the preferred stock with
dividend, liquidation, conversion, voting or other rights that could adversely
affect the voting power or other rights of the holders of the Common Stock. In
addition, such charter provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Company's Common Stock
and may have the effect of delaying or preventing a change in control of the
Company. The issuance of preferred stock could also decrease the amount of
earnings and assets available for distribution to the holders of the Common
Stock. There can be no assurance that the Company will not issue preferred stock
at some time in the future. See 'Description of Securities -- Preferred Stock.'
Effect of Stock Options. In accordance with the Stock Option Plan, the
Company has reserved a total of 300,000 authorized but unissued shares of Common
Stock for issuance to executive employees and directors. The committee
administering the Stock Option Plan will have sole authority and discretion to
grant options under the Stock Option Plan. Options granted will be exercisable
during the period specified by the committee administering the Stock Option Plan
except that options will become immediately exercisable in the event of a Change
in Control (as defined in the Stock Option Plan) of the Company and in the event
of certain mergers and reorganizations of the Company. The existence of such
options could limit the price that certain investors might be willing to pay in
the future for shares of the Company's Common Stock and may have the effect of
delaying or preventing a change in control of the Company. The exercise of such
options could also decrease the amount of earnings and assets available for
distribution to the holders of the Common Stock. See 'Management -- Stock Option
Plan.'
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Shares Eligible for Future Sale. The Shares and Warrants will be freely
tradeable unless acquired by affiliates of the Company. The market price of the
Shares and/or the Warrants of the Company could be adversely affected by the
sale of substantial amounts of Common Stock in the public market following this
Offering. No prediction can be made as to the effect that future sales of Common
Stock and of the availability of the shares of Common Stock for future sale will
have on the market prices of the Shares and the Warrants prevailing from time to
time. The Company and the existing stockholders (and any holders of outstanding
securities exercisable or exchangeable for or convertible into shares of Common
Stock) have agreed not to, directly or indirectly, issue, offer, agree or offer
to sell, sell, transfer, assign, encumber, grant an option for purchase or sale
of, pledge, hypothecate or otherwise dispose of any beneficial interest in such
securities for a period of thirteen months (six months in the case of holders of
Bridge Notes) from the date of this Prospectus without the prior written consent
of the Company and the Representative other than, in the case of such
stockholders and holders of the Bridge Notes, (i) shares of Common Stock
transferred pursuant to bona fide gifts when the transferee agrees in writing to
be similarly bound or (ii) securities transferred through the law of descent,
and in the case of the Company, (a) pursuant to options existing on the date of
this Prospectus and pursuant to the exercise of the Warrants and the
Representative's Warrants or pursuant to the terms of the Bridge Notes and the
Bridge Warrants or (b) debt securities issued to non-affiliated third parties in
connection with bona fide business acquisitions and/or expansion consistent with
the Company's business plans as generally described in this Prospectus. The
registration, sale or issuance of Common Stock after that thirteen month period
(or six month period in the case of shares underlying the Bridge Notes), could
have an adverse impact on the market prices of the Shares and/or the Warrants.
Sales of substantial amounts of Common Stock or the perception that such sales
could occur could adversely affect the prevailing market prices for the Shares
and/or the Warrants. Upon expiration of this thirteen month period (or six month
period in the case of shares underlying the Bridge Notes), all such shares may
be sold subject to the limitations of, and in accordance with, Rule 144 under
the Securities Act of 1933 (the 'Securities Act'). Additional shares of Common
Stock, including shares issuable upon exercise of options issued pursuant to the
Stock Option Plan and shares underlying the Representative's Warrants, Bridge
Warrants and the Warrants will also become eligible for sale in the public
market from time to time in the future. See 'Certain Transactions,' 'Description
of Securities,' 'Shares Eligible for Future Sale' and 'Underwriting.'
Control by Existing Stockholders; Benefits of Offering to Existing
Stockholders. Following this Offering, the Company's directors, officers and
principal (greater than 5%) stockholders, and certain of their affiliates, will
beneficially own approximately 55% of the outstanding shares of Common Stock,
including 112,727 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. As a result of such ownership, these
stockholders will be able to control the election of all directors and other
actions submitted to a vote of the Company's stockholders. Certain former and
existing stockholders provided, respectively, a guarantee and letters of credit
in connection with a Promissory Note issued to Hibernia National Bank on March
31, 1995 with principal payments due on September 30, 1996 and March 31, 1997
(the 'Hibernia Note') and an existing stockholder made a direct loan to the
Company pursuant to a Limited Recourse Promissory Note issued to BPW Holding LLC
on March 5, 1996 (the 'BPW Note'). A portion of the net proceeds of this
Offering will be used to retire both the Hibernia Note and the BPW Note. In
addition, a portion of the net proceeds of this Offering will be used to retire
up to $370,000 of Bridge Notes at the consummation of this Offering. The
existing stockholders will benefit from the use of the proceeds of this
Offering. See 'Use of Proceeds,' 'Dilution,' 'Principal Stockholders' and
'Certain Transactions.'
Potential Adverse Effects of the Exercise of Warrants. The Warrants
offered hereby grant the holders the right to purchase 1,333,333 shares of
Common Stock commencing six months from the date hereof at 125% of the initial
public offering price per share of Common Stock. The Company will also grant, in
connection with this Offering, the Representative's Warrants which entitle the
Representative to purchase up to 133,333 shares of Common Stock at an exercise
price of 125% of the initial public offering price per Share and/or up to
133,333 warrants at an exercise price of $0.125 per warrant each entitling the
holder thereof to purchase one share of Common Stock at an exercise price of
165% of the initial public offering price per Share. The Representative's
Warrants may be exercised for a period of
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four years commencing on the first anniversary of the date hereof. In addition,
the Company has granted the Bridge Warrants entitling the holders thereof the
right to purchase, in the aggregate, up to that number of shares of Common Stock
equal to the sum of (i) the quotient obtained by dividing 120,000 by the initial
public offering price per Share and (ii) the quotient obtained by dividing the
principal amount of the Bridge Notes converted into shares of Common Stock upon
the consummation of this Offering by the product of 0.5 and the initial public
offering price per Share in each case commencing six months from the date hereof
at 150% of the initial public offering price per Share. Assuming an initial
public offering price per Share of $5.50, the Bridge Warrants will, in the
aggregate, entitle the holders thereof to purchase up to 112,727 shares of
Common Stock. The existence of the Warrants, the Representative's Warrants and
the Bridge Warrants may prove to be a hinderance to future financing by the
Company. In addition, the exercise of any such warrants may further dilute the
net tangible book value of the Shares. For the term of the Warrants, the
Representative's Warrants and the Bridge Warrants, the holders thereof will have
the opportunity to profit from a rise in the market price of the Common Stock
without assuming risk of ownership, with a resulting dilution in the interest of
other security holders. As long as the Warrants, the Representative's Warrants
and the Bridge Warrants remain unexercised, the Company's ability to obtain
additional equity capital might be adversely affected. Moreover, the holders may
be expected to exercise such warrants at a time when the Company would, in all
likelihood, be able to obtain any needed capital through a new offering of its
securities on terms more favorable than those provided by the currently
outstanding warrants. The Company has agreed that, under certain circumstances,
it will register under federal and state securities laws the shares of Common
Stock and warrants underlying the Representative's Warrants. These registration
obligations could involve substantial expense to the Company and may adversely
affect the terms upon which the Company may obtain additional financing. See
'Certain Transactions,' 'Description of Securities' and 'Underwriting.'
Necessity of Future Registration of Warrants and State Blue Sky
Registration; Exercise of Warrants. The Warrants are separately transferable
immediately upon issuance. Although the Warrants will not knowingly be sold to
purchasers in jurisdictions in which the Warrants are not registered or
otherwise qualified for sale or exempt, purchasers may buy Warrants in the
after-market in, or may move to, jurisdictions in which the Warrants and the
Common Stock underlying the Warrants are not so registered or qualified or
exempt. In this event, the Company would be unable lawfully to issue Common
Stock to those persons desiring to exercise their Warrants (and the Warrants
would not be exercisable by those persons) unless and until the Warrants and the
underlying Common Stock are registered, or qualified for sale in jurisdictions
in which such purchasers reside, or an exemption from such registration or
qualification requirement exists in such jurisdictions. There can be no
assurance that the Company will be able to effect any required registration or
qualification.
The Warrants will not be exercisable unless the Company maintains a current
effective registration statement under the Securities Act either by filing
post-effective amendments to the Registration Statement of which this Prospectus
is a part or by filing a new registration statement with respect to the exercise
of the Warrants. The Company has agreed to use its reasonable efforts to file
and maintain, so long as the Warrants are exercisable, a current effective
registration statement relating to the Warrants and the shares of Common Stock
underlying the Warrants. However, there can be no assurance that it will be able
to do so or that the Warrants or such underlying Common Stock will be or
continue to be so registered.
The value of the Warrants could be adversely affected if a then-current
prospectus covering the Common Stock issuable upon exercise of the Warrants is
not available pursuant to an effective registration statement or if such Common
Stock is not registered or qualified for sale or exempt from registration or
qualification in the jurisdictions in which the holders of the Warrants reside.
See 'Description of Securities -- Warrants.'
Representative's Potential Influence on the Market; Possible Limitation on
Market Making Activities. The Representative may act as a broker-dealer with
respect to the purchase or sale of the Shares and the Warrants in the market
where each will trade and may solicit exercise of the Warrants. 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
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by the Securities and Exchange Commission (the 'Commission') from Rule 10b-6
('Rule 10b-6') under the Securities Exchange Act of 1934 (the 'Exchange Act'),
the Representative and any other soliciting broker-dealers will be prohibited
from engaging in any market making activities or solicited brokerage activities
with respect to the Company's securities during periods prescribed by exemptions
(xi) and (xii) to Rule 10b-6 (i) before the solicitation of the exercise of any
Warrants until the later of the termination of such solicitation activity or the
termination of any right the Representative may have to receive commissions for
further solicitation of Warrants and (ii) during any distribution of the Common
Stock and Warrants underlying the Representative's Warrants as well as during
any other distribution of the Company's securities in which the Representative
is participating. As a result, the Representative and any other soliciting
broker-dealers and participants in any distribution of the Company's securities
may be unable to continue to make a market for the Company's securities during
certain periods while the Warrants are exercisable and during any distribution
of the Company's securities in which the Representative is participating. Such a
limitation, while in effect, could impair the liquidity and market price of the
Securities. See 'Underwriting.'
Potential Adverse Effect of Redemption of Warrants. Commencing eighteen
(18) months after the date of this Prospectus, all, but not less than all, of
the Warrants are subject to redemption at $0.10 per Warrant on thirty (30) days
prior written notice to the warrantholders if the per share closing bid
quotation of the Shares as reported on Nasdaq equals or exceeds 300% of the
initial public offering price per share of Common Stock for any twenty (20)
trading days within a period of thirty (30) consecutive trading days ending on
the fifth trading day prior to the date of the notice of redemption. If the
Warrants are redeemed, holders of the Warrants will lose their rights to
exercise after the expiration of the 30-day notice of redemption period. Upon
receipt of the notice of redemption, holders would be required to: (i) exercise
the Warrants and pay the exercise price at a time when it may be disadvantageous
for them to do so, (ii) sell the Warrants at the current market price, if any,
when they might otherwise wish to hold the Warrants, or (iii) accept the
redemption price which is likely to be substantially less than the market value
of the Warrants at the time of redemption. Warrantholders whose Warrants are
redeemed would also lose the potential for appreciation in the Common Stock
underlying the Warrants. See 'Description of Securities -- Warrants.'
Limited Underwriting History. Although National Securities Corporation,
the Representative of the several Underwriters, has been in business for over 40
years, the Representative has participated in only nine public offerings as an
underwriter in the last five years. In evaluating an investment in the Company,
prospective investors in the Securities offered hereby should consider the
Representative's limited experience. See 'Underwriting.'
No Prior Market; Possible Volatility of Stock Price. Prior to this
Offering, there has been no public market for the Securities and there can be no
assurance that an active public market for the Securities will develop or
continue after this Offering or that the market prices of the Securities will
not decline below their respective initial public offering prices. The initial
public offering prices of the Securities were determined by negotiations between
the Company and the Representative, and may not be indicative of the market
price for the Securities after this Offering. See 'Underwriting' for factors
considered in determining the initial public offering prices. From time to time
after this Offering, there may be significant volatility in the market prices of
the Securities. Quarterly operating results of the Company, announcements of new
breweries or the introduction of new products by the Company or its competitors,
developments in the Company's relationships with its suppliers, joint venture
brewing partners or distributors, regulatory developments, general market
conditions or other developments affecting the Company or its competitors could
cause the respective market prices of the Securities to fluctuate substantially.
The equity markets have, on occasion, experienced significant price and volume
fluctuations that have affected the market prices for many companies' securities
and that have often been unrelated to the operating performance of these
companies. Any such fluctuations that occur following completion of this
Offering may adversely affect the respective market prices of the Securities.
Immediate and Substantial Dilution. The purchasers of the Shares will
experience immediate and substantial dilution in pro forma, as adjusted net
tangible book value in the amount of $3.64 or 66% per Share. The Company's
current stockholders acquired shares of Common Stock for consideration that
15
<PAGE>
<PAGE>
was substantially less than the public offering price of the shares of Common
Stock offered hereby. As a result, new investors will bear substantially all of
the risks inherent in an investment in the Company. In the event that the
Company issues additional shares of Common Stock in the future, including shares
that may be issued in connection with future acquisitions, purchasers of shares
may experience further dilution in net tangible book value per share of the
Common Stock of the Company. Three hundred thousand shares of Common Stock have
been reserved for issuance upon exercise of options granted pursuant to the
Stock Option Plan, 500,000 shares of Common Stock have been reserved for future
issuance pursuant to the Bridge Notes and the Bridge Warrants and 266,666 shares
of Common Stock have been reserved for issuance pursuant to the Representative's
Warrants. The issuance of Common Stock under the Stock Option Plan or pursuant
to the Bridge Notes, the Bridge Warrants or the Representative's Warrants may
result in further dilution to new investors. Assuming an initial public offering
price per Share of $5.50, the Company could be required to issue up to 225,454
shares of Common Stock pursuant to the terms of the Bridge Notes and the Bridge
Warrants. Upon the consummation of this Offering, the Company could be required
to issue up to 112,727 shares of Common Stock assuming an initial public
offering price of $5.50 per Share for an aggregate consideration of $250,000, or
a price per share of $2.22. See 'Dilution' and 'Management -- Stock Option
Plan.'
Dividend Policy. The Company intends to retain all earnings to finance the
development and expansion of its business and does not intend to pay cash
dividends on the Common Stock in the foreseeable future. Any future declaration
of dividends will depend, among other things, on the Company's results of
operations, capital requirements and financial condition, and on such other
factors as the Company's Board of Directors may, in its discretion, consider
relevant. See 'Dividend Policy.'
No Assurance of Continued Nasdaq Listing. The Board of Governors of the
National Association of Securities Dealers, Inc. has established certain
standards for the initial listing and continued listing of a security on Nasdaq.
The standards for initial listing require, among other things, that an issuer
have total assets of $4,000,000 and capital and surplus of at least $2,000,000;
that the minimum bid price for the listed securities be $3.00 per share; that
the minimum market value of the public float (the shares held by non-insiders)
be at least $2,000,000, and that there be at least two market makers for the
issuer's securities. The maintenance standards require, among other things, that
an issuer have total assets of at least $2,000,000 and capital and surplus of at
least $1,000,000; that the minimum bid price for the listed securities be $1.00
per share; that the minimum market value of the 'public float' be at least
$1,000,000 and that there be at least two market makers for the issuer's
securities. A deficiency in either the market value of the public float or the
bid price maintenance standard will be deemed to exist if the issuer fails the
individual stated requirement for ten consecutive trading days. If an issuer
falls below the bid price maintenance standard, it may remain on Nasdaq if the
market value of the public float is at least $1,000,000 and the issuer has
$2,000,000 in equity. There can be no assurance that the Company will continue
to satisfy the requirements for maintaining a Nasdaq listing. If the Company's
securities were to be excluded from Nasdaq, it would adversely affect the prices
of such securities and the ability of holders to sell them, and the Company
would be required to comply with the initial listing requirements to be relisted
on Nasdaq.
If the Company is unable to satisfy Nasdaq's maintenance requirements and
the price per share were to drop below $5.00, then unless the Company satisfied
certain net asset tests, the Company's securities would become subject to
certain penny stock rules promulgated by the Securities and Exchange Commission.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standarized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. In addition, the penny
stock rules require that prior to a transaction in a penny stock not otherwise
exempt from such rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the
16
<PAGE>
<PAGE>
penny stock rules. If the Company's Common Stock becomes subject to the penny
stock rules, investors in the Offering may find it more difficult to sell their
shares.
THE COMPANY
AmBrew International owns and operates the South China Brewery, Hong Kong,
the first of a series of American-style micro-breweries the Company intends to
establish in selected locations in the Pacific Rim, Europe and Mexico.
AmBrew International was incorporated in Bermuda in June 1996. AmBrew
International is a holding company whose assets following the Reorganization
consist of all of the outstanding shares of the Hong Kong companies comprising
the South China Brewery. See 'Prospectus Summary' and Note 1 to Notes to
Consolidated Financial Statements. The South China Brewery companies were
established in 1994 by a group of investors involved in the alcohol beverage
industry.
AmBrew International's principal executive office is located at 1 Galleria
Boulevard (Suite 912) Metairie, Louisiana 70001 and its telephone number is
(504) 849-2739.
17
<PAGE>
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered
hereby after deducting estimated underwriting discounts and commissions and
expenses payable by the Company in connection with this Offering, are estimated
to be approximately $5.9 million ($6.8 million if the Over-allotment Option is
exercised in full) assuming initial public offering prices of $5.50 per Share
and $0.10 per Warrant.
The following table sets forth each amount in tabular format as an
approximate percentage of net proceeds.
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
DOLLAR AMOUNT NET PROCEEDS
------------- -------------
<S> <C> <C>
Capital expenditures relating to establishment of proposed breweries.............. $ 5,000,000 85.2%
Repayment of Hibernia Note........................................................ 452,000 7.7
Repayment of Bridge Notes......................................................... 120,000 2.0
Repayment of BPW Note............................................................. 65,000 1.1
Working capital and other general corporate purposes.............................. 234,000 4.0
------------- -----
$ 5,871,000 100%
------------- -----
------------- -----
</TABLE>
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.
$452,000 of the net proceeds will be used to retire the remaining principal
amount of the Hibernia Note, with principal payments due on September 30, 1996
and March 31, 1997 and an interest rate equal to Citibank prime plus 0.5%;
$120,000 of the net proceeds will be used to retire the Bridge Notes, due
September 1, 1997, with an interest rate of 12% per annum; and $65,000 of the
net proceeds will be used to retire the BPW Note, due ten days after the
consummation of this Offering with an interest rate of 5.5% per annum. The
remainder of the net proceeds, if any, will be used for working capital and
other general corporate purposes.
The foregoing represents the Company's current best estimate of its
allocation of the net proceeds of this Offering based on the current state of
its business operations, its current plans and current economic and industry
conditions. Although the Company does not contemplate material changes in the
proposed allocation of the use of proceeds, to the extent the Company finds that
adjustment is required by reason of business conditions or otherwise, the
amounts shown may be adjusted among the uses indicated above. See 'Risk
Factors -- Management's Broad Discretion in Use of Proceeds.'
The proceeds of the Bridge Notes were used to finance a portion of the
expenses of this Offering. See 'Certain Transactions.'
The Company believes that the net proceeds of this Offering will be
sufficient to establish five of seven micro-breweries it intends to develop and
operate by the end of 1997. See 'Risk Factors.' The Company currently plans to
obtain, if possible, additional financing for these breweries from third
parties. The Company intends to propose to strategic local partners that they
purchase minority equity interests in certain of the proposed breweries and also
intends to utilize debt financing. The Company believes that this financing, if
obtained on acceptable terms, in conjunction with the net proceeds of this
Offering, will enable the Company to establish seven proposed breweries. Pending
the aforementioned uses, the net proceeds from this Offering will be invested in
interest-bearing government securities or short-term investment-grade
securities.
18
<PAGE>
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock. The
Company intends to retain all earnings to finance the development and expansion
of its business and does not intend to pay cash dividends on the Common Stock in
the foreseeable future. The payment of any dividends in the future will depend,
among other things, on the Company's results of operations, capital requirements
and financial condition, and on such other factors as the Company's Board of
Directors may, in its discretion, consider relevant.
The amount of dividends payable by the South China Brewery as well as by
future subsidiaries of the Company operating the proposed expansion breweries is
and will be subject to general limitations imposed by the corporate laws of the
respective jurisdictions of incorporation of such subsidiaries as well as
restrictions in debt agreements. Dividends paid to the Company by these
subsidiaries may be subject to investment registration requirements and
withholding requirements.
19
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at April
30, 1996, (i) on an actual basis, (ii) on a pro forma basis giving effect to the
issuance of $370,000 principal amount of Bridge Notes and (iii) on a pro forma,
as adjusted basis to give effect to (at an assumed initial public offering price
of $5.50 per Share and $0.10 per Warrant) (a) the issuance of the Shares and 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',
(b) (I) the issuance to a Bridge Note holder of 21,818 shares of Common Stock at
no additional cost (in accordance with the terms of such note) and Bridge
Warrants to purchase an equal number of shares of Common Stock, (II) the
conversion of $250,000 principal amount of Bridge Notes into 90,909 shares of
Common Stock (in accordance with the terms of such notes) and Bridge Warrants to
purchase an equal number of shares of Common Stock, (c) the recognition of a
non-recurring, non-cash interest expense of $265,000 for the unamortized portion
of the original issue discount relating to the repayment of the Bridge Notes and
(d) the repayment of long-term bank loan of $452,000 and the shareholders' loan
from BPW of $65,000. See 'Certain Transactions.'
<TABLE>
<CAPTION>
APRIL 30, 1996
-----------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA ADJUSTED
--------- ----------- -------------
<S> <C> <C> <C>
Current portion of long-term bank loan................................ $ 452,000 $ 452,000 $ --
Bridge Notes payable(1)............................................... -- 370,000 --
Current portion of capital lease obligations.......................... 12,858 12,858 12,858
Shareholders' loans................................................... 85,638 85,638 20,638
--------- ----------- -------------
Total current portion of debt.................................... 550,496 920,496 33,496
Capital lease obligations, net of current portion..................... 24,864 24,864 24,864
--------- ----------- -------------
Total non-current portion of debt................................ 24,864 24,864 24,864
Stockholders' equity:
Common Stock, $0.01 par value; 10,000,000 shares authorized,
2,000,000 shares outstanding actual and pro forma(2), and
3,446,060 shares outstanding pro forma, as adjusted(3)......... 20,000 20,000 34,460
Additional paid-in capital....................................... 535,460 535,460 6,907,000
Preferred Stock, $0.01 par value, 500,000 shares authorized and
no shares outstanding.......................................... -- -- --
Accumulated deficit.............................................. (274,505) (274,505 ) (539,505)
--------- ----------- -------------
Total stockholders' equity....................................... 280,955 280,955 6,401,955
--------- ----------- -------------
Total capitalization................................... $ 856,315 $1,226,315 $ 6,460,315
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
- ------------
(1) The Bridge Notes were issued in May 1996 to finance a portion of the
expenses of this Offering. See 'Certain Transactions.'
(2) Excludes (i) 300,000 shares of Common Stock reserved for future issuance
pursuant to options available for grant under the Stock Option Plan and (ii)
500,000 shares of Common Stock reserved for future issuance pursuant to the
Bridge Notes and the Bridge Warrants. See 'Management -- Stock Option Plan,'
'Certain Transactions' and 'Underwriting.'
(3) Includes the issuance of 112,727 shares of Common Stock upon the
consummation of this Offering pursuant to the terms of the Bridge Notes
assuming an initial public offering price per Share of $5.50.
20
<PAGE>
<PAGE>
DILUTION
The net tangible book value of the South China Brewery at April 30, 1996
was approximately $280,955, or $0.14 per share of Common Stock after giving
effect to the Reorganization, including the Share Split. Net tangible book value
per share represents the amount of the Company's total tangible assets less
total liabilities divided by the number of shares of Common Stock outstanding at
that date. After giving effect to the sale of the Shares and the Warrants at an
assumed initial public offering price of $5.50 per Share and $0.10 per Warrant,
and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, as well as the issuance of 21,818
shares of Common Stock pursuant to the terms of the Bridge Notes at no
additional cost and the conversion of $250,000 principal amount of Bridge Notes
into 90,909 shares of Common Stock, the Company's pro forma, as adjusted net
tangible book value at April 30, 1996 would have been $6,401,955 or $1.86 per
share of Common Stock. This represents an immediate increase in the net tangible
book value of $1.72 per share to existing stockholders and an immediate dilution
of $3.64 per share to new investors purchasing Shares in this Offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................... $5.50
Net tangible book value per share at April 30, 1996........................... $0.14
Increase per share due to conversion of $250,000 of Bridge Notes.............. $0.11
Increase per share attributable to new investors.............................. $1.61
-----
Pro forma, as adjusted net tangible book value per share after the Offering... $1.86
-----
Dilution per share to new investors........................................... $3.64
-----
-----
</TABLE>
The computations in the table set forth above assume that the
Over-allotment Option is not exercised. If the Over-allotment Option is
exercised in full, the pro forma net tangible book value at April 30, 1996 would
have been $7,376,355 or $2.02 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 112,727 shares of Common
Stock issuable pursuant to the terms of the Bridge Notes upon the consummation
of this Offering, 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................................... 2,112,727 61.3% $ 805,460 9.9% $0.38
New investors........................................... 1,333,333 38.7% 7,333,332 90.1% $5.50
--------- ------- ---------- -------
Total.............................................. 3,446,060 100.0% $8,138,792 100.0%
--------- ------- ---------- -------
--------- ------- ---------- -------
</TABLE>
The information presented above, with respect to existing stockholders,
assumes no exercise of the Over-allotment Option. In addition, 1,333,333 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 112,727 shares of Common Stock have been reserved for
future issuance pursuant to the Bridge Warrants. The issuance of such shares of
Common Stock may result in further dilution to new investors. See
'Management -- Stock Option Plan' and 'Underwriting.'
21
<PAGE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the fiscal year ended October
31, 1995, have been derived from the Consolidated Financial Statements included
elsewhere in this Prospectus which have been audited by Arthur Andersen & Co.,
independent public accountants, whose report thereon is also included elsewhere
in this Prospectus. The selected consolidated financial data as of April 30,
1996, and for the six month periods ended October 31, 1995 and April 30, 1996,
are unaudited, but in the opinion of management include all adjustments
necessary for a fair presentation of such data. The selected consolidated
financial data set forth below should be read in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30,
1995 1995 1996
--------------- --------------------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $ 63,707 $ 63,707 $ 244,753
Cost of sales.......................................... (38,960) (38,960) (43,055)
--------------- --------------------- ----------------
Gross profit...................................... 24,747 24,747 201,698
Selling, general and administrative expenses........... (292,888) (195,846) (207,094)
Interest expense, net.................................. (17,838) (16,059) (24,908)
Other expenses, net.................................... (2,265) (2,265) (888)
--------------- --------------------- ----------------
Loss before income taxes.......................... (288,244) (189,423) (31,192)
Income tax benefit..................................... 47,560 31,255 5,147
--------------- --------------------- ----------------
Net loss.......................................... $ (240,684) $ (158,168) $ (26,045)
Net loss per common share.............................. $ (0.12) $ (0.08) $ (0.01)
Number of shares outstanding(1)........................ 2,067,273 2,067,273 2,067,273
Pro forma net loss per common share(2)................. $ (0.13) $ -- $ (0.02)
Pro forma number of shares outstanding(2).............. 2,184,773 -- 2,184,773
<CAPTION>
APRIL 30, 1996
---------------------------------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA(3) ADJUSTED(3)(4)
--------------- --------------------- ----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets................................... $ 109,382 $ 479,382 $5,713,382
Total assets........................................... $ 893,013 $ 1,263,013 $6,497,013
Total current liabilities.............................. $ 587,194 $ 957,194 $ 70,194
Total long-term liabilities............................ $ 24,864 $ 24,864 $ 24,864
Total liabilities...................................... $ 612,058 $ 982,058 $ 95,058
Total shareholders' equity............................. $ 280,955 $ 280,955 $6,401,955
</TABLE>
- ------------
(1) Assumes the consummation of the Reorganization and excludes (i) 300,000
shares of Common Stock reserved for future issuance pursuant to options
available for grant under the Stock Option Plan and (ii) 500,000 shares of
Common Stock reserved for future issuance pursuant to the Bridge Notes and
the Bridge Warrants. See 'Management -- Stock Option Plan,' 'Certain
Transactions' and 'Underwriting.'
(2) Pro forma net loss per common share is computed by dividing pro forma net
loss for each period by 2,184,773 which is based on the historical weighted
average number of shares outstanding plus the additional number of shares
required to be issued at the assumed net offering price of $4.40 per share
to obtain funds for the repayment of the outstanding principal amounts of
indebtedness aggregating $517,000. See Note 16 of the Notes to Consolidated
Financial Statements.
(3) Gives pro forma effect to the issuance of $370,000 principal amount of
Bridge Notes. See 'Certain Transactions.'
(4) 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, (ii) the repayment of $120,000 of Bridge Notes
from the net proceeds of this Offering, (iii) the issuance to a Bridge Note
holder of 21,818 shares of Common Stock and Bridge Warrants to purchase an
equal number of shares of Common Stock at no additional cost (in accordance
with the terms of such note), (iv) the conversion of $250,000 principal
amount of Bridge Notes into 90,909 shares of Common Stock (in accordance
with the terms of such notes) and the issuance of Bridge Warrants to
purchase an equal number of shares of Common Stock and (v) the recognition
of a non-recurring, non-cash interest expense of $265,000 for the
unamortized portion of the original issue discount relating to the repayment
of the Bridge Notes. See 'Use of Proceeds' and 'Certain Transactions.'
22
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Unless otherwise indicated, the following discussion addresses the combined
financial condition and results of operations of the South China Brewery, which
consists of brewing and distribution operating subsidiaries of the Company
located in Hong Kong. The discussion should be read in conjunction with the
'Selected Consolidated Financial Data' and the Consolidated Financial Statements
and the Notes thereto included elsewhere in this Prospectus. In addition, the
period-to-period presentation set forth under ' -- Results of Operations' will
not necessarily be indicative of future results and future net losses can be
expected as increased expenses are incurred in connection with the establishment
of the proposed expansion breweries.
The South China Brewery relies upon a single supplier (other than for
labels) for each of the raw materials used to make and package the Company's
beers. While the South China Brewery believes that multiple sources of supply
are available for all of its ingredients and raw materials, if the South China
Brewery were unable to obtain adequate quantities of ingredients or other raw
materials, delays or reductions in product shipments would occur which would
have an adverse effect on the South China Brewery's business, financial
condition and results of operations. As with most agricultural products, the
supply and price of raw materials used to produce the Company's beers can be
affected by a number of factors beyond the control of the Company, such as
frosts, droughts, other weather conditions, economic factors affecting growing
decisions, various plant diseases and pests. If any of the foregoing were to
occur, no assurance can be given that such condition would not have an adverse
effect on the Company's business, financial condition and results of operations.
See 'Business -- Brewing Operations' and ' -- Suppliers.'
A substantial portion of the South China Brewery's sales are made to a
small number of customers on an open account basis and generally no collateral
is required. For the six months ended April 30, 1996, 72.1% of net sales were
generated by sales to these customers. At April 30, 1996, the five largest
accounts receivable constituted 82% of the South China Brewery's accounts
receivable. See Note 14 of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
The South China Brewery commenced operations in June 1995 and has not
experienced a full fiscal year of operations. The first sales of the South China
Brewery's products occurred in July 1995. For comparison purposes, the following
presentation compares the six months ended October 31, 1995 with the six months
ended April 30, 1996. The following table sets forth for the periods indicated
certain line items from the South China Brewery's summary of operations
expressed as a percentage of the South China Brewery's net sales for each of the
six months ended October 31, 1995 and April 30, 1996, respectively:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, 1995 APRIL 30, 1996
------------------ ------------------
<S> <C> <C>
Net sales................................................... 100.0% 100.0%
Cost of sales............................................... 61.2% 17.6%
Gross profit................................................ 38.8% 82.4%
Selling, general and administrative expenses................ 307.4% 84.6%
Operating loss.............................................. 268.6% 2.2%
Interest expense, net....................................... 25.2% 10.2%
Net loss.................................................... 248.3% 10.6%
</TABLE>
Net Sales. For the six months ended October 31, 1995 and April 30, 1996,
the South China Brewery had net sales of $63,707 and $244,753, respectively. The
growth in sales resulted from an increased awareness of and acceptance by
consumers of the South China Brewery's flagship brand, Crooked Island Ale, the
first micro-brewed beer produced and sold in Hong Kong. In addition, in
September 1995, the South China Brewery entered into contracts for the brewing
and supply of custom
23
<PAGE>
<PAGE>
brewed ales for consumption in two Hong Kong pubs. Private label sales have
accounted for 72.1% of all of the South China Brewery's sales for the six months
ending April 30, 1996 though the Company expects that sales of the South China
Brewery's brands will increase relative to its private label sales. See
'Business -- Products -- Specialty Brewing.'
Cost of Sales. The South China Brewery's cost of sales for the six months
ended October 31, 1995 and April 30, 1996 was $38,960 and $43,055, respectively.
The improvement in gross profit percentage was due to the lower cost per barrel
of kegged products over bottled products resulting from the South China
Brewery's increased sales of kegged products during the six months ended April
30, 1996 and to more efficient use of brewery equipment.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six months ended October 31, 1995 and April 30,
1996 were $195,846 and $207,094, respectively. The selling, general and
administrative expenses for the six months ended October 31, 1995 reflect
advertising and marketing costs of $24,312 compared to advertising and marketing
costs of $12,298 for the six months ended April 30, 1996. The higher costs for
the earlier period were due to start-up advertising and promotion. This decrease
in expenses was in part offset by staff salary expense which increased during
the six months ended April 30, 1996 over the six months ended October 31, 1995
by $50,846 due to the hiring of an office manager and an additional sales
representative. The Company's selling, general and administrative expenses,
including salary, marketing and other operational expenses, will increase as the
proposed expansion breweries are established.
Net Interest Expense. Net interest expense for the six months ended
October 31, 1995 and April 30, 1996 was $16,059 and $24,908, respectively. The
Company's net interest expense is expected to decrease in the future as the
Company intends to repay the Hibernia Note and the BPW Note out of the net
proceeds of this Offering. See 'Use of Proceeds.'
LIQUIDITY AND CAPITAL RESOURCES
Until this Offering, the South China Brewery has been able to satisfy its
cash requirements through a combination of private sales of equity, borrowings
from a stockholder and from an institutional lender (supported by a guarantee
and letters of credit from stockholders) and cash flow from operations. At April
30, 1996, the South China Brewery had total current assets of $140,850,
consisting of $6,232 in cash on hand, and $61,162 in accounts receivable, net
$29,585 in inventories, and $43,871 in other current assets. At April 30, 1996,
the South China Brewery's five largest accounts receivable accounted for 82% of
its total accounts receivable as of such date.
At April 30, 1996, the Company had total liabilities of $612,058 of which
$587,194 were current liabilities and a resulting working capital deficit of
$446,344.
At April 30, 1996, the South China Brewery had fixed capital lease
obligations of $17,179 per year for each of the three years ending April 30,
1999 relating to its delivery vehicles. At April 30, 1996, the South China
Brewery had $128,774 in operating lease commitments over the two year period
ending April 30, 1998 relating to its warehouse and brewery facility. The
Company may expand the production capacity at the South China Brewery by 50%
with the purchase of five fermentation tanks at an installed cost of
approximately $150,000. Any such purchase would be funded by cash flow generated
by the South China Brewery.
The amount of dividends payable by the South China Brewery as well as by
future subsidiaries of the Company operating the proposed expansion breweries is
and will be subject to general limitations imposed by the corporate laws of the
respective jurisdictions of incorporation of such subsidiaries as well as
restrictions in debt agreements. Dividends paid to the Company by these
subsidiaries may be subject to local investment registration requirements and
withholding requirements.
In May 1996, Craft issued $370,000 principal amount of Bridge Notes bearing
an interest rate of 12% per annum to certain investors in Singapore and Hong
Kong and maturing September 1, 1997. Pursuant to the terms of the Bridge Notes,
these investors are entitled to receive 112,727 shares of Common Stock assuming
an initial public offering price per Share of $5.50 and Bridge Warrants
entitling such investors to purchase, in the aggregate, up to 112,727 shares of
Common Stock, 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 and an interest rate equal
to Citibank prime plus 0.5%. The amount due on the Hibernia Note has been
reduced to $452,000 through principal repayments by the Company. The South China
Brewery borrowed $65,000 evidenced by a limited recourse promissory note dated
March 5, 1996 due ten days after the date of this Prospectus bearing an interest
rate of 5.5%.
The Company intends to devote a portion of the net proceeds of this
Offering to repay loans used for working capital purposes. The Company intends
to retire the Bridge Notes (that are not converted by the holders thereof into
shares of Common Stock upon the consummation of this Offering), the Hibernia
Note and the BPW Note with a portion of the net proceeds of this Offering.
Although the Company believes that the balance of the net proceeds of this
Offering should be sufficient to establish five of the seven micro-breweries it
intends to develop and operate by the end of 1997, the Company currently plans
to obtain, if possible, additional financing for these breweries from third
parties. The Company intends to propose to strategic local partners that they
purchase minority equity interests in certain of the proposed breweries and also
intends to utilize debt financing for these breweries, if available. Such
financing, or other additional financing, will be required to enable the Company
to establish all seven proposed breweries. See 'Use of Proceeds.'
The Company has recently entered into new employment agreements with its
Executive Vice President, Chief Operating Officer and Secretary, James L. Ake
and with its Managing Director for Hong Kong Operations, David K. Haines, which
provide for annual base salaries of $72,000 and $60,000, respectively. See
'Management -- Executive Compensation.'
If the Company's assumptions change or prove to be inaccurate or the net
proceeds of this Offering prove to be insufficient, the Company may be required
to curtail its expansion activities or seek additional financing through the
sale of additional debt or equity securities or borrowings from banks or other
sources. There can be no assurance that such financing would be available or, if
available, could be obtained on terms satisfactory to the Company.
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BUSINESS
GENERAL
AmBrew International owns and operates the South China Brewery, the first
in a series of international breweries based on the concept of American-style
micro-breweries. The South China Brewery, the first American-style micro-brewery
in Hong Kong, produces fresh, high-quality, preservative-free, hand-crafted
beers using state-of-the-art American-manufactured brewing equipment.
Hand-crafted beers are distinguishable by their full flavor which results from
traditional brewing styles. The Company believes that American-style
micro-brewing has growth potential in other key world markets and that the South
China Brewery is a model that can be adapted to other markets.
The American-style micro-brewery concept has developed over the past ten
years into the fastest growing segment of the American beer industry.
American-style micro-breweries produce less than 15,000 barrels per year of
hand-crafted beers in a variety of styles. The Company believes that the growing
demand for micro-brewed beers in the United States is part of a broader shift in
preferences on the part of a certain segment of consumers away from
mass-produced products and toward high-quality, distinctive foods and beverages.
While craft beers currently account for less than 2% of total United States beer
consumption, sales volume of these beers grew by 50% in 1995 and had an annual
growth rate of approximately 47% during the period from 1985 through 1994.
AmBrew International believes that the demand for craft beers is not limited to
the United States and is committed to the production of a variety of craft beers
designed to appeal to a growing number of consumers in global markets.
The Company exported the American-style micro-brewery concept to Hong Kong
with the establishment of the South China Brewery in June 1995. With only one
head brewer and six other employees, the South China Brewery produces,
distributes and markets two full-flavored beers marketed under South China's own
brand names, Crooked Island Ale and Dragon's Back India Pale Ale, and custom
produces beers for local Hong Kong establishments in accordance with their
individual specifications to market under their own labels. One of these
custom-produced beers, Delaney's Ale, won a Gold Award at the Association of
Brewers' World Beer Cup in June 1996. The South China Brewery is designed to
permit small and economical production runs of differentiated products to meet
special tastes or other custom requirements and for sale in niche markets.
Increased consumer demand for high quality, full-flavored beers has allowed the
South China Brewery to achieve a price premium relative to mass-produced
domestic beer producers and to set its prices at the upper end of the premium
import market.
The Company's senior management and Board of Directors have extensive
experience in the international beverage alcohol industry. The Company expects
to utilize this experience to identify new markets receptive to the
American-style micro-brewery concept and to seek out strategic local partners to
co-invest in new micro-breweries in such markets. The Company plans to establish
and operate, either through wholly-owned subsidiaries or through majority-owned
joint venture arrangements with strategic local partners, a series of
micro-breweries similar in concept to the South China Brewery. The Company
expects that these partners will use their knowledge of local regulation and
markets to facilitate the establishment and acceptance of the Company's
micro-breweries and their products. In pursuing its expansion strategy, the
Company will move into both markets dominated by mass-market breweries and
markets in which high-quality beer producers will be the Company's primary
competition. In markets where mass-produced beers are sold to a broad consumer
profile, AmBrew International intends to develop craft beers as locally produced
premium product alternatives. In markets in which there are already a number of
traditional high-quality beer producers, the Company intends to produce
distinctive micro-brewed products for niche market segments. The Company has
preliminarily identified seven locations in which it is considering establishing
breweries by the end of 1997, subject to more extensive feasibility studies:
Zurich, Dublin, Shanghai, Tecate (Mexico), Budapest, Singapore and Warsaw.
The Company expects to achieve greater economies of scale as it expands.
For example, the Company intends to enter into a contract with Micro Brew
Systems Company, Limited ('Micro Brew Systems') which supplied the equipment for
the South China Brewery, or another comparable provider of state-of-the-art
brewing equipment, to purchase, at discounted prices, the necessary brewing
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equipment for its proposed new breweries. In addition, the Company believes that
it can benefit from volume discounts on purchases of equipment and ingredients.
Based on the growth of its South China Brewery to date, the Company believes it
is well-positioned to establish similar American-style micro-breweries in other
markets.
AMERICAN-STYLE MICRO-BREWERIES AND THE BREWING INDUSTRY
American-style micro-breweries produce small quantities of fresh,
high-quality, preservative-free hand-crafted beers. In 1995, craft brewers, both
regional and micro, comprised the only growing segment of the United States beer
market. According to the Association of Brewers of Boulder, Colorado, 830 new
breweries have been established in the United States since 1980: 17 'regional
craft breweries' (breweries producing between 15,000 and 500,000 barrels per
year); 280 micro-breweries (breweries producing less than 15,000 barrels for
off-premises sale); and 533 brewpubs (brewery restaurants that sell mostly on
premises).
AmBrew International believes that it can take advantage of this
micro-brewery market niche opportunity by selling high-quality, hand-crafted
beers in certain international markets just as United States micro-brewers have
done in domestic markets. While craft beers currently account for less than 2%
of total United States beer consumption, sales volume of these beers grew by 50%
in 1995 and had an annual growth rate of approximately 47% during the period
from 1985 through 1994. Based on its experience in the industry, the Company
believes that the South China Brewery presently is the only American-equipped
micro-brewery outside of the United States.
SOUTH CHINA BREWERY
The Company exported the American-style micro-brewery concept by
establishing the South China Brewery in Hong Kong in June 1995. The South China
Brewery produces its specialty products in a state-of-the-art, company-owned
facility using traditional brewing methods. A head brewer and two assistants
brew all of the South China Brewery's beer. With only one head brewer and six
other employees, the South China Brewery produces, distributes and markets two
full-flavored, craft beers marketed under South China's own brand names, Crooked
Island Ale and Dragon's Back India Pale Ale, and custom brews beers for local
Hong Kong establishments in accordance with their individual specifications to
market under their own labels. The South China Brewery is designed to permit
small and economical production runs of differentiated products to meet special
tastes or other custom requirements and for sale in niche markets.
PROPOSED EXPANSION MARKETS
The Company plans to establish and operate, either through wholly-owned
subsidiaries or through majority-owned joint venture arrangements with strategic
local partners, a series of state-of-the-art, American-style micro-breweries.
The Company is currently considering the following locations, subject to more
extensive feasibility studies: Zurich, Dublin, Shanghai, Tecate (Mexico),
Buda pest, Singapore and Warsaw. Preliminary work has commenced at several of
the proposed sites:
Zurich. The Company has entered into a non-binding letter of intent with
Lateltin AG ('Lateltin') to establish a micro-brewery in Zurich which provides
that AmBrew International will acquire 60% of the equity interest of a joint
venture, of which Lateltin will hold the remaining equity interest. The Company
has indentified a proposed site for the Zurich expansion brewery.
Dublin. The Company has entered into a non-binding letter of intent with
Twinmeadows, Ltd., trading as Meadows Micro-Brewery ('Meadows'), to establish a
micro-brewery in the Dublin vicinity. The letter of intent provides that AmBrew
International will acquire 51% of the equity interest of a joint venture of
which affiliates of Meadows will hold the balance of the equity interest. The
Company has identified a site for the Dublin expansion brewery, which site is
fully prepared for the installation of micro-brewery equipment.
Shanghai. The Company has identified a prospective site for the Shanghai
expansion brewery, is currently conducting negotiations with prospective Chinese
joint venture partners.
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Tecate. The Company has selected the site for the Tecate expansion
brewery, has commenced work for a preliminary site lay-out and is currently
conducting lease negotiations. The proposed site is in Mexico less than one mile
from the California border. The Company's present plan is to distribute its
products in Mexico, although there may be opportunities for distribution in
southern California.
There can be no assurance that the Company will be successful in
establishing and operating additional breweries at any of such sites. However,
the Company currently expects to obtain, if possible, financing for these
breweries from third parties. The Company intends to propose to strategic local
partners that they purchase minority equity interests in certain of the proposed
breweries and also intends to utilize debt financing. The Company expects to
utilize the extensive experience of management and the Board of Directors in the
international beverage alcohol industry to seek out strategic local partners for
such co-investment purposes. Such financing, or other additional financing, will
be required to enable the Company to establish all seven proposed breweries. See
'Use of Proceeds.'
The Company expects to achieve economies of scale with its proposed
breweries through volume discounts on equipment and ingredient purchases and
reduction of brewery start-up expenses. The Company intends to enter into a
contract with Micro Brew Systems, or a comparable provider of micro-brewing
equipment, to purchase brewing equipment manufactured by JV Northwest, Ltd. of
Portland, Oregon ('JVNW') at a price discounted for volume purchases. For each
of the proposed breweries, the Company will conduct a feasibility study covering
brewery licensing, taxation and local operating costs and conduct a head brewer
search. In addition, the Company expects to utilize its experience with the
South China Brewery to speed the process from start-up to profitable operations
at the proposed breweries.
Successful expansion will require management of various factors associated
with the construction of new facilities in geographically and politically
diverse locations. Factors include site selection, local land use requirements,
obtaining governmental permits and approvals, adequacy of municipal
infrastructure, environmental uncertainties, possible cost estimation errors or
overruns, additional financing, construction delays, weather problems and other
factors, many of which are beyond the Company's control. There can be no
assurance that the Company will be successful in establishing and operating
additional breweries.
If the Company successfully acquires interests in joint ventures or
establishes new breweries located in the Pacific Rim, Europe or Mexico, the
Company expects that a substantial portion of the revenues of such breweries, as
well as revenues generated by its South China Brewery, will be denominated in
local currency. A portion of such revenues will need to be converted to U.S.
dollars in order for the Company to pay dividends in U.S. dollars. Both the
conversion of local currencies in U.S. dollars and the remittance of local
currencies abroad, depending on the local laws where such brewery operates, may
require government approval. There can be no assurance that the breweries will
be able to obtain expatriate currency for such purposes or that the Company will
be able to convert such currency into U.S. dollars. While the Company does not
currently engage in hedging or other transactions intended to manage the risks
relating to foreign currency exchange, inflation or interest rate fluctuations,
it may elect to do so in the future as it expands into new markets.
BREWING OPERATIONS
The Company's beer is prepared from barley, grain, hops, yeast and water.
Distinctive styles of beer depend upon how the barley is malted, the use of hops
and the proportions of the ingredients, among other factors. The following
discusses the production process for the South China Brewery. The Company
intends to utilize the same type and scale of equipment at the other breweries
and to generally pattern future brewery operations on the South China Brewery.
Brewing Process. The South China Brewery's products are crafted from pale
and specialty malted barley produced in Great Britain by high-quality malters.
The South China Brewery acquires its hops from micro-brewery quality sources in
the United States. The first step in the South China Brewery's brewing process
is to crack malted barley in a roller mill (milled barley is called grist) and
store it in a grist case. Hot water (called 'liquor') and grist are mixed in a
mash/lauter tun producing the mash. A
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sweet, clear liquid called wort is filtered out of the mash and transferred to
the kettle. The wort is brought to a rolling boil in the kettle. Some hops are
added early to provide bitterness; other hops (finishing hops) are put in later
to give a fine aroma. The hot wort is cooled to termination temperature (about
40[d] F) through a heat exchanger. The cold liquor tank provides the water to
cool the wort in the heat exchanger and the resulting heated water is
transferred to the hot liquor tank for use in the next brew.
The cooled wort is then transferred to the fermentation tanks ('unitanks'),
yeast is added and fermentation begins. Fermentation is the process by which
yeast transforms the sweet wort into a flavor solution containing alcohol and
carbon dioxide. After fermentation, the beer is aged to develop its final smooth
taste. The fermentation and aging process can last 14 days for ales and 21 days
and longer for lagers.
The conditioned product is filtered and stored in a bright beer tank where
it is carbonated and then packaged. Packaged beer is stored in a refrigerated
walk-in cooler and delivered in refrigerated vehicles and containers.
Quality Control. The South China Brewery employs an experienced head
brewer who hand crafts all of the brewery's beer. The Company will seek to
employ a similarly qualified head brewer at each of the Company's proposed
breweries by conducting a head brewer personnel search for each proposed
brewery. The Company plans to monitor production and exercise quality control at
each of its breweries. Each brewery will have equipment for on-site yeast
propagation, to monitor product quality, to test products and to measure color
and bitterness. The breweries will also utilize independent laboratories for
further product analysis. The Company's policy is to meet the highest quality
standards, with the goal of assuring the purity and safety of each of its beers.
Management believes that its ability to engage in constant product
innovation and its control over product quality are critical competitive
advantages. Accordingly, the Company does not hire third parties to perform
contract brewing of any of its products, and plans to operate its own breweries
in each of the proposed initial expansion locations and at any subsequent sites.
In addition, AmBrew International believes that its ownership of a number of
micro-breweries will enable it to shift production among breweries giving it
greater operating flexibility while reducing the risk of producing all of its
products at a single location. This strategy would also permit the Company to
produce its brands that achieve widespread market-acceptance at any of its
proposed breweries for local consumption.
PRODUCTS
The South China Brewery currently produces two styles of full-flavored
craft beers using traditional brewing methods, high quality ingredients and
state-of-the-art American-manufactured brewing equipment that the Company
intends to replicate at each of its proposed breweries. The Company's beers are
marketed on the basis of freshness and distinctive flavor profiles. Like most
other micro-brewed brands, the South China Brewery's products are not
pasteurized. Accordingly, they should be kept cool so that oxidation and
heat-induced aging will not adversely affect the original taste, and should be
distributed and served within 90 days after brewing to maximize freshness and
flavor. The South China Brewery distributes its products in kegs and glass
bottles. The bottles are freshness-dated for the benefit of consumers. For the
six months ended April 30, 1996, approximately 79% of the South China Brewery's
sales were generated by sales of kegged products.
Proprietary Brands. The South China Brewery presently produces two branded
products, each with its own distinctive combination of flavor, color and
clarity:
Crooked Island Ale. The flagship brand, Crooked Island Ale, accounted
for approximately 23% of the Company's sales during the quarter ended April
30, 1996. This Ale is produced from pale malted barley from Great Britain
and hops from the United States. Crooked Island Ale is a light, golden ale
with a fresh clean nose and crisp finish. It is brewed light, with all the
flavor and uniqueness of a full-bodied ale. The Company believes that this
Ale's distinctive malt flavor comes from a careful balance of bittering and
aroma hops. Crooked Island Ale is available in both kegs and bottles.
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Dragon's Back India Pale Ale. Brewed to reflect the essence of a
traditional oak barrel British India Pale Ale, Dragon's Back gets its amber
hue from a blend of premium British malted barley. This Ale is heavily
hopped maintaining all of the qualities of the quintessential cask ale.
Currently, Dragon's Back is brewed for distribution only in kegs.
Specialty Brewing. In addition to its branded products, the South China
Brewery custom brews beers for local Hong Kong establishments in accordance with
their individual product specifications to market under their own labels. For
the six months ended April 30, 1996, such sales to two customers, Dabeers
Distributors Limited and Delaney's (Wanchai) Limited, owner of Delaney's Irish
Pub, have accounted for 72% of the South China Brewery's sales. The Company's
contracts with these customers both expire in September 1996. While the Company
has no reason to believe that such contracts will not be renewed, there is no
assurance that either contract will be renewed or renewed on favorable terms.
One of the Company's specialty brewed products, Delaney's Ale, won a Gold
Award at the Association of Brewers' World Beer Cup in June 1996. AmBrew
International retains the proprietary rights to the recipes of its specialty
brewed beers.
The Company believes that continual development of new products is the
hallmark of micro-breweries. In an effort to be responsive to varying consumer
style and flavor preferences, the South China Brewery is continually engaged in
the development and testing of new products. The South China Brewery has the
capability of producing all distinct styles of beer, including ale, lager, stout
and porter, and has a single production batch size of 260 cases. The Company
intends to construct its proposed breweries with similar versatility. The
Company intends to expand sales by entering into specialty brewing arrangements
with local bars, clubs, hotel, restaurant and airline partners in Hong Kong and
in each of the locales of the proposed breweries.
SOUTH CHINA FACILITY
Plant. The South China Brewery's brewing facility is located in Aberdeen,
Hong Kong, on the south side of the island. The Company believes, based on its
experience in the industry, that the South China Brewery is the first and only
independent micro-brewery established outside the United States using
state-of-the-art, American-made brewing equipment. The selection of this site
enabled the South China Brewery to be located near its primary markets in the
Hong Kong Central district and Kowloon while not incurring the high lease costs
of downtown Hong Kong. The primary operations are in a 3,600 gross square foot
space on the second floor of a 23 story building. An additional 2,000 square
foot storage facility for dry package goods (bottles, caps, labels) is also
located in the same building. Both the brewing facility and the storage facility
are leased.
The Hong Kong 20-barrel brewery is an adaptable facility that is able to
produce 9 different products simultaneously. The capacity of this brewery can be
increased by 50% with the addition of five fermentation tanks at an installed
cost of approximately $150,000. The configuration and space of the brewery
allows the Company to achieve this 50% expansion with no modification to either
the facility or equipment currently installed. For these reasons, the South
China Brewery will serve as a prototype for the proposed breweries, allowing the
Company to modify the basic configuration at each location to achieve optimum
brewery capacity and capability.
Equipment. The equipment for the brewery was designed and fabricated by
JVNW. JVNW was established in 1981 and is considered one of the premiere
fabricators of micro-brewery systems. The Company's state-of-the-art equipment
allows the head brewer to control the brewing process to achieve a consistent
hand-crafted, high-quality product. The Company intends to enter into a contract
with Micro Brew Systems (a distributor of JVNW brewing equipment) or another
comparable provider of brewing equipment, to purchase, at discounted prices, the
necessary brewing equipment for its proposed new breweries.
The plant is a 20-barrel system which means that it is capable of brewing
20 barrels of product with each brewing cycle. Twenty barrels (each barrel is 31
gallons) equates to approximately 260 cases of 24-355 ml bottles or 75 30-liter
kegs. Annual capacity is approximately 70,000 cases. The 10 fermentation vessels
allow the plant to make different products at the same time.
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The South China Brewery also utilizes several pieces of ancillary equipment
such as a boiler to make steam for heating the hot liquor and boiling in the
brew kettle, a glycol refrigeration unit to provide cooling for the cold liquor
tank, fermentation tanks and a bright beer tank, fixed and movable pumps to
transfer the liquid, filters, soft piping, for transferring liquid to and from
the fermentation tanks and labeling, bottling and kegging equipment.
SALES AND MARKETING
The South China Brewery presently markets its products by educating
consumers as to the distinctive qualities of its products and by emphasizing
localized promotions designed to enhance the South China Brewery's word-of-mouth
reputation. The Company intends to adopt sales and marketing strategies targeted
for each individual local market it serves, but generally will seek to identify
its products with local markets. Management believes that by locating the
proposed breweries in proximity to the local markets they serve, AmBrew
International will be able to enjoy distinct competitive advantages, including
established consumer identification with the Company's brands and enhanced
familiarity with local consumer tastes. By pursuing this strategy, the Company
believes that it will be able to develop its reputation and prestige as a local
craft brewer, while selectively introducing new and existing products into new
regional markets.
The South China Brewery devotes considerable effort to the promotion of
on-premises consumption at participating pubs and restaurants, and currently
engages in limited media advertising. Among other things, the South China
Brewery participates in and sponsors cultural and community events, local music
and other entertainment venues, local festivals and cuisine events, and local
professional sporting events in Hong Kong. The Company believes that educating
retailers about the freshness and quality of its products will in turn allow
retailers to assist in educating consumers. The Company considers on-premises
product sampling and education to be among its most effective tools for building
brand identity with consumers and establishing word-of-mouth reputation. The
South China Brewery achieves additional on-premises marketing through a variety
of other point-of-sale tools, such as tap handles, coasters, table tents, neon
signs, banners, posters and menu guidance. The South China Brewery also markets
its products through sales and give-aways of T-shirts, polo shirts, baseball
hats and glasses. Sales of merchandise could develop as an independent source of
revenue for the Company. In addition, the South China Brewery offers guided
tours of its facility to further increase consumer awareness of its products and
is considering offering tasting sessions.
The South China Brewery presently distributes its own products and does not
use independent distributors. To expand distribution of proprietary brands, the
South China Brewery has recently hired two local sales representatives. The
Company intends to reevaluate its distribution strategy for each market as its
business develops.
COMPETITION
The beer industry is intensely competitive. While there are no other craft
brewers in Hong Kong, the South China Brewery competes directly with premium
import beers as well as with mass-produced beers marketed by a number of much
larger producers. Some much larger United States beer producers are currently
marketing their beers in the United States as craft beers. There can be no
assurance that, in the future, the Company will not face competition from
mass-produced beer marketed internationally as craft beer. Similarly, the
Company may face competition from brewers or other investors who wish to
establish American-style micro-breweries in Hong Kong or in other areas in which
the Company plans to locate proposed breweries.
SUPPLIERS
The South China Brewery currently purchases all of its pale and specialty
malted barley from Hugh Baird & Sons, Limited, located in Essex, England. The
Company purchases its premium-quality select hops from Hop Union, located in
Yakima, Washington in the United States and regularly renews its yeast supply by
purchasing yeast from Wyeast Laboratories, Inc. The South China Brewery
currently purchases its case boxes, bottles and crowns each from a single
supplier and maintains multiple
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competitive sources for its supply of labels. While the South China Brewery
believes that at least two comparable sources of malted barley, five comparable
sources of hops and multiple sources of yeast are available, there can be no
assurance that political, economic or other factors will not limit or restrict
the availability of supplies. The Company expects that future breweries will
adopt similar practices for obtaining supplies.
As with most agricultural products, the supply and price of raw materials
used to produce the Company's beers can be affected by a number of factors
beyond the control of the Company, such as frosts, droughts, other weather
conditions, economic factors affecting growing decisions, various plant diseases
and pests. If any of the foregoing were to occur, no assurance can be given that
such condition would not have an adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company's
results of operations are dependent upon its ability to accurately forecast its
demand for raw materials. Any failure by the Company to accurately forecast its
demand for raw materials could result in the Company either being unable to meet
higher than anticipated demand for its products or producing excess inventory,
either of which may adversely affect the Company's business, results of
operations and financial condition.
GOVERNMENT REGULATION
Hong Kong Regulation. The South China Brewery was granted a brewery
license pursuant to the Dutiable Commodities Ordinance and the Dutiable
Commodities Regulations (Chapter 109 of the Laws of Hong Kong). Such license
will expire on June 6, 1997.
The South China Brewery is required to comply with the terms and conditions
of a license for the environmental discharge originating from the South China
Brewery in the Western Buffer Water Control Zone of Hong Kong which has been
obtained pursuant to Section 20 of the Water Pollution Control Ordinance
(Chapter 358 of the Laws of Hong Kong) (which will expire on February 28, 1997).
The South China Brewery's premises is connected, directly or indirectly, to
a communal drain or a communal sewer which is vested in and maintained by the
Hong Kong government, and produces trade effluent that is discharged into a
communal drain or communal sewer. Accordingly the South China Brewery, in
addition to a sewer charge, pays to the Hong Kong government a trade effluent
surcharge under the Sewage Services Ordinance (Chapter 463 of the Laws of Hong
Kong). The Water Pollution Control Ordinance regulates the parts per million in
the Company's discharge into this communal sewer of substances that create
Biological Oxygen Demand ('BOD') through PH imbalance. The Company must monitor
and regulate the PH of its discharge to maintain an acceptable level of BODs by
mixing high PH caustics with low PH sanitizers before discharging such
substances. While the Company is subject to spot checks of its BOD levels under
the Ordinance and maintains levels in accordance with the Ordinance, no such
monitoring by the Environmental Protection Department has occurred to date.
Other Regulation. The Company will conduct a preliminary feasibility study
for each of the proposed expansion brewery locations including analyses of
brewery licensing requirements and other local operating costs. In addition, the
Company will seek the assistance and expertise of local joint venture partners
in complying with local regulatory requirements.
INSURANCE
The South China Brewery maintains a public liability insurance policy
(coverage limit approximately $1.3 million) to protect against damage to third
party property. In addition, the South China Brewery maintains a total of
$800,000 commercial all risks coverage and approximately $390,000 of business
interruption coverage. The South China Brewery also maintains employee
compensation insurance as required by local law. The Company plans to purchase
comparable insurance, and any additional insurance necessitated by local
conditions or regulations, for each of the proposed breweries.
INTELLECTUAL PROPERTY
The Company regards the trademarks it adopts and uses in connection with
the sale of its products as having substantial value and as being an important
factor in the marketing of its products. The Company's policy is to pursue
registration of the trademarks it adopts and uses in connection with the sale of
its products whenever possible, and to oppose vigorously any infringement of its
marks. The
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Company has applied to register the marks CROOKED ISLAND and DRAGON'S BACK INDIA
PALE ALE in Hong Kong, China and Taiwan. The Crooked Island Ale application was
accepted for registration in Taiwan, and is pending in Hong Kong. The
application was rejected in China because of its similarity to a prior
registered mark; the Company has appealed this rejection. The Company is not
aware of any infringing uses of its trademarks by third parties that could
materially affect its current business.
While it has not obtained patents on its recipes, AmBrew International
believes that it is not standard practice in the industry to obtain such
patents.
EMPLOYEES
As of June 30, 1996, the South China Brewery had seven full-time employees.
The Company's future success will depend, in part, on its ability to continue to
attract, retain and motivate highly qualified marketing and managerial
personnel. Each of James L. Ake, Executive Vice President, Chief Operating
Officer and Secretary of the Company, David K. Haines, Managing Director for
Hong Kong Operations, and Edward Cruise Miller, the head brewer of the South
China Brewery, have employment agreements. The employment agreements of Messrs.
Ake and Haines contain non-competition clauses which provide, in pertinent part,
that during the term of the agreements, as they may be extended, and for a
period of two years thereafter, Mr. Ake or Mr. Haines, as the case may be, shall
not engage in any activity competitive with the business of the Company in any
region in which the Company does business, shall not solicit or attempt to
solicit customers or employees of the Company and shall not otherwise interfere
with the Company's business relationships. None of the South China Brewery's
employees are represented by a collective bargaining agreement, nor has the
South China Brewery experienced work stoppages. The South China Brewery believes
that relations with its employees are satisfactory.
LEASES
The South China Brewery leases brewing and storage space in the Vita Tower
at 29 Wong Chuk Hang, Aberdeen, Hong Kong under two leases at a current monthly
rent of $8,200. The leases expire in September 1997 and April 1998. The South
China Brewery has the option to extend each of the leases six years beyond their
original term at a rent to be agreed by the parties.
The brewing operations are in a 3,600 gross square foot space on the second
floor of a 23-story building. The storage facility is a 2,000 square foot space
for dry package goods (bottles, caps, labels). The plant is a 20-barrel system
which means that it is capable of brewing 20 barrels of product with each
brewing cycle. Twenty barrels (each barrel is 31 gallons) equates to
approximately 260 cases of 24-355 ml. bottles or 75 30-liter kegs. Annual
capacity is approximately 70,000 cases.
LEGAL PROCEEDINGS
The South China Brewery is not currently involved in any material pending
legal proceedings and is not aware of any material legal proceedings threatened
against it.
THE MERGER
Prior to the date of this Prospectus, Craft, a British Virgin Islands
company holding substantially all of the capital stock of South China and SCBC,
the companies that operate the South China Brewery, amalgamated with AmBrew
International, a newly formed company. AmBrew International is the surviving
company as a result of the Merger. Each stockholder of Craft received one share
of Common Stock of AmBrew International for each share of Craft capital stock
previously held by such stockholder so that the holders and amounts held of
Common Stock are identical to the former holders and amounts held of Craft
capital stock. AmBrew International's current sole activity is to act as a
holding company for substantially all of the shares of capital stock of South
China and SCBC. It is intended that AmBrew International will also hold the
interests in wholly-owned subsidiaries and majority-owned joint ventures that
the Company plans to form to operate the proposed expansion breweries. See
' -- Proposed Expansion Breweries.'
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Company's directors, officers and
significant employee and their ages as of the date hereof:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Peter W. H. Bordeaux......................... 48 Chairman of the Board of Directors
Federico G. Cabo Alvarez..................... 51 Deputy Chairman of the Board of Directors
James L. Ake................................. 51 Executive Vice President, Chief Operating Officer and
Secretary
Norman H. Brown, Jr.(1)(2)................... 49 Director
John F. Beaudette(2)(3)...................... 39 Director
Wyndham H. Carver(1)(2)...................... 52 Director
David K. Haines.............................. 30 Director and Managing Director for Hong Kong Operations
Joseph E. Heid(1)(3)......................... 50 Director
John Campbell(4)............................. 56 Director
Tonesan Amissah-Furbert(4)................... 30 Director
Edward C. Miller............................. 26 Head Brewer
</TABLE>
Each of the directors was elected as of June 5, 1996. Each of the officers
was appointed to his respective position with the Company as of June 5, 1996,
the date of incorporation of AmBrew International.
(1) Messrs. Brown, Carver and Heid are members of the Stock Option Committee.
See ' -- Stock Option Plan.'
(2) Messrs. Brown, Beaudette and Carver are members of the Compensation
Committee.
(3) Messrs. Beaudette and Heid are members of the Audit Committee.
(4) Mr. Campbell and Ms. Furbert, attorneys in the law firm acting as the
Company's Bermuda counsel, have been appointed directors of the Company in
accordance with Bermuda local requirements applicable to non-publicly traded
Bermuda companies. They will resign as directors upon consummation of this
Offering.
Mr. Bordeaux has been Chairman of the Board of Directors of AmBrew
International since June 5, 1996 and has been associated with its subsidiaries
since August 9, 1994. Mr. Bordeaux joined New Orleans-based Sazerac Company,
Inc. ('Sazerac'), the tenth largest United States producer, importer and
exporter of spirits as well as a large U.S. distributor of wine, beer and
non-alcoholic beverages, in 1980. Since 1982, Mr Bordeaux has been the Chief
Executive Officer and President of Sazerac. In addition, Mr. Bordeaux has served
as Chairman of Concorde Holdings Limited (Beijing), a distributor of alcohol and
non-alcohol beverages ('Concorde'), since November 1994 and as President, since
1992, of Leestown Company, Inc., which owns the world's largest bourbon
distillery. Mr. Bordeaux is Vice Chairman of the Board of the National
Association of Beverage Importers, a Board Member and member of the Executive
Committee of the Board of the World Trade Center, New Orleans, Chairman of the
International Advisory Council of Hibernia National Bank (New Orleans) and a
member of the Executive Commitee of the Board and Treasurer of Episcopal Housing
for Seniors, Inc.
Mr. Ake has been the Executive Vice President, Chief Operating Officer and
Secretary of AmBrew International since June 5, 1996 and has been associated
with its subsidiaries since August 9, 1994. From 1993 to July 1996, Mr. Ake
served as the Director of Financial Analysis and Planning for Sazerac and was
responsible for expansion of operations overseas with emphasis on ventures in
the Pacific Rim countries. In addition, from 1994 to July 1996, Mr. Ake has
seved as Managing Director of Concorde. Prior to joining Sazerac, Mr. Ake was
the Director of Planning of Zapata-Haynie Corporation in Hammond, Louisiana, the
largest fishing company in the United States, where Mr. Ake was responsible for
corporate planning and oversaw profitability and development of various
departments. Mr. Ake is a registered engineer and is a member of the Board of
Directors of the Japan-Louisiana Friendship Foundation.
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Mr. Beaudette has been a director of AmBrew International since June 5,
1996 and has been associated with its subsidiaries since April 27, 1995. Mr.
Beaudette has been President of BPW Holding LLC, a beverage investment and
consulting company, and its predecessor, since February 1995. Mr Beaudette has
also been Executive Vice President and General Manager of MHW, Ltd., a beverage
alcohol importer, distributor and service company located in Manhasset, New
York, since 1994. From 1992 to 1994, Mr. Beaudette was Vice President and Chief
Financial Officer of Monsieur Henri Wines, Ltd. and from 1988 to 1992, he was
Director of Planning at PepsiCo Wines and Spirits International. Both companies
were involved in the United States and Canadian marketing and distribution of
imported wines and spirits from around the world.
Mr. Brown has been a director of AmBrew International since June 5, 1996
and has been associated with its subsidiaries since August 9, 1994. Mr. Brown
has been a Managing Director of Donaldson, Lufkin & Jenrette in the Investment
Banking Division since 1985. In this capacity, Mr. Brown acts as Head of the
Metals and Mining Industrial Coverage Group and as Co-Head of Industrial New
Business in Canada. Mr. Brown is a director of Gaylord Container Corporation, a
manufacturer of paper, box board and corrugated cardboard.
Mr. Cabo has been Deputy Chairman of the Board of Directors since June 5,
1996 and has been associated with its subsidiaries since August 9, 1994. Since
1970, Mr. Cabo has been Chief Executive Officer and President of Cabo
Distributing Company, Inc., formerly a distributor of Mexican beers in the
United States and currently a producer of beer and spirits.
Mr. Carver has been a director of AmBrew International since June 5, 1996.
Since 1995, Mr. Carver has been on a two-year secondment from Grand Metropolitan
PLC ('Grand Met'), an international producer, distributor, wholesaler and
retailer of spirits, wines and foods, to the British Department of Trade and
Industry where Mr. Carver is a Latin American export promoter. Mr. Carver has
served in a variety of capacities on behalf of International Distillers &
Vintners, Ltd., an international producer and distributor of spirits and wine
and a subsidiary of Grand Met ('IDV'), since 1965, including Managing Director
of Wyvern International, the marketing division of IDV, and Regional Director
for IDV in the Caribbean and Central America.
Mr. Haines has been the Managing Director of Hong Kong Operations of AmBrew
International since June 5, 1996. Since August 9, 1994, Mr. Haines has devoted
his efforts to establishing and developing the South China Brewery. Before his
involvement with the Company, Mr. Haines practiced clinical psychology for one
year in Vail, Colorado and was in private practice as a psychologist for two
years in Hong Kong.
Mr. Heid has been a director of AmBrew International since June 5, 1996.
Mr. Heid has been Senior Vice President of Sara Lee Corporation ('Sara Lee'), an
international food and consumer products company, and Chief Executive Officer of
Sara Lee Personal Products -- North and South America, a line of business
responsible for Sara Lee's brands in apparel and accessories in North and South
America, since 1996, President and Chief Executive Officer of Sara Lee Personal
Products -- Pacific Rim, a line of business responsible for Sara Lee's brands in
apparel and accessories in the Pacific Rim, since 1994 and Vice President of
Sara Lee since 1992. From 1988 to 1992, Mr. Heid served as President of Guinness
America, Inc. ('Guinness'), a holding company of Guinness PLC's United States
ventures, and Executive Vice President and Chief Operating Officer of United
Distillers North America, Inc., a subsidiary of Guinness that imports, produces,
markets and sells alcoholic beverages.
Mr. Campbell has been a director of AmBrew International since June 5, 1996
and a partner of the law firm of Appleby, Spurling & Kempe since 1972.
Ms. Furbert has been a director of AmBrew International since June 5, 1996
and an associate with the law firm of Appleby, Spurling & Kempe since 1989.
Edward Cruise Miller has been the Head Brewer at the South China Brewery
since May 15, 1995. From June 1994 through May 1995, Mr. Miller was one of five
brewers at the Thomas Kemper Brewery, a subsidiary of Hart Brewing Company, in
Poulsbo, Washington. From November 1990 through May 1994, Mr. Miller was
employed at Broad Ripple Brew Company, a brew pub in Indianapolis, Indiana. He
was an Assistant Brewer at Broad Ripple from November 1990 through December 1992
and was Head Brewer from January 1993 through May 1994.
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Directors of the Company were elected at a special meeting of the Company's
stockholders on June 5, 1996, and thereafter will be elected annually at a
general meeting of stockholders. The next annual meeting of stockholders is
scheduled for the second Tuesday of March, 1997.
DIRECTORS' COMPENSATION
Messrs. Bordeaux and Cabo will receive an annual fee of $20,000 and the
remaining directors will receive an annual fee of $10,000. No directors' fees
have been paid to date.
EXECUTIVE COMPENSATION
Other than pursuant to the agreements described in the next paragraph and
other than directors' fees, none of the officers of AmBrew International has
received any salary, bonus or long-term incentive or other compensation from the
Company's inception through April 30, 1996. The Company has no long-term
incentive compensation plans other than the Stock Option Plan. No options have
been granted to the Company's officers or directors under the plan to date.
Although the Company has no formal bonus plan, the Compensation Committee of the
Board, in its discretion, may award bonuses to executive officers of the
Company. The Company has not paid bonuses in the past but in the future may pay
bonuses based on individual and Company performance. The Company does not
provide for deferred awards.
The Company has entered into an employment agreement with David K. Haines,
the Company's Managing Director for Hong Kong Operations. Pursuant to that
agreement, Mr. Haines will manage the South China Brewery. Mr. Haines' annual
salary will be approximately $60,000. From September 1994 through April 30, 1996
Mr. Haines has received approximately $71,927 in salary. Mr. Haines' employment
agreement will expire in July 1998. The Company has entered into an employment
agreement with James L. Ake, the Company's Executive Vice President and Chief
Operating Officer. Pursuant to that agreement, Mr. Ake will manage the Company
as directed by the Board of Directors. Mr. Ake's annual salary will be $72,000.
Mr. Ake's employment agreement will expire in June 1998. Each of the employment
agreements of Messrs. Ake and Haines contain non-competition clauses which
provide, in pertinent part, that during the term of the agreements, as they may
be extended, and for a period of two years thereafter, Mr. Ake or Mr. Haines, as
the case may be, shall not engage in any activity competitive with the business
of the Company in any region in which the Company does business, shall not
solicit or attempt to solicit customers or employees of the Company and shall
not otherwise interfere with the Company's business relationships.
STOCK OPTION PLAN
Prior to the date of this Prospectus, the Stock Option Plan was adopted by
the Company's Board of Directors and approved by its stockholders. The Company
has reserved 300,000 authorized but unissued shares of Common Stock for issuance
under the Stock Option Plan. The purpose of the Stock Option Plan is to provide
key employees (including officers and directors) and independent contractors of
AmBrew International (including its subsidiaries) with additional incentives by
increasing their equity ownership in the Company.
Options granted under the Stock Option Plan are intended to qualify as
incentive stock options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the 'Code') ('ISOs'). The Plan is intended to satisfy the
conditions of Section 16 of the Exchange Act pursuant to Rule 16b-3.
The Stock Option Plan will be administered by a committee of the Company's
Board of Directors comprised of at least two non-employee directors who are
'disinterested' within the meaning of Rule 16b-3 (the 'Stock Option Committee').
Subject to the terms of the Stock Option Plan, the committee administering the
plan has the sole authority and discretion to grant options, construe the terms
of the plan and make all other determinations and take all other action with
respect to the Stock Option Plan.
Options will be exercisable during the period specified by the Stock Option
Committee, except that options will become immediately exercisable in the event
of a Change in Control (as defined in the Stock Option Plan) of the Company and
in the event of certain mergers and reorganizations of the
36
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<PAGE>
Company. Generally, options will vest over a five-year period. No option will be
exercisable more than 10 years from the date of grant (or five years in the case
of ISOs granted to holders of more than 10% of the Common Stock) or after the
option holder ceases to be an employee or independent contractor of the Company;
provided that the Stock Option Committee may permit an employee or independent
contractor to exercise options after such employee or independent contractor
ceases to be an employee or independent contractor, as the case may be, in the
event of certain circumstances specified in the documentation of the grant of
the option, but in no event will any option be exercisable after its expiration
date. Options are nontransferable, except by will or the laws of intestate
succession. Shares underlying options that terminate unexercised are available
for reissuance under the Stock Option Plan.
The per share exercise price of options granted under the Stock Option Plan
may not be less than 100% of the Fair Market Value (as defined in the Stock
Option Plan) of a share of the Company's Common Stock on the date of grant (or
110% in the case of ISOs granted to employees owning more than 10% of the Common
Stock).
The Company has agreed not to grant options without the prior written
consent of the Representative for a period of thirteen (13) months following the
date of this Prospectus. See 'Shares Eligible for Future Sale' and
'Underwriting.'
INDEMNIFICATION; LIMITATION OF LIABILITY
Bermuda law permits a company to indemnify its directors and officers,
except for any act of willful negligence, willful default, fraud or dishonesty.
The Company has provided in its Bye-Laws that the directors and officers of the
Company will be indemnified and held harmless against any expenses, judgments,
fines, settlements and other amounts incurred by reason of any act or omission
in the discharge of their duty, other than in the case of willful negligence,
willful default, fraud or dishonesty.
Bermuda law and the Bye-Laws of the Company also permit the Company to
purchase insurance for the benefit of directors and officers against any
liability incurred by them for the failure to exercise the requisite care,
diligence and skill in the exercise of their powers and the discharge of their
duties, or indemnifying them in respect of any loss arising or liability
incurred by them by reason of negligence, default, breach of duty or breach of
trust. The Company intends to purchase a directors' and officers' liability
insurance policy upon consummation of this Offering.
The Company intends to enter into indemnification agreements with the
Company's officers and directors. To the extent permitted by law, the
indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature) and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
At present, there is no pending material litigation or proceeding involving
a director or officer of the Company where indemnification will be required or
permitted. In addition, the Company is not aware of any threatened material
litigation or proceeding that may result in a claim for such indemnification.
37
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<PAGE>
PRINCIPAL STOCKHOLDERS
As of the date of this Prospectus, 2,000,000 shares of Common Stock were
issued and outstanding. The following table sets forth certain information with
respect to the beneficial ownership of the Common Stock prior to this Offering
and after giving effect to this Offering (i) of each person (or group of
affiliated persons) who is known by the Company to own beneficially more than 5%
of the Common Stock, (ii) of the Company's directors and (iii) of all directors
and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL(1)
SHARES ---------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING(2)
- ---------------------------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
John F. Beaudette(3) ....................................................... 152,000 7.6% 4.4%
MHW, Ltd.
1165 Northern Boulevard
Manhasset, New York 11030
Peter W. H. Bordeaux ....................................................... 200,000 10.0% 5.8%
1 Galleria Boulevard
Metairie, Lousiana 70001
Norman H. Brown, Jr. ....................................................... 152,000 7.6% 4.4%
277 Park Avenue
New York, New York 10172
Federico G. Cabo Alvarez ................................................... 914,400 45.7% 26.5%
Cabo Distributing Co.
9657 East Rush Street
South Elmonte, California 91733
Richard Frederick Cabo ..................................................... 101,600 5.1% 3.0%
Cabo Distributing Co.
9657 East Rush Street
South Elmonte, California 91733
David K. Haines ............................................................ 380,000 19.0% 11.0%
J. P. Walsh & Co. Ltd.
Block F. (8th Floor)
3-3G Robinson Road
Hong Kong
Edmund O. Piccolino(3) ..................................................... 152,000 7.6% 4.4%
124 Rowayton Avenue
Rowayton, Connecticut 06853
Peter K. Warren(3) ......................................................... 152,000 7.6% 4.4%
1030 Ridgefield Road
Wilton, Connecticut 06897
All executive officers and directors as a group (ten persons)(3)(4)......... 1,900,000 95.0% 55.1%
</TABLE>
- ------------
(1) Assumes no exercise of the Over-allotment Option. Applicable percentage
ownership is based on 2,000,000 shares of Common Stock outstanding as of the
date hereof. Beneficial ownership is determined in accordance with the rules
of the Commission and generally includes voting or investment power with
respect to securities, subject to community property laws, where applicable.
(2) Includes 112,727 shares of Common Stock issuable pursuant to the Bridge
Notes assuming an initial public offering price per Share of $5.50.
(3) Represents shares of Common Stock held of record by BPW Holding LLC, a New
York limited liability company ('BPW'). Messrs. Beaudette (a director of the
Company), Edmund Piccolino (former Vice President of Human Resources for
Pepsi-Co International, a division of PepsiCo Inc.) and Peter Warren (former
President of Pepsi-Co International and a former director of Pepsi-Co Inc.)
each own one third of the membership interest of BPW.
(4) None of Messrs. Campbell, Carver and Heid and Ms. Amissah-Furbert, directors
of AmBrew International, beneficially own any shares of Common Stock.
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CERTAIN TRANSACTIONS
The following summary is qualified in its entirety by the agreements that
have been filed as exhibits to the Registration Statement, of which this
Prospectus forms a part.
On March 31, 1995, the South China Brewery borrowed $565,000 from Hibernia
National Bank. The loan is evidenced by a promissory note with remaining
principal payments due on September 30, 1996 and March 31, 1997 and an interest
rate equal to Citibank prime plus 0.5%. Sazerac provided a $250,000 guarantee
for the Hibernia Note. Norman H. Brown, Jr. and Federico G. Cabo Alvarez, each
directors of AmBrew International, provided standby letters of credit in the
total amount of $315,000. Peter W. H. Bordeaux is President and Chief Executive
Officer of Sazerac and Chairman of the Board of Directors of the Company as well
as Chairman of the International Advisory Council of Hibernia National Bank (New
Orleans). The amount due has been reduced to $452,000 through principal
repayments by the South China Brewery.
The South China Brewery borrowed $65,000 from BPW evidenced by a Limited
Recourse Promissory Note dated as of March 5, 1996 and due ten days after the
consummation of this Offering bearing an interest rate of 5.5%. John F.
Beaudette, a director of AmBrew International, is President of BPW, which owned
7.6% of the shares of Common Stock of the Company issued and outstanding as of
the date of this Prospectus.
In May 1996, Craft issued $370,000 principal amount of convertible Bridge
Notes to certain investors in Singapore and Hong Kong bearing an interest rate
of 12%. Holders of $250,000 principal amount of the Bridge Notes have the right
to convert such Bridge Notes, upon the consummation of this Offering, into a
maximum of that number of shares of Common Stock equal to the quotient obtained
by dividing 250,000 by the product of 0.5 and the initial public offering price
per Share. The holder of the remaining $120,000 principal amount of Bridge Notes
will be entitled to Common Stock at no additional 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 an initial public
offering price per Share of $5.50, a total of 112,727 shares of Common Stock
will be issued to holders of the Bridge Notes and 112,727 shares of Common Stock
will be issued pursuant to the Bridge Warrants.
On May 31, 1996, Sazerac, Lunar Holdings Ltd. (the previous holder of
shares currently held by David K. Haines, Managing Director of Hong Kong
Operations for the Company), BPW and Messrs. Cabo and Brown, the holders of all
of the issued and outstanding shares of South China and SCBC, exchanged such
shares for 23,750 shares of capital stock of Craft. This Share Exchange had the
effect of consolidating ownership of the South China Brewery's operating
companies in Craft.
On July 30, 1996, Craft, a British Virgin Islands company, amalgamated into
AmBrew International. AmBrew International is the surviving company and its
officers and directors remained in office after the Merger.
In addition, see 'Management' for a discussion of employment contracts with
Messrs. Ake and Haines.
In connection with this Offering, the Company has adopted a policy whereby
any further transactions between the Company and its officers, directors,
principal stockholders and any affiliates of the foregoing persons will be on
terms no less favorable to the Company than could reasonably be obtained in an
arm's length transaction with independent third parties, and that any such
transactions also be approved by a majority of the Company's disinterested
outside directors.
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DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of 10,000,000 shares of
Common Stock, par value $0.01 per share and 500,000 shares of preferred stock,
par value $0.01 per share. As of the date hereof, there were 2,000,000 shares of
Common Stock outstanding held by 29 stockholders of record.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the shareholders. The holders of
Common Stock are entitled to receive ratably the dividends, if any, that may be
declared from time to time by the Board of Directors out of funds legally
available for such dividends. The holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities. Holders of Common
Stock have no preemptive rights and no right to convert their Common Stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All the outstanding shares of Common Stock are,
and the shares of Common Stock to be issued in this Offering will be, validly
issued, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, without further stockholder approval,
to issue up to 500,000 shares of 'blank check' preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
or imposed upon unissued shares of preferred stock and to fix the number of
shares constituting any series and designations of such series.
The issuance of preferred stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of preferred stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. As of the closing of this Offering, no shares of
preferred stock will be outstanding and the Company currently has no plans to
issue any shares of preferred stock.
WARRANTS
The following is a brief summary of certain provisions of the Warrants, but
such summary does not purport to be complete and is qualified in all respects by
reference to the actual text of the warrant agreement (the 'Warrant Agreement')
among the Company, the Representative, and the Bank of New York (the 'Warrant
Agent'). A copy of the Warrant Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. As of the date
hereof, there are no Warrants outstanding. See 'Available Information.'
Exercise Price and Terms. Each Warrant entitles the registered holder
thereof to purchase, at any time over a fifty-four month period commencing six
(6) months after the date of this Prospectus, one share of Common Stock at a
price of 125% of the initial public offering price per Share, subject to
adjustment in accordance with the anti-dilution and other provisions referred to
below. The holder of any Warrant may exercise such Warrant by surrendering the
certificate representing the Warrant to the Warrant Agent, with the subscription
form thereon properly completed and executed, together with payment of the
exercise price. The Warrants may be exercised at any time in whole or in part at
the applicable exercise price until expiration of the Warrants. No fractional
shares will be issued upon the exercise of the Warrants.
The exercise price of the Warrants bears no relationship to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of the securities offered hereby.
Adjustments. The holders of the Warrants are protected against dilution of
their interests by adjustments, as set forth in the Warrant Agreement, of the
exercise price and the number of shares of Common Stock purchasable upon the
exercise of the Warrants upon the occurrence of certain events,
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including stock dividends, stock splits, combinations or reclassification of the
Common Stock, or sale by the Company of shares of its Common Stock or other
securities convertible into Common Stock at a price below the then-applicable
exercise price of the Warrants. Additionally, an adjustment would be made in the
case of a reclassification or exchange of Common Stock, consolidation or merger
of the Company with or into another corporation (other than a consolidation or
merger in which the Company is the surviving corporation) or sale of all or
substantially all of the assets of the Company in order to enable warrantholders
to acquire the kind and number of shares of stock or other securities or
property receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon the exercise of the Warrant.
Redemption Provisions. Commencing eighteen (18) months after the date of
this Prospectus, all, but not less than all, of the Warrants are subject to
redemption at $0.10 per Warrant on not less than thirty (30) days' prior written
notice to the holders of the Warrants provided the per share closing bid
quotation of the Common Stock as reported on Nasdaq equals or exceeds
$ [300% of the initial public offering price per Share] for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
on the fifth trading day prior to the date on which the Company gives notice of
redemption. The Warrants will be exercisable until the close of business on the
day immediately preceding the date fixed for redemption in such notice. If any
Warrant called for redemption is not exercised by such time, it will cease to be
exercisable and the holder will be entitled only to the redemption price.
Transfer, Exchange and Exercise. The Warrants are in registered form and
may be presented to the Warrant Agent for transfer, exchange or exercise at any
time on or prior to their expiration date five (5) years from the date of this
Prospectus, at which time the Warrants become wholly void and of no value. If a
market for the Warrants develops, the holder may sell the Warrants instead of
exercising them. There can be no assurance, however, that a market for the
Warrants will develop or continue.
The Warrants are not exercisable unless, at the time of the exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Warrants. Although the Company will use its best
efforts to have all the shares of Common Stock issuable upon exercise of the
Warrants registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
there can be assurance that it will be able to do so.
The Warrants are separately transferable immediately upon issuance.
Although the Warrants will not knowingly be sold to purchasers in jurisdictions
in which the Warrants are not registered or otherwise qualified for sale or
exemption, purchasers may buy Warrants in the after-market in, or may move to,
jurisdictions in which Warrants and the Common Stock underlying the Warrants are
not so registered or qualified or exempt. In this event, the Company would be
unable lawfully to issue Common Stock to those persons desiring to exercise
their Warrants (and the Warrants would not be exercisable by those persons)
unless and until the Warrants and the underlying Common Stock are registered, or
qualified for sale in jurisdictions in which such purchasers reside, or an
exemption from registration or qualification exists in such jurisdiction.
Warrantholder Not a Stockholder. The Warrants do not confer upon holders
any voting, dividend or other rights as stockholders of the Company.
Modification of Warrants. The Company and the Warrant Agent may make such
modifications to the Warrants as they deem necessary and desirable that do not
adversely affect the interests of the warrantholders. The Company may, in its
sole discretion, lower the exercise price of the Warrants for a period of not
less than thirty (30) days on not less than thirty (30) days' prior written
notice to the warrantholders and the Representative. Modification of the number
of securities purchasable upon the exercise of any Warrant, the exercise price
and the expiration date with respect to any Warrant requires the consent of
two-thirds of the warrantholders. No other modifications may be made to the
Warrants, without the consent of two-thirds of the warrantholders.
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BERMUDA LAW
The following discussion is based upon the advice of Appleby, Spurling &
Kempe, Bermuda counsel for the Company.
Prior to the effective date of the Registration Statement of which this
Prospectus is a part, Craft, a British Virgin Islands holding company, was
amalgamated into the Company and continues as an exempted company under the
Companies Act 1981 of Bermuda (the 'Act'). The rights of the Company's
stockholders, including those persons who will become stockholders of the
Company in connection with this Offering, are governed by Bermuda law and the
Company's Memorandum of Amalgamation and Bye-Laws. The following is a summary of
certain provisions of Bermuda law and the Company's organizational documents.
This summary is not a comprehensive description of such laws and documents and
is qualified in its entirety by appropriate reference to Bermuda law and to the
organizational documents of the Company which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
Dividends. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.
Voting Rights. Under Bermuda law, save as otherwise provided in the Act or
the Bye-laws of the Company, questions brought before a general meeting of
stockholders are decided by a majority vote of stockholders present at the
meeting, each stockholder having one vote for each share held by him save where
a question is to be decided on a show of hands in which case (subject to any
rights or restrictions for the time being lawfully attached to a class of
shares) every stockholder present shall be entitled to one vote, irrespective of
the number of shares held. The Company's Bye-Laws provide that, subject to the
provisions of the Act, any questions proposed for the consideration of the
stockholders will be decided by a simple majority of the votes cast, with each
stockholder present, or person holding proxies for any stockholder, entitled to
one vote. If a poll is requested, each stockholder present in person or by proxy
has one vote for each share held. A poll may only be requested under the
Company's Bye-Laws by (i) the Chairman of the meeting, (ii) at least three
stockholders present in person or by proxy, (iii) any stockholder or
stockholders, present in person or by proxy, holding between them not less than
10% of the total voting rights of all stockholders having the right to vote at
such meeting or (iv) a stockholder or stockholders present in person or by proxy
holding voting shares in the company on which an aggregate sum has been paid
equal to not less than 10% of the total sum paid up on all such voting shares.
Rights in Liquidation. Under Bermuda law, in the event of liquidation,
dissolution or winding up of a company, after satisfaction in full of all claims
of creditors and subject to the preferential rights accorded to any series of
preferred stock, the proceeds of such liquidation, dissolution or winding up are
distributed pro rata among the holders of common stock.
Meetings of Stockholders. Under Bermuda law, a company is required to
convene at least one general stockholders' meeting per calendar year. The
Company will hold its annual meeting in the United States. Bermuda law provides
that a special general meeting may be called by the board of directors and must
be called upon the request of stockholders holding not less than 10% of such of
the paid-up capital of the company carrying the right to vote. Bermuda law also
requires that stockholders be given at least five days' advance notice of a
general meeting but the accidental omission of notice to any person does not
invalidate the proceedings at a meeting. Under the Bye-Laws of the Company, at
least ten days' notice of the annual general meeting and of any special general
meeting must be given to each stockholder.
Under Bermuda law, the number of stockholders constituting a quorum at any
general meeting of stockholders is determined by the bye-laws of a company. The
Company's Bye-Laws provide that the presence in person or by proxy of the
holders of more than 50% of the voting capital stock of the Company constitutes
a quorum.
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Access to Books and Records and Dissemination of Information. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include a company's Certificate of Incorporation, its Memorandum of
Association (including its objects and powers) and any alteration to a company's
Memorandum of Association. The stockholders have the additional right to inspect
the bye-laws of the company, minutes of general meetings and a company's audited
financial statements, which must be presented at the annual general meeting. The
register of stockholders of a company is also open to inspection by stockholders
without charge and to members of the general public on the payment of a fee. A
company is required to maintain its share register in Bermuda but may, subject
to the provisions of the Act, establish a branch register outside Bermuda. The
Company intends to maintain a share register in New York, New York. A company is
required to keep at its registered office a register of its directors and
officers which is open for inspection for not less than two hours in each day by
members of the public without charge. Bermuda law does not, however, provide a
general right for stockholders to inspect or obtain copies of any other
corporate records.
Election or Removal of Directors. Under Bermuda law and the Company's
Bye-Laws, directors are elected at the annual general meeting and shall serve
until re-elected or until their successors are elected or appointed, unless they
are earlier removed or resign.
Under Bermuda law and the Bye-Laws of the Company, a director may be
removed at a special general meeting of stockholders specifically called for
that purpose, provided that the director was served with at least 14 days'
notice. The director has a right to be heard at the meeting. Any vacancy created
by the removal of a director at a special general meeting may be filled at such
meeting by the election of another director in his or her place or, in the
absence of any such election, by the Board of Directors.
Amendment of Memorandum of Amalgamation and Bye-Laws. Bermuda law provides
that the Memorandum of Amalgamation of a company may be amended by a resolution
passed at a general meeting of stockholders of which due notice has been given.
An amendment to the Memorandum of Amalgamation other than an amendment which
alters or reduces a company's share capital as provided in the Act, also
requires the approval of the Bermuda Minister of Finance, who may grant or
withhold approval at his discretion. The Bye-Laws may be amended by a resolution
passed by a majority of shares cast at a general meeting.
Under Bermuda law, the holders of an aggregate of no less than 20% in par
value of a company's issued share capital have the right to apply to the Bermuda
Court for an annulment of any amendment of the Memorandum of Amalgamation
adopted by stockholders at any general meeting, other than an amendment which
alters or reduces a company's share capital as provided in the Act. Where such
an application is made, the amendment becomes effective only to the extent that
it is confirmed by the Bermuda Court. An application for amendment of the
Memorandum of Amalgamation must be made within 21 days after the date on which
the resolution altering the company's memorandum is passed and may be made on
behalf of the persons entitled to make the application by one or more of their
number as they may appoint in writing for the purpose. No such application may
be made by persons voting in favor of the amendment.
Appraisal Rights and Stockholder Suits. Under Bermuda law, in the event of
an amalgamation of two Bermuda companies, a stockholder who is not satisfied
that fair value has been paid for his shares may apply to the Bermuda Court to
appraise the fair value of his shares. The amalgamation of a company with
another company (except where the amalgamation is between a holding company and
one or more of its wholly-owned subsidiaries or between two or more wholly-owned
subsidiaries of the same holding company), requires the amalgamation agreement
to be approved by the board of directors and by a meeting of the holders of
shares of the amalgamating company of which they are directors and of the
holders of each class of such shares. Under Bermuda law, an amalgamation also
requires the consent of the Bermuda Minister of Finance, who may grant or
withhold consent at his discretion.
Class actions and derivative actions are generally not available to
stockholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a stockholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of is alleged to
be beyond the corporate power of the company or is illegal or would result in
the violation
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of the company's Memorandum of Amalgamation or Bye-Laws. Furthermore,
consideration would be given by the Court to acts that are alleged to constitute
a fraud against the minority stockholders or, for instance, where an act
requires the approval of a greater percentage of the company's stockholders than
those who actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or ordering the purchase of the
shares by any shareholder, by other shareholders or by the company.
TRANSFER AGENT AND WARRANT AGENT
The Transfer Agent and Registrar for the Common Stock and the Warrant Agent
for the Warrants is the Bank of New York.
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CERTAIN FOREIGN ISSUER CONSIDERATIONS
The following discussion is based on the advice of Appleby, Spurling &
Kempe, Bermuda counsel to the Company.
The Company has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority ('BMA'). In addition, prior to this
Offering, this Prospectus will be filed with the Registrar of Companies in
Bermuda in accordance with Bermuda law.
IT MUST BE DISTINCTLY UNDERSTOOD THAT, IN GRANTING SUCH PERMISSION AND UPON
ACCEPTING THIS PROSPECTUS FOR FILING, THE BMA AND THE REGISTRAR OF COMPANIES IN
BERMUDA WILL ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF ANY SCHEMES
OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED WITH
REGARD TO THEM.
There are no limitations on the rights of non-Bermuda owners of the Common
Stock to hold or vote their shares. Because the Company has been designated as a
non-resident for Bermuda exchange control purposes, there are no restrictions on
its ability to transfer funds in and out of Bermuda or to pay dividends to
United States residents who are holders of the Company's Common Stock, other
than in respect of local Bermuda currency.
In the case of an applicant acting in a special capacity (for example, as
an executor or trustee), certificates may, at the request of the applicant,
record the capacity in which the applicant is acting. Notwithstanding the
recording of any such special capacity, the Company is not bound to investigate
or incur any responsibility in respect of the proper administration of any such
estate or trust. The Company will take no notice of any trust applicable to any
of its shares whether or not it had notice of such trust.
Under Bermuda law, the Company is an exempted company (that is, it is
exempted from the provisions of Bermuda law which stipulate that at least 60% of
the equity must be beneficially owned by Bermudians). Consents under The
Exchange Control Act 1972 of Bermuda and the regulations made thereunder have
been obtained for the issue and subsequent transfer of the shares of Common
Stock and Warrants offered by this Prospectus to and among persons not resident
in Bermuda for exchange control purposes. Persons regarded as residents of
Bermuda for exchange control purposes require specific consent under The
Exchange Control Act 1972 to purchase such Securities. The Act permits companies
to adopt bye-law provisions relating to the transfer of securities. Neither
Bermuda law, the Memorandum of Amalgamation nor the Bye-Laws of the Company
impose limitations on the right of foreign nationals or nonresidents of Bermuda
to hold the Securities or vote the Shares. Pursuant to the provisions of Section
28 of the Companies Act 1981 of Bermuda, there is no minimum subscription which
must be raised by the issue of the Securities to provide the funds required to
be provided in respect of the matters set forth in that section.
As an exempted company, the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted company the Company may not participate in certain business
transactions, including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years) without the express authorization of the
Bermuda legislature; (2) the taking of mortgages on land in Bermuda to secure an
amount in excess of $50,000 without the consent of the Bermuda Minister of
Finance; (3) the acquisition of securities created or issued by, or any interest
in, any local company or business, other than certain types of Bermuda
government securities or securities of another exempted company, partnership or
other corporation resident in Bermuda but incorporated abroad or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or under a license granted by
the Bermuda Minister of Finance. In addition, no more than 20% of the share
capital of an exempted Company may be held by Bermudians.
The Bermuda government actively encourages foreign investment in exempted
entities like the Company that are based in Bermuda but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign ownership, the Company is subject neither to taxes on its
income or dividends nor to any foreign exchange controls in Bermuda. In
addition, there is no capital gains tax in Bermuda, and profits can be
accumulated by the Company, as required, without limitation.
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TAXATION
The following discussion of United States federal income tax laws is based
upon the opinion of Howard, Darby & Levin, United States counsel to the Company.
The summary of certain Bermuda tax consequences is based upon the opinion of
Appleby, Spurling & Kempe, Bermuda counsel to the Company.
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 based
upon their individual circumstances and including the tax consequences to
investors of laws not discussed herein.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general description of the material United States
federal income tax consequences of the purchase, ownership, and sale of the
Securities. This description is for general information purposes only and is
based on the Code, Treasury Regulations promulgated thereunder and judicial and
administrative interpretations thereof, all as in effect on the date hereof and
all of which are subject to change, possibly retroactively. The tax treatment of
a holder of Securities may vary depending upon the holder's particular
situation. Certain holders (including, but not limited to, insurance companies,
tax-exempt organizations, financial institutions, persons subject to the
alternative minimum tax, dealers in the Securities, persons that have a
'functional currency' other than the U.S. dollar, persons that receive
Securities as compensation for services, and persons owning, directly or
indirectly, including by rules of attribution, 5% or more of the stock of the
Company measured by vote or value) may be subject to special rules not discussed
below. Except as discussed below with regard to persons who are not U.S.
Holders, the following summary is limited to U.S. Holders who will hold the
Securities as 'capital assets' within the meaning of Section 1221 of the Code
and not as part of a 'straddle' or 'conversion transaction' within the meaning
of Sections 1092 and 1258 of the Code. The discussion below does not address the
effect of any state or local tax law on a holder of the Securities. Persons
considering the purchase of Securities should consult their own tax advisors
concerning the application of United States state and local tax laws to their
investments and any consequences arising under the laws of any other
jurisdiction and as to United States federal tax consequences which may depend
on their particular circumstances.
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
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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.
Sale of Securities. The sale of Securities by a U.S. Holder will generally
result in the recognition of gain or loss in an amount equal to the difference
between the amount realized on the sale and the holder's adjusted basis in the
sold Securities. This will result in a long-term or short-term capital gain or
loss, depending on whether the sold Securities have been held for more than one
year. The redemption of Warrants by the Company will generally be treated as a
sale of the redeemed Warrants by the U.S. Holder.
Exercise of Warrants. The exercise of a Warrant will not generally be a
taxable event to the holder. The tax basis of Common Stock purchased on exercise
of a Warrant will include the holder's tax basis in the exercised Warrant plus
the price paid for the Common Stock.
Passive Foreign Investment Company Status. The foregoing discussion
assumes that the Company is not currently, and will not in the future be, a
'passive foreign investment company' ('PFIC'). A PFIC is a foreign corporation
(i) 75% or more of whose income is passive income or (ii) 50% or more of whose
assets produce or are held to produce passive income. The Company believes that
it has not been and will not become a PFIC. Although the Company expects to earn
sufficient active business income to avoid PFIC status, the Company may earn
passive income such as interest on working capital. Furthermore, the extent and
timing of the Company's non-passive income and of its ownership of assets that
produce non-passive income cannot be predicted with certainty. In a year in
which the Company is a PFIC, a U.S. Holder would be subject to increased tax
liability in respect of gain realized on the sale of the Securities and upon the
receipt of certain distributions on the Common Stock. A U.S. Holder holding
Common Stock can avoid this increased tax liability by making an election to be
taxed currently on its pro rata portion of the Company's income, whether or not
such income is distributed. The election can be made only if certain required
information is made available by the Company to the U.S. Internal Revenue
Service and to the U.S. Holder of Common Stock. Although there can be no
assurance, the Company currently intends to make available the information
necessary for holders to make such election in the event the Company is
classified as a PFIC.
Foreign Personal Holding Company Status. The Company believes that it has
not been and will not become a foreign personal holding company ('FPHC'). In
general terms, a foreign corporation is an FPHC if at least 60% of its gross
income for the taxable year is FPHC income and more than 50% of either the total
combined voting power of all classes of stock or the total value of all stock in
such corporation is owned (directly or indirectly) by or for five or fewer
individuals who are United States persons. FPHC income generally includes the
same items of income as passive income but the two terms are not identical.
After its initial year as an FPHC, a corporation may remain an FPHC even if only
50% of its gross income is FPHC income.
For a year in which a corporation is an FPHC, stockholders who are United
States persons are required to include in their taxable income a deemed dividend
equal to their share of the corporation's 'undistributed FPHC' income. In
general, a corporation's undistributed FPHC income is the corporation's total
taxable income (which is gross income minus allowable deductions such as
ordinary and necessary business expenses), with certain adjustments, less
dividends paid by the corporation. For any year in which it is an FPHC, the
Company presently intends to distribute sufficient dividends so that it will
have no undistributed FPHC income, to the extent practicable. Nevertheless, if
the Company is an FPHC and has undistributed FPHC income, U.S. Holders will
recognize deemed dividend income regardless of whether they receive cash
distributions from the Company.
TAXATION OF NON-U.S. HOLDERS
The following discussion of the United States federal income tax
consequences of ownership of Securities by a person that is not a U.S. Holder (a
'Non-U.S. Holder') and has no connection with the United States other than
holding its Securities assumes that the Non-U.S. Holder is not engaged in the
conduct of a trade or business within the United States for United States
federal income tax purposes. Each prospective Non-U.S. Holder should consult
with its individual tax advisor to determine the effect that its conduct of a
trade or business within the United States or the applicability of a tax treaty
may have upon its ownership of Securities.
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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. If the 25% threshold for such period is exceeded, a
portion of any dividend paid by the Company to a Non-U.S. Holder could be
subject to federal income tax withholding at the rate of 30%, unless a lower
treaty rate is applicable; the portion of the dividend that could be subject to
withholding would correspond to the portion of the Company's gross income for
the period that is effectively connected to its conduct of a trade or business
within the United States.
Sale of Securities. A Non-U.S. Holder generally will not be subject to
United States federal income tax on gain from the sale of Securities or the
redemption of Warrants.
UNITED STATES BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments in respect of the Securities may be subject to information
reporting to the United States Internal Revenue Service and to a 31% United
States backup withholding tax. In general, backup withholding will not apply,
however, to a holder who furnishes a correct taxpayer identification number or
certificate of foreign status and makes any other required certification or who
is otherwise exempt from backup withholding. Currently, in general, a U.S.
Holder will provide such certification on Form W-9 (Request for Taxpayer
Identification Number and Certification) and a Non-U.S. Holder will provide such
certification on Form W-8 (Certification of Foreign Status).
BERMUDA TAX CONSIDERATIONS
At the present time, there is no Bermuda income or profits tax, withholding
tax, capital gains tax, capital transfer tax, estate duty or inheritance tax
payable by a Bermuda company or its stockholders, other than stockholders
ordinarily resident in Bermuda. The Company has obtained an assurance from the
Minister of Finance under the Exempted Undertakings Tax Protection Act 1966
that, in the event that any legislation is enacted in Bermuda imposing any tax
computed on profits or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of an estate duty or inheritance tax,
such tax shall not, until March 28, 2016, be applicable to the Company or to any
of its operations or to the shares, warrants, debentures or other obligations of
the Company except insofar as such tax applies to persons ordinarily resident in
Bermuda and holding such shares, warrants, debentures or other obligations of
the Company or any land leased or let to the Company. Therefore, there will be
no Bermuda tax consequences with respect to the sale or exchange of the Common
Stock or the Warrants or with respect to distributions in respect of the Common
Stock or the Warrants. As an exempted company, the Company is liable to pay in
Bermuda a registration fee of $1,680 based upon its initial authorized share
capital upon amalgamation, 12,000 shares, and the premium on its shares which
fee will not exceed $25,000.00. The registration fee payable by the Company in
1996 will be $1,680.00.
OTHER COUNTRIES
The Company will likely be subject to tax on income earned in each of the
countries in which it does business (directly or through subsidiaries or joint
ventures). The Company has not to date analyzed the tax consequences of doing
business in any jurisdiction other than those described above.
48
<PAGE>
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, 3,446,060 shares of Common Stock,
1,333,333 Warrants and 112,727 Bridge Warrants will be outstanding (3,646,060
Shares and 1,533,333 Warrants if the Over-allotment Option is exercised in full)
including shares of Common Stock issuable pursuant to the Bridge Notes assuming
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, 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 will convert such Bridge Notes,
upon the consummation of this Offering, into 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 the Bridge Notes and the Bridge Warrants or
(y) debt securities issued to non-affiliated third parties in
49
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<PAGE>
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 (34,460 shares immediately after
completion of this Offering or 36,460 shares if the Over-allotment Option is
exercised in full, in each case including 112,727 shares of Common Stock issued
pursuant to the Bridge Notes assuming 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 Rule 144 are also subject to
certain requirements relating to the manner and notice of sale and the
availability of current public information about the Company.
The Company has reserved 300,000 shares of Common Stock for issuance under
the Stock Option Plan. At appropriate times subsequent to completion of the
Offering, the Company may file registration statements under the Securities Act
to register the Common Stock to be issued under this plan. After the effective
date of such registration statement, and subject to the lock-up agreement
executed by existing shareholders, shares issued under this plan will be freely
tradeable without restriction or further registration under the Securities Act,
unless acquired by affiliates of the Company.
Prior to this Offering, there has been no market for the Common Stock or
Warrants. No predictions can be made with respect to the effect, if any, that
public sales of shares of the Common Stock or Warrants or the availability of
shares or Warrants for sale will have on the market price of the Common Stock or
Warrants after this Offering. Sales of substantial amounts of the Common Stock
or Warrants in the public market following this Offering, or the perception that
such sales may occur, could adversely affect the market price of the Common
Stock and Warrants or the ability of the Company to raise capital through sales
of its equity securities.
50
<PAGE>
<PAGE>
UNDERWRITING
The Underwriters named below (the 'Underwriters'), for whom National
Securities Corporation is acting as Representative, have severally agreed,
subject to the terms and conditions of the Underwriting Agreement (the
'Underwriting Agreement') to purchase from the Company and the Company has
agreed to sell to the Underwriters on a firm commitment basis, the respective
number of Shares and Warrants set forth opposite their names:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNDERWRITER SHARES WARRANTS
------------ --------- ---------
<S> <C> <C>
National Securities Corporation...............................................
--------- ---------
Total.................................................................... 1,333,333 1,333,333
--------- ---------
--------- ---------
</TABLE>
The Underwriters are committed to purchase all the Shares and Warrants
offered hereby, if any of such Securities are purchased. The Underwriting
Agreement provides that the obligations of the several Underwriters are subject
to conditions precedent specified therein.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities to the public at the initial public
offering prices set forth on the cover page of this Prospectus and to certain
dealers at such prices less concessions not in excess of $ per Share and
$ per Warrant. Such dealers may re-allow a concession not in excess of
$ per Share and $ per Warrant to certain other dealers. After the
commencement of the Offering, the public offering prices, concession and
reallowance may be changed by the Representative.
The Representative has informed the Company that it does not expect sales
to discretionary accounts by the Underwriters to exceed five percent (5%) of the
Securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make. The Company has also
agreed to pay to the Representative a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds derived from the sale of the Securities
underwritten, of which $50,000 has been paid to date.
The Company has granted to the Underwriters an over-allotment option,
exercisable during the forty-five (45) day period from the date of this
Prospectus, to purchase up to an additional 200,000 shares of Common Stock
and/or 200,000 Warrants at the initial public offering price per Share and
Warrant, respectively, offered hereby, less underwriting discounts and the
non-accountable expense allowance. Such option may be exercised only for the
purpose of covering over-allotments, if any, incurred in the sale of the
Securities offered hereby. To the extent such option is exercised in whole or in
part, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the number of the additional Securities proportionate to
its initial commitment.
In connection with this Offering, the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase from the Company
up to 133,333 shares of Common Stock and/or 133,333 warrants. The
Representative's Warrants are initially exercisable at a price of $ per
share [125% of the initial public offering price per Share] of Common Stock and
$ [125% of the initial public offering price per Warrant] per warrant each
entitling the holder thereof to purchase one share of Common Stock at an
exercise price of 165% of the initial public offering price per share. The
Representative's Warrants may be exercised for a period of four (4) years,
commencing at the beginning of the second year after their issuance and sale and
are restricted from sale, transfer, assignment or hypothecation for a period of
twelve (12) months from the date hereof, except to officers of the
Representative. The Representative's Warrants provide for adjustment in the
number of shares of Common Stock and Warrants issuable upon the exercise thereof
and in the exercise price of the Representative's Warrants as a result of
certain events, including subdivisions and combinations of the
51
<PAGE>
<PAGE>
Common Stock. The Representative's Warrants grant to the holders thereof certain
rights of registration for the securities issuable upon exercise thereof.
All officers, directors and stockholders of the Company and all holders of
any options, warrants or other securities convertible, exercisable or
exchangeable for or convertible into shares of Common Stock have agreed not to,
directly or indirectly, issue, offer, agree or offer to sell, sell, transfer,
assign, encumber, grant an option for the purchase or sale of, pledge,
hypothecate or otherwise dispose of any beneficial interest in such securities
for a period of thirteen (13) months (six months in the case of holders of
Bridge Notes) following the date of this Prospectus without the prior written
consent of the Company and the Representative other than (x) shares of Common
Stock transferred pursuant to bona fide gifts where the transferee agrees in
writing to be similarly bound or (y) securities transferred through the laws of
descent. An appropriate legend shall be marked on the face of certificates
representing all such securities.
The Company has agreed not to, directly or indirectly, without the prior
written consent of the Representative, issue, sell, agree or offer to sell,
grant an option for the purchase or sale of, or otherwise transfer or dispose of
any of its securities for a period of thirteen (13) months following the date of
this Prospectus, except (x) pursuant to options existing on the date of this
Prospectus and pursuant to the exercise of the Warrants and the Representative's
Warrants or pursuant to the terms of the Bridge Notes and the Bridge Warrants or
(y) debt securities issued to non-affiliated third parties in connection with
bona fide business acquisitions and/or expansions consistent with the Company's
business plans as generally described in this Prospectus.
The Company has agreed until December 31, 1997, if requested by the
Representative, to use its best efforts to nominate for election to the
Company's Board of Directors one person designated by the Representative. In the
event the Representative elects not to exercise such right, the Representative
may designate a person to receive all notices of meetings of the Company's Board
of Directors and all other correspondence and communications sent by the Company
to its Board of Directors and to attend all such meetings of the Company's Board
of Directors. The Company has agreed to reimburse designees of the
Representative for their out-of-pocket expenses incurred in connection with
their attendance of meetings of the Company's Board of Directors.
Although the Representative has been in business for over 40 years, the
Representative has participated in only nine public offerings as an underwriter
during the last five years. Prospective purchasers of the Securities offered
hereby should consider the Representative's limited experience in evaluating an
investment in the Company.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. Consequently, the initial public offering prices of the
Securities have been determined by negotiation between the Company and the
Representative and do not necessarily bear any relationship to the Company's
asset value, net worth, or other established criteria of value. The factors
considered in such negotiations, in addition to prevailing market conditions,
included the history of and prospects for the industry in which the Company
competes, an assessment of the Company's management, the prospects of the
Company, its capital structure, the market for initial public offerings and
certain other factors as were deemed relevant.
Upon the exercise of any Warrants more than one year after the date of this
Prospectus, which exercise was solicited by the Representative, and to the
extent not inconsistent with the guidelines of the National Association of
Securities Dealers, Inc. and the Rules and Regulations of the Commission, the
Company has agreed to pay the Representative a commission which shall not exceed
five percent (5%) of the aggregate exercise price of such Warrants in connection
with bona fide services provided by the Representative relating to any warrant
solicitation undertaken by the Representative. In addition, the individual must
designate the firm entitled to payment of such warrant solicitation fee. A
warrant solicitation fee will only be paid to the Representative or another NASD
member when such NASD member is specifically designated in writing as the
soliciting broker. However, no compensation will be paid to the Representative
in connection with the exercise of the Warrants if (a) the market price of the
Common Stock is lower than the exercise price, (b) the Warrants were held in a
discretionary account, or (c) the exercise of the Warrants is not solicited by
the Representative. Unless granted an exemption by the Commission from its Rule
10b-6 under the Exchange Act, the Representative will be prohibited from
engaging in any market-making activities with regard to the Company's securities
for the period
52
<PAGE>
<PAGE>
from nine (9) business days (or other such applicable periods as Rule 10b-6 may
provide) prior to any solicitation of the exercise of the Warrants until the
later of the termination of such solicitation activity or the termination (by
waiver or otherwise) of any right the Representative may have to receive a fee.
As a result, the Representative may be unable to continue to provide a market
for the Common Stock or Warrants during certain periods while the Warrants are
exercisable. If the Representative has engaged in any of the activities
prohibited by Rule 10b-6 during the periods described above, the Representative
undertakes to waive unconditionally its rights to receive a commission on the
exercise of such Warrants.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement that is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. See 'Available Information.'
LEGAL MATTERS
The validity of the Securities offered hereby and certain other matters of
Bermuda law will be passed upon for the Company by Appleby, Spurling & Kempe,
Bermuda counsel to the Company. Woo, Kwan, Lee & Lo has acted as Hong Kong
counsel to the Company to advise on certain matters of Hong Kong law in relation
to the Share Exchange and the section entitled 'Business -- Government
Regulation -- Hong Kong Regulation.' Certain United States tax matters described
under 'Taxation' will be passed upon for the Company by Howard, Darby & Levin,
New York, New York, United States counsel for the Company. Orrick, Herrington &
Sutcliffe, New York, New York, has acted as counsel to the Underwriters in
connection with this Offering.
EXPERTS
The financial statements and schedules included elsewhere in this
Registration Statement, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen & Co., independent public
accountants, as indicated in their reports with respect thereto and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
AVAILABLE INFORMATION
Pursuant to the requirements of the Act, the Company has filed with the
Commission a registration statement on Form S-1 (the 'Registration Statement')
relating to the Securities offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Additional information concerning the Company and the Securities may
be found in the Registration Statement, including the exhibits and schedules
thereto, which may be inspected at the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of all or any portion of the Registration Statement may be obtained from
the Public Reference Section of the Commission, upon payment of prescribed fees.
The Company will furnish its shareholders with annual reports within 90
days of the end of each fiscal year containing audited financial statements and
intends to furnish quarterly reports containing selected unaudited financial
data for the first three quarters of each fiscal year within 45 days of the end
of each such fiscal quarter (in each case prepared in accordance with United
States generally accepted accounting principles).
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
53
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
<PAGE>
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
Report of Independent Public Accountants.............................................................. F-2
Consolidated Balance Sheets as of October 31, 1994 and 1995 (Audited) and April 30, 1996
(Unaudited).......................................................................................... F-3
Consolidated Statements of Operations for the period from August 31, 1993 to October 31, 1994 and year
ended October 31, 1995 (Audited) and for the Six Months ended April 30, 1995 and 1996 (Unaudited).... F-4
Consolidated Statements of Cash Flows for the period from August 31, 1993 to October 31, 1994 and year
ended October 31, 1995 (Audited) and for the Six Months ended April 30, 1995 and 1996 (Unaudited).... F-5
Consolidated Statements of Changes in Shareholders' Equity for the period from August 31, 1993 to
October 31, 1994 and year ended October 31, 1995 (Audited) and for the Six Months ended April 30,
1996 (Unaudited)..................................................................................... F-6
Notes to Consolidated Financial Statements............................................................ F-7
BALANCE SHEET OF
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
Report of Independent Public Accountants.............................................................. F-19
Balance Sheet as of June 10, 1996..................................................................... F-20
Note to the Balance Sheet............................................................................. F-21
</TABLE>
F-1
<PAGE>
<PAGE>
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.
ARTHUR ANDERSEN & CO.
Certified Public Accountants
Hong Kong
Hong Kong,
July 30, 1996.
F-2
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 1994 AND 1995 (AUDITED) AND
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
--------------- -------------- ---------------
(AUDITED) (AUDITED) (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 197,752 $102,248 $ 6,232
Accounts receivable, net............................................ -- 21,680 61,162
Inventories......................................................... -- 22,922 29,585
Other current assets................................................ -- 391 12,403
--------------- -------------- ---------------
Total current assets........................................ 197,752 147,241 109,382
Rental, utility and other deposits.................................... 9,433 35,174 35,174
Deferred tax assets................................................... 1,536 49,096 54,243
Equipment and capital leases, net..................................... 10,295 634,767 662,746
Deferred stock issuance costs......................................... -- -- 31,468
--------------- -------------- ---------------
Total assets................................................ $ 219,016 $866,278 $ 893,013
--------------- -------------- ---------------
--------------- -------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term bank loan, current portion................................ $ -- $113,000 $ 452,000
Capital lease obligations, current portion.......................... -- 13,284 12,858
Accrued liabilities................................................. 182 39,294 36,698
Shareholders' loans................................................. 2,490 85,638 85,638
--------------- -------------- ---------------
Total current liabilities................................... 2,672 251,216 587,194
Long-term bank loan................................................... -- 395,500 --
Capital lease obligations............................................. -- 30,221 24,864
--------------- -------------- ---------------
Total liabilities........................................... 2,672 676,937 612,058
--------------- -------------- ---------------
Commitments...........................................................
Shareholders' equity:
Common stock........................................................ 1 645 20,000
Additional paid-in capital.......................................... -- -- 535,460
Subscription monies received in advance............................. 224,119 437,156 --
Accumulated deficit................................................. (7,776) (248,460) (274,505)
--------------- -------------- ---------------
Total shareholders' equity.................................. 216,344 189,341 280,955
--------------- -------------- ---------------
Total liabilities and shareholders' equity.................. $ 219,016 $866,278 $ 893,013
--------------- -------------- ---------------
--------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM AUGUST 31, 1993 TO OCTOBER 31, 1994 AND
YEAR ENDED OCTOBER 31, 1995 (AUDITED) AND FOR THE
SIX MONTHS ENDED APRIL 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
PERIOD ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30, APRIL 30,
1994 1995 1995 1996
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
Net sales................................................ $ -- $ 63,707 $ -- $ 244,753
Cost of sales............................................ -- (38,960) -- (43,055)
------------ ------------ ---------- ------------
Gross profit........................................ -- 24,747 -- 201,698
Selling, general and administrative expenses............. (9,312) (292,888) (97,042) (207,094)
Interest expense, net.................................... -- (17,838) (1,779) (24,908)
Other expenses, net...................................... -- (2,265) -- (888)
------------ ------------ ---------- ------------
Loss before income taxes............................ (9,312) (288,244) (98,821) (31,192)
Income tax benefit....................................... 1,536 47,560 16,305 5,147
------------ ------------ ---------- ------------
Net loss............................................ $ (7,776) $ (240,684) $ (82,516) $ (26,045)
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
Net loss per common share................................ $ -- $ (0.12) $ (0.04) $ (0.01)
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
Weighted average number of shares outstanding............ 2,067,273 2,067,273 2,067,273 2,067,273
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM AUGUST 31, 1993 TO OCTOBER 31, 1994 AND
YEAR ENDED OCTOBER 31, 1995 (AUDITED) AND FOR THE
SIX MONTHS ENDED APRIL 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
PERIOD ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30, APRIL 30,
1994 1995 1995 1996
------------ ----------- ------------ ------------
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $ (7,776) $(240,684) $ (82,516) $(26,045)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation................................ -- 21,997 -- 31,119
Deferred income tax......................... (1,536) (47,560) (16,305) (5,147)
Increase in operating assets:
Accounts receivable, net............... -- (21,680) -- (39,482)
Inventories............................ -- (22,922) -- (6,663)
Other current assets................... -- (391) (2,744) (12,012)
Rental, utility and other deposits..... (9,433) (25,741) (8,000) --
Increase (Decrease) in operating
liabilities:
Accrued liabilities.................... 182 39,112 4,045 (2,596)
------------ ----------- ------------ ------------
Net cash used in operating activities....... (18,563) (297,869) (105,520) (60,826)
------------ ----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment............................ (10,295) (595,037) (543,004) (59,098)
------------ ----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock........... 1 644 -- --
Subscription monies received in advance.......... 224,119 213,037 24,905 117,659
Stock issuance costs paid........................ (31,468)
Shareholders' loan............................... 2,490 83,148 258 --
New bank loan.................................... -- 565,000 565,000 --
Repayment of bank loan........................... -- (56,500) -- (56,500)
Repayment of capital lease obligations........... -- (7,927) -- (5,783)
------------ ----------- ------------ ------------
Net cash provided by financing activities... 226,610 797,402 590,163 23,908
------------ ----------- ------------ ------------
Increase (Decrease) in cash........................... 197,752 (95,504) (58,361) (96,016)
Cash at beginning of period........................... -- 197,752 197,752 102,248
------------ ----------- ------------ ------------
Cash at end of period................................. $197,752 $ 102,248 $ 139,391 $ 6,232
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS:
Cash paid for interest expense (net of amount
capitalized)................................... $ -- $ 15,989 $ -- $ 25,090
Cash received for interest income................ -- 3,201 2,447 1,123
Equipment purchased under capital leases......... -- 51,432 -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM AUGUST 31, 1993 TO OCTOBER 31, 1994 AND
YEAR ENDED OCTOBER 31, 1995 (AUDITED) AND FOR THE
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL SUBSCRIPTION
COMMON PAID-IN MONIES RECEIVED IN ACCUMULATED
STOCK CAPITAL ADVANCE DEFICIT
------- ---------- ------------------ -----------------
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
<S> <C> <C> <C> <C>
Balance as of August 31, 1993....................... $ -- $ -- $ -- $ --
Issuance of common stock............................ 1 -- -- --
Subscription monies received in advance............. -- 224,119 --
Net loss............................................ -- -- -- (7,776)
------- ---------- ------------------ -----------------
Balance as of October 31, 1994 (audited)............ 1 -- 224,119 (7,776)
Issuance of common stock............................ 644 --
Subscription monies received in advance............. -- -- 213,037 --
Net loss............................................ -- -- -- (240,684)
------- ---------- ------------------ -----------------
Balance as of October 31, 1995 (audited)............ 645 437,156 (248,460)
Subscription monies received in advance
(unaudited)....................................... -- -- 117,659 --
Sale of common stock and capitalization of
subscription monies received (unaudited).......... 13 554,802 (554,815) --
Effect of the Share Exchange and the
Share Split (see Note 1) (unaudited).............. 19,342 (19,342) -- --
Net loss (unaudited)................................ -- -- -- (26,045)
------- ---------- ------------------ -----------------
Balance as of April 30, 1996 (unaudited)............ $20,000 $535,460 $ -- $(274,505)
------- ---------- ------------------ -----------------
------- ---------- ------------------ -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
ORGANIZATION
American Craft Brewing International Limited, a Bermuda company ('AmBrew
International' or the 'Company'), was incorporated on June 5, 1996. On July 30,
1996, American Craft Brewing International Limited, a British Virgin Islands
company formerly known as Craft Brewing Holdings Limited ('Craft'), amalgamated
into AmBrew International (the 'Merger'). AmBrew International is the surviving
company and its officers and directors remained in office after the
amalgamation. On May 31, 1996, Craft acquired its entire interests in South
China Brewing Company Limited ('South China'), a company incorporated in Hong
Kong and formerly known as Forever Smooth Investments Limited, and SCBC
Distribution Company Limited, a company incorporated in Hong Kong and formerly
known as Arizona Limited ('SCBC,' and collectively with South China, the 'South
China Brewery'), through the exchange (the 'Share Exchange') of substantially
all of the issued and outstanding shares of capital stock of South China and
SCBC by the stockholders thereof for 23,750 shares of capital stock of Craft.
This Share Exchange had the effect of consolidating ownership of the South China
Brewery's operating companies into Craft. The Merger had the effect of
transferring all of the assets (including the capital stock of South China and
SCBC) and liabilities of Craft to AmBrew International, a company without
material assets or liabilities prior to the Merger. Concurrent with the Share
Exchange, Craft issued 1,250 shares of capital stock to certain investors in
Hong Kong. Effective as of June 19, 1996, Craft consummated an eighty-for-one
share split (the 'Share Split') (as a result 2,000,000 shares were outstanding)
which has been reflected retroactively in the accompanying April 30, 1996
balance sheet and in all per share computations. See Note 16.
Unless otherwise required by the context, the terms 'AmBrew International'
and the 'Company' include American Craft Brewing International Limited and its
subsidiaries. Details of these companies are:
<TABLE>
<CAPTION>
PERCENTAGE OF
EQUITY INTEREST
COUNTRY AND DATE ATTRIBUTABLE TO
NAME OF INCORPORATION THE GROUP PRINCIPAL ACTIVITIES
---- ------------------ --------------- ---------------------
<S> <C> <C> <C>
American Craft Brewing International ........... Bermuda June 5, 100% Holding company
Limited 1996
South China Brewing Company .................... Hong Kong 100%* Production of beer
Limited (formerly known as Forever May 26, 1994
Smooth Investments Limited)
SCBC Distribution Company Limited .............. Hong Kong 100%* Distribution of beer
(formerly known as Arizona Limited) August 31, 1993
</TABLE>
- ------------
* Pursuant to the requirement of a minimum of two registered shareholders for
companies incorporated in Hong Kong, David K. Haines, an officer of the
Company, holds one share of the capital stock of each of South China and SCBC
in trust for the benefit of AmBrew International.
PRINCIPAL ACTIVITIES
AmBrew International is a holding company for the capital stock of the
South China Brewery's operating companies: South China and SCBC. The South China
Brewery operates a micro-brewery in Hong Kong for the production of beer and ale
and distributes beer and ale produced to customers in Hong Kong. The South China
Brewery started to build its production facilities in October 1994, and
commenced commercial operations in June 1995.
F-7
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
2. BASIS OF PRESENTATION
The Merger has been accounted for as a reorganization of companies under
common control on a historical cost basis in a manner similar to a pooling of
interests because AmBrew International had the same shareholdings immediately
after the Merger that Craft had immediately before the Merger. The Share
Exchange has also been accounted for as reorganizations of companies under
common control in a manner similar to a pooling of interests because Craft had
the same shareholdings immediately after the Share Exchange that South China and
SCBC had immediately before the Share Exchange.
The consolidated financial statements as of and for the period ended
October 31, 1994, for the six months ended April 30, 1995 and as of and for the
year ended October 31, 1995 incorporate the financial statements of the South
China Brewery. The consolidated financial statements as of and for the six
months ended April 30, 1996 incorporate the financial statements of Craft and
the South China Brewery. All material inter-company balances and transactions
have been eliminated on consolidation.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. INVENTORIES
Inventories are stated at the lower of cost, on a first-in first-out basis,
or market. Costs of work-in-process and finished goods include direct materials,
direct labor and production overhead costs.
B. EQUIPMENT AND CAPITAL LEASES
Equipment and capital leases are recorded at cost. Depreciation for
financial reporting purposes is provided by the straight-line method over the
estimated useful lives of the assets as follows: brewing equipment -- 20 years;
furniture and equipment -- 4 years; and motor vehicles (capital leases) -- 4
years. Leasehold improvements are amortized by the straight-line method over the
terms of the leases or the estimated useful lives of the improvements, whichever
is shorter. All ordinary repair and maintenance costs are expensed as incurred.
Interest costs for the acquisition of certain equipment are capitalized and
amortized over the estimated useful lives of the related assets. For the period
ended October 31, 1994, year ended October 31, 1995, six months ended April 30,
1995 and six months ended April 30, 1996, interest costs capitalized were
approximately $0, $13,177, $0 and $0, respectively.
C. SALES
Sales represents the invoiced value of goods supplied to customers. Sales
are recognized upon delivery of goods and passage of title to customers.
D. INCOME TAXES
The Company accounts for income tax under the provisions of Statement of
Financial Accounting Standards No. 109, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
income taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases of assets and
liabilities.
F-8
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
E. OPERATING LEASES
Operating leases represent those leases under which substantially all the
risks and rewards of ownership of the leased assets remain with the lessors.
Rental payments under operating leases are charged to expense on the
straight-line basis over the period of the relevant leases.
F. FOREIGN CURRENCY TRANSLATION
The translation of financial statements of foreign subsidiaries into United
States dollars is performed for balance sheet accounts using the closing
exchange rate in effect at the balance sheet date and for revenue and expense
accounts using an average exchange rate during each reporting period. The gains
or losses resulting from translation are included in shareholders' equity
separately as cumulative translation adjustments. For the period ended October
31, 1994, year ended October 31, 1995, six months ended April 30, 1995 and six
months ended April 30, 1996, aggregate loss from foreign currency transactions
included in the results of operations were $0, $451, $0 and $271, respectively.
G. NET LOSS PER COMMON SHARE
Net loss per common share is computed by dividing net loss for each period
by 2,067,273, the weighted average shares of capital stock outstanding during
the year or periods, as the case may be, on the basis that the Share Exchange,
the Share Split and the Merger (see Note 1 ) had been consummated prior to the
year or periods presented. The weighted average number of shares outstanding
includes 67,273 shares which represents the effect, using the treasury stock
method, of shares issuable to the holders of the Bridge Notes (see Note 16)
since such shares will be issuable for a per share consideration that is lower
than the assumed initial public offering price of $5.50 per Share.
H. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates.
4. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Trade receivables........................................................ $ -- $22,236 $62,730
Less: Allowance for doubtful accounts.................................... -- (556) (1,568)
----------- ----------- -----------
Accounts receivable, net................................................. $ -- $21,680 $61,162
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-9
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
5. INVENTORIES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Raw materials............................................................ $ -- $16,682 $25,932
Work-in-process and finished goods....................................... -- 6,240 3,653
----------- ----------- -----------
$ -- $22,922 $29,585
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
6. EQUIPMENT AND CAPITAL LEASES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Equipment:
Leasehold improvements.............................................. $ -- $ 52,123 $ 52,123
Brewing equipment................................................... 4,489 522,869 522,869
Furniture and equipment............................................. 5,806 25,216 84,315
Capital leases:
Motor vehicles...................................................... -- 56,556 56,555
----------- ----------- -----------
Cost................................................................ 10,295 656,764 715,862
Less: Accumulated depreciation
Equipment........................................................... -- (17,284) (41,334)
Capital leases...................................................... -- (4,713) (11,782)
----------- ----------- -----------
$10,295 $ 634,767 $ 662,746
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
7. LONG-TERM BANK LOAN
Maturities of long-term bank loan are as follows:
<TABLE>
<CAPTION>
Payable during the following period: OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Within one year..................................................... $ -- $ 113,000 $ 452,000
Over one year but not exceeding two years........................... -- 395,500 --
----------- ----------- -----------
$ -- $ 508,500 $ 452,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The long-term bank loan is evidenced by a promissory note, with repayment
of $56,500 of the principal due on September 30, 1996 and the remaining $395,500
of the principal due on March 31, 1997. It bears interest at variable rates
equal to the U.S. Citibank prime rate plus 0.50%, which was 9.25% per annum as
of October 31, 1995 and 8.75% per annum as of April 30, 1996, and is secured by
a letter of credit of $315,000 provided by two directors of the Company who are
also stockholders of the Company and a corporate guarantee of $250,000 given by
a stockholder of the Company.
F-10
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
8. CAPITAL LEASE OBLIGATIONS
Future minimum lease payments under the capital leases as of October 31,
1994, October 31, 1995 and April 30, 1996, together with the present value of
the minimum lease payments are:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Payable during the following period:
Within one year..................................................... $ -- $ 17,747 $ 17,179
Over one year but not exceeding two years........................... -- 17,179 17,179
Over two years but not exceeding three years........................ -- 17,179 16,047
Over three years but not exceeding four years....................... -- 6,025 --
----------- ----------- -----------
Total minimum lease payments............................................. -- 58,130 50,405
Less: Amount representing interest....................................... -- (14,625) (12,683)
----------- ----------- -----------
Present value of minimum lease payments.................................. -- 43,505 37,722
Less: Current portion.................................................... -- (13,284) (12,858)
----------- ----------- -----------
Non-current portion...................................................... $ -- $ 30,221 $ 24,864
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
9. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Accrued interest expense................................................. $ -- $ 5,050 $ 5,991
Accrued operating lease rental........................................... -- 13,755 7,471
Other accrued liabilities................................................ 182 20,489 23,236
----------- ----------- -----------
$ 182 $39,294 $36,698
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
10. SHAREHOLDERS' LOANS
During the year ended October 31, 1995, South China borrowed $65,000 from
BPW Holding Limited ('BPW'), a shareholder of the Company. The loan is evidenced
by a limited recourse promissory note dated as of March 5, 1996, bearing
interest at a rate of 5.5% per annum and is due ten days after the consummation
of an initial public offering of shares of common stock of AmBrew International
(see Note 16). For the period ended October 31, 1994, year ended October 31,
1995, six months ended April 30, 1995 and six months ended April 30, 1996,
interest expense payable to the shareholder was approximately $0, $813, $0, and
$894, respectively.
The remaining balance of the shareholders' loans as of October 31, 1994,
October 31, 1995 and April 30, 1996 of $2,490, $20,638 and $20,638,
respectively, was unsecured, non-interest bearing and without pre-determined
repayment terms. Subsequent to April 30, 1996 and up to the date of this report,
shareholders' loans of $20,638 had been repaid.
11. COMMON STOCK
As of October 31, 1994 and October 31, 1995, the amount of common stock
recorded in the consolidated balance sheets represents the aggregate amount of
the common stock of the subsidiaries of the Company as of those dates.
As of April 30, 1996, the amount of common stock recorded in the
consolidated balance sheet represents the common stock of the Company as of that
date after giving effect to the Share Exchange and the Share Split as described
in Note 1.
F-11
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
12. INCOME TAXES
The Company and its subsidiaries are subject to income taxes on an entity
basis on income arising in or derived from the tax jurisdiction in which they
are domiciled and operate. AmBrew International is exempted from income tax in
Bermuda until 2016. The Hong Kong subsidiaries are subject to Hong Kong profits
tax at a rate of 16.5%.
Significant components of income tax benefit are:
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
PERIOD ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30, APRIL 30,
1994 1995 1995 1996
------------- ---------- ------------ ------------
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current............................................ $ -- $ -- $ -- $ --
Deferred -- Operating loss carryforwards........... 1,536 47,560 16,305 5,147
------------- ---------- ------------ ------------
$ 1,536 $ 47,560 $ 16,305 $5,147
------------- ---------- ------------ ------------
------------- ---------- ------------ ------------
</TABLE>
The reconciliation of the United States federal income tax rate to the
effective income tax rate based on the loss before income tax benefit stated in
the consolidated statements of operations is as follows:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED SIX MONTHS SIX MONTHS
OCTOBER 31, OCTOBER ENDED ENDED
1994 31, APRIL 30, APRIL 30,
------------ 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% 18.5%
------ ---------- ----------- -----------
Effective income tax rate............................... (16.5%) (16.5%) (16.5%) (16.5%)
------ ---------- ----------- -----------
------ ---------- ----------- -----------
</TABLE>
The major component of deferred tax assets relates to the tax loss
carryforwards. As of October 31, 1994, October 31, 1995 and April 30, 1996, tax
losses of approximately $10,000, $298,000 and $329,000, respectively, can be
carried forward indefinitely.
13. COMMITMENTS
A. CAPITAL COMMITMENTS
As of October 31, 1994, October 31, 1995 and April 30, 1996, the Company
had purchase commitments for the purchase of equipment and furniture of
approximately $0, $19,000 and $0, respectively.
B. LEASE COMMITMENTS
The Company leases various facilities under noncancelable operating leases
which expire at various dates through 1998. Rental expenses for the period ended
October 31, 1994, year ended October 31, 1995, six months ended April 30, 1995
and six months ended April 30, 1996 were approximately $0, $67,000, $27,000 and
$41,000, respectively. Future minimum rental payments as of October 31, 1994,
F-12
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
13. COMMITMENTS -- (CONTINUED)
October 31, 1995 and April 30, 1996, under agreements classified as operating
leases with noncancelable terms in excess of one year, are as follows:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31, APRIL 30,
1994 1995 1996
----------- ----------- -----------
(AUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C>
Payable during the following period:
Within one year..................................................... $ 52,645 $ 79,742 $ 79,742
Over one year but not exceeding two years........................... 52,645 75,355 49,032
Over two years but not exceeding three years........................ 48,258 13,548 --
----------- ----------- -----------
$ 153,548 $ 168,645 $ 128,774
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
14. OPERATING RISK
A. BUSINESS RISK
The South China Brewery commenced commercial operations in June 1995. Its
operations are subject to all the risks inherent in an emerging business
enterprise. These include, but are not limited to, high expense levels relative
to production, complications and delays frequently encountered in connection
with the development and introduction of new products, the ability to recruit
and retain accomplished management personnel, competition from established
breweries, the need to expand production and distribution, and the ability to
establish and sustain product quality.
B. CONCENTRATION OF CREDIT RISK
A substantial portion of the South China Brewery's sales are made to a
small number of customers on an open account basis and generally no collateral
is required. Details of individual customers accounting for more than 10% of the
South China Brewery's sales for the year ended October 31, 1995 and six months
ended April 30, 1996 are as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------------------
YEAR ENDED SIX MONTHS ENDED
OCTOBER 31, 1995 APRIL 30, 1996
---------------- ------------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
DaBeers Distributors Limited.............................................. 27.1% 43.5%
Delaney's (Wanchai) Limited............................................... 10.5% 28.6%
--------- ----------
--------- ----------
</TABLE>
Concentration of accounts receivable as of October 31, 1995 and April 30, 1996
is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF ACCOUNTS RECEIVABLE
--------------------------------------
AS OF AS OF
OCTOBER 31, 1995 APRIL 30, 1996
---------------- ------------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
Five largest accounts receivables......................................... 41% 82%
--- ---
--- ---
</TABLE>
The South China Brewery performs ongoing credit evaluation of each
customer's financial condition. It maintains reserves for potential credit
losses and such losses in the aggregate have not exceeded management's
projections.
F-13
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
14. OPERATING RISK -- (CONTINUED)
C. CONCENTRATION OF SUPPLIERS
The South China Brewery relies upon a single supplier (other than for
labels) for each of the raw materials used to make and package its beers.
Although to date, the South China Brewery has been able to obtain adequate
supplies of these ingredients and other raw materials in a timely manner from
these sources, if the South China Brewery were unable to obtain adequate
supplies of ingredients or other raw materials, delays or reductions in product
shipments could occur which would have an adverse effect on the South China
Brewery's business, financial condition and results of operations. As with most
agricultural products, the supply and price of raw materials used to produce the
South China Brewery's beers can be affected by factors beyond the control of the
South China Brewery, such as drought, frost, other weather conditions, economic
factors affecting growing decisions, various plant diseases and pests. If any of
the foregoing were to occur, the Company's business, financial condition and
results of operations would be adversely affected.
D. POLITICAL RISK
Substantially all of the Company's assets are located in Hong Kong. As a
result, the Company's business, financial condition and results of operations
may be influenced by the political situation in Hong Kong and by the general
state of the Hong Kong economy. On July 1, 1997, sovereignty over Hong Kong will
be transferred from the United Kingdom to the People's Republic of China
('China'), and Hong Kong will become a Special Administrative Region of China.
15. OTHER SUPPLEMENTAL INFORMATION
The following items were included in the consolidated statements of
operations:
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
PERIOD ENDED YEAR ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30, APRIL 30,
1994 1995 1995 1996
------------ ----------- ------------ ------------
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Depreciation of fixed assets
-- owned assets................................. $ -- $ 17,284 $ -- $ 24,050
-- assets held under capital leases............. -- 4,713 -- 7,069
Operating lease rental for rented premises............ -- 67,005 26,529 41,290
Advertising expenses.................................. -- 24,312 -- 12,298
Repairs and maintenance expenses...................... -- 1,155 -- 1,832
Interest expense incurred............................. -- 34,216 4,226 26,031
Less: Amount capitalized as equipment................. -- (13,177) -- --
------------ ----------- ------------ ------------
-- 21,039 4,226 26,031
Net foreign exchange loss............................. -- 451 -- 271
Interest income....................................... $ -- $ 3,201 $ 2,447 $ 1,123
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
16. SUBSEQUENT EVENTS
Subsequent to October 31, 1995, the following events took place:
a. Effective on May 31, 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 in a
transaction accounted for as a reorganization of companies under common
control in a manner similar to a pooling of interests.
F-14
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS -- (CONTINUED)
b. On May 31, 1996, Craft issued 1,250 shares of capital stock to
certain investors in Hong Kong for $300,000. The $300,000 was received
prior to April 30, 1996, and accordingly, the 1,250 shares are reflected as
outstanding in the accompanying April 30, 1996 balance sheet.
c. On June 19, 1996, Craft consummated an eighty-for-one share split
of its capital stock, which has been reflected retroactively in the
accompanying April 30, 1996 balance sheet..
d. On July 30, 1996, Craft amalgamated into AmBrew International, in a
transaction accounted for as a reorganization of companies under common
control in a manner similar to a pooling of interests. The officers and
directors of AmBrew International remained in office after the
amalgamation.
e. In May 1996, the Company issued $370,000 principal amount of notes
bearing interest at a rate of 12% per annum (the 'Bridge Notes'). Holders
of $250,000 principal amount of these notes have the right to convert such
notes, upon consummation of a contemplated initial public offering, into a
maximum number of shares of common stock of AmBrew International equal to
the quotient obtained by dividing 250,000 by the product of 0.5 and the
initial public offering price per share of such offering. The holder of the
remaining $120,000 principal amount of such notes will be repaid in cash
with the entire principal amount upon consummation of the offering and will
be entitled to common stock of the Company at no additional cost, with the
number of shares of common stock equal to the quotient obtained by dividing
120,000 by the initial public offering price per share of such offering.
Each holder of these notes will receive a warrant entitling such holder to
purchase for a period of eighteen months 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 (the 'Bridge
Warrants'). 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 net proceeds from this offering, after underwriters'
discounts and commission and other estimated expenses, are expected to be
$5,871,000, based on an assumed initial public offering price of $5.50 per
share and $.10 per warrant.
The following unaudited pro forma consolidated financial statements have
been prepared on the basis described below. The unaudited pro forma condensed
consolidated balance sheet as of April 30, 1996, has been prepared to give
effect to the following events as if such events had occurred on April 30, 1996:
(i) the aforementioned subsequent events, (ii) the repayment of the Company's
bank loan of $452,000 and the shareholder's loan from BPW of $65,000, (iii) the
repayment of $120,000 of Bridge Notes and the issuance of 21,818 shares of
common stock and 21,818 Bridge Warrants to the holders of such Bridge Notes, and
(iv) the conversion of $250,000 principal amount of Bridge Notes into 90,909
shares of common stock at an assumed conversion price of $2.75 per share and the
issuance of 90,909 Bridge Warrants. The unaudited pro forma consolidated
statements of operations for the year ended October 31, 1995 and for the six
months ended April 30, 1996, have been prepared to give effect to the following
events as if such events had occurred on November 1, 1994: (i) subsequent events
a, b and d above, (ii) the accrual of salary payable to the Company's Executive
Vice President, Chief Operating Officer and Secretary at an annual rate of
$72,000 as if such salary had become payable on and after November 1, 1994 and
(iii) the elimination of interest expense payable for the period in respect of
the bank loan and shareholders' loan as if such loans had been repaid on
November 1, 1994. The pro forma condensed financial statements are unaudited and
have been prepared using the
F-15
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS -- (CONTINUED)
historical financial statements of the Company, and are qualified entirely by
reference to, and should be read in conjunction with, such historical financial
statements. The pro forma financial statements are provided for informational
and comparative purposes only. The pro forma adjustments are based on available
financial information and certain estimates and assumptions. The pro forma
financial statements do not purport to be indicative of the results of
operations and financial position of AmBrew International had such transactions
in fact occurred on November 1, 1994, or during the periods presented or during
any future period.
i. Unaudited pro forma condensed balance sheet as of April 30, 1996:
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
PRO FORMA INITIAL PUBLIC OFFERING
PRO FORMA BEFORE INITIAL AND REPAYMENT
ACTUAL ADJUSTMENTS PUBLIC OFFERING OF DEBT PRO FORMA
-------- ----------- --------------- ----------------------- ----------
<S> <C> <C> <C> <C> <C>
Total current assets........... $109,382 $ 370,000(1) $ 479,382 $ (120,000)(2) $5,713,382
$ (517,000)(3)
$ 5,871,000(4)
Total assets................... $893,013 $ 370,000(1) $ 1,263,013 $ (120,000)(2) $6,497,013
$ (517,000)(3)
$ 5,871,000(4)
Total current liabilities...... $587,194 $ 370,000(1) $ 957,194 $ (120,000)(2) $ 70,194
$ (250,000)(5)
$ (517,000)(3)
Total liabilities.............. $612,058 $ 370,000(1) $ 982,058 $ (120,000)(2) $ 95,058
$ (250,000)(5)
$ (517,000)(3)
Total shareholders' equity..... $280,955 $ 280,955 $ 5,871,000(4) $6,401,955
$ 265,000(6)
$ (265,000)(6)
$ 250,000(5)
</TABLE>
ii. Unaudited pro forma statement of operations for year ended October 31, 1995:
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
--------- ----------- ----------
<S> <C> <C> <C>
Net sales.................................................. $ 63,707 $ 63,707
Cost of sales.............................................. (38,960) (38,960)
--------- ----------
Gross profit.......................................... 24,747 24,747
Selling, general and administrative expenses............... (292,888) $ (72,000)(8) (364,888)
Interest (expense) income, net............................. (17,838) $ 18,228(7) 390
Other expenses, net........................................ (2,265) (2,265)
--------- ----------
Loss before income taxes.............................. (288,244) (342,016)
Income tax benefit......................................... 47,560 $ 8,873(9) 56,433
--------- ----------
Net loss.............................................. $(240,684) $ (285,583)
--------- ----------
--------- ----------
Net loss per common share.................................. $ (0.12) $ (0.13)
Weighted average number of shares outstanding.............. 2,067,273 2,184,773(10)
---------
---------
</TABLE>
F-16
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS -- (CONTINUED)
iii. Unaudited pro forma statement of operations for the six months ended April
30, 1996:
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
--------- ----------- ---------
<S> <C> <C> <C>
Net sales.................................................... $ 244,753 $ 244,753
Cost of sales................................................ (43,055) (43,055)
--------- ---------
Gross profit............................................ 201,698 201,698
Selling, general and administrative expenses................. (207,094) $ (36,000)(8) (243,094)
Interest expense, net........................................ (24,908) $ 23,993(7) (915)
Other expenses, net.......................................... (888) (888)
--------- ---------
Loss before income taxes................................ (31,192) (43,199)
Income tax benefit........................................... 5,147 $ 1,981(9) 7,128
--------- ---------
Net loss................................................ $ (26,045) $ (36,071)
--------- ---------
--------- ---------
Net loss per common share.................................... (0.01) (0.02)
--------- ---------
--------- ---------
Weighted average number of shares outstanding................ 2,067,273 2,184,773(10)
--------- ---------
--------- ---------
</TABLE>
F-17
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)
(DATA WITH RESPECT TO APRIL 30, 1996 AND FOR THE SIX MONTHS ENDED APRIL 30, 1995
AND 1996 ARE UNAUDITED)
16. SUBSEQUENT EVENTS -- (CONTINUED)
Notes to unaudited pro forma financial statements:
(1) Represents the receipt of $370,000, the gross proceeds in connection with
the issuance of the Bridge Notes.
(2) Represents the repayment of $120,000 principal amount of the Bridge Notes
with the proceeds of the initial public offering.
(3) Represents the repayment of long-term bank loan of $452,000 and
shareholder's loan from BPW of $65,000.
(4) Represents the estimated proceeds receivable from the initial public
offering of 1,333,333 shares of the Company's common stock and 1,333,333
redeemable common stock purchase warrants, net of underwriting discounts
and commissions and offering expenses.
(5) Represents the conversion of $250,000 principal amount of the Bridge Notes
into shares of common stock.
(6) Represents the recognition of a non-recurring, non-cash interest expense of
$265,000 representing the original issue discount relating to the Bridge
Notes.
(7) Represents the elimination of interest expense as a result of the repayment
of the long-term bank loan and the shareholder's loan from BPW as described
in Note (3) above.
(8) Represents additional salary expense, effective upon consummation of the
initial public offering payable to the Company's Executive Vice President,
Chief Operating Officer and Secretary totalling $72,000 for the year ended
October 31, 1995 and $36,000 for the six months ended April 30, 1996.
(9) Represents the deferred tax effect relating to the aforementioned pro forma
adjustments.
(10) The pro forma weighted average number of shares outstanding is based on the
historical weighted average number of shares outstanding plus the
additional number of shares required to be issued at the assumed net
initial public offering price of $4.40 per share to obtain funds for the
repayment of the long-term bank loan of $452,000 and the shareholders' loan
from BPW of $65,000.
F-18
<PAGE>
<PAGE>
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.
ARTHUR ANDERSEN & CO.
Certified Public Accountants
Hong Kong
Hong Kong,
July 30, 1996.
F-19
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
BALANCE SHEET
AS OF JUNE 10, 1996
<TABLE>
<CAPTION>
JUNE 10, 1996
------------------------
(AMOUNTS EXPRESSED IN
UNITED STATES DOLLARS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ --
--------
--------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities...................................................................... $ 7,865
--------
Shareholders' deficits:
Common stock........................................................................ $ 120
Less: Subscription receivable....................................................... (120)
--------
--
Accumulated deficits................................................................ (7,865)
--------
Total shareholders' deficits................................................... (7,865)
--------
Total liabilities and shareholders' deficits................................... $ --
--------
--------
</TABLE>
The accompanying note is an integral part of this balance sheet.
F-20
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
NOTE TO THE BALANCE SHEET
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
American Craft Brewing International Limited, a Bermuda company ('AmBrew
International'), was incorporated in Bermuda on June 3, 1996. AmBrew
International has issued 12,000 shares of common stock of US$0.01 each, which
are unpaid as of June 10, 1996. On July 30, 1996 American Craft Brewing
International Limited, a British Virgin Islands company ('Craft'), amalgamated
with AmBrew International, which is the surviving company and its officers and
directors remained in office after the amalgamation.
F-21
<PAGE>
<PAGE>
_____________________________________ _____________________________________
NO UNDERWRITER, DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
The Company.................................... 17
Use of Proceeds................................ 18
Dividend Policy................................ 19
Capitalization................................. 20
Dilution....................................... 21
Selected Consolidated Financial Data........... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 26
Management..................................... 34
Principal Stockholders......................... 38
Certain Transactions........................... 39
Description of Securities...................... 40
Certain Foreign Issuer Considerations.......... 45
Taxation....................................... 46
Shares Eligible for Future Sale................ 49
Underwriting................................... 51
Legal Matters.................................. 53
Experts........................................ 53
Available Information.......................... 53
Index to Financial Information................. F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
1,333,333 SHARES OF COMMON STOCK
AND
1,333,333 REDEEMABLE COMMON
STOCK PURCHASE WARRANTS
---------------------------
PROSPECTUS
---------------------------
NATIONAL SECURITIES
CORPORATION
, 1996
_____________________________________ _____________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
the securities being registered. All the amounts shown are estimates, except for
the registration fee with the Securities and Exchange Commission (the 'SEC'),
the filing fee with the National Association of Securities Dealers, Inc. (the
'NASD'), and the Nasdaq SmallCap Market ('Nasdaq') quotation and the Boston
Stock Exchange (the 'BSE') listing fees.
<TABLE>
<S> <C>
SEC Registration fee........................................................... $ 8,818.38
NASD filing fee................................................................ 3,057.33
Nasdaq fees.................................................................... 5,000.00
BSE fees....................................................................... 7,750.00
Blue Sky fees and expenses..................................................... 30,000.00
Printing and engraving expenses................................................ 140,000.00
Legal fees and expenses........................................................ 275,000.00
Accounting fees and expenses................................................... 130,000.00
Transfer agent and registrar fees.............................................. 8,500.00
Miscellaneous.................................................................. 16,874.29
-----------
Total..................................................................... $625,000.00
-----------
-----------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Bermuda law permits a company to indemnify its directors and officers,
except for any act of willful negligence, willful default, fraud or dishonesty.
The Registrant has provided in its Bye-Laws that its directors and officers will
be indemnified and held harmless against any expenses, judgments, fines,
settlements and other amounts incurred by reason of any act or omission in the
discharge of their duty, other than in the case of willful negligence, willful
default, fraud or dishonesty.
Bermuda law and the Bye-Laws of the Registrant also permit the Registrant
to purchase insurance for the benefit of its directors and officers against any
liability incurred by them for the failure to exercise the requisite care,
diligence and skill in the exercise of their powers and the discharge of their
duties, or indemnifying them in respect of any loss arising or liability
incurred by them by reason of negligence, default, breach of duty or breach of
trust.
The Registrant intends to enter into indemnification agreements with its
officers and directors. To the extent permitted by law, the indemnification
agreements may require the Registrant, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities arising
from willful misconduct of a culpable nature) and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
The Registrant intends to purchase upon consummation of the offering a
directors' and officers' liability insurance policy.
The underwriting agreement (the 'Underwriting Agreement') to be entered by
the Registrant and the several underwriters party thereto (the 'Underwriters'),
will contain provisions for the indemnification of, among others, controlling
persons, directors and officers of the Registrant for certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) (i) On May 31, 1996, American Craft Brewing International Limited, a
British Virgin Islands company ('Craft') and a predecessor company of the
Registrant, issued 23,750 shares to the stockholders of South China Brewing
Company Limited ('South China') and SCBC Distribution Company Limited ('SCBC')
in exchange for substantially all of the outstanding capital stock of each of
II-1
<PAGE>
<PAGE>
South China and SCBC. The shares were issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933 (the 'Securities
Act'). Also on May 31, 1996, Craft issued 1,250 shares of its capital stock to
investors pursuant to Regulation S promulgated under the Securities Act for an
aggregate consideration of $300,000. The shares were offered and sold in an
overseas directed offering in an off-shore transaction to non-United States
persons. The shares of capital stock of Craft issued pursuant to this share
exchange and sale constitute all of the shares of Craft outstanding. On June 19,
1996, Craft consummated an eighty-for-one share split of its capital stock.
No other shares or other securities of Craft were issued prior to the
amalgamation of Craft with the Registrant. On July 30, 1996, Craft was
amalgamated under Bermuda law with the Registrant, which was a newly formed
company and which was the survivor. As a result of the amalgamation, outstanding
shares of Craft were converted into shares of the Registrant's common stock, the
convertible notes became convertible into shares of the Registrant's common
stock, and the warrants to purchase shares of Craft became warrants to purchase
shares of the Registrant's common stock, all on identical terms. The
amalgamation was, in effect, a reincorporation of Craft, in Bermuda.
(ii) In May 1996, Craft issued $370,000 in principal amount of convertible
notes and warrants pursuant to Regulation S promulgated under the Securities
Act. The notes and warrants were offered and sold in an overseas directed
offering in an off-shore transaction to non-United States persons.
(b) There were no underwriters, brokers or finders employed in connection
with any of the transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<C> <S>
1.0 -- Form of Underwriting Agreement between the Registrant and National Securities
Corporation ('National Securities').
2.0 -- Form of Plan and Agreement of Amalgamation between Craft and the Registrant
(previously filed as Exhibit 10.13).**
3.1 -- Memorandum of Amalgamation of the Registrant.**
3.2 -- Bye-Laws of the Registrant.**
4.1 -- Specimen common stock certificate.
4.2 -- Form of Warrant Agreement between the Registrant, National Securities and the Bank of
New York (including form of Redeemable Common Stock Purchase Warrant).
4.3 -- Form of Representative's Warrant Agreement between the Registrant and National
Securities (including form of Representative's Warrant).
5.0 -- Opinion of Appleby, Spurling & Kempe.**
8.1 -- Tax Opinion of Appleby, Spurling & Kempe.**
8.2 -- Tax Opinion of Howard, Darby & Levin.**
10.1 -- 1996 Stock Option Plan of the Registrant.**
10.2 -- Agreement of Lease between Ping Ping Investment Company Limited ('Ping Ping') and
South China dated as of December 12, 1994.**
10.3 -- Agreement of Lease between Ping Ping and South China dated as of May 1, 1995.**
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.**
</TABLE>
(table continued on next page)
II-2
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<C> <S>
10.10 -- Forms of Bridge Financing Purchase Agreements.**
10.11 -- Forms of Bridge Financing Convertible Notes (including forms of Bridge Financing
Warrants attached thereto).**
10.12 -- Employment Agreement, dated as of April 27, 1995, between Edward Cruise Miller and
South China.**
10.13 -- Form of Plan and Agreement of Amalgamation between Craft and the Registrant.**
10.14 -- Ratification and Exchange Agreement.**
10.15 -- Form of Employment Agreement between David K. Haines and the Registrant.
21.0 -- Subsidiaries of the Registrant.**
23.1 -- Consent of Arthur Andersen & Co.
23.2 -- Consent of Appleby, Spurling & Kempe (set forth in their Opinion filed as Exhibit 5.0
to this Registration Statement).**
23.3 -- Consent of Woo, Kwan, Lee & Lo.**
23.4 -- Consent of Howard, Darby & Levin (set forth in their Opinion filed as Exhibit 8.2 to
this Registration Statement).**
24 -- Power of Attorney of Directors and Officers (set forth on signature page of this
Registration Statement).**
27 -- Financial Data Schedule.**
99.1 -- Enforceability of Civil Liabilities Opinion of Appleby, Spurling & Kempe (set forth
in their Opinion filed as Exhibit 8.1 to this Registration Statement).**
</TABLE>
- ------------
* To be filed by amendment.
** Previously filed.
Confidential treatment requested.
(b) Financial Statement Schedules:
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
V. -- Indebtedness to Related Parties............................................. S-2
IX. -- Valuation and Qualifying Accounts........................................... S-3
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) (1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in
II-3
<PAGE>
<PAGE>
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
(c) To provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(d) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act if,
in the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
'Calculation of Registration Fee' table in the effective registration
statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(e) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(f) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on September 5, 1996.
AMERICAN CRAFT BREWING INTERNATIONAL
LIMITED
By: *
...................................
NAME: PETER W. H. BORDEAUX
TITLE: CHAIRMAN OF THE BOARD
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 3 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board of Directors and September 5, 1996
......................................... Director
PETER W. H. BORDEAUX
/S/ JAMES L. AKE Executive Vice President and Chief Operating September 5, 1996
......................................... Officer (principal executive, accounting
JAMES L. AKE and financial officer)
* Director September 5, 1996
.........................................
JOHN F. BEAUDETTE
* Director September 5, 1996
.........................................
NORMAN H. BROWN, JR.
* Deputy Chairman of the Board of Directors September 5, 1996
......................................... and Director
FEDERICO G. CABO ALVAREZ
Director
.........................................
WYNDHAM H. CARVER
* Director September 5, 1996
.........................................
DAVID K. HAINES
* Director September 5, 1996
.........................................
JOSEPH E. HEID
Director
.........................................
JOHN CAMPBELL
Director
.........................................
TONESAN AMISSAH-FURBERT
*By As Attorney-in-Fact
/s/ JAMES L. AKE
.........................................
JAMES L. AKE
</TABLE>
II-5
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the shareholders and Board of Directors of
American Craft Brewing International Limited:
We have audited, in accordance with generally accepted auditing standards
in the United States of America, the consolidated financial statements of
American Craft Brewing International Limited ('the Company') and its
subsidiaries as of October 31, 1994 and 1995 and related consolidated statements
of operations, cash flows and changes in shareholders' equity for the period
from August 31, 1993 to October 31, 1994 and the year ended October 31, 1995,
included in this registration statement and have issued our report thereon dated
July 30, 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,
July 30, 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
STATEMENT OF DIFFERENCES
The section mark shall be expressed as......... ss.
<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')......................................................................
2.0 -- Form of Plan and Agreement of Amalgamation between Craft and the Registrant (previously filed
as Exhibit 10.13).**.........................................................................
3.1 -- Memorandum of Amalgamation of the Registrant**...............................................
3.2 -- Bye-Laws of the Registrant**.................................................................
4.1 -- Specimen common stock certificate............................................................
4.2 -- Form of Warrant Agreement between the Registrant, National Securities and the Bank of New
York (including form of Redeemable Common Stock Purchase Warrant)............................
4.3 -- Form of Representative's Warrant Agreement between the Registrant and National Securities
(including form of Representative's Warrant).................................................
5.0 -- Opinion of Appleby, Spurling & Kempe.**......................................................
8.1 -- Tax Opinion of Appleby, Spurling & Kempe.**..................................................
8.2 -- Tax Opinion of Howard, Darby & Levin.**......................................................
10.1 -- 1996 Stock Option Plan of the Registrant.**..................................................
10.2 -- Agreement of Lease between Ping Ping Investment Company Limited ('Ping Ping') and South China
dated as of December 12, 1994.**.............................................................
10.3 -- Agreement of Lease between Ping Ping and South China dated as of May 1, 1995.**..............
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).**.........................................................................
10.12 -- Employment Agreement, dated as of April 27, 1995, between Edward Cruise Miller and South
China.**.....................................................................................
10.13 -- Form of Plan and Agreement of Amalgamation between Craft and the Registrant.**...............
10.14 -- Ratification and Exchange Agreement.**.......................................................
10.15 -- Form of Employment Agreement between David K. Haines and the Registrant. ....................
21.0 -- Subsidiaries of the Registrant.**............................................................
23.1 -- Consent of Arthur Andersen & Co. ............................................................
23.2 -- Consent of Appleby, Spurling & Kempe (set forth in their Opinion filed as Exhibit 5.0 to this
Registration Statement).**...................................................................
23.3 -- Consent of Woo, Kwan, Lee & Lo.**............................................................
23.4 -- Consent of Howard, Darby & Levin (set forth in their Opinion filed as Exhibit 8.2 to this
Registration Statement).**...................................................................
24 -- Power of Attorney of Directors and Officers (set forth on signature page of this Registration
Statement).**................................................................................
27 -- Financial Data Schedule.**...................................................................
99.1 -- Enforceability of Civil Liabilities Opinion of Appleby, Spurling & Kempe (set forth in their
Opinion filed as Exhibit 8.1 to this Registration Statement).**..............................
</TABLE>
- ------------
* To be filed by amendment.
** Previously filed.
Confidential treatment requested.
i
<PAGE>
EXHIBIT 1.1
OHS DRAFT
9/3/96
[Form of Underwriting Agreement - Subject to Additional Review]
1,333,333 SHARES OF COMMON STOCK
AND 1,333,333 REDEEMABLE WARRANTS
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
UNDERWRITING AGREEMENT
New York, New York
, 1996
NATIONAL SECURITIES CORPORATION
As Representative of the
Several Underwriters listed on Schedule A hereto
1001 Fourth Avenue
Suite 2200
Seattle, Washington 98154
Ladies and Gentlemen:
American Craft Brewing International Limited, a Bermuda corporation (the
"Company"), confirms its agreement with National Securities Corporation
("National") and each of the underwriters named in Schedule A hereto
(collectively, the "Underwriters," which term shall also include any underwriter
substituted as hereinafter provided in Section 11), for whom National is acting
as representative (in such capacity, National shall hereinafter be referred to
as "you" or the "Representative"), with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares ("Shares") of the Company's common stock, $.01 par
value per share ("Common Stock"), and redeemable common stock purchase warrants
(the "Redeemable Warrants"), each to purchase one share of Common Stock, set
forth in Schedule A hereto. The aggregate 1,333,333 Shares and 1,333,333
<PAGE>
<PAGE>
Redeemable Warrants will be separately tradeable upon issuance and are
hereinafter referred to as the "Firm Securities." Each Redeemable Warrant is
exercisable commencing on ____________, 1997 [6 months from the date of this
Agreement] until ____________, 2001 [60 months from the date of this Agreement],
unless previously redeemed by the Company, at an initial exercise price of
$_______ [125% of the initial public offering price] per share of Common Stock.
The Redeemable Warrants may be redeemed by the Company at a redemption price of
$.10 per Redeemable Warrant at any time after _____________, 1998 [18 months
from the date of this Agreement] on thirty (30) days' prior written notice,
provided that the closing bid price of the Common Stock 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 of the notice of redemption,
all in accordance with the terms and conditions of the Warrant Agreement (herein
defined).
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and not
jointly, up to an additional 200,000 shares of Common Stock and/or 200,000
Redeemable Warrants for the purpose of covering over-allotments, if any. Such
200,000 shares of Common Stock and 200,000 Redeemable Warrants are hereinafter
collectively referred to as the "Option Securities." The Company also proposes
to issue and sell to you warrants (the "Representative's Warrants") pursuant to
the Representative's Warrant Agreement (the "Representative's Warrant
Agreement") for the purchase of an additional 133,333 shares of Common Stock
and/or 133,333 Redeemable Warrants. The shares of Common Stock and Redeemable
Warrants issuable upon exercise of the Representative's Warrants are hereinafter
referred to as the "Representative's Securities." The Firm Securities, the
Option Securities, the Representative's Warrants and the Representative's
Securities (collectively, hereinafter referred to as the "Securities") are more
fully described in the Registration Statement and the Prospectus referred to
below.
Prior to ____________, 1996, the Company's business was operated by Craft
Brewing Holdings Limited, a British Virgin Islands company, South China Brewing
Company Limited, a Hong Kong company (formerly known as Forever Smooth
Investments Limited), and SCBC Distribution Company Limited, a Hong Kong company
(formerly known as Arizona Limited) (collectively, the "Predecessors"). The
Company represents and warrants that all of the representations and warranties
of the Company contained herein shall, except as described in the Prospectus, be
true and correct in all material respects as to the Predecessors prior to the
Reorganization.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters as of the date
hereof, and as of the Closing Date (as hereinafter defined) and each Option
Closing Date (as hereinafter defined), if any, as follows:
a. The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form S-1 (No. 333-_________), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Firm Securities, the Option Securities, the
- 2 -
<PAGE>
<PAGE>
Representative's Warrants and the Representative's Securities under the
Securities Act of 1933, as amended (the "Act"), which registration statement and
amendment or amendments have been prepared by the Company in conformity with the
requirements of the Act, and the rules and regulations (the "Regulations") of
the Commission under the Act. The Company will promptly file a further amendment
to said registration statement in the form heretofore delivered to the
Underwriters and will not file any other amendment thereto to which the
Underwriters shall have objected in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein (including, but not limited to those documents or
information incorporated by reference therein) and all information deemed to be
a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement," and the form
of prospectus in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations, is hereinafter called the "Prospectus." For purposes
hereof, "Rules and Regulations" mean the rules and regulations adopted by the
Commission under either the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as applicable.
b. Neither the Commission nor any state or foreign regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part of any thereof
and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed
with the requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement or Prospectus at the time of
filing thereof contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
c. When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date (as defined herein) and each Option
Closing Date (as defined herein), if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in strict conformity with information
furnished to the Company in
- 3 -
<PAGE>
<PAGE>
writing by or on behalf of any Underwriter expressly for use in the Preliminary
Prospectus, Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
d. Each of the Company and the Company's wholly-owned subsidiaries, South
China Brewing Company Limited, a Hong Kong company ("South China Brewery"), and
SCBC Distribution Company Limited, a Hong Kong company ("SCBC Distribution")
(such subsidiaries being the only subsidiaries that are "significant
subsidiaries" (as defined in the Rules and Regulations) of the Company, are
hereinafter referred to individually as a "Subsidiary" and collectively as the
"Subsidiaries"), has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation. Except as set forth in the Prospectus, none of the Company nor
the Subsidiaries owns an interest in any corporation, partnership, trust, joint
venture or other business entity. Each of the Company and the Subsidiaries is
duly qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing. The
Company owns, directly or indirectly, one hundred percent (100%) of the
outstanding capital stock of each of the Subsidiaries, and all of such shares
have been validly issued, are fully paid and non-assessable, were not issued in
violation of any preemptive rights, and, except as set forth in the Prospectus,
are owned free and clear of any liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever. Each of the Company and the Subsidiaries has all requisite power and
authority (corporate and other), and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; each of the Company and the Subsidiaries is and has
been doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all applicable
federal, state, local and foreign laws, rules and regulations; and none of the
Company nor the Subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the earnings,
position, prospects, value, operation, properties, business or results of
operations of the Company or the Subsidiaries. The disclosures in the
Registration Statement concerning the effects of federal, state, local, and
foreign laws, rules and regulations on the Company's and the Subsidiaries'
businesses as currently conducted and as contemplated are correct in all
material respects and do not omit to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading in
light of the circumstances under which they were made.
e. The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the pro forma and as adjusted
capitalization set forth therein on the Closing Date and each Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement, the Warrant Agreement, the
Representative's Warrant Agreement and as described in the
- 4 -
<PAGE>
<PAGE>
Prospectus. The Securities and all other securities issued or issuable by the
Company conform or, when issued and paid for, will conform, in all respects to
all statements with respect thereto contained in the Registration Statement and
the Prospectus. All issued and outstanding securities of the Company have been
duly authorized and validly issued and are fully paid and non-assessable and the
holders thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company. The Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and will conform to the
description thereof contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate action required
to be taken for the authorization, issue and sale of the Securities has been
duly and validly taken; and the certificates representing the Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities to be sold by the Company hereunder, the Underwriters
or the Representative, as the case may be, will acquire good and marketable
title to such Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever.
f. The combined financial statements of the Company and the Subsidiaries,
together with the related notes and schedules thereto, included in the
Registration Statement, each Preliminary Prospectus and the Prospectus fairly
present the financial position, income, changes in cash flow, changes in
stockholders' equity and the results of operations of the Company and the
Subsidiaries at the respective dates and for the respective periods to which
they apply and such financial statements have been prepared in conformity with
generally accepted accounting principles in the United States and the Rules and
Regulations, consistently applied throughout the periods involved and such
financial statements as are audited have been examined by Arthur Andersen LLP,
who are independent certified public accountants within the meaning of the Act
and the Rules and Regulations, as indicated in their reports filed therewith.
There has been no adverse change or development involving a prospective adverse
change in the condition, financial or otherwise, or in the earnings, position,
prospects, value, operation, properties, business, or results of operations of
the Company and the Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, since the date of the financial statements included
in the Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company and the
Subsidiaries, conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. Financial
information (including, without limitation, any pro forma financial information)
set forth in the Prospectus under the headings "Summary Consolidated Financial
Data", "Selected Consolidated Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein, and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus; and, in the case of pro forma financial information, if any, the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and
circumstances referred to therein. The amounts shown as accrued
- 5 -
<PAGE>
<PAGE>
for current and deferred income and other taxes in such financial statements are
sufficient for the payment of all accrued and unpaid federal, state, local and
foreign income taxes, interest, penalties, assessments or deficiencies
applicable to the Company and the Subsidiaries, whether disputed or not, for the
applicable period then ended and periods prior thereto; adequate allowance for
doubtful accounts has been provided for unindemnified losses due to the
operations of the Company and the Subsidiaries; and the statements of income do
not contain any items of special or nonrecurring income not earned in the
ordinary course of business, except as specified in the notes thereto.
g. Each of the Company and the Subsidiaries (i) has paid all federal,
state, local, and foreign taxes for which it is liable, including, but not
limited to, withholding taxes and amounts payable under Chapters 21 through 24
of the Internal Revenue Code of 1986, as amended (the "Code"), and has furnished
all information returns it is required to furnish pursuant to the Code or any
comparable foreign statute or regulation, (ii) has established adequate reserves
for such taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
h. No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters in connection with (i) the issuance by the Company of
the Securities, (ii) the purchase by the Underwriters of the Firm Securities and
the Option Securities from the Company and the purchase by the Representative of
the Representative's Warrants from the Company, (iii) the consummation by the
Company of any of its obligations under this Agreement, or (iv) resales of the
Firm Securities and the Option Securities in connection with the distribution
contemplated hereby.
i. Each of the Company and the Subsidiaries maintains insurance policies,
including, but not limited to, general liability, product and property
insurance, which insures each of the Company, the Subsidiaries and their
respective employees, against such losses and risks generally insured against by
comparable businesses. None of the Company nor the Subsidiaries (A) has failed
to give notice or present any insurance claim with respect to any matter,
including but not limited to the Company's business, property or employees,
under any insurance policy or surety bond in a due and timely manner, (B) has
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has failed to pay any premiums due and payable thereunder, or
(C) has failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company or any Subsidiary.
j. There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the Company
or the Subsidiaries which (i) questions the validity of the capital stock of the
Company, this Agreement, the Warrant Agreement or the Representative's Warrant
Agreement, or of any action taken or to be taken by the Company pursuant to or
in connection with this Agreement, the Warrant Agreement or the Representative's
Warrant Agreement, (ii) is required
- 6 -
<PAGE>
<PAGE>
to be disclosed in the Registration Statement which is not so disclosed (and
such proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (iii) might materially and adversely
affect the condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties, business or
results of operations of the Company and the Subsidiaries taken as a whole.
k. The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Securities, enter into this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement and to consummate the
transactions provided for in this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement; and this Agreement, the Warrant Agreement
and the Representative's Warrant Agreement have each been duly and properly
authorized, executed and delivered by the Company. Each of this Agreement, the
Warrant Agreement and the Representative's Warrant Agreement constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, and none of the Company's issue and sale
of the Securities, execution or delivery of this Agreement, the Warrant
Agreement or the Representative's Warrant Agreement, its performance hereunder
and thereunder, its consummation of the transactions contemplated herein and
therein, or the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, conflicts
with or will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of any of the Company or the Subsidiaries pursuant to the terms of
(i) the certificate of incorporation, memorandum and articles of association or
by-laws of any of the Company or the Subsidiaries, (ii) any license, contract,
collective bargaining agreement, indenture, mortgage, deed of trust, lease,
voting trust agreement, stockholders agreement, note, loan or credit agreement
or any other agreement or instrument to which any of the Company or the
Subsidiaries is a party or by which any of the Company or the Subsidiaries is or
may be bound or to which either of its or their respective properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to any of the
Company or the Subsidiaries of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over any of the Company or the
Subsidiaries or any of its or their respective activities or properties.
l. No consent, approval, authorization or order of, and no filing with,
any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement,
the Warrant Agreement and the Representative's Warrant Agreement and the
transactions contemplated hereby and thereby, including without limitation, any
waiver of any preemptive, first refusal or other rights that any entity or
person may have for the issue and/or sale of any of the Securities, except such
as have been or may be obtained under the Act or may be required under state
securities or Blue Sky laws in connection with the Underwriters' purchase and
distribution of the Firm Securities and the Option Securities, and the
Representative's Warrants to be sold by the Company hereunder.
- 7 -
<PAGE>
<PAGE>
m. All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which any of the Company or the Subsidiaries is a
party or by which it or they may be bound or to which its or their respective
assets, properties or business may be subject have been duly and validly
authorized, executed and delivered by the Company or the Subsidiaries, as the
case may be, and constitute the legal, valid and binding agreements of the
Company or the Subsidiaries, as the case may be, enforceable against each of
them in accordance with their respective terms. The descriptions in the
Registration Statement of agreements, contracts and other documents are accurate
and fairly present the information required to be shown with respect thereto by
Form S-1, and there are no contracts or other documents which are required by
the Act to be described in the Registration Statement or filed as exhibits to
the Registration Statement which are not described or filed as required, and the
exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
n. Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, none of the Company nor the
Subsidiaries has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into any
transaction other than in the ordinary course of business, or (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any change in the capital stock, or
any change in the debt (long or short term) or liabilities or material adverse
change in or affecting the general affairs, management, financial operations,
stockholders' equity or results of operations of any of the Company or the
Subsidiaries.
o. No default exists in the due performance and observance of any term,
covenant or condition of any license, contract, collective bargaining agreement,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders agreement, partnership agreement, note, loan or
credit agreement, purchase order, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which any of the Company or the Subsidiaries is a party or by
which any of the Company or the Subsidiaries may be bound or to which the
property or assets (tangible or intangible) of any of the Company or the
Subsidiaries is subject or affected.
p. Each of the Company and the Subsidiaries has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
any of the Company or the Subsidiaries by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against any of the Company or the Subsidiaries pending
before the National Labor Relations Board or any comparable foreign agency or
any lockout, strike, picketing, boycott, dispute, slowdown or stoppage pending
or threatened against or involving any of the Company or the Subsidiaries, or
any predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of any of the Company or the Subsidiaries, and
no collective bargaining
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agreement or modification thereof is currently being negotiated by any of the
Company or the Subsidiaries. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of any of the
Company or the Subsidiaries. No labor dispute with the employees of any of the
Company or the Subsidiaries exists, or, is imminent.
q. None of the Company nor any of the Subsidiaries maintains, sponsors or
contributes to any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan," or a "multiemployer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
comparable foreign program or arrangement (collectively, "ERISA Plans"). None of
the Company nor the Subsidiaries maintains or contributes, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of ERISA or
any section of a comparable foreign statute or regulation. No ERISA Plan (or any
trust created thereunder) has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code or any section of a
comparable foreign statute or regulation, which could subject the Company or the
Subsidiaries to any tax penalty on prohibited transactions and which has not
adequately been corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA or any comparable
foreign statute or regulation as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
None of the Company, the Subsidiaries or any predecessor thereof has ever
completely or partially withdrawn from a "multiemployer plan."
r. None of the Company, the Subsidiaries, nor any of its or their
respective employees, directors, stockholders, partners, or affiliates (within
the meaning of the Rules and Regulations) of any of the foregoing has taken or
will take, directly or indirectly, any action designed to or which has
constituted or which might be expected to cause or result in, under the Exchange
Act, or otherwise, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities or otherwise.
s. Except as otherwise disclosed in the Prospectus, none of the patents,
patent applications, trademarks, service marks, trade names and copyrights, and
licenses and rights to the foregoing presently owned or held by any of the
Company or the Subsidiaries, are in dispute so far as known by the Company or
are in any conflict with the right of any other person or entity. Each of the
Company and the Subsidiaries (i) owns or has the right to use, free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, defects
or other restrictions or equities of any kind whatsoever, all patents,
trademarks, service marks, trade names and copyrights, technology and licenses
and rights with respect to the foregoing, used in the conduct of its business as
now conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing and (ii) is not
obligated or under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service mark, trade name, copyright, know-how, technology
or other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
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t. Each of the Company and the Subsidiaries owns and has the unrestricted
right to use all trade secrets, know-how (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
inventions, designs, processes, works of authorship, computer programs and
technical data and information (collectively herein "intellectual property")
that are material to the development, manufacture, operation and sale of all
products and services sold or proposed to be sold by any of the Company or the
Subsidiaries, free and clear of and without violating any right, lien, or claim
of others, including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of any of the Company or the Subsidiaries, or its or
their respective employees or agents, could have developed trade secrets or
items of technical information similar or identical to those of any of the
Company or the Subsidiaries. None of the Company nor the Subsidiaries is aware
of any such development of similar or identical trade secrets or technical
information by others.
u. Each of the Company and the Subsidiaries has taken reasonable security
measures to protect the secrecy, confidentiality and value of its intellectual
property in all material respects.
v. Each of the Company and the Subsidiaries has good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or leased by it, free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects, or other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not yet due and payable.
w. Arthur Andersen LLP, whose report is filed with the Commission as a
part of the Registration Statement, are independent certified public accountants
as required by the Act and the Rules and Regulations.
x. The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers,
directors, stockholders and holders of securities exchangeable or exercisable
for or convertible into shares of Common Stock has agreed (i) not to, directly
or indirectly, issue, offer, offer to sell, sell, grant any option for the sale
or purchase of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein for a
period of not less than thirteen (13) months following the effective date of the
Registration Statement without the prior written consent of the Representative
and the Company, 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, and (ii) to waive all
rights to request or demand the registration pursuant to the Act of any
securities of the Company which are registered in the name of or beneficially
owned by any such holder. During the 13 month period commencing on the effective
date of the Registration Statement, the Company shall not, without the prior
written consent of the Representative, sell, contract or offer to sell, issue,
transfer, assign, pledge, distribute, or
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otherwise dispose of, directly or indirectly, any shares of Common Stock or any
options, rights or warrants with respect to any shares of Common Stock, except
(x) pursuant to options outstanding as of the date hereof and pursuant to the
exercise of the Redeemable Warrants and the Representative's Warrants or
pursuant to the terms of the Bridge Financing (as hereinafter defined) 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 the Prospectus. The Company will cause
the Transfer Agent (as hereinafter defined) to mark an appropriate legend on the
face of stock certificates representing all of such securities and to place
"stop transfer" orders on the Company's stock ledgers.
y. There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company, the Subsidiaries, or any of its or their respective
officers, directors, stockholders, partners, employees or affiliates, that may
affect the Underwriters' compensation, as determined by the National Association
of Securities Dealers, Inc. ("NASD").
z. The Common Stock has been approved for quotation on each of the Nasdaq
SmallCap Market ("Nasdaq") and the Boston Stock Exchange ("BSE").
aa. None of the Company, the Subsidiaries, their respective
predecessors, nor any of its or their respective officers, employees, agents or
any other person acting on behalf of any of the Company or the Subsidiaries or
any predecessor thereof has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
any of the Company or the Subsidiaries or any predecessor thereof (or assist any
of the Company or the Subsidiaries or any predecessor thereof in connection with
any actual or proposed transaction) which (a) might subject any of the Company
or the Subsidiaries or any predecessor thereof or any predecessor thereof, or
any other such person to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (b) if not given in
the past, might have had a material adverse effect on the assets, business or
operations of any of the Company or the Subsidiaries or any predecessor thereof,
or (c) if not continued in the future, might adversely affect the assets,
business, condition, financial or otherwise, earnings, position, properties,
value, operations or prospects of any of the Company or the Subsidiaries or any
predecessor thereof. The Company's and each Subsidiary's internal accounting
controls are sufficient to cause each of the Company and the Subsidiaries to
comply with the Foreign Corrupt Practices Act of 1977, as amended.
bb. Except as set forth in the Prospectus, no officer, director,
stockholder or partner of the Company or of any Subsidiary, or any "affiliate"
or "associate" (as these terms are defined in Rule 405 promulgated under the
Rules and Regulations) of any of the foregoing persons or entities has or has
had, either directly or indirectly, (i) an interest in any person or
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entity which (A) furnishes or sells services or products which are furnished or
sold or are proposed to be furnished or sold by any of the Company or the
Subsidiaries, or (B) purchases from or sells or furnishes to any of the Company
or the Subsidiaries any goods or services, or (ii) a beneficiary interest in any
contract or agreement to which the Company or any Subsidiary is a party or by
which it may be bound or affected. Except as set forth in the Prospectus under
"Certain Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company or any Subsidiary,
and any officer, director, or 5% or greater securityholder of the Company or any
Subsidiary, or any partner, affiliate or associate of any of the foregoing
persons or entities.
cc. Any certificate signed by any officer of the Company or any
Subsidiary, and delivered to the Underwriters or to Underwriters' Counsel (as
defined herein) shall be deemed a representation and warranty by the Company to
the Underwriters as to the matters covered thereby.
dd. The minute books of each of the Company, the Subsidiaries and their
respective predecessors have been made available to the Underwriters and contain
a complete summary of all meetings and actions of the directors (including
committees thereof) and stockholders of each of the Company, the Subsidiaries
and their respective predecessors since the time of their respective
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
ee. No holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to require
the Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company.
ff. (A) Each of the Company and the Subsidiaries is in compliance with
all federal, state, local or foreign laws, common law, rules, codes,
administrative orders or regulations relating to pollution or protection of
human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, all laws, common law, rules, codes, administrative
orders and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws") and (B) to the best of the Company's knowledge, there are
no events or circumstances that could form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting any of the Company or the
Subsidiaries relating to any Hazardous Materials or the violation of any
Environmental Laws. The Company has no reason to believe that it will not
receive all necessary and required approvals, authorizations, validations and
certifications from applicable regulatory authorities to enable the Company to
commence full operations as contemplated in the Registration Statement and the
Prospectus.
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gg. In the ordinary course of its business, each of the Company and the
Subsidiaries conducts a periodic review of the effect of Environmental Laws on
the business, operations and properties of the Company and the Subsidiaries, in
the course of which it identifies and evaluates associated costs and liabilities
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities and
any potential liabilities to third parties). On the basis of such review, each
of the Company and the Subsidiaries has reasonably concluded that such
associated costs and liabilities would not, singly or in the aggregate, have a
material adverse effect on the Company or the Subsidiaries.
hh. The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with each of James L. Ake and
Edward Cruise Miller and a management agreement and performance guaranty with
Lunar Holdings Limited in the forms filed as Exhibits 10.9, 10.12 and 10.4,
respectively, to the Registration Statement [and (ii) purchased term key person
insurance on the lives of Messrs. __________ and ____________ in the amount of
$____ million each, which policies name the Company as the sole beneficiary
thereof].
ii. As of the date hereof, the Company does not have more than
2,000,000 shares of Common Stock issued and outstanding (including securities
with equivalent rights as the Common Stock and shares of Common Stock, or such
equivalent securities, issuable upon exercise of any and all options, warrants
and other contract rights and securities convertible directly or indirectly into
shares of Common Stock or such equivalent securities, but excluding up to
300,000 shares of Common Stock issuable upon the exercise of options available
for grant under the Company's 1996 Stock Option Plan at prices not less than the
higher of the market value of the shares at the date of the grant or the
offering price per share).
jj. Each of the Company and the Subsidiaries confirms as of the date
hereof that it is in compliance with all provisions of Section 1 of Laws of
Florida, Chapter 92-198, An Act Relating to Disclosure of Doing Business with
Cuba, and each of the Company and the Subsidiaries further agrees that if it or
any affiliate commences engaging in business with the government of Cuba or with
any person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with the
Florida Department of Banking and Finance (the "Department"), whichever date is
later, or if the information reported or incorporated by reference in the
Prospectus, if any, concerning the Company's, any Subsidiary's or any
affiliate's, business with Cuba or with any person or affiliate located in Cuba
changes in any material way, the Company will provide the Department notice of
such business or change, as appropriate, in a form acceptable to the Department.
kk. The Company is not, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus under the caption "Use of Proceeds"
will not be, an "investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
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ll. Each of the Company and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles in the United States and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorizations; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
mm. The Company has entered into a warrant agreement substantially in
the form filed as Exhibit ____ to the Registration Statement (the "Warrant
Agreement") with the Representative and the , as Warrant Agent, in form and
substance satisfactory to the Representative, with respect to the Redeemable
Warrants and providing for the payment of the commission contemplated by Section
4(x).
nn. As of the date hereof, the Company has effected: (i) the
reincorporation in Bermuda of the Company, originally formed as Craft Brewing
Holdings Limited, a British Virgin Islands Company ("Craft"); (ii) the exchange,
effective as of December 31, 1995, of all of the issued and outstanding shares
of capital stock of South China Brewing and SCBC Distribution by the
shareholders thereof for all of the issued and outstanding shares of capital
stock of Craft; (iii) the increase in the authorized shares of the Company's
Common Stock to 10,000,000 shares, effective as of _________, 1996; and (iv) the
eighty-for-one split of the Company's Common Stock effective as of __________,
1996 (also collectively referred to herein as the "Reorganization"). The
Reorganization has been duly and validly authorized by each of the Company, the
Predecessors and the Subsidiaries and their respective shareholders, partners
and/or members and all certificates, agreements, contracts, minutes or other
documents necessary to effect the Reorganization (collectively, the
"Reorganization Documents") have been duly and validly authorized, executed and
delivered and, if necessary, filed with the appropriate regulatory body,
government agency or other body, domestic or foreign, by the appropriate
parties, and constitute the legal, valid and binding agreements of such parties,
enforceable against each of them in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law), and none of the
execution or delivery of any of the Reorganization Documents by the parties
thereto, the performance by the Company and the Subsidiaries hereunder or by the
Company, the Subsidiaries and the Predecessors thereunder, consummation of the
transactions contemplated herein or therein, conflicts with or will conflict
with or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of any of the Company or
the Subsidiaries pursuant to the terms of, (A) the certificate of incorporation,
memorandum and articles of association or by-laws of any of the Company or the
Subsidiaries, (B) any license, contract, collective bargaining agreement,
indenture, mortgage, deed of trust, lease, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or
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instrument to which any of the Company or the Subsidiaries is a party or by
which it is or they are or may be bound or to which any of its or their
respective properties or assets (tangible or intangible) is or may be subject,
or any indebtedness, or (C) any statute, judgment, decree, order, rule or
regulation applicable to any of the Company or the Subsidiaries of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over any of the Company or the Subsidiaries or any of its or their
respective activities or properties. The Reorganization Documents effectively
convey to the Company all right, title and interest to the business of the
Company as described in the Prospectus; and the descriptions in the Registration
Statement of the Reorganization are accurate and fairly present the information
required to be shown with respect thereto by Form S-1.
2. Purchase, Sale and Delivery of the Securities.
a. On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$_______ [90% of the public offering price] per Share and $_______ [90% of the
public offering price] per Redeemable Warrant, that number of Firm Securities
set forth in Schedule A opposite the name of such Underwriter, subject to such
adjustment as the Representative in its sole discretion shall make to eliminate
any sales or purchases of fractional shares, plus any additional number of Firm
Securities which such Underwriter may become obligated to purchase pursuant to
the provisions of Section 11 hereof.
b. In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 200,000 shares of Common Stock at a price of $ ____ [90% of the
public offering price] per share of Common Stock and/or an additional 200,000
Redeemable Warrants at a price of $______ [90% of the public offering price] per
Redeemable Warrant. The option granted hereby will expire forty-five (45) days
after (i) the date the Registration Statement becomes effective, if the Company
has elected not to rely on Rule 430A under the Rules and Regulations, or (ii)
the date of this Agreement if the Company has elected to rely upon Rule 430A
under the Rules and Regulations, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Firm Securities upon
notice by the Representative to the Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for any such Option Securities.
Any such time and date of delivery (an "Option Closing Date") shall be
determined by the Representative, but shall not be later than three (3) full
business days after the exercise of said option, nor in any event prior to the
Closing Date, as hereinafter defined, unless otherwise agreed upon by the
Representative and the Company. Nothing herein contained shall obligate the
Underwriters to make any over-allotments. No Option Securities shall be
delivered unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
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c. Payment of the purchase price for, and delivery of certificates for,
the Firm Securities shall be made at the offices of the Representative at 1001
Fourth Avenue, Suite 2200, Seattle, Washington 98154, or at such other place as
shall be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on ____________, 1996
or at such other time and date as shall be agreed upon by the Representative and
the Company, but not less than three (3) nor more than five (5) full business
days after the effective date of the Registration Statement (such time and date
of payment and delivery being herein called the "Closing Date"). In addition, in
the event that any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above-mentioned office of the
Representative or at such other place as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in the
notice from the Representative to the Company. Delivery of the certificates for
the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not jointly, of
the purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company for the Firm Securities and the Option Securities, if
any, by New York Clearing House funds. In the event such option is exercised,
each of the Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Securities then being purchased which
the number of Firm Securities set forth in Schedule A hereto opposite the name
of such Underwriter bears to the total number of Firm Securities, subject in
each case to such adjustments as the Representative in its discretion shall make
to eliminate any sales or purchases of fractional shares. Certificates for the
Firm Securities and the Option Securities, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriters may request in
writing at least two (2) business days prior to the Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Firm
Securities and the Option Securities, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to the Closing Date or the relevant Option Closing Date,
as the case may be.
d. On the Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrants at a purchase price of $.0001 per
warrant, which Representative's Warrants shall entitle the holders thereof to
purchase an aggregate of 133,333 shares of Common Stock and/or 133,333
Redeemable Warrants. The Representative's Warrants shall be exercisable for a
period of four (4) years commencing one (1) year from the effective date of the
Registration Statement at a price equaling one hundred fifty percent (125%) of
the respective initial public offering price of the Shares and the Redeemable
Warrants. The Representative's Warrant Agreement and form of Warrant Certificate
shall be substantially in the form filed as Exhibit [___] to the Registration
Statement. Payment for the Representative's Warrants shall be made on the
Closing Date.
3. Public Offering of the Shares and Redeemable Warrants. As soon after
the Registration Statement becomes effective as the Representative deems
advisable, the Underwriters shall make a public offering of the Shares and
Redeemable Warrants (other than to residents of or in any jurisdiction in which
qualification of the Shares and Redeemable
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Warrants is required and has not become effective) at the price and upon the
other terms set forth in the Prospectus. The Representative may from time to
time increase or decrease the respective public offering price after
distribution of the Shares and Redeemable Warrants has been completed to such
extent as the Representative, in its sole discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
a. The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the Shares and Redeemable Warrants by
the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
b. As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representative and confirm the notice in writing (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose; (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
c. The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
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d. The Company will give the Representative notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the
Representative or Orrick, Herrington & Sutcliffe ("Underwriters' Counsel") shall
object.
e. The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
f. During the time when a prospectus is required to be delivered under
the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
g. As soon as practicable, but in any event not later than forty-five
(45) days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (ninety (90) days
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in the event that the end of such fiscal quarter is the end of the Company's
fiscal year), the Company shall make generally available to its security
holders, in the manner specified in Rule 158(b) of the Rules and Regulations,
and to the Representative, an earnings statement which will be in the detail
required by, and will otherwise comply with, the provisions of Section 11(a) of
the Act and Rule 158(a) of the Rules and Regulations, which statement need not
be audited unless required by the Act, covering a period of at least twelve (12)
consecutive months after the effective date of the Registration Statement.
h. During a period of seven (7) years after the date hereof, the Company
will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
i.concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in the
form furnished to the Company's stockholders and certified by the
Company's principal financial or accounting officer;
ii. concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate thereon of independent certified
public accountants;
iii. as soon as they are available, copies of all reports (financial or
other) mailed to stockholders;
iv. as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any
securities exchange;
v. every press release and every material news item or article of
interest to the financial community in respect of the Company, or its
affairs, which was released or prepared by or on behalf of the Company;
and
vi. any additional information of a public nature concerning the
Company (and any future subsidiary) or its businesses which the
Representative may request.
During such seven-year period, if the Company has an active subsidiary, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiary(ies) are consolidated, and
will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
i. The Company will maintain a transfer agent and warrant agent
("Transfer Agent") and, if necessary under the jurisdiction of incorporation of
the Company, a Registrar (which may be the same entity as the Transfer Agent)
for its Common Stock and Redeemable Warrants.
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j. The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may request.
k. On or before the effective date of the Registration Statement, the
Company shall provide the Representative with true original copies of duly
executed, legally binding and enforceable agreements pursuant to which, for a
period of thirteen (13) months from the effective date of the Registration
Statement, each of the Company's stockholders and holders of securities
exchangeable or exercisable for or convertible into shares of Common Stock
agrees that it or he or she (i) will not, directly or indirectly, issue, offer
to sell, sell, grant an option for the sale or purchase of, assign, transfer,
pledge, hypothecate or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein without the prior consent of the
Representative and the Company, 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
(collectively, the "Lock-up Agreements") and (ii) waives, during such thirteen
(13) month period, any and all rights to request or demand the registration
pursuant to the Act, of any securities of the Company which are registered in
the name of or beneficially owned by it or he or she, respectively. During the
13 month period commencing on the effective date of the Registration Statement,
the Company shall not, without the prior written consent of the Representative,
sell, contract or offer to sell, issue, transfer, assign, pledge, distribute, or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
options, rights or warrants with respect to any shares of Common Stock, except
(x) pursuant to options outstanding as of the date hereof and pursuant to the
exercise of the Redeemable Warrants and the Representative's Warrants or
pursuant to the terms of the Bridge Financing (as hereinafter defined) 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 the Prospectus. On or before the
Closing Date, the Company shall deliver instructions to the Transfer Agent
authorizing it to place appropriate legends on the certificates representing the
securities subject to the Lock-up Agreements and to place appropriate stop
transfer orders on the Company's ledgers.
l. None of the Company, the Subsidiaries, nor any of its or their
respective officers, directors, stockholders, nor any of its or their respective
affiliates (within the meaning of the Rules and Regulations) will take, directly
or indirectly, any action designed to, or which might in the future reasonably
be expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company.
m. The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. No
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portion of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
n. The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time, under the Act,
the Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
o. The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in their letters to be
furnished pursuant to Sections 6(j) and 6(k) hereof.
p. The Company shall cause the Common Stock and Redeemable Warrants to be
quoted on Nasdaq and BSE and, for a period of seven (7) years from the date
hereof, use its best efforts to maintain the Nasdaq and BSE quotation of the
Common Stock and the Redeemable Warrants to the extent outstanding.
q. For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock and Redeemable
Warrants (ii) the list of holders of all of the Company's securities and (iii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel to the Company.
r. As soon as practicable, (i) but in no event more than five (5)
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than thirty (30) days after
the effective date of the Registration Statement, take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions and Moody's OTC Manual and to continue such inclusion for a period
of not less than seven (7) years.
s. The Company hereby agrees that it will not, for a period of thirteen
(13) months from the effective date of the Registration Statement, adopt,
propose to adopt or otherwise permit to exist any employee, officer, director,
consultant or compensation plan or similar arrangement permitting (i) the grant,
issue, sale or entry into any agreement to grant, issue or sell any option,
warrant or other contract right (x) at an exercise price that is less than the
greater of the public offering price of the Shares set forth herein and the fair
market value on the date of grant or sale or (y) to any of its executive
officers or directors or to any holder of 5% or more of the Common Stock, except
as provided in subsection (ii) of this subparagraph; (ii) the maximum number of
shares of Common Stock or other securities of the Company purchasable at any
time pursuant to options or warrants issued by the Company to exceed the
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aggregate ________ shares reserved for future issuance under the Company's Stock
Option Plan described in footnote one (1) to the "Prospectus Summary - The
Offering" section of the Prospectus; (iii) the payment for such securities with
any form of consideration other than cash; or (iv) the existence of stock
appreciation rights, phantom options or similar arrangements.
t. Until the completion of the distribution of the Securities, the
Company shall not, without the prior written consent of the Representative and
Underwriters' Counsel, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
u. For a period equal to the lesser of (i) seven (7) years from the date
hereof, and (ii) the sale to the public of the Representative's Securities, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Form S-1 (or other appropriate form) for the registration under
the Act of the Representative's Securities. The Company further agrees to use
its best efforts to file such post-effective amendments to the Registration
Statement, as may be necessary, in order to maintain its effectiveness and to
keep such Registration Statement effective while any of the Redeemable Warrants
or Representative's Warrants remain outstanding.
v. For a period of two (2) years from the effective date of the
Registration Statement, the Company hereby agrees to grant the Representative a
preferential right of first refusal on the terms and subject to the conditions
set forth in this paragraph, to act as the sole and/or managing underwriter or
placement agent with respect to any sales or distributions of securities by the
Company or any of its present or future affiliates or subsidiaries. In the event
of any such proposed offering or placement, the Company will consult, and will
cause any such present or future subsidiaries or affiliates to consult with the
Representative with regard to any such offering or placement and will offer, or
cause any of its present or future subsidiaries to offer, to the Representative
the opportunity, on terms not more favorable to the Company, or any present or
future subsidiary or affiliate thereof than they can secure elsewhere from other
non-affiliated broker-dealers (as evidenced by a bona fide engagement letter or
term sheet from such other broker-dealer), to purchase or sell any such
securities. If the Representative fails to accept in writing (by submission to
the Company of an engagement letter or other equivalent response) such proposal
made by the Company, or any present or future subsidiaries or affiliates thereof
within ten (10) business days after receipt of a notice containing such proposal
(which notice may be delivered to the Representative simultaneously), then the
Representative shall have no further claim or right with respect to the proposed
offering or placement of securities contained in such notice. If, thereafter
such proposal is modified, the Company shall again consult, and cause any
present or future subsidiary or affiliate to consult, with the Representative in
connection with such modification and shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided hereinabove with respect to the original proposal. Notwithstanding the
foregoing, the Company may terminate such right of first refusal upon the date
that Messrs. Raymond L. Dirks and Michael K. Hsu terminate their association
with the Representative.
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w. [Discuss: Prior to the effective date of the Registration Statement,
the Company shall have completed a private placement of the Company's
securities, on a best efforts basis, which will result in gross proceeds to the
Company of approximately $300,000-$600,000 (the "Bridge Financing"). The terms
and conditions of the Bridge Financing shall have been determined mutually by
the Company and the Representative and such Bridge Financing shall otherwise be
in form and substance satisfactory to the Representative.]
x. Commencing one year and one day from the date hereof, if the Company
engages the Representative as a warrant solicitation agent under the terms of
the Warrant Agreement, the Company shall pay the Representative a commission
equal to five percent (5%) of the exercise price of the Redeemable Warrants,
payable on the date of the exercise thereof on the terms provided in the Warrant
Agreement; provided, however, the Representative shall be entitled to receive
the commission contemplated by this Section 4(x) only if: (i) the Representative
has provided actual services in connection with the solicitation of the exercise
of a Redeemable Warrant by a Warrantholder and (ii) the Warrantholder exercising
a Redeemable Warrant affirmatively designates in writing on the exercise form on
the reverse side of the Redeemable Warrant Certificate that the exercise of such
Warrantholder's Redeemable Warrant was solicited by the Representative.
y. For a period of ____________ (_) years from the effective date of the
Registration Statement, the Company hereby grants the Representative the right
to designate one (1) person to attend all meetings of the Company's Board of
Directors (the "Board"). The Company shall send to such person all notices and
other correspondence and communications sent by the Company to members of the
Board. Such designee of the Representative shall be reimbursed for all
out-of-pocket expenses incurred in connection with his attendance of meetings of
the Board.
5. Payment of Expenses.
a. The Company hereby agrees to pay on each of the Closing Date and the
Option Closing Date (to the extent not paid at the Closing Date) all expenses
and fees (other than fees of Underwriters' Counsel, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement, the Warrant Agreement and the Representative's Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Warrant Agreement, the
Representative's Warrant Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreements, and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriters and such
dealers as the Underwriters may request, in quantities as hereinabove stated,
(iii) the printing, engraving, issuance and delivery of the Securities
including, but not limited to, (x) the purchase by the Underwriters of the Firm
Securities and the Option Securities and the purchase by the Representative of
the
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Representative's Warrants from the Company, (y) the consummation by the Company
of any of its obligations under this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, and (z) resale of the Firm Securities and
the Option Securities by the Underwriters in connection with the distribution
contemplated hereby, (iv) the qualification of the Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum", the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show", information meetings and presentations, bound volumes and prospectus
memorabilia and "tomb-stone" advertisement expenses, (vi) costs and expenses in
connection with due diligence investigations, including but not limited to the
fees of any independent counsel, expert or consultant retained, (vii) fees and
expenses of the Transfer Agent and registrar and all issue and transfer taxes,
if any, (viii) applications for assignment of a rating of the Securities by
qualified rating agencies, (ix) the fees payable to the Commission and the NASD,
and (x) the fees and expenses incurred in connection with the quotation of the
Securities on Nasdaq, BSE and any other exchange. It is agreed that the services
to be provided under clause (iv) of the foregoing sentence shall be performed by
Underwriters' Counsel.
b. If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6 or Section 12, the Company shall reimburse and
indemnify the Underwriters for all of their actual out-of-pocket expenses (on an
accountable basis), including the fees and disbursements of Underwriters'
Counsel, up to an aggregate maximum of $150,000, less any amounts already paid
pursuant to Section 5(c) hereof. Notwithstanding anything to the contrary
contained herein, the Company shall remain liable for all Blue Sky counsel fees
and expenses and Blue Sky filing fees as provided in Section 5(a)(iv) hereof.
c. The Company further agrees that, in addition to the expenses payable
pursuant to subsection (a) of this Section 5, it will pay to the Representative
on the Closing Date by certified or bank cashier's check or, at the election of
the Representative, by deduction from the proceeds of the offering contemplated
herein a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds received by the Company from the sale of the Firm Securities,
$50,000 of which has been paid to date. In the event the Representative elects
to exercise the over-allotment option described in Section 2(b) hereof, the
Company agrees to pay to the Representative on the Option Closing Date (by
certified or bank cashier's check or, at the Representative's election, by
deduction from the proceeds of the offering) a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received by the Company from
the sale of the Option Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date with respect to the Company and each Option Closing Date,
if any, with respect to the Company as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements of
the officers of the Company made pursuant to the provisions hereof; and the
performance by the
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Company on and as of the Closing Date and each Option Closing Date, if any, of
its covenants and obligations hereunder and to the following further conditions:
a. The Registration Statement shall have become effective not later than
12:00 P.M., New York time, on the date of this Agreement or such later date and
time as shall be consented to in writing by the Representative, and, at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Shares and Redeemable
Warrants and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period and, prior to the Closing Date, the Company
shall have provided evidence satisfactory to the Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
b. The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
c. On or prior to each of the Closing Date and each Option Closing Date,
if any, the Representative shall have received from Underwriters' Counsel, such
opinion or opinions with respect to the organization of the Company, the
validity of the Securities, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
d. At the Closing Date, the Underwriters shall have received the
favorable opinion of Howard, Darby & Levin, counsel to the Company and the
Subsidiaries, dated the Closing Date, addressed to the Underwriters, in form and
substance satisfactory to Underwriters' Counsel, and in substantially the form
of Schedule B hereto.
Such counsel shall state that such counsel has participated in conferences
with officers and other representatives of the Company and the Subsidiaries, and
representatives of the independent public accountants for the Company and the
Subsidiaries, at which conferences such counsel made inquiries of such officers,
representatives and accountants and discussed the contents of the Preliminary
Prospectus, the Registration Statement, the Prospectus, and related
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matters and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Preliminary Prospectus, the Registration Statement and
Prospectus, on the basis of the foregoing, no facts have come to the attention
of such counsel which lead them to believe that either the Registration
Statement or any amendment thereto, at the time such Registration Statement or
amendment became effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
(it being understood that such counsel need express no opinion with respect to
the financial statements and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration Statement or the
Prospectus). Such counsel shall further state that its opinions may be relied
upon by Underwriters' Counsel in rendering its opinion to the Underwriters.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of each of the Company and the
Subsidiaries and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of each of the Company and the
Subsidiaries, provided that copies of any such statements or certificates shall
be delivered to Underwriters' Counsel if requested. The opinion of such counsel
for the Company and the Subsidiaries shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and that the
Representative, Underwriters' Counsel and they are each justified in relying
thereon. Any opinion of counsel for the Company and the Subsidiaries shall not
state that it is to be governed or qualified by, or that it is otherwise subject
to, any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991) or any comparable state accord.
e. At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Howard, Darby & Levin, counsel to the Company
and the Subsidiaries, dated such Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming as of such Option Closing Date the statements made by Howard, Darby &
Levin, in its opinion delivered on the Closing Date.
f. On or prior to each of the Closing Date and each Option Closing Date,
if any, Underwriters' Counsel shall have been furnished such documents,
certificates and additional opinions (including opinions of local and special
counsel to the Company, the Subsidiaries and the Predecessors) as they may
require.
g. Prior to each of the Closing Date and each Option Closing Date, if
any, (i) there shall have been no adverse change nor development involving a
prospective change in the condition, financial or otherwise, earnings, position,
value, properties, results of operations,
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prospects, stockholders' equity or the business activities of any of the Company
or the Subsidiaries, whether or not in the ordinary course of business, from the
latest dates as of which such condition is set forth in the Registration
Statement and Prospectus; (ii) there shall have been no transaction, not in the
ordinary course of business, entered into by any of the Company or the
Subsidiaries, from the latest date as of which the financial condition of the
Company and the Subsidiaries is set forth in the Registration Statement and
Prospectus which is adverse to the Company and the Subsidiaries taken as a
whole; (iii) none of the Company nor the Subsidiaries shall be in default under
any provision of any instrument relating to any outstanding indebtedness; (iv)
none of the Company nor the Subsidiaries shall have issued any securities (other
than the Securities) or declared or paid any dividend or made any distribution
in respect of its capital stock of any class and there shall not have been any
change in the capital stock or any change in the debt (long or short term) or
liabilities or obligations of any of the Company or the Subsidiaries (contingent
or otherwise); (v) no material amount of the assets of any of the Company or the
Subsidiaries shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (vi) no action, suit or proceeding, at
law or in equity, shall have been pending or threatened (or circumstances giving
rise to same) against any of the Company or the Subsidiaries, or affecting any
of its or their respective properties or businesses before or by any court or
federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may adversely affect the
business, operations, earnings, position, value, properties, results of
operations, prospects or financial condition or income of the Company and the
Subsidiaries taken as a whole; and (vii) no stop order shall have been issued
under the Act and no proceedings therefor shall have been initiated, threatened
or contemplated by the Commission.
h. At each of the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
i. The representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of the Closing Date or the
Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions contained
in this Agreement on its part to be performed or satisfied at or prior to
such Closing Date or Option Closing Date, as the case may be;
ii. No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no proceedings for
that purpose have been instituted or are pending or, to the best of each
of such person's knowledge, after due inquiry, are contemplated or
threatened under the Act;
iii. The Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not
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misleading and neither the Preliminary Prospectus or any supplement
thereto included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading; and
iv. Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, (a) none of the Company
nor the Subsidiaries has incurred up to and including the Closing Date or
the Option Closing Date, as the case may be, other than in the ordinary
course of its business, any material liabilities or obligations, direct
or contingent; (b) none of the Company nor the Subsidiaries has paid or
declared any dividends or other distributions on its capital stock; (c)
none of the Company nor the Subsidiaries has entered into any
transactions not in the ordinary course of business; (d) there has not
been any change in the capital stock or long-term debt or any increase in
the short-term borrowings (other than any increase in the short-term
borrowings in the ordinary course of business) of any of the Company or
the Subsidiaries; (e) none of the Company nor the Subsidiaries has
sustained any loss or damage to its or their respective properties or
assets, whether or not insured; (f) there is no litigation which is
pending or threatened (or circumstances giving rise to same) against any
of the Company or the Subsidiaries or any affiliated party of any of the
foregoing which is required to be set forth in an amended or supplemented
Prospectus which has not been set forth; and (g) there has occurred no
event required to be set forth in an amended or supplemented Prospectus
which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.
i. By the Closing Date, the Underwriters will have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
j. At the time this Agreement is executed, the Underwriters shall have
received a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory (including the non-material nature of the changes or
decreases, if any, referred to in clause (iii) below) in all respects to the
Underwriters and Underwriters' Counsel, from Arthur Andersen LLP:
i. confirming that they are independent certified public accountants with
respect to the Company and the Subsidiaries within the meaning of the Act and
the applicable Rules and Regulations;
ii. stating that it is their opinion that the consolidated financial
statements and supporting schedules of the Company and the Subsidiaries
included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations thereunder and that the Representative may rely
upon the opinion of Arthur Andersen LLP with respect to the
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consolidated financial statements and supporting schedules included in
the Registration Statement;
iii. stating that, on the basis of a limited review which included a
reading of the latest available unaudited interim financial statements of
each of the Company and the Subsidiaries, a reading of the latest
available minutes of the stockholders and board of directors and the
various committees of the boards of directors of each of the Company and
the Subsidiaries, consultations with officers and other employees of each
of the Company and the Subsidiaries responsible for financial and
accounting matters and other specified procedures and inquiries, nothing
has come to their attention which would lead them to believe that (A) the
unaudited consolidated financial statements and supporting schedules of
the Company and the Subsidiaries included in the Registration Statement
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or are
not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited consolidated financial statements of the Company and the
Subsidiaries included in the Registration Statement, or (B) at a
specified date not more than five (5) days prior to the effective date of
the Registration Statement, there has been any change in the capital
stock or long-term debt of any of the Company or the Subsidiaries, or any
decrease in the stockholders' equity or net current assets or net assets
of any of the Company or the Subsidiaries as compared with amounts shown
in the January 31, 1996 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any change or decrease, setting forth the
amount of such change or decrease, and (C) during the period from
February 1, 1996 to a specified date not more than five (5) days prior to
the effective date of the Registration Statement, there was any decrease
in net revenues, net earnings or increase in net earnings per common
share of any of the Company or the Subsidiaries, in each case as compared
with the corresponding period beginning February 1, 1995, other than as
set forth in or contemplated by the Registration Statement, or, if there
was any such decrease, setting forth the amount of such decrease;
iv. setting forth, at a date not later than five (5) days prior to the
date of the Registration Statement, the amount of liabilities of the
Company and the Subsidiaries taken as a whole (including a break-down of
commercial paper and notes payable to banks);
v. stating that they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company and the Subsidiaries set
forth in the Prospectus in each case to the extent that such amounts,
numbers, percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and the
Subsidiaries and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be
in agreement;
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vi. statements as to such other matters incident to the transaction
contemplated hereby as the Representative may request.
vii. [discuss pro forma negative assurance language].
k. At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Arthur Andersen LLP a letter, dated as of
the Closing Date or the Option Closing Date, as the case may be, to the effect
that they reaffirm that statements made in the letter furnished pursuant to
subsection (j) of this Section, except that the specified date referred to shall
be a date not more than five (5) days prior to the Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of subsection (j) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Representative and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
l. On each of the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number Securities.
m. No order suspending the sale of the Securities in any jurisdiction
designated by the Representative pursuant to subsection (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Option Closing Date, if
any, and no proceedings for that purpose shall have been instituted or shall be
contemplated.
n. On or before the Closing Date, the Company shall have executed and
delivered to the Representative, (i) the Representative's Warrant Agreement
substantially in the form filed as Exhibit [___] to the Registration Statement,
in final form and substance satisfactory to the Representative, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
o. On or before the Closing Date, the Firm Securities and Option
Securities shall have been duly approved for quotation on Nasdaq, subject to
official notice of issuance.
p. On or before the Closing Date, there shall have been delivered to the
Representative all of the Lock-up Agreements, in form and substance satisfactory
to Underwriters' Counsel.
q. On or before the Closing Date, the Company shall have executed and
delivered to the Representative and the Transfer Agent the Warrant Agreement
substantially in the form filed as Exhibit [___] to the Registration Statement,
in final form and substance satisfactory to the Representative.
r. Prior to the effective date of the Registration Statement, the Company
shall have consummated the Bridge Financing on terms and conditions satisfactory
to the Representative.
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s. On or before the Closing Date, the Company shall have effected the
Reorganization as described in the Prospectus.
t. On each of the Closing Date and each Option Closing Date, if any, the
Company shall have obtained all necessary and required approvals,
authorizations, franchises, licenses, orders, permits, validations and
certifications from the EPA and other regulatory authorities to permit the
commencement of its commercial operations as contemplated in the Prospectus
which shall include, but not be limited to, the issuance by EPA of a National
Permit for Alternate Destruction to the Company, and none of such approvals,
authorizations, franchises, licenses, orders, permits, validations and
certifications shall have been revoked, restricted or limited in any manner and
all such approvals, authorizations, franchises, licenses, orders, permits,
validations and certifications shall be in full force and effect on such Closing
Date or Option Closing Date, as the case may be.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the case
may be, is not so fulfilled, the Representative may terminate this Agreement or,
if the Representative so elects, it may waive any such conditions which have not
been fulfilled or extend the time for their fulfillment.
7. Indemnification.
a. The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 11 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, suits and litigation in respect
thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such claim, action, proceeding, investigation, inquiry, suit or litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Securities; or
(iii) in any application or other document or written communication (in this
Section 7 collectively called "application") executed by the Company or based
upon written information furnished by the Company in any jurisdiction in order
to qualify the Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, Nasdaq, BSE or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon and
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in strict conformity with written information furnished to the Company with
respect to any Underwriter by or on behalf of such Underwriter expressly for use
in any Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
b. Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Firm Securities and the Option Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus.
c. Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any claim, action, suit, investigation, inquiry,
proceeding or litigation, such indemnified party shall, if a claim in respect
thereof is to be made against one or more indemnifying parties under this
Section 7, notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 7 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may have
otherwise). In case any such claim, action, suit, investigation, inquiry,
proceeding or litigation is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of thereof at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense thereof within a reasonable
time after notice of commencement thereof, or (iii) such indemnified
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party or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense thereof on
behalf of the indemnified party or parties), in any of which events such fees
and expenses of one additional counsel shall be borne by the indemnifying
parties. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
claim, action, suit, investigation, inquiry, proceeding or litigation or
separate but similar or related claims, actions, suits, investigations,
inquiries, proceedings or litigation in the same jurisdiction arising out of the
same general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim, action, suit, investigation, inquiry, proceeding or
litigation effected without its written consent; provided, however, that such
consent was not unreasonably withheld. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle, compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit, investigation, inquiry, proceeding or litigation in respect
of which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim, action,
suit, investigation, inquiry, proceeding or litigation), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit, investigation,
inquiry, proceeding or litigation and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
d. In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 7 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
(A) in such proportion as is appropriate to reflect the relative benefits
received by each of the contributing parties, on the one hand, and the party to
be indemnified on the other hand, from the offering of the Firm Securities and
the Option Securities or (B) if the allocation provided by clause (A) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any case
where the Company is the contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Firm Securities
and the Option Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement
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of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or by the Underwriters, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Firm Securities and the Option
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subsection (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subsection (d), notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subsection (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of the Company submitted pursuant hereto, shall be
deemed to be representations, warranties and agreements at the Closing Date and
the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters and the Representative, as the case may be.
9. Effective Date. This Agreement shall become effective at 10:00 a.m., New
York City time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such securities for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
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10. Termination.
a. Subject to subsection (b) of this Section 10, the Representative shall
have the right to terminate this Agreement, (i) if any domestic or international
event or act or occurrence has disrupted, or in the Representative's opinion
will in the immediate future disrupt, the financial markets; or (ii) if any
material adverse change in the financial markets shall have occurred; or (iii)
if trading generally shall have been suspended or materially limited on or by,
as the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the NASD, the BSE, any over-the-counter market, the Commission or any
other government authority having jurisdiction, or if minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for securities
shall have been required on the over-the-counter market, by the NASD or by order
of the Commission or any other government or other authority having
jurisdiction; or (iv) if trading of any of the securities of the Company shall
have been suspended, or any of the securities of the Company shall have been
delisted, on any exchange or in any over-the-counter market; (v) if the United
States shall have become involved in a war or major hostilities, or if there
shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (vi) if a
banking moratorium has been declared by a state or federal authority; or (vii)
if a moratorium in foreign exchange trading has been declared; or (viii) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities; or (ix) if there shall have
been such a material adverse change in the conditions or prospects of the
Company, or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere, that, in each case, in
the Representative's judgment, would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities or (x) if any of Peter W.H.
Bordeaux, James L. Ake or David K. Haines shall no longer serve the Company in
their present capacity.
b. If this Agreement is terminated by the Representative in accordance
with the provisions of Section 10(a) the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). Notwithstanding any
contrary provision contained in this Agreement, if this Agreement shall not be
carried out within the time specified herein, or any extension thereof granted
to the Representative, by reason of any failure on the part of the Company to
perform any undertaking or satisfy any condition of this Agreement by it to be
performed or satisfied (including, without limitation, pursuant to Section 6 or
Section 12) then, the Company shall promptly reimburse and indemnify the
Representative for all of its actual out-of-pocket expenses, on an accountable
basis, including the fees and disbursements of counsel for the Underwriters, up
to an aggregate maximum of $150,000 (less amounts previously paid pursuant to
Section 5(c) above). In addition, the Company shall remain liable for all Blue
Sky counsel fees and disbursements, expenses and filing fees. Notwithstanding
any contrary provision contained in this Agreement, any election hereunder or
any termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10, 11 and 12 hereof), and whether or not this Agreement is
otherwise
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carried out, the provisions of Section 5 and Section 7 shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 6, Section 10 or Section 12
hereof) to purchase the Securities which it or they are obligated to purchase on
such date under this Agreement (the "Defaulted Securities"), the Representative
shall have the right, within 24 hours thereafter, to make arrangement for one or
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters (or, if such
default shall occur with respect to any Option Securities to be purchased
on an Option Closing Date, the Underwriters may at the Representative's
option, by notice from the Representative to the Company, terminate the
Underwriters' obligation to purchase Option Securities from the Company
on such date).
No action taken pursuant to this Section 11 shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination
of this Agreement, the Representative shall have the right to postpone the
Closing Date for a period not exceeding seven (7) days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing Date
or at any Option Closing Date, as applicable, to sell and deliver the number of
Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Section 5, Section 7 and Section 10
hereof. No action taken pursuant to this Section 12 shall relieve the Company
from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed
<PAGE>
<PAGE>
or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representative at National Securities
Corporation, 1001 Fourth Avenue, Suite 2200, Seattle, Washington 98154,
Attention: Steven A. Rothstein, Chairman, with a copy to Orrick, Herrington &
Sutcliffe, 666 Fifth Avenue, New York, New York 10103, Attention: Lawrence B.
Fisher, Esq. Notices to the Company shall be directed to the Company at 803
Jefferson Highway, New Orleans, Louisiana 70121, Attention: Peter W.H. Bordeaux,
Chairman and Chief Executive Officer, with a copy to Howard, Darby & Levin, 1330
Avenue of the Americas, New York, New York 10019, Attention: Lawrence A. Darby,
III, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement, the Warrant Agreement
and the Representative's Warrant Agreement constitute the entire agreement of
the parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By: ________________________________
Peter W.H. Bordeaux
Chairman and Chief Executive Officer
<PAGE>
<PAGE>
Confirmed and accepted as of
the date first above written.
NATIONAL SECURITIES CORPORATION
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By: _________________________
Steven A. Rothstein
Chairman
<PAGE>
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF REDEEMABLE
NAME OF UNDERWRITERS TO BE PURCHASED WARRANTS TO BE PURCHASED
- -------------------- --------------- ------------------------
<S> <C> <C>
National Securities Corporation...
Total............................. 1,333,333 1,333,333
========= =========
<PAGE>
<PAGE>
SCHEDULE B
[FORM OF HOWARD, DARBY & LEVIN OPINION]
<PAGE>
</TABLE>
<PAGE>
[LOGO]
NUMBER SHARES
AM
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
COMMON STOCK COMMON STOCK
INCORPORATED
UNDER THE LAWS SEE REVERSE FOR
OF BERMUDA CERTAIN DEFINITIONS
CUSIP 602702 10 1
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK
OF THE PAR VALUE OF $0.01 EACH
CERTIFICATE OF STOCK
of AMERICAN CRAFT BREWING INTERNATIONAL LIMITED, transferable on the books of
the Corporation in person or by attorney duly authorized in writing upon
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions of
the Corporation's Memorandum of Amalgamation and any amendments thereof, copies
of which are on file with the Transfer Agent, to all the provisions of which the
holder hereof by acceptance of this certificate assents. This certificate is not
valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated
[signature] [signature]
SECRETARY [SEAL] CHAIRMAN OF THE BOARD
'c' SECURITY - COLUMBIAN UNITED STATES BANKNOTE CORPORATION 1960
COUNTERSIGNED AND REGISTERED:
THE BANK OF NEW YORK
BY TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATORY
<TABLE>
<S> <C>
AMERICAN BANKNOTE COMPANY PRODUCTION COORDINATOR ALBERT DERMOVSIAN 215-830-2103
680 BLAIR MILL ROAD PROOF OF AUGUST 28, 1996
HORSHAM, PA 19044 AMERICAN CRAFT BREWING
215-657-3480 H46108fc
__________________________________________________ _____________________________________________________
SALES PERSON- D. WETZLER 212-557-9100 Opr. js/lr rev 1
/home/seibert/inprogress/home11/americancraft46108 /net/banknote/home11/A
</TABLE>
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ___________ Custodian __________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as
tenants in common Act ______________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
__________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _________________________________
_____________________________________________
The signature to this assignment must
correspond with the name as written upon the
NOTICE: face of the certificate in every particular,
without alteration or enlargement or any
change whatever.
<TABLE>
<S> <C>
AMERICAN BANKNOTE COMPANY PRODUCTION COORDINATOR ALBERT DERMOVSIAN 215-830-2103
680 BLAIR MILL ROAD PROOF OF AUGUST 28, 1996
HORSHAM, PA 19044 AMERICAN CRAFT BREWING
215-657-3480 H46108bkPATCH
__________________________________________________ _____________________________________________________
SALES PERSON- D. WETZLER 212-557-9100 Opr. js NEW
/home/seibert/inprogress/home11/americancraft46108 /net/banknote/home11/A
</TABLE>
<PAGE>
<PAGE>
DRAFT
7/29/96
[Form of Warrant Agreement Subject to Additional Review]
================================================================================
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
AND
THE BANK OF NEW YORK
AND
NATIONAL SECURITIES CORPORATION
________________
WARRANT AGREEMENT
DATED AS OF AUGUST __, 1996
================================================================================
<PAGE>
<PAGE>
AGREEMENT, dated this ---- day of August, 1996, by and among AMERICAN
CRAFT BREWING INTERNATIONAL LIMITED, a Bermuda corporation (the "Company"), THE
BANK OF NEW YORK, as Warrant Agent (the "Warrant Agent"), and NATIONAL
SECURITIES CORPORATION, its successors and assigns (collectively, "National" or
the "Representative") .
W I T N E S S E T H:
WHEREAS, in connection with (i) the offering to the public of up to
1,333,333 shares of Common Stock (as defined in Section 1) and 1,333,333
redeemable common stock purchase warrants (the "Warrants"), each Warrant
entitling the holder thereof to purchase one additional share of Common Stock,
(ii) the over-allotment option to purchase up to an additional 200,000 shares of
Common Stock and/or 200,000 Warrants (the "Over-allotment Option"), and (iii)
the sale to National of warrants (the "Representative's Warrants") to purchase
up to 133,333 shares of Common Stock and/or 133,333 Warrants, the Company will
issue up to 1,666,666 Warrants (subject to increase as provided herein and in
the Representative's Warrant Agreement); and
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the Warrants
and the rights of the holders thereof.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants
<PAGE>
<PAGE>
and the certificates representing the Warrants and the respective rights and
obligations thereunder of the Company, National, the holders of certificates
representing the Warrants and the Warrant Agent, the parties hereto agree as
follows:
SECTION 1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Common Stock" shall mean the authorized stock of the
Company of any class, whether now or hereafter authorized, which has the right
to participate in the voting and in the distribution of earnings and assets of
the Company without limit as to amount or percentage which at the date hereof
consists of 10,000,000 shares of Common Stock, $.01 par value per share.
(c) "Commission" shall mean the Securities and Exchange
Commission.
(d) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its business in New
York, New York, shall be administered, which office is located on the date
hereof at -----------------------------.
(e) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(f) "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
shall have received both (i) the Warrant Certificate representing such Warrant,
with the exercise form thereon duly executed by the Registered Holder thereof or
his attorney duly authorized in writing, and (ii) payment in cash or by official
bank or certified check made payable to the Warrant Agent for the account
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<PAGE>
<PAGE>
of the Company, of the amount in lawful money of the United States of America
equal to the applicable Purchase Price (as hereinafter defined) in good funds.
(g) "Initial Warrant Exercise Date" shall mean __________ __,
1996 [6 months from the effective date of the Registration Statement].
(h) "Initial Warrant Redemption Date" shall mean
_______________ __, 1998 [18 months from the effective date of the Registration
Statement].
(i) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(j) "Nasdaq" shall mean the Nasdaq Stock Market.
(k) "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8, $_____ [150% of the initial public offering
price of the Common Stock] and further subject to the Company's right, in its
sole discretion, to decrease the Purchase Price for a period of not less than 30
days on not less than 30 days' prior written notice to the Registered Holders
and National.
(l) "Redemption Date" shall mean the date (which may not occur
before the Initial Warrant Redemption Date) fixed for the redemption of the
Warrants in accordance with the terms hereof.
(m) "Redemption Price" shall mean the price at which the
Company may, at its option, redeem the Warrants, in accordance with the terms
hereof, which price shall be $0.10 per Warrant, subject to adjustment from time
to time pursuant to the provisions of Section 9 hereof.
3
<PAGE>
<PAGE>
(n) "Registered Holder" shall mean the person in whose name
any certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(o) "Transfer Agent" shall mean The Bank of New York, or its
authorized successor.
(p) "Underwriting Agreement" shall mean the underwriting
agreement dated ________________ __, 1996 [the date of the Prospectus] between
the Company and the several underwriters listed therein relating to the purchase
for resale to the public of the 1,333,333 shares of Common Stock and 1,333,333
Warrants.
(q) "Representative's Warrant Agreement" shall mean the
agreement dated as of ________________ __, 1996 [the date of the Prospectus]
between the Company and National relating to and governing the terms and
provisions of the Representative's Warrants.
(r) "Warrant Certificate" shall mean a certificate
representing each of the Warrants substantially in the form annexed hereto as
Exhibit A.
(s) "Warrant Expiration Date" shall mean, unless the Warrants
are redeemed as provided in Section 9 hereof prior to such date, 5:30 p.m. (New
York time), on ________________ __, 2001 [60 months after the date of the
Prospectus], or the Redemption Date as defined herein, whichever date is
earlier; provided that if such date shall in the State of New York be a holiday
or a day on which banks are authorized to close, then 5:30 p.m. (New
York time) on the next following day which, in the State of New York, is not a
holiday or a day on which banks are authorized to close. Upon five business
days' prior written notice to the Registered Holders, the Company shall have the
right to extend the Warrant Expiration Date.
4
<PAGE>
<PAGE>
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one share of Common Stock upon the exercise thereof in
accordance with the terms hereof, subject to modification and adjustment as
provided in Section 8.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting Agreement
(subject to modification and adjustment as provided in Section 8) shall be
executed by the Company and delivered to the Warrant Agent.
(c) Upon exercise of the Representative's Warrants as provided
therein, Warrant Certificates representing all or a portion of 133,333 Warrants
to purchase up to an aggregate of 133,333 shares of Common Stock (subject to
modification and adjustment as provided in Section 8 hereof and in the
Representative's Warrant Agreement) shall be countersigned, issued and delivered
by the Warrant Agent upon written order of the Company signed by its Chairman of
the Board, Chief Executive Officer, President or a Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary.
(d) From time to time, up to the Warrant Expiration Date or
the Redemption Date, whichever date is earlier, the Warrant Agent shall
countersign and deliver Warrant Certificates in required denominations of one or
whole number multiples thereof to the person entitled thereto in connection with
any transfer or exchange permitted under this Agreement. Except as provided
herein, no Warrant Certificates shall be issued except (i) Warrant Certificates
initially issued hereunder, those issued pursuant to the exercise of the Over-
5
<PAGE>
<PAGE>
allotment Option and those issued on or after the Initial Warrant Exercise Date,
upon the exercise of fewer than all Warrants held by the exercising Registered
Holder, (ii) Warrant Certificates issued upon any transfer or exchange of
Warrants, (iii) Warrant Certificates issued in replacement of lost, stolen,
destroyed or mutilated Warrant Certificates pursuant to Section 7, (iv) Warrant
Certificates issued pursuant to the Representative's Warrant Agreement, and (v)
at the option of the Company, Warrant Certificates in such form as may be
approved by its Board of Directors, to reflect any adjustment or change in the
Purchase Price, the number of shares of Common Stock purchasable upon exercise
of the Warrants or the Redemption Price therefor made pursuant to Section 8
hereof.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. The Warrant Certificates shall
be dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen or destroyed Warrant
Certificates) and issued in registered form. Warrants shall be numbered serially
with the letter W on the Warrants.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, President or any
Vice President and by its
6
<PAGE>
<PAGE>
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
by manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent,
issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such officer of the
Company. After countersignature by the Warrant Agent, Warrant Certificates shall
be delivered by the Warrant Agent to the Registered Holder promptly and without
further action by the Company, except as otherwise provided by Section 4(a)
hereof.
SECTION 4. Exercise.
(a) Warrants in denominations of one or whole number multiples
thereof may be exercised by the Registered Holder thereof commencing at any time
on or after the Initial Warrant Exercise Date, but not after the Warrant
Expiration Date, upon the terms and subject to the conditions set forth herein
and in the applicable Warrant Certificate. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder, upon exercise thereof, as of
the close of business on the Exercise Date. If Warrants in denominations other
than whole number multiples thereof shall be exercised at one time by the same
Registered Holder, the number of full shares of Common Stock which shall be
issuable upon exercise thereof shall be computed on the basis of
7
<PAGE>
<PAGE>
the aggregate number of full shares of Common Stock issuable upon such exercise.
As soon as practicable on or after the Exercise Date and in any event within
five business days after such date, if one or more Warrants have been exercised,
the Warrant Agent on behalf of the Company shall cause to be issued to the
person or persons entitled to receive the same a Common Stock certificate or
certificates for the shares of Common Stock deliverable upon such exercise, and
the Warrant Agent shall deliver the same to the person or persons entitled
thereto. Upon the exercise of any one or more Warrants, the Warrant Agent shall
promptly notify the Company in writing of such fact and of the number of
securities delivered upon such exercise and, subject to subsection (b) below,
shall cause all payments of an amount in cash or by check made payable to the
order of the Company, equal to the Purchase Price, to be deposited promptly in
the Company's bank account.
(b) At any time upon the exercise of any Warrants after one
year and one day from the date hereof, the Warrant Agent shall, on a daily
basis, within two business days after such exercise, notify National of the
exercise of any such Warrants and shall, on a weekly basis (subject to
collection of funds constituting the tendered Purchase Price, but in no event
later than five business days after the last day of the calendar week in which
such funds were tendered), remit to National an amount equal to five percent
(5%) of the Purchase Price of such Warrants then being exercised unless National
shall have notified the Warrant Agent that the payment of such amount with
respect to such Warrant is violative of the General Rules and Regulations
promulgated under the Exchange Act, or the rules and regulations of the NASD or
applicable state securities or "blue sky" laws, or the Warrants are those
underlying the Representative's Warrants in which event, the Warrant Agent shall
have to pay such amount to the Company; provided, that the Warrant Agent shall
not be obligated to pay any amounts
8
<PAGE>
<PAGE>
pursuant to this Section 4(b) during any week that such amounts payable are less
than $1,000 and the Warrant Agent's obligation to make such payments shall be
suspended until the amount payable aggregates $1,000, and provided further,
that, in any event, any such payment (regardless of amount) shall be made not
less frequently than monthly. Notwithstanding the foregoing, National shall be
entitled to receive the commission contemplated by this Section 4(b) as Warrant
solicitation agent only if: (i) National has provided actual services in
connection with the solicitation of the exercise of a Warrant(s) by a Registered
Holder and (ii) the Registered Holder exercising a Warrant(s) affirmatively
designates in writing on the exercise form on the reverse side of the Warrant
Certificate that the exercise of such Registered Holder's Warrant(s) was
solicited by National.
(c) The Company shall not be required to issue fractional
shares on the exercise of Warrants. Warrants may only be exercised in such
multiples as are required to permit the issuance by the Company of one or more
whole shares. If one or more Warrants shall be presented for exercise in full at
the same time by the same Registered Holder, the number of whole shares which
shall be issuable upon such exercise thereof shall be computed on the basis of
the aggregate number of shares purchasable on exercise of the Warrants so
presented. If any fraction of a share would, except for the provisions provided
herein, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall pay an amount in cash equal to such fraction
multiplied by the then current market value of a share of Common Stock,
determined as follows:
(1) If the Common Stock is listed, or admitted to unlisted trading
privileges on a national securities exchange, or is traded on Nasdaq, the
current market value of a share of Common Stock shall be the closing sale price
of the Common Stock at the end of the regular
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<PAGE>
<PAGE>
trading session on the last business day prior to the date of exercise of the
Warrants on whichever of such exchanges or Nasdaq had the highest average daily
trading volume for the Common Stock on such day; or
(2) If the Common Stock is not listed or admitted to unlisted trading
privileges on any national securities exchange, or listed, quoted or reported
for trading on Nasdaq, but is traded in the over-the-counter market, the current
market value of a share of Common Stock shall be the average of the last
reported bid and asked prices of the Common Stock reported by the National
Quotation Bureau, Inc. on the last business day prior to the date of exercise of
the Warrants; or
(3) If the Common Stock is not listed, admitted to unlisted trading
privileges on any national securities exchange, or listed, quoted or reported
for trading on Nasdaq, and bid and asked prices of the Common Stock are not
reported by the National Quotation Bureau, Inc., the current market value of a
share of Common Stock shall be an amount, not less than the book value thereof
as of the end of the most recently completed fiscal quarter of the Company
ending prior to the date of exercise, determined by the members of the Board of
Directors of the Company exercising good faith and using customary valuation
methods.
10
<PAGE>
<PAGE>
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery thereof, be duly and validly
issued and fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens and charges with respect to the issue thereof, and that
upon issuance such shares shall be listed on each securities exchange, if any,
on which the other shares of outstanding Common Stock of the Company are then
listed.
(b) The Company covenants that if any securities to be
reserved for the purpose of exercise of Warrants hereunder require registration
with, or approval of, any governmental authority under any federal securities
law before such securities may be validly issued or delivered upon such
exercise, then the Company will file a registration statement under the federal
securities laws or a post-effective amendment, use its best efforts to cause the
same to become effective and to keep such registration statement current while
any of the Warrants are outstanding and deliver a prospectus which complies with
Section 10(a)(3) of the Act, to the Registered Holder exercising the Warrant
(except, if in the opinion of counsel to the Company, such registration is not
required under the federal securities law or if the Company receives a letter
from the staff of the Commission stating that it would not take any enforcement
action if such registration is not effected). The Company will use its best
efforts to obtain appropriate approvals or registrations under state "blue sky"
securities laws with respect to any such
11
<PAGE>
<PAGE>
securities. However, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares of Common Stock
upon exercise of the Warrants; provided, however, that if shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder of
the Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office,
and, upon satisfaction of the terms and provisions hereof, the Company shall
execute and the Warrant Agent shall countersign, issue and deliver in exchange
therefor the Warrant Certificate or Certificates which the Registered Holder
making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at its office, books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the
12
<PAGE>
<PAGE>
transfer thereof in accordance with customary practice. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants of the same class.
(c) With respect to all Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
exercise form, as the case may be, on the reverse thereof shall be duly endorsed
or be accompanied by a written instrument or instruments of transfer and
subscription, in form satisfactory to the Company and the Warrant Agent, duly
executed by the Registered Holder thereof or his attorney-in-fact duly
authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for
any exchange or registration of transfer of Warrant Certificates. In addition,
the Company may require payment by such Holder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly canceled by
the Warrant Agent and thereafter retained by the Warrant Agent until termination
of this Agreement.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by any
notice to the contrary.
13
<PAGE>
<PAGE>
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the case of
loss, theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall (in the absence of notice to the Company and/or the
Warrant Agent that a new Warrant Certificate has been acquired by a bona fide
purchaser) countersign and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. Adjustment of Purchase Price and Number of Shares of Common
Stock Deliverable.
(a) Except as hereinafter provided, in the event the Company
shall, at any time or from time to time after the date hereof and prior to the
Warrant Expiration Date, issue or sell any shares of Common Stock for a
consideration per share less than the Purchase Price or issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Purchase Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent to the nearest
cent) determined by dividing (i) the sum of (a) the total number of shares of
Common Stock outstanding immediately prior to such Change of Shares, multiplied
by the
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Purchase Price in effect immediately prior to such Change of Shares and (b) the
consideration, if any, received by the Company upon such sale, issuance,
subdivision or combination, by (ii) the total number of shares of Common Stock
outstanding immediately after such Change of Shares; provided, however, that in
no event shall the Purchase Price be adjusted pursuant to this computation to an
amount in excess of the Purchase Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a), the following provisions shall be applicable:
(A) In case of the issuance or sale of shares of Common Stock
(or of other securities deemed hereunder to involve the issuance or sale of
shares of Common Stock) for a consideration part or all of which shall be cash,
the amount of the cash portion of the consideration therefor deemed to have been
received by the Company shall be (i) the subscription price, if shares of Common
Stock are offered by the Company for subscription, or (ii) the public offering
price (before deducting therefrom any compensation paid or discount allowed in
the sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection therewith),
if such securities are sold to underwriters or dealers for public offering
without a subscription offering, or (iii) the gross amount of cash actually
received by the Company for such securities, in any other case.
(B) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company, and otherwise than
on the exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of
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shares of Common Stock) for a consideration part or all of which shall be other
than cash, the amount of the consideration therefor other than cash deemed to
have been received by the Company shall be the value of such consideration as
determined in good faith by the Board of Directors of the Company, using
customary valuation methods and on the basis of prevailing market values for
similar property or services.
(C) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of shareholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
(D) The reclassification of securities of the Company other
than shares of Common Stock into securities including shares of Common Stock
shall be deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (B) of this Section 8(a).
(E) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(b) Upon each adjustment of the Purchase Price pursuant to
this Section 8, the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall be the number derived by multiplying the number
of shares of Common Stock purchasable
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immediately prior to such adjustment by the Purchase Price in effect prior to
such adjustment and dividing the product so obtained by the applicable adjusted
Purchase Price.
(c) In case the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Common
Stock, or issue any securities convertible into or exchangeable for shares of
Common Stock, for a consideration per share (determined as provided in Sections
8(a) and 8(b) and as provided below) less than the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, or without consideration (including the
issuance of any such securities by way of dividend or other distribution), the
Purchase Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to the issuance of such options, rights
or warrants, or such convertible or exchangeable securities, as the case may be,
shall be reduced to a price determined by making the computation in accordance
with the provisions of Sections 8(a) and 8(b) hereof, provided that:
(A) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable or that may become issuable under such options, rights
or warrants (assuming exercise in full even if not then currently exercisable or
currently exercisable in full) shall be deemed to be issued and outstanding at
the time such options, rights or warrants were issued, for a consideration equal
to the minimum purchase price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration, if any, received by
the Company for such options, rights or warrants; provided, however, that upon
the expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (A) (and for the
purposes of subsection (E) of Section 8(a) hereof) shall be
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reduced by the number of shares as to which options, warrants and/or rights
shall have expired, and such number of shares shall no longer be deemed to be
issued and outstanding, and the Purchase Price then in effect shall forthwith be
readjusted and thereafter be the price that it would have been had adjustment
been made on the basis of the issuance only of the shares actually issued plus
the shares remaining issuable upon the exercise of those options, rights or
warrants as to which the exercise rights shall not have expired or terminated
unexercised.
(B) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or otherwise), the number of shares
of Common Stock deemed to be issued and outstanding pursuant to this subsection
(B) (and for the purposes of subsection (E) of Section 8(a) hereof) shall be
reduced by the number of shares as to which the conversion or exchange rights
shall have expired or terminated unexercised, and such number of shares shall no
longer be deemed to be issued and outstanding, and the Purchase Price then in
effect shall forthwith be readjusted and thereafter be the price that it would
have been had adjustment been made on the basis of the issuance only of the
shares actually issued plus the shares remaining issuable upon conversion or
exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated unexercised.
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(C) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in subsection (A) of
this Section 8(c), or in the price per share or ratio at which the securities
referred to in subsection (B) of this Section 8(c) are convertible or
exchangeable, such options, rights or warrants or conversion or exchange rights,
as the case may be, to the extent not theretofore exercised, shall be deemed to
have expired or terminated on the date when such price change became effective
in respect of shares not theretofore issued pursuant to the exercise or
conversion or exchange thereof, and the Company shall be deemed to have issued
upon such date new options, rights or warrants or convertible or exchangeable
securities.
(d) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary of the Company in which merger the Company is
the continuing corporation) and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of subdivision or combination) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Registered Holder of each Warrant then outstanding shall have the
right thereafter to receive on exercise of such Warrant
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the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance and shall forthwith file at the Corporate Office of the Warrant Agent
a statement signed by its Chief Executive Officer, President or a Vice President
and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant
Secretary evidencing such provision. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Sections 8(a), (b) and (c). The above provisions of
this Section 8(d) shall similarly apply to successive reclassifications and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(e) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
share and the number of shares purchasable thereunder as the Purchase Price per
share and the number of shares purchasable thereunder were expressed in the
Warrant Certificates when the same were originally issued.
(f) After each adjustment of the Purchase Price pursuant to
this Section 8, the Company will promptly prepare a certificate signed by the
Chairman, Chief Executive Officer or President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company
setting forth: (i) the Purchase Price as so adjusted, (ii) the number of shares
of Common Stock purchasable upon exercise of each Warrant, after such
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adjustment, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with the Warrant
Agent and cause a brief summary thereof to be sent by ordinary first class mail
to each Registered Holder at his last address as it shall appear on the registry
books of the Warrant Agent. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity thereof except as to
the holder to whom the Company failed to mail such notice, or except as to the
holder whose notice was defective. The affidavit of an officer of the Warrant
Agent or the Secretary or an Assistant Secretary of the Company that such notice
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(g) No adjustment of the Purchase Price shall be made as a
result of or in connection with (A) the issuance or sale of shares of Common
Stock pursuant to options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the date hereof and on
the terms described in the final prospectus relating to the public offering
contemplated by the Underwriting Agreement; or (B) the issuance or sale of
shares of Common Stock if the amount of said adjustment shall be less than $.10,
provided, however, that in such case, any adjustment that would otherwise be
required then to be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment that shall amount, together
with any adjustment so carried forward, to at least $.10. In addition,
Registered Holders shall not be entitled to cash dividends paid by the Company
prior to the exercise of any Warrant or Warrants held by them.
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SECTION 9. Redemption.
(a) Commencing on the Initial Warrant Redemption Date, the
Company may, on 30 days' prior written notice, redeem all, but not less than
all, of the Warrants at ten cents ($0.10) per Warrant, provided, however, that
before any such call for redemption of Warrants can take place, the closing bid
price for the Common Stock as reported by Nasdaq, if the Common Stock is then
traded on the Nasdaq Small Cap Market (or the closing sale price, if the Common
Stock is then traded on Nasdaq/NM or on a national securities exchange) shall
have equalled or exceeded $________ [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 notice contemplated by subsections (b) and (c) below is given (subject
to adjustment in the event of any stock splits or other similar events as
provided in Section 8 hereof).
(b) In case the Company shall exercise its right to redeem all
of the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants, by mailing to such Registered Holders a notice of
redemption, first class, postage prepaid, at their last address as shall appear
on the records of the Warrant Agent. Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice. Not less than five (5) business days
prior to the mailing to the Registered Holders of the Warrants of the notice of
redemption, the Company shall deliver or cause to be delivered to National a
similar notice telephonically and confirmed in writing together with a list of
the Registered Holders (including their respective addresses and number of
Warrants beneficially owned) to whom such notice of redemption has been or will
be given.
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(c) The notice of redemption shall specify (i) the redemption
price, (ii) the Redemption Date, which shall in no event be less than thirty
(30) days after the date of mailing of such notice, (iii) the place where the
Warrant Certificate shall be delivered and the redemption price shall be paid,
(iv) if National is engaged as a Warrant solicitation agent, that National shall
receive the commission contemplated by Section 4(b) hereof, and (v) that the
right to exercise the Warrant shall terminate at 5:30 p.m. (New York time) on
the business day immediately preceding the date fixed for redemption. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the validity of the proceedings for such redemption except as to a holder
(a) to whom notice was not mailed or (b) whose notice was defective. An
affidavit of the Warrant Agent or the Secretary or Assistant Secretary of the
Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:30
p.m. (New York time) on the business day immediately preceding the Redemption
Date. The redemption price payable to the Registered Holders shall be mailed to
such persons at their addresses of record.
(e) The Company shall indemnify National and each person, if
any, who controls National within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from the
registration statement or prospectus referred to in Section 5(b) hereof to the
same extent and with the same effect (including the provisions regarding
contribution) as the provisions pursuant
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to which the Company has agreed to indemnify National contained in Section 7 of
the Underwriting Agreement.
(f) Five business days prior to the Redemption Date, the
Company shall furnish to National (i) an opinion of counsel to the Company,
dated such date and addressed to National, and (ii) a "cold comfort" letter
dated such date addressed to National, signed by the independent public
accountants who have issued a report on the Company's financial statements
included in such registration statement, in each case covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
SECTION 10. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and National, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
(b) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price or the Redemption Price provided in
this Agreement, or to determine whether any fact exists which may require any
such adjustments, or with respect to the nature
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or extent of any such adjustments, when made, or with respect to the method
employed in making the same. It shall not (i) be liable for any recital or
statement of fact contained herein or for any action taken, suffered or omitted
by it in reliance on any Warrant Certificate or other document or instrument
believed by it in good faith to be genuine and to have been signed or presented
by the proper party or parties, (ii) be responsible for any failure on the part
of the Company to comply with any of its covenants and obligations contained in
this Agreement or in any Warrant Certificate, or (iii) be liable for any act or
omission in connection with this Agreement except for its own negligence, bad
faith or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or for National) and
shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
(d) Any notice, statement, instruction, request, direction,
order or demand of the Company shall be sufficiently evidenced by an instrument
signed by the Chairman of the Board of Directors, Chief Executive Officer,
President or any Vice President (unless other evidence in respect thereof is
herein specifically prescribed). The Warrant Agent shall not be liable for any
action taken, suffered or omitted by it in accordance with such notice,
statement, instruction, request, direction, order or demand reasonably believed
by it to be genuine.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and save it harmless from and against any and all losses, expenses and
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of its duties
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and powers hereunder except losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence, bad faith or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own gross negligence or willful misconduct),
after giving 30 days' prior written notice to the Company. At least 15 days
prior to the date such resignation is to become effective, the Warrant Agent
shall cause a copy of such notice of resignation to be mailed to the Registered
Holder of each Warrant Certificate at the Company's expense. Upon such
resignation, or any inability of the Warrant Agent to act as such hereunder, the
Company shall appoint in writing a new warrant agent. If the Company shall fail
to make such appointment within a period of 15 days after it has been notified
in writing of such resignation by the resigning Warrant Agent, then the
Registered Holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a bank or trust
company having a capital and surplus, as shown by its last published report to
its stockholders, of not less than $10,000,000 or a stock transfer company.
After acceptance in writing of such appointment by the new warrant agent is
received by the Company, such new warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning Warrant Agent. Not later than the effective date of
any such appointment the Company shall file notice thereof with the resigning
Warrant Agent and
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shall forthwith cause a copy of such notice to be mailed to the Registered
Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and
any of its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two years
from the date of exercise any Warrant Certificate received by it upon such
exercise.
SECTION 11. Modification of Agreement.
The Warrant Agent and the Company may by supplemental agreement make
any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; or (ii) that they may
deem necessary or desirable and which shall not adversely
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affect the interests of the holders of Warrant Certificates; provided, however,
that this Agreement shall not otherwise be modified, supplemented or altered in
any respect except with the consent in writing of the Registered Holders
representing not less than 66-2/3% of the Warrants then outstanding; provided,
further, that no change in the number or nature of the securities purchasable
upon the exercise of any Warrant, or to increase the Purchase Price therefor or
to accelerate the Warrant Expiration Date, shall be made without the consent in
writing of the Registered Holder of the Warrant Certificate representing such
Warrant, other than such changes as are presently specifically prescribed by
this Agreement as originally executed. In addition, this Agreement may not be
modified, amended or supplemented without the prior written consent of National,
other than to cure any ambiguity or to correct any provision which is
inconsistent with any other provision of this Agreement or to make any such
change that is necessary or desirable and which shall not adversely affect the
interests of National and except as may be required by law.
SECTION 12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class registered or certified mail, postage prepaid, as follows: if
to the Registered Holder of a Warrant Certificate, at the address of such holder
as shown on the registry books maintained by the Warrant Agent; if to the
Company at __________________________________, New Orleans, Louisiana ________,
Attention: James L. Ake, Chief Operating Officer, or at such other address as
may have been furnished to the Warrant Agent in writing by the Company; and if
to the Warrant Agent, atits Corporate Office. Copies of any notice delivered
pursuant to this Agreement shall also be delivered to National Securities
Corporation, 1001 Fourth Avenue, Suite
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2200, Seattle, Washington 98154-1100, Attention: General Counsel, or at such
other address as may have been furnished to the Company and the Warrant Agent in
writing.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to conflicts of laws.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, National, the Warrant Agent and their respective successors and assigns
and the holders from time to time of Warrant Certificates or any of them.
Nothing in this Agreement is intended or shall be construed to confer upon any
other person any right, remedy or claim, in equity or at law, or to impose upon
any other person any duty, liability or obligation.
SECTION 15. Termination.
This Agreement shall terminate at the close of business on the
Expiration Date of all of the Warrants or such earlier date upon which all
Warrants have been exercised or redeemed, except that the Warrant Agent shall
account to the Company for cash held by it and the provisions of Section 10
hereof shall survive such termination.
SECTION 16. Counterparts.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
[SEAL]
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By:-----------------------------
Name:
Title:
Attest:
By:-------------------
Name:
Title:
THE BANK OF NEW YORK,
As Warrant Agent
By:-----------------------------
Name:
Title:
NATIONAL SECURITIES CORPORATION
By:-----------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT A
No. W_____ VOID AFTER __________, 2001
___________ WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
CUSIP_______
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Common Stock, $.01 par
value, of American Craft Brewing International Limited, a Bermuda corporation
(the "Company"), at any time between ______, 1996 (the "Initial Warrant Exercise
Date"), and the Expiration Date (as hereinafter defined) upon the presentation
and surrender of this Warrant Certificate with the Subscription Form on the
reverse hereof duly executed, at the corporate office of The Bank of New York,
as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment
of $_____, [150% of the initial public offering price of the Common Stock]
subject to adjustment (the "Purchase Price"), in lawful money of the United
States of America in cash or by check made payable to the Warrant Agent for the
account of the Company.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated ______, 1996
[date of the Prospectus], by and among the Company, National Securities
Corporation ("National") and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
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The term "Expiration Date" shall mean 5:30 p.m. (New York time) on
____________, 2001 [fifty-four (54) months after the Initial Warrant Exercise
Date]. If each such date shall in the State of New York be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall mean
5:30 p.m. (New York time) on the next following day which in the State of New
York is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the same to become effective, use
its best efforts to keep such registration statement current, if required under
the Act, while any of the Warrants are outstanding, and deliver a prospectus
which complies with Section 10(a)(3) of the Act to the Registered Holder
exercising this Warrant. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may
be redeemed at the option of the Company, at a redemption price of $0.10 per
Warrant, at any time commencing after ______________, 1997 [18 months after the
effective date of the Registration Statement], provided that the closing bid
price for the Common Stock as reported by the Nasdaq Small Cap Market, if the
Common Stock is then traded on the Nasdaq Small Cap Market (or the closing sale
price, if the Common Stock is then traded on the Nasdaq National Market or a
national securities exchange), shall have equalled or exceeded $_____ [160% of
the initial public offering price per share] 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, as defined below
(subject to adjustment in the event of any stock splits or other similar
events). Notice of redemption (the "Notice of Redemption") shall be given not
later than the thirtieth day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no rights with
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<PAGE>
respect to the Warrants except to receive the $0.10 per Warrant upon surrender
of this Warrant Certificate.
Under certain circumstances, National may be entitled to receive an
aggregate of five percent (5%) of the Purchase Price of the Warrants represented
hereby.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated:
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
[SEAL]
By:_____________________________
Name:
Title:
By:_____________________________
___________________
Secretary
COUNTERSIGNED:
THE BANK OF NEW YORK,
as Warrant Agent
By:_____________________________
Authorized Officer
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<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise ______________ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
________________________
________________________
________________________
________________________
(please print or type name and address)
and be delivered to
________________________
________________________
________________________
________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
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IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was solicited by National Securities
Corporation. [ ]
2. The exercise of this Warrant was solicited by [ ]
_______________________.
3. The exercise of this Warrant was not solicited. [ ]
Dated: X____________________________
____________________________
____________________________
Address
____________________________
Social Security or Taxpayer
Identification Number
____________________________
Signature Guaranteed
____________________________
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<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________, hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
________________________
________________________
________________________
________________________
(please print or type name and address)
_______________________ of the Warrants represented by this Warrant Certificate,
and hereby irrevocably constitutes and appoints_______________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated:__________________ X______________________________
Signature Guaranteed
______________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
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<PAGE>
EXHIBIT ____
OHS DRAFT
7/29/96
[FORM OF REPRESENTATIVE'S WARRANT AGREEMENT]
[SUBJECT TO ADDITIONAL REVIEW]
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AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
AND
NATIONAL SECURITIES CORPORATION
---------
REPRESENTATIVE'S
WARRANT AGREEMENT
DATED AS OF ________, 1996
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
REPRESENTATIVE'S WARRANT AGREEMENT dated as of _______, 1996
between AMERICAN CRAFT BREWING INTERNATIONAL LIMITED, a Bermuda corporation (the
"Company"), and NATIONAL SECURITIES CORPORATION (hereinafter referred to
variously as the "Holder" or the "Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative
warrants ("Warrants") to purchase up to an aggregate of 133,333 shares of Common
Stock, $.01 par value, of the Company and/or 133,333 redeemable common stock
purchase warrants of the Company ("Redeemable Warrants"), each Redeemable
Warrant to purchase one additional share of Common Stock; and
WHEREAS, the Representative has agreed pursuant to the
underwriting agreement (the "Underwriting Agreement") dated as of the date
hereof between the Company and the several Underwriters listed therein to act as
the Representative in connection with the Company's proposed public offering of
up to 1,333,333 shares of Common Stock and 1,333,333 Redeemable Warrants (the
"Public Warrants") at a public offering price of $____ per share of Common Stock
and $.10 per Public Warrant (the "Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representative in consideration for, and as
part of the Representative's compensation in connection with, the Representative
acting as the Representative pursuant to the Underwriting Agreement;
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NOW, THEREFORE, in consideration of the premises, the payment by
the Representative to the Company of an aggregate thirteen dollars and
thirty-three cents ($13.33), the agreements herein set forth and other good and
valuable consideration, hereby acknowledged, the parties hereto agree as
follows:
1. Grant. The Representative (or its designees) is hereby
granted the right to purchase, at any time from _______, 1997 [one year from the
effective date of the Registration Statement], until 5:30 P.M., New York time,
on _______, 2001 [five years from the effective date of the Registration
Statement], up to an aggregate of 133,333 shares of Common Stock and/or 133,333
Redeemable Warrants at an initial exercise price (subject to adjustment as
provided in Section 8 hereof) of $____ per share of Common Stock [150% of the
initial public offering price per share] and $____ per Redeemable Warrant [150%
of the initial public offering price per Redeemable Warrant], subject to the
terms and conditions of this Agreement. One Redeemable Warrant is exercisable to
purchase one additional share of Common Stock at an initial exercise price of
$_____ [150% of the initial public offering price per share] from _______, 1996
[six months from the effective date of the Registration Statement] until 5:30
p.m. New York time on _____, 2001 [five years from the effective date of the
Registration Statement], at which time the Redeemable Warrants shall expire.
Except as set forth herein, the shares of Common Stock and the Redeemable
Warrants issuable upon exercise of the Warrants are in all respects identical to
the shares of Common Stock and the Public Warrants being purchased by the
Underwriters for resale to the public pursuant to the terms and provisions of
the Underwriting Agreement. The shares of Common Stock and the Redeemable
Warrants issuable upon exercise of the Warrants are sometimes hereinafter
referred to collectively as the "Securities."
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2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
ss.3.1 Method of Exercise. The Warrants initially are
exercisable at an aggregate initial exercise price (subject to adjustment as
provided in Section 8 hereof) per share of Common Stock and Redeemable Warrant
set forth in Section 6 hereof payable by certified or official bank check in New
York Clearing House funds, subject to adjustment as provided in Section 8
hereof. Upon surrender of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
(as hereinafter defined) for the shares of Common Stock and/or Redeemable
Warrants purchased at the Company's principal executive offices in New Orleans,
Louisiana (presently located at _________________________________, New Orleans,
Louisiana _____) the registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for the
shares of Common Stock so purchased and a certificate or certificates for the
Redeemable Warrants so purchased. The purchase rights represented by each
Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock and
Redeemable Warrants underlying the Warrants). In the event the Company redeems
all of the Public Warrants (other than the Redeemable Warrants underlying the
Warrants), then the Warrants may only be exercised if such exercise is
accompanied by the simultaneous exercise of the Redeemable Warrant(s) underlying
the Warrants being so exercised. Warrants may be exercised to purchase all or
part of the shares
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<PAGE>
of Common Stock together with an equal or unequal number of the Redeemable
Warrants represented thereby. In the case of the purchase of less than all the
shares of Common Stock and/or Redeemable Warrants purchasable under any Warrant
Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock and/or Redeemable
Warrants purchasable thereunder.
ss.3.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1 in
exchange for the number of shares of Common Stock equal to the quotient derived
from DIVIDING the NUMERATOR (X) an amount equal to the DIFFERENCE BETWEEN (A)
the SUM OF (1) the number of shares of Common Stock as to which the Warrants are
being exercised MULTIPLIED by the per share Market Price, AND (2) the number of
Redeemable Warrants as to which the Warrants are being exercised MULTIPLIED by
the per Redeemable Warrant Market Price, AND (3) the number of shares of Common
Stock issuable upon exercise of the Redeemable Warrants underlying the Warrants
being exercised MULTIPLIED by the per share Market Price, AND (B) the SUM OF (1)
the number of Warrants which are being exercised MULTIPLIED by the Exercise
Price AND (2) the number of Redeemable Warrants included in the Warrants which
are being exercised MULTIPLIED by the exercise price per Redeemable Warrant (as
calculated pursuant to the Redeemable Warrant Agreement (hereinafter defined))
as then in effect, BY the DENOMINATOR (Y) the per share Market Price of the
Common Stock. Solely for the purposes of this paragraph, Market Price shall be
calculated either (i) on the date on which the form of election attached
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<PAGE>
hereto is deemed to have been sent to the Company pursuant to Section 14 hereof
("Notice Date") or (ii) as the average of the Market Prices for each of the five
trading days preceding the Notice Date, whichever of (i) or (ii) is greater.
ss.3.3 Definition of Market Price. As used herein, the phrase
"Market Price" at any date shall be deemed to be (i) when referring to the
Common Stock, the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading or by the Nasdaq National Market ("Nasdaq/NM"), or, if the Common Stock
is not listed or admitted to trading on any national securities exchange or
quoted by the National Association of Securities Dealers Automated Quotation
System ("Nasdaq"), the average closing bid price as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through Nasdaq or similar
organization if Nasdaq is no longer reporting such information, or if the Common
Stock is not quoted on Nasdaq, as determined in good faith (using customary
valuation methods) by resolution of the members of the Board of Directors of the
Company, based on the best information available to it or (ii) when referring to
a Redeemable Warrant, the last reported sales price, or, in the case no such
reported sale takes place on such day, the average of the last reported sale
prices for the last three (3) trading days, in either case as officially
reported by the principal securities exchange on which the Redeemable Warrants
are listed or admitted to trading or by Nasdaq/NM, or, if the Redeemable
Warrants are not listed or admitted to trading on any national securities
exchange or quoted by Nasdaq, the average closing bid price as furnished by the
NASD through Nasdaq or similar organization if Nasdaq is no longer reporting
such information, or if the Redeemable Warrants are not quoted on Nasdaq or are
no longer
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<PAGE>
outstanding, the Market Price of a Redeemable Warrant shall equal the difference
between the Market Price of the Common Stock and the Exercise Price of the
Redeemable Warrant.
4. Issuance of Certificates. Upon the exercise of the Warrants,
the issuance of certificates for shares of Common Stock and/or Redeemable
Warrants and/or other securities, properties or rights underlying such Warrants
and, upon the exercise of the Redeemable Warrants, the issuance of certificates
for shares of Common Stock and/or other securities, properties or rights
underlying such Redeemable Warrants shall be made forthwith (and in any event
within five (5) business days thereafter) without charge to the Holder thereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
shares of Common Stock and the Redeemable Warrants underlying the Warrants and
the shares of Common Stock underlying the Redeemable Warrants (and/or other
securities, properties or rights issuable upon the exercise of the Warrants or
the Redeemable Warrants) shall be executed on behalf of the Company by the
manual or facsimile signature of the then Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company. Warrant Certificates
shall
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<PAGE>
be dated the date of execution by the Company upon initial issuance, division,
exchange, substitution or transfer. Certificates representing the shares of
Common Stock and Redeemable Warrants, and the shares of Common Stock underlying
each Redeemable Warrant (and/or other securities, properties or rights issuable
upon exercise of the Warrants) shall be dated as of the Notice Date (regardless
of when executed or delivered) and dividend bearing securities so issued shall
accrue dividends from the Notice Date.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to officers of the Representative.
6. Exercise Price.
ss.6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $____ [150% of the initial public offering price] per share of Common Stock
and $_____ per Redeemable Warrant [150% of the initial public offering price per
Public Warrant]. The adjusted exercise price shall be the price which shall
result from time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Section 8 hereof. Any transfer of a
Warrant shall constitute an automatic transfer and assignment of the
registration rights set forth in Section 7 hereof with respect to the Securities
or other securities, properties or rights underlying the Warrants.
ss.6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context or unless otherwise specified.
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7. Registration Rights.
ss.7.1 Registration Under the Securities Act of 1933. The
Warrants, the shares of Common Stock and Redeemable Warrants issuable upon
exercise of the Warrants, the shares of Common Stock issuable upon exercise of
the Redeemable Warrants issuable upon exercise of the Warrants and any of the
other securities issuable upon exercise of the Warrants (collectively, the
"Warrant Securities") have been registered under the Securities Act of 1933, as
amended (the "Act"), pursuant to the Company's Registration Statement on Form
S-1 (Registration No. ________) (the "Registration Statement"). All of the
representations and warranties of the Company contained in the Underwriting
Agreement relating to the Registration Statement, the Preliminary Prospectus and
Prospectus (as such terms are defined in the Underwriting Agreement) and made as
of the dates provided therein, are incorporated by reference herein. The Company
agrees and covenants promptly to file post-effective amendments to such
Registration Statement as may be necessary in order to maintain its
effectiveness and otherwise to take such action as may be necessary to maintain
the effectiveness of the Registration Statement as long as any Warrants are
outstanding. In the event that, for any reason whatsoever, the Company shall
fail to maintain the effectiveness of the Registration Statement, the
certificates representing the Warrant Securities shall bear the following
legend:
The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended ("Act"), and may not be offered or sold
except pursuant to (i) an effective registration
statement under the Act, (ii) to the extent
applicable, Rule 144 under the Act (or any similar
rule under such Act relating to the disposition of
securities), or (iii) an opinion of counsel, if such
opinion shall be reasonably satisfactory to counsel to
the issuer, that an exemption from registration under
such Act is available.
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<PAGE>
ss.7.2 Piggyback Registration. If, at any time commencing after
the date hereof and expiring seven (7) years thereafter, the Company proposes to
register any of its securities under the Act (other than pursuant to Form S-4,
Form S-8 or a comparable registration statement) it will give written notice by
registered mail, at least thirty (30) days prior to the filing of each such
registration statement, to the Representative and to all other Holders of the
Warrants and/or the Warrant Securities of its intention to do so. If the
Representative or other Holders of the Warrants and/or Warrant Securities notify
the Company within twenty (20) business days after receipt of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford the Representative and such Holders of the
Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement (sometimes referred to
herein as a "Piggyback Registration").
Notwithstanding the provisions of this Section 7.2, the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 7.2 (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect not to file any
such proposed registration statement, or to withdraw the same after the filing
but prior to the effective date thereof.
If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing underwriters advise the
Company in writing that in their good faith opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Warrant Securities
requested to be included in such registration, pro rata among the Holders of
such Warrant Securities on
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the basis of the number of Warrant Securities of such Holders requested to be
included in such registration, and (iii) third, other securities requested to be
included in such registration.
If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's Common Stock, and the
managing underwriters advise the Company in writing that in their good faith
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, the Company will include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration pursuant to a demand registration
right, pro rata among such holders, (ii) second, the Warrant Securities
requested to be included by Holders under this Section 7.2 on a pro rata basis
based upon the number of Warrant Securities of such Holders requested to be
included in such registration and (iii) third, other securities requested to be
included in such registration.
ss.7.3 Demand Registration.
(a) At any time commencing after the date hereof and expiring
five (5) years thereafter, the Holders of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the Warrants) shall have the right (which right is in
addition to the registration rights under Section 7.2 hereof), exercisable by
written notice to the Company, to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Representative and Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale of their respective Warrant
Securities for nine (9) consecutive months by such Holders and any
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other Holders of the Warrants and/or Warrant Securities who notify the Company
within ten (10) days after receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Intentionally omitted.
(d) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrant
Securities within the time period specified in Section 7.4(a) hereof pursuant to
the written notice specified in Section 7.3(a) of a Majority of the Holders of
the Warrants and/or Warrant Securities, the Company may, at its option, upon the
written notice of election of a Majority of the Holders of the Warrants and/or
Warrant Securities requesting such registration, repurchase (i) any and all
Warrant Securities of such Holders at the higher of the Market Price per share
of Common Stock and per Redeemable Warrant on (x) the date of the notice sent
pursuant to Section 7.3(a) or (y) the expiration of the period specified in
Section 7.4(a) and (ii) any and all Warrants of such Holders at such Market
Price less the Exercise Price of such Warrant. Such repurchase shall be in
immediately available funds and shall close within two (2) days after the later
of (i) the expiration of the period specified in Section 7.4(a) or (ii) the
delivery of the written notice of election specified in this Section 7.3(d).
(e) For a period not to exceed thirty (30) days, the Company
shall not be prevented from delaying a registration statement pursuant to this
Agreement at any time when the Company, in its good faith judgment with written
advice of counsel, reasonably believes
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that the filing thereof at the time requested, or the offering of Warrant
Securities pursuant thereto, would materially and adversely affect (a) a bona
fide pending or scheduled public offering of the Company's securities pursuant
to a bona fide letter of intent entered into prior to delivery of a notice by a
Holder(s) of the exercise of his or its demand registration rights pursuant to
this Section 7.3, or (b) an acquisition, merger, recapitalization,
consolidation, reorganization or similar transaction by or of the Company.
ss.7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within thirty (30) days of receipt of any demand
therefor, shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish each Holder
desiring to sell Warrant Securities such number of prospectuses as shall
reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses
of Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3 hereof including, without limitation, the Company's legal
and accounting fees, printing expenses, blue sky fees and expenses.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general
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consent to service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify each of the Underwriters contained in Section 7
of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Securities to be sold pursuant
to a registration statement, and their successors and assigns, shall severally,
and not jointly, indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 7 of the
Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company.
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<PAGE>
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Warrant Securities to be included in any registration statement
filed pursuant to Section 7.3 hereof, or permit any other registration statement
to be or remain effective during the effectiveness of a registration statement
filed pursuant to Section 7.3 hereof, without the prior written consent of the
Holders of the Warrants and Warrant Securities representing a Majority of such
securities.
(h) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
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<PAGE>
(i) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriters, copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such Holder or underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement with
the managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Securities requested to be included in such
underwriting, which may be the Representative. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriter(s), and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter(s). The Holders shall be parties
to any underwriting
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<PAGE>
agreement relating to an underwritten sale of their Warrant Securities and may,
at their option, require that any or all of the representations, warranties and
covenants of the Company to or for the benefit of such underwriter(s) shall also
be made to and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriter(s) except as they may relate to such Holders and
their intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written
request therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including without limitation
restricted shares of Common Stock, options, warrants or any other securities
convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities, shall mean in excess
of fifty percent (50%) of the then outstanding Warrants or Warrant Securities
that (i) are not held by the Company, an affiliate, officer, creditor, employee
or agent thereof or any of their respective affiliates, members of their family,
persons acting as nominees or in conjunction therewith and (ii) have not been
resold to the public pursuant to a registration statement filed with the
Commission under the Act.
(n) Notwithstanding anything to the contrary contained herein,
all registration rights granted any Holder under Section 7.2 or 7.3 hereof shall
terminate as to any such Holder upon such Holder becoming eligible to resell his
or its Warrant Securities pursuant to the provisions of paragraph (k) of Rule
144 promulgated under the Act ("Rule 144"), provided that
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<PAGE>
no other provisions of Rule 144 in any way limit such Holder's resale of his or
its Warrant Securities.
8. Adjustments to Exercise Price and Number of Securities.
ss.8.1 Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
ss.8.2 Stock Dividends and Distributions. In case the Company
shall pay a dividend in, or make a distribution of, shares of Common Stock or of
the Company's capital stock convertible into Common Stock, the Exercise Price
shall forthwith be proportionately decreased. An adjustment made pursuant to
this Section 8.2 shall be made as of the record date for the subject stock
dividend or distribution.
ss.8.3 Adjustment in Number of Securities. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 8, the number
of Warrant Securities issuable upon the exercise at the adjusted exercise price
of each Warrant shall be adjusted to the nearest full amount by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
ss.8.4 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Memorandum of Association of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common
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<PAGE>
Stock consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that the Company shall
after the date hereof issue securities with greater or superior voting rights
than the shares of Common Stock outstanding as of the date hereof, the Holder,
at its option, may receive upon exercise of any Warrant either the Warrant
Securities or a like number of such securities with greater or superior voting
rights.
ss.8.5 Merger or Consolidation. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of securities of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
subsection shall similarly apply to successive consolidations or mergers.
ss.8.6 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the Warrant
Securities issuable upon the exercise of the Warrants;
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<PAGE>
(b) If the amount of said adjustment shall be less than two
cents (2(cent)) per Warrant Security, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents (2(cent)) per Warrant Security.
9. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Securities in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of any Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock or Redeemable Warrants upon the exercise of the Warrants, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be
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<PAGE>
eliminated by rounding any fraction up to the nearest whole number of shares of
Common Stock or Redeemable Warrants or other securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants and
the Redeemable Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all shares of Common Stock, Redeemable Warrants
and other securities issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights of
any stockholder. The Company further covenants and agrees that upon exercise of
the Redeemable Warrants underlying the Warrants and payment of the respective
Redeemable Warrant exercise price therefor, all shares of Common Stock and other
securities issuable upon such exercises shall be duly and validly issued, fully
paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Warrants shall be outstanding, the Company shall use
its best efforts to cause all shares of Common Stock issuable upon the exercise
of the Warrants and Redeemable Warrants and all Redeemable Warrants underlying
the Warrants to be listed (subject to official notice of issuance) on all
securities exchanges on which the Common Stock or the Public Warrants issued to
the public in connection herewith may then be listed and/or quoted on Nasdaq/NM
or Nasdaq.
12. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any
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<PAGE>
other matter, or as having any rights whatsoever as a stockholder of the
Company. If, however, at any time prior to the expiration of the Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution payable otherwise than in
cash, or a cash dividend or distribution payable otherwise than
out of current or retained earnings or capital surplus (in
accordance with applicable law), as indicated by the accounting
treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of
capital stock of the Company, or any option, right or warrant to
subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least thirty (30) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the
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<PAGE>
declaration or payment of any such dividend, or the issuance of any convertible
or exchangeable securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
13. Redeemable Warrants.
The form of the certificate representing Redeemable Warrants
(and the form of election to purchase shares of Common Stock upon the exercise
of Redeemable Warrants and the form of assignment printed on the reverse
thereof) shall be substantially as set forth in Exhibit "A" to the Warrant
Agreement dated as of the date hereof by and among the Company, the
Representative and _____________________________ (the "Redeemable Warrant
Agreement"). Each Redeemable Warrant issuable upon exercise of the Warrants
shall evidence the right to initially purchase a fully paid and non-assessable
share of Common Stock at an initial purchase price of $______ [150% of the
Public Warrant offering price] from ______ 1996 [six months from the effective
date of the Registration Statement] until 5:30 p.m. New York time on _________
2001 [5 years from the effective date of the Registration Statement] at which
time the Redeemable Warrants, unless the exercise period has been extended,
shall expire. The exercise price of the Redeemable Warrants and the number of
shares of Common Stock issuable upon the exercise of the Redeemable Warrants are
subject to adjustment, whether or not the Warrants have been exercised and the
Redeemable Warrants have been issued, in the manner and upon the occurrence of
the events set forth in Section 8 of the Redeemable Warrant Agreement, which is
hereby incorporated herein by reference and made a part hereof as if set forth
in its entirety herein. Subject to the provisions of this Agreement and upon
issuance of the Redeemable Warrants underlying the Warrants, each registered
holder of such Redeemable Warrant shall have the right to purchase from the
Company (and the
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<PAGE>
Company shall issue to such registered holders) up to the number of fully paid
and non-assessable shares of Common Stock (subject to adjustment as provided
herein and in the Redeemable Warrant Agreement), free and clear of all
preemptive rights of stockholders, provided that such registered holder complies
with the terms governing exercise of the Redeemable Warrant set forth in the
Redeemable Warrant Agreement, and pays the applicable exercise price, determined
in accordance with the terms of the Redeemable Warrant Agreement. Upon exercise
of the Redeemable Warrants, the Company shall forthwith issue to the registered
holder of any such Redeemable Warrant in his name or in such name as may be
directed by him, certificates for the number of shares of Common Stock so
purchased. Except as otherwise provided in this Agreement, the Redeemable
Warrants underlying the Warrants shall be governed in all respects by the terms
of the Redeemable Warrant Agreement. The Redeemable Warrants shall be
transferable in the manner provided in the Redeemable Warrant Agreement, and
upon any such transfer, a new Redeemable Warrant Certificate shall be issued
promptly to the transferee. The Company covenants to, and agrees with, the
Holder(s) that without the prior written consent of the Holder(s), which will
not be unreasonably withheld, the Redeemable Warrant Agreement will not be
modified, amended, canceled, altered or superseded, and that the Company will
send to each Holder, irrespective of whether or not the Warrants have been
exercised, any and all notices required by the Redeemable Warrant Agreement to
be sent to holders of Redeemable Warrants.
14. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
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<PAGE>
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by
notice to the Holders.
15. Supplements and Amendments. The Company and the
Representative may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrant Certificates (other than the
Representative) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Representative may deem
necessary or desirable and which the Company and the Representative deem shall
not adversely affect the interests of the Holders of Warrant Certificates.
16. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of
business on _______, 2003. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on _______, 2009.
18. Governing Law; Submission to Jurisdiction. This Agreement
and each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without giving effect to the
rules of said State governing the conflicts of laws.
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<PAGE>
The Company, the Representative and the Holders hereby agree
that any action, proceeding or claim against it arising out of, or relating in
any way to, this Agreement shall be brought and enforced in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and irrevocably submits to such jurisdiction, which jurisdiction
shall be exclusive. The Company, the Representative and the Holders hereby
irrevocably waive any objection to such exclusive jurisdiction or inconvenient
forum. Any such process or summons to be served upon any of the Company, the
Representative and the Holders (at the option of the party bringing such action,
proceeding or claim) may be served by transmitting a copy thereof, by registered
or certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 14 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the party so served in any
action, proceeding or claim. The Company, the Representative and the Holders
agree that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other party(ies) all of its/their reasonable legal
costs and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
19. Entire Agreement; Modification. This Agreement (including
the Underwriting Agreement and the Redeemable Warrant Agreement to the extent
portions thereof are referred to herein) contains the entire understanding
between the parties hereto with respect to the subject matter hereof and may not
be modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
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<PAGE>
21. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Warrant Certificates or
Warrant Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole benefit of the Company and
the Representative and any other registered Holders of Warrant Certificates or
Warrant Securities.
23. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By:______________________________________
Name:
Title:
Attest:
_________________________
Secretary
NATIONAL SECURITIES CORPORATION
By:______________________________________
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, __________, 2001
No. W- Warrants to Purchase
____ Shares of Common Stock and/or
____ Redeemable Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that __________, or
registered assigns, is the registered holder of Warrants to purchase initially,
at any time from __________, 1997 [one year from the effective date of the
Registration Statement] until 5:30 p.m. New York time on ___________, 2001 [five
years from the effective date of the Registration Statement] ("Expiration
Date"), up to __________ fully-paid and non-assessable shares of common stock,
$.01 par value ("Common Stock"), of AMERICAN CRAFT BREWING INTERNATIONAL
LIMITED, a Bermuda corporation (the "Company"), and/or _____ Redeemable Warrants
of the Company (one Redeemable Warrant entitling the owner to purchase one
fully-paid and non-assessable share of Common Stock) at the initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of
$______ [150% of the initial public offering price] per share of Common Stock
and $____ [150% of the initial public offering price] per Redeemable Warrant
upon surrender of this Warrant Certificate and payment of the Exercise Price at
an office or agency of the Company, but subject to the conditions set forth
herein and in the Representative's Warrant Agreement dated as of _______, 1996
between the Company and
A-1
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<PAGE>
NATIONAL SECURITIES CORPORATION (the "Warrant Agreement"). Payment of the
Exercise Price shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company or by surrender of this
Warrant Certificate.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by
this Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
A-2
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of ___________, 1996
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By: _____________________________________
Name:
Title:
<PAGE>
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
[ ] _________________ shares of Common Stock;
[ ] _________________ Redeemable Warrants;
[ ] _________________ shares of Common Stock together with an equal number of
Redeemable Warrants; or
[ ] ________________ shares of Common Stock together with
________________ Redeemable Warrants.
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House funds to the order of American Craft
Brewing International Limited in the amount of $_______________________, all in
accordance with the terms of Section 3.1 of the Representative's Warrant
Agreement dated as of ______________________, 1996 between American Craft
Brewing International Limited and National Securities Corporation. The
undersigned requests that a certificate for such securities be registered in the
name of _________________________ whose address is _________________________ and
that such Certificate be delivered to _________________________ whose address is
_________________________.
Dated:
Signature ____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
______________________________________
(Insert Social Security or Other
Identifying Number of Holder)
A-4
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<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
[ ] ___________________ shares of Common Stock;
[ ] ___________________ Redeemable Warrants;
[ ] ___________________ shares of Common Stock together with an equal number of
Redeemable Warrants; or
[ ] __________________ shares of Common Stock together with
__________________ Redeemable Warrants.
and herewith tenders in payment for such securities ________ Warrants all in
accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of __________________, 1996 between American Craft Brewing
International Limited and National Securities Corporation. The undersigned
requests that a certificate for such securities be registered in the name of
_____________________ whose address is ________________________________ and that
such Certificate be delivered to _____________________ whose address is
____________________.
Dated:
Signature ____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
______________________________________
(Insert Social Security or Other
Identifying Number of Holder)
A-5
<PAGE>
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _________________________ hereby sells,
assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _______________________ Signature: ___________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
_____________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
A-6
<PAGE>
<PAGE>
ARTHUR
ANDERSEN
______________________________
Arthur Andersen & Co.
Certified Public Accountants
August 23, 1996 ______________________________
25/F., Wing On Centre
111 Connaught Road Central
Hong Kong
852 2852 0222
852 2815 0548 Fax
The Directors Direct Fax:
American Craft Brewing International Limited
41 Cedar Avenue
P O Box HM 1179
Hamilton HM EX
Bermuda
Dear Sirs,
As independent public accountants, we hereby consent to the use of our reports,
and to all references to our Firm included in or made a part of this
Registration Statement.
Very truly yours,
/s/ Arthur Andersen & Co.
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