<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 11, 1997
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
1-12119
(COMMISSION FILE NUMBER)
BERMUDA 72-1323940
(STATE OF OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE GALLERIA BOULEVARD, SUITE 1714, METAIRIE, LOUISIANA 70001
(ADDRESS, INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICES)
(504) 849-2739
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
Item 5. Other Events.
On November 11, 1997 American Craft Brewing International Limited (the
"Company"), entered into a loan agreement with Entrepreneurial Investors Ltd.
(the "Lender") and borrowed U.S. $900,000 from the Lender. The outstanding
principal amount of the senior note evidencing the loan bears interest at the
rate of 10% per annum, is senior to all other indebtedness of the Company, and
is payable in a single payment of principal and accrued interest on March 31,
1998.
The note is secured by a pledge of all of the shares of capital stock of
AmBrew USA, Inc., Cerveceria Rio Bravo, S.A. de C.V. and South China Brewing
Company, each of which is a wholly-owned subsidiary of the Company. The note is
also secured by the Company's sixty percent (60%) interest in Celtic Brew LLC.
The Company will use a portion of the proceeds to pay the principal and
accrued interest due on the loan from Internacional de Mexico S.A. de C.V.
extended to Cerveceria Rio Bravo S.A. de C.V. ("Rio Bravo"), a wholly-owned
subsidiary the Company, and to pay the principal and accrued interest due on a
loan from Equity Services, Ltd. and fees and expenses due to Equity Services,
Ltd. The loan from Internacional de Mexico S.A. de C.V. was previously
disclosed on the Company's Form 8-K dated September 24, 1997. The Company will
use the remaining proceeds of the loan for its continuing operations.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable
(b) Proforma Financial Information.
Not Applicable
(c) Exhibits.
The following exhibits are filed herewith:
10.38 Loan Agreement dated November 11, 1997 between American Craft Brewing
International Limited and Entrepreneurial Investors, Ltd.
10.39 Senior Promissory Note dated November 11, 1997 between American Craft
Brewing International Limited and Entrepreneurial Investors, Ltd.
10.40 Pledge Agreement dated November 11, 1997 between American Craft Brewing
International Limited and Entrepreneurial Investors, Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
Date: November 20, 1997 By: /s/ James L. Ake
--------------------------------
James L. Ake
Executive Vice President
3
<PAGE>
EXHIBIT INDEX
10.38 Loan Agreement dated November 11, 1997 between American Craft Brewing
International Limited and Entrepreneurial Investors, Ltd.
10.39 Senior Promissory Note dated November 11, 1997 between American Craft
Brewing International Limited and Entrepreneurial Investors, Ltd.
10.40 Pledge Agreement dated November 11, 1997 between American Craft Brewing
International Limited and Entrepreneurial Investors, Ltd.
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<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT (the "Agreement") is being entered into as of this 11th
day of November, 1997, by and between AMERICAN CRAFT BREWING INTERNATIONAL
LIMITED, a Bermuda company ("AmBrew" or "Company"), with offices at One Galleria
Boulevard, Suite 1714, Metairie, Louisiana 70001 and ENTREPRENEURIAL INVESTORS,
LTD. ("Holder"), whose address is Entrepreneurial Investors, Ltd., Citbank
Building, 2nd Floor, East Mall Drive, P.O. Box 40643, Freeport, Bahamas.
W I T N E S S E T H:
WHEREAS, Holder desires to loan (the "Loan") the Company Nine Hundred
Thousand Dollars ($900,000.00) (the "Funds") and the Company desires to borrow
the Funds from the Holder;
WHEREAS, the Loan shall be senior to all other indebtedness of the Company;
WHEREAS, the Loan and the Company shall be subject to the terms and
conditions set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Loan. On the date of this Agreement, Holder shall loan the Company the
sum of Nine Hundred Thousand (U.S. $900,000.00). The Funds shall be delivered
to the Company by wire transfer.
2. Note.
(a) As evidence of the Loan, the Company shall execute and deliver to
Holder a senior promissory note (the "Senior Note") substantially in the form
attached hereto as Exhibit "A". The Senior Note shall be senior to all other
indebtedness of the Company and shall not be subordinated.
(b) The principal of the Senior Note shall be finally due and payable on
March 31, 1998 (the "Maturity Date").
(c) Interest on the Senior Note shall accrue at the rate of Ten Percent
(10%) per annum (not compounded) and shall be due and payable on the Maturity
Date. Interest on the Senior Note will be paid by the Company in cash, unless
otherwise agreed by the Company and Holder in writing.
<PAGE>
3. Collateral. The Note will be secured and collateralized by the
Company's pledge of (a) Nine Hundred Fifty (950) shares of the common stock, no
par value per share, of AmBrew USA, Inc. represented by Certificate No. 2
registered in the name of Debtor; (b) Nine Hundred Ninety Nine (999) shares of
the capital stock of Cerveceria Rio Bravo, S.A. de C.V. represented by
Certificate No. 1 registered in the name of Debtor; (c) the sixty percent (60%)
percentage interest of Debtor in Celtic Brew LLC (as evidenced by certified
copies of (i) the Articles of Organization of Celtic Brew LLC, and (ii) the
Operating Agreement of Celtic Brew LLC, such certified copies to be delivered to
Holder on or prior to the date hereof), and (d) Four Thousand Seven Hundred and
Forty Nine (4,749) shares of South China Brewing Company Limited represented by
Certificate No. 17 registered in the name of Debtor (the items described in
Sections 3(a) through 3(d) above are hereinafter collectively referred to as the
"Collateral"), such pledge to be evidenced by a pledge agreement (the "Pledge
Agreement") in substantially the form attached hereto as Exhibit "B".
Concurrently with the execution of this Agreement, the Company hereby covenants
and agrees to (i) execute and deliver the Pledge Agreement and the portion of
the Collateral described in Sections 3(a) and 3(b) above to Cardinal
International Bank & Trust Company, Ltd. (the "Escrow Agent"), (ii) deliver to
Locke, Purnell, Rain, Harrell, P.C. (New Orleans office), as escrow agent for
Holder, the portion of the Collateral described in Section 3(d) above, along
with executed stock powers in blank, and (iii) execute and deliver to Holder any
and all documents necessary to perfect the security interest of the portion of
the Collateral described in Section 3(c) above.
4. Use of Proceeds.
The Company will use the Funds for the continuing operations of the Company
during the negotiations of a private placement of the Company's securities by
Equity Services, Ltd. (the "Private Placement"). Nevertheless, even if the
Private Placement is not consummated, the Company shall remain obligated to the
Holder for the Loan.
5. Holder's Representations and Covenants.
Holder represents, warrants, and covenants to Company as follows:
(a) Holder is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
(b) Holder understands that the Loan is being made in reliance on specific
provisions of federal and state securities laws and that the Company is relying
upon the trust and accuracy of the representations, warranties, agreements,
acknowledgements and understandings of Holder set forth herein in order to
determine the applicability of such provisions.
(c) Holder is capable of evaluating the risks and merits of this Loan by
virtue of its experience as an investor and its knowledge, experience, and
sophistication in financial and business matters.
(d) Holder has not employed any investment banker, broker, or finder or
incurred any liability for any brokerage fees, commissions, or finder's fees in
connection with the transactions contemplated by this Agreement.
6. Company's Representations and Covenants. The Company represents,
warrants, and covenants to Holder as follows:
(a) The Company has been duly incorporated and is validly existing and in
good standing under the laws of Bermuda, with full corporate power and authority
to own, lease and operate its properties and to conduct its business as
currently conducted, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification.
(b) The Company has registered the outstanding shares of its Common Stock
pursuant to Section 12 of the Securities Exchanges Act of 1934, as amended (the
"Exchange Act'), is in full compliance with all reporting requirements of the
Exchange Act, and the Common Stock is quoted on the Nasdaq Small Cap Market
(trading symbol ABREF).
(c) The Company has furnished Holder with copies of its most recent Annual
Report on Firm 10-K filed with the Securities and Exchange Commission (the
"Commission") and all Forms 10-Q and 8-K filed thereafter, if any (collectively,
the "Public Documents"). The Public Documents at the time of their filing did
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
(d) This Agreement has been duly authorized, validly executed and delivered
on behalf of the Company and is the valid and binding agreement of the Company
enforceable in accordance with its terms.
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(e) Except for Castle Developments Limited through Stephen L. Tebo, the
Company has not employed any investment banker, broker, or finder or incurred
any liability for any brokerage fees, commissions, or finder's fees in
connection with the transactions contemplated by this Agreement.
7. Proceeds of Loan. Holder and Company hereby agree that a portion of
the proceeds of the Loan will be used as follows:
(a) to pay off that certain One Hundred Thousand ($100,000) loan from
Equity Services, Ltd. ("ESL") to Company;
(b) to pay the following fees and expenses owed to ESL by Company, as
follows:
i) One Hundred Eight Thousand Dollars ($108,000) as a loan fee;
and
ii) Twenty Seven Thousand Dollars ($27,000) as a non-accountable
expense allowance;
iii) Five Thousand Dollars ($5,000) as reimbursement to ESL for
attorney fees incurred; and
(c) to pay a Eighteen Thousand Dollars ($18,000) fee to Capital
Solutions, Inc.
8. Miscellaneous.
(a) This Agreement shall be governed by, and interpreted in accordance
with, the laws of the State of Delaware, without giving effect to the rules
governing the conflicts of laws.
(b) Each of the parties agrees to pay its own expenses incident to
this Agreement and the performance of its obligations hereunder, including,
without limitation, the fees and expenses of each such party's legal counsel.
(c) All notices and other communications provided for or permitted
hereunder will be made in writing by hand delivery, express overnight courier,
registered first class mail, overnight courier, or telecopied, initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 8:
IF TO COMPANY:
American Craft Brewing International Limited
One Galleria Blvd., Suite 1714
Metaire, Louisiana 70001
Attn: Peter W. H. Bordeaux, Chairman or
James Ake, Executive Vice-President
Telephone: (504) 849-2739
Telecopier: (504) 849-2740
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<PAGE>
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Locke, Purnell, Rain, Harrell, P.C.
601 Poydras St., Suite 2400
New Orleans, Louisiana 70130
Attn: Donald Ensenat, Esq.
Telephone: (504) 558-5100
Telecopier: (504) 558-5200
IF TO HOLDER:
Entrepreneurial Investors, Ltd.
Citbank Building, 2nd Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Mr. Robert E. Cordes, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given: (i)
when delivered by hand, if personally delivered; (ii) three (3) business days
after being deposited in the mail, postage prepaid, if mailed; (iii) the next
business day after being deposited with an overnight courier, if deposited with
a nationally recognized, overnight courier service; or (iv) upon receipt, if
telecopied.
(d) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same instrument, but in making proof of this Agreement, only one counterpart
must be accounted for or produced.
(e) Each party to this Agreement is entitled to rely on a facsimile
signature of any other party to this Agreement upon receipt of facsimile
transmission via telecopier. Any party initially providing his or her signature
via telecopier will deliver an original signature page to the other party
promptly after transmission of the facsimile.
(f) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior oral or
written proposals or agreements relating thereto. This Agreement may not be
amended or any provisions hereof waived in whole or in part, except by a written
amendment signed by both of the parties.
COMPANY:
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By: /s/ Peter W. H. Bordeaux
------------------------------
PETER W. H. BORDEAUX, Chairman
4
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HOLDER:
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ Robert E. Cordes
------------------------------
ROBERT E. CORDES, Director
5
<PAGE>
EXHIBIT "A"
Senior Note
EXHIBIT TO LOAN AGREEMENT
- -------------------------
<PAGE>
EXHIBIT "B"
Pledge Agreement
EXHIBIT TO LOAN AGREEMENT
- -------------------------
<PAGE>
SENIOR PROMISSORY NOTE
$900,000.00 Date of This Note:
November 11, 1997
FOR VALUE RECEIVED, the undersigned AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED., a Bermuda corporation ("Maker"), promises to pay to the
order of ENTREPRENEURIAL INVESTORS, LTD. ("Payee") at Freeport, Bahamas, or at
such other place as Payee may from time to time designate by written notice to
Maker, in lawful money of the United States of America, the sum of Nine Hundred
Thousand Dollars (U.S. $900,000.00), together with interest on the principal
balance from time to time remaining unpaid at the rate hereinafter provided.
Maker further agrees as follows:
SECTION 1. INTEREST RATE.
(a) Interest will accrue on the unpaid principal balance of this
Note at a rate equal to: Ten Percent (10%) per annum (not
compounded).
(b) Interest will be computed on the basis of a year of Three
Hundred Sixty Five (365) days for the actual number of days
elapsed.
(c) All agreements between Maker and Payee are expressly limited so
that in no contingency or event whatsoever shall the amount paid
or agreed to be paid to Payee for the use, forbearance, or
detention of the indebtedness evidenced by this Note shall
exceed the maximum amount permissible under applicable law. If
from any circumstance Payee should ever receive as interest or
imputed interest an amount which would exceed the highest lawful
rate, such amount as would be excessive interest shall be
applied to the reduction of the principal amount owing under
this Note and not to the payment of interest.
(d) Interest will be paid in cash, unless Maker and Payee agree
otherwise in writing.
SECTION 2. PAYMENTS.
All outstanding amounts owing under this Note, including accrued
interest and the outstanding principal, will be due and payable in full on March
31, 1998. All payments will be applied first to accrued interest and then to
principal.
SECTION 3. SECURITY.
This Note is secured by and entitled to the benefits of (a) Nine
Hundred and Fifty (950) shares of the common stock of AmBrew, USA, Inc., (b)
Nine Hundred Ninety Nine (999) shares of the capital stock of Cerveceria Rio
Bravo, S.A. de C.V., (c) the sixty percent (60%) percentage interest of Maker in
Celtic Brew LLC (as evidenced by certified copies of (i) the Articles of
Organization of Celtic Brew LLC, and (ii) the Operating Agreement of Celtic Brew
LLC, such certified copies to be delivered to Payee on or prior to the date
hereof), and (d) Four Thousand Seven Hundred and Forty Nine (4,749) shares of
South China Brewing Company Limited represented by Certificate No. 17 registered
in the name of Debtor (the items described in Sections 3(a) through 3(d), above
are hereinafter collectively referred to as the "Collateral"). The portion of
the Collateral described in Sections 3(a) and 3(b) above, along with executed
stock powers in blank, will be deposited with Cardinal International Bank &
Trust Co., Ltd., Nassau, Bahamas (the "Escrow Agent") within two (2) business
days of the Date of This Note. Prior to funding, Maker will provide, execute
and deliver to Payee any and all documents necessary to perfect the security
interest in the portion of the Collateral described in Section 3(c) above. The
portion of the Collateral described in Section 3(d) above, along with executed
stock powers in blank, will be deposited by Maker with Locke, Purnell, Rain,
Harrell, P.C. (New Orleans office), as escrow agent for Payee, prior to funding.
<PAGE>
SECTION 4. DEFAULT.
Any of the following will constitute an event of default ("Event of
Default"):
(a) Any failure on the part of Maker to make any payment when due
under this Note, whether by acceleration or otherwise, and the
continuation of such failure for a period of five (5) days after
written notice thereof from Payee.
(b) Any failure on the part of Maker to keep or perform any of the
terms or provisions of this Note (other than a monetary default
described in Section 4(a) above), or any other documents
evidencing, governing, or securing this Note and the
continuation of such failure for more than five (5) days after
written notice thereof from Payee.
(c) Maker shall commence (or take any action for the purpose of
commencing) any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, moratorium or similar law or
statute.
(d) A proceeding shall be commenced against Maker under any
bankruptcy, reorganization, arrangement, readjustment of debt,
moratorium or similar law or statute and relief is ordered
against it, or the proceeding is controverted but is not
dismissed within sixty (60) days after the commencement thereof.
(e) Maker consents to or suffers the appointment of a receiver,
trustee or custodian to any substantial part of its assets that
is not vacated within sixty (60) days.
(f) The occurrence of any event of default under the terms of any
documents evidencing, governing or securing any indebtedness of
maker now existing or hereafter arising in favor of equity
services, ltd. or payee.
Upon the occurrence of an Event of Default, Payee will have the right and
option, without notice or demand (except as otherwise provided herein) to
accelerate the unpaid balance of principal and accrued interest on this Note.
If this Note is not paid at its maturity, regardless of how such maturity may be
brought about, Payee may exercise any of its rights provided hereunder or in any
instrument which evidences, governs or secures payment of this Note, or at law
or in equity. Failure to exercise any of such rights upon the occurrence of an
Event of Default will not constitute a waiver of the right to exercise any of
them at any time. If, after default, this Note is placed in the hands of an
attorney for collection, or if collection is sought through judicial
proceedings, Maker will pay, in addition to the sums referred to above,
reasonable attorneys fees and other reasonable costs incurred by Payee in the
collection of the unpaid amounts due hereunder.
SECTION 5. SUBORDINATION.
This Note will be a general obligation of Maker and is senior and not
subordinated to any and all obligations of Maker (e.g., to any bank or other
financial institution), regardless of whether such obligations are presently
existing or are subsequently incurred.
SECTION 6. WAIVERS.
Maker and all sureties, endorsers, guarantors and any other party now
or hereafter liable for the payment of this Note in whole or in part, hereby
severally (i) waive (except as otherwise herein provided) demand, presentment
for payment, notice of nonpayment, protest, notice of protest, notice of intent
to accelerate, notice of acceleration and all other notice, filing of suit and
diligence in collecting this Note or enforcing any of the security herefor, (ii)
agree to any substitution, subordination, exchange or release of any such
security or the release of any party primarily or secondarily liable hereon,
(iii) agree that Payee shall not be required first to institute suit or exhaust
its remedies hereon against Maker or others liable or to become liable hereon or
to enforce its rights against them or any security herefor, and (iv) consent to
any extension or postponement of time of payment of this Note and to any other
indulgence with respect hereto without notice thereof to any of them.
SECTION 7. ASSIGNMENT OF NOTE.
Neither Maker nor Payee may assign or transfer this Note in any manner
whatsoever. Any such purported assignment shall be void ab initio.
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<PAGE>
SECTION 8. MISCELLANEOUS.
(a) This Note may be altered only by prior written agreement signed
by the party against whom enforcement of any waiver, change,
modification, or discharge is sought. This Note may not be
modified by an oral agreement, even if supported by new
consideration.
(b) This Note shall be governed by, and construed in accordance
with, the laws of the State of Delaware without giving effect to
such state's principles of the conflict of laws.
(c) All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight
courier, or telecopied, initially to the address set forth
below, and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 8(c):
IF TO MAKER:
American Craft Brewing International Limited
One Galleria Blvd., Suite 1714
Metaire, Louisiana 70001
Attn: Peter W. H. Bordeaux, Chairman or
James Ake, Executive Vice-President
Telephone: (504)849-2739
Telecopier: (504)849-2740
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Locke, Purnell, Rain, Harrell, P.C.
601 Poydras St., Suite 2400
New Orleans, Louisiana 70130
Attn: Donald Ensenat, Esq.
Telephone: (504)558-5100
Telecopier: (504)558-5200
IF TO PAYEE:
Entrepreneurial Investors, Ltd.
Citibank Building, Second Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Mr. Robert E. Cordes, Director
Telephone: (242)352-7063
Telecopier: (242)352-3932
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214)922-9221
Telecopier: (214)969-7557
All such notices and communications shall be deemed to have been duly given: (i)
when delivered by hand, if personally delivered; (ii) three (3) business days
after being deposited in the mail, postage prepaid, if mailed; (iii) the next
business day after being deposited with an overnight courier, if deposited with
a nationally recognized, overnight courier service; or (iv) upon receipt, if
telecopied.
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<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note effective as of the
date first set forth above.
MAKER:
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By: /s/ PETER W. H. BORDEAUX
-------------------------------
PETER W. H. BORDEAUX, Chairman
4
<PAGE>
PLEDGE AGREEMENT
This Pledge Agreement (the "Agreement") dated as of the 11 day of
November, 1997, is made by and between AMERICAN CRAFT BREWING INTERNATIONAL
LIMITED, a Bermuda corporation (the "Debtor") and ENTREPRENEURIAL INVESTORS,
LTD., a Bahamas company (the "Secured Party").
INTRODUCTORY PROVISIONS:
A. The Debtor has this day executed a Senior Note (the "Note"),
payable to the order of the Secured Party, which Note evidences a loan from
Secured Party to the Debtor in the original principal amount thereof (the
"Loan").
B. As a condition to the making of the Loan to the Debtor, the
Secured Party requires that the Debtor pledge to and grant a security interest
in certain shares and interests to secure the payment and performance of the
Loan.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged and confessed, the parties hereto agree as follows:
1. The Pledge and Security Interest. The Debtor hereby grants to the
Secured Party security interests in and to any and all present or future rights
of the Debtor in and to all of the following rights, interests, and property
(all of the following being herein sometimes called the "Collateral"): (a) Nine
Hundred Fifty (950) shares of the common stock, no par value per share, of
AmBrew USA, Inc. represented by Certificate No. 2 registered in the name of
Debtor; (b) Nine Hundred Ninety Nine (999) shares of the capital stock of
Cerveceria Rio Bravo, S.A. de C.V. represented by Certificate No. 1 registered
in the name of Debtor; (c) the sixty percent (60%) percentage interest of Debtor
in Celtic Brew LLC (as evidenced by certified copies of (i) the Articles of
Organization of Celtic Brew LLC, and (ii) the Operating Agreement of Celtic Brew
LLC, such certified copies to be delivered to Secured Party on or prior to the
date hereof), and (d) Four Thousand Seven Hundred and Forty Nine (4,749) shares
of South China Brewing Company Limited represented by Certificate No. 17
registered in the name of Debtor and any and all substitutes, replacements,
accessions, attachments, increase, profits, revisions, or additions thereto; and
(e) any and all proceeds arising from or by virtue of the sale or other
disposition of, or from the collection of, the Collateral described in (a), (b),
(c), and (d) preceding.
2. The Indebtedness. This Agreement is being executed and delivered
to secure, and the security interests herein granted (the "Security Interests")
shall secure, (a) full payment and performance of all of the indebtedness and
obligations owing to the Secured Party by the Debtor under the Note, together
with any and all renewals and extensions of the same, or any part thereof; (b)
all indebtedness and liabilities of the Debtor to the Secured Party at any time
arising under the terms of any other agreement securing the Note; and (c) all
future advances or other value at any time hereafter made or given by the
Secured Party to the Debtor, whether or not the advance or value is given
pursuant to the Note (all of such debts, indebtedness, liabilities and duties
referred to in (a) through (c) of this paragraph are hereinafter collectively
referred to as the "Indebtedness").
3. Representations and Warranties of the Debtor. The Debtor
represents and warrants to the Secured Party that: (a) the Security Interests
are first and prior security interests in and to all of the Collateral; (b) the
Debtor is the owner of the Collateral; (c) no dispute, right of set off,
counterclaim, or defenses exist with respect to all or any part of the
Collateral; and (d) the shares and interests represented by the Certificates are
duly authorized shares and interests and are fully paid and non-assessable. The
delivery at any time by the Debtor to the Secured Party of Collateral shall
constitute a representation and warranty by the Debtor under this Agreement that
the matters heretofore warranted in clause (a) of this paragraph remain true and
correct.
4. Negative Covenants of the Debtor. The Debtor further covenants
and agrees that, without the prior written consent of the Secured Party, the
Debtor will not (a) sell, assign or transfer any of the Debtor's rights in the
Collateral, or (b) create any other security interest in, mortgage or otherwise
encumber the Collateral, or any part thereof, or permit the same to be or become
subject to any lien, attachment, execution, sequestration, other legal or
equitable process or any encumbrance of any kind or character, except the
security interest herein created.
5. Delivery of Collateral to the Escrow Agent. The Debtor,
simultaneously with the execution of this Agreement, is delivering to Cardinal
International Bank & Trust Co., Ltd. (the "Escrow Agent") at their offices
located at Norfolk House, 3rd Floor, Frederick Street, Nassau, Bahamas, or to
such other escrow agent chosen by Secured Party and reasonably acceptable to
Debtor, stock certificates, endorsed in blank for transfer or accompanied by
stock powers appropriate for transfer, representing the portion of the
Collateral described in Sections 1(a) and 1(b) above to be held by Escrow Agent
in accordance with the terms and provisions of an Escrow Agreement (herein so
called) between Debtor, Secured Party and Escrow Agent. The portion of the
Collateral described in Section 1(d) above, along with executed stock powers in
blank, will be deposited by Debtor with Locke, Purnell, Rain, Harrell, P.C. (New
Orleans office), as escrow agent for Secured Party, prior to the funding of the
Note.
6. Default. As used herein, the term "Default" or "Event of Default"
means the occurrence of one or more of the following: (a) the failure to timely
pay or perform any obligations or covenants contained herein, or in the Note or
in any other
<PAGE>
document evidencing, governing or securing the Note (after any applicable notice
or grace period); (b) any warranty, representation or statement made or
furnished to the Secured Party by or in behalf of the Debtor is incorrect in any
material respect (which remains incorrect after any applicable cure period); (c)
the sale, loss, theft, destruction, encumbrance or transfer of any of the
Collateral in violation hereof, or substantial damage to any of the Collateral;
(d) the dissolution, merger or consolidation, termination of existence, or
business failure of the Debtor; (e) appointment of a receiver for any part of
the Collateral; (f) assignment for the benefit of creditors or the commencement
of any proceeding under any bankruptcy or insolvency law by or against the
Debtor or any partnership of which the Debtor is a partner or by or against any
maker, or upon the Collateral; (g) the levy on, seizure or attachment of the
Collateral, or any part thereof; (h) the filing of any financing statement with
regard to the Collateral, other than relating to the security interest herein
created; or (i) attachment of any lien or security interest to any portion of
the Collateral except the security interests hereunder.
7. Remedies. Upon the occurrence of any Default, in addition to any
and all other rights and remedies which the Secured Party may then have
hereunder, under the Uniform Commercial Code of the State of Delaware or of any
other pertinent jurisdiction (the "Code"), or otherwise, the Secured Party may,
at its option: (a) reduce its claim to judgment or foreclose or otherwise
enforce the Security Interests, in whole or in part, by any available judicial
procedure; (b) after notification provided for herein, sell, lease, or otherwise
dispose of, at the office of the Secured Party, on the premises of the Debtor,
or elsewhere, all or any part of the Collateral, in its then condition or
following any commercially reasonable preparation or processing, and any such
sale or other disposition may be as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Collateral shall not exhaust the Secured Party's power of
sale, but sales may be made from time to time, and at any time, until all of the
Collateral has been sold or until the Indebtedness has been paid and performed
in full), and at any such sale it shall not be necessary to exhibit any of the
Collateral; (c) at its discretion, vote the shares of stock included in the
Collateral pursuant to the provisions of Paragraph 8 hereof; and (d) exercise
any and all other rights, remedies, and privileges it may have under any
document which secures the Indebtedness.
In the event any consent, approval or authorization of any
governmental agency (other than an agency regulating the sale of securities
under applicable securities laws) shall be necessary to enforce the Security
Interests or sell, lease or otherwise dispose of or retain the Collateral, the
Debtor shall execute and file all such applications or other instruments as may
be reasonably required. In the event of a sale of all or part of the
Collateral, public or private, the Debtor shall pay all costs and expenses of
every kind of sale or delivery, including brokers' and attorneys' fees and all
expenses incurred by Secured Party in protecting and enforcing its rights under
this Agreement or the Note.
Any and all proceeds ever received by any Secured Party from any sale
or other disposition of the Collateral, or any part thereof, or the exercise of
any other remedy pursuant hereto shall be applied by the Secured Party to the
Indebtedness in such order and manner as the Secured Party, in its sole
discretion, may deem appropriate, notwithstanding any directions or instructions
to the contrary by the Debtor.
With respect to any part of the Collateral which is stock
certificates, bonds, or other securities, the Secured Party shall have
authority, upon the occurrence of any Default, without notice to the Debtor,
either to have them registered in the Secured Party's name, or in the name of a
nominee, and, with or without such registration, to demand of the corporation or
association issuing the same, and to receive and receipt for, any and all
dividends and other distributions payable in respect thereof, regardless of the
medium in which paid and whether they be ordinary or extraordinary. Any entity
making payment to the Secured Party hereunder shall be fully protected in
relying upon the written statement of the Secured Party that the Secured Party
then holds the Security Interests which entitles it to receive such payment, and
the receipt of the Secured Party for such payment shall be full acquittance
therefor to the person making such payment.
8. Proxy. The Debtor hereby irrevocably names, constitutes and
appoints the Secured Party as the Debtor's true and lawful attorney, in the
Debtor's name, place and stead and with full power of substitution, upon and
after the occurrence of any Default hereunder, to vote, as proxy and in the
Secured Party's sole discretion, all shares of stock included in the Collateral
at any and all meetings of the stockholders of the issuer of such stock (whether
annual, regular or special or any adjournments thereof), and to execute any and
all written consents, directions or other instruments with respect to such stock
and to otherwise exercise all of the rights and powers which the Debtor would
possess if personally present. The Debtor hereby revokes any and all proxies
heretofore granted to any person with respect to any shares of stock included in
the Collateral. The proxy granted hereby shall be valid until the Indebtedness
shall have been paid in full by extinguishment thereof but not by renewal,
modification or extension thereof. THE PROXY GRANTED HEREBY IS COUPLED WITH AN
INTEREST AND IS IRREVOCABLE.
9. Notice of Sale. Notice of the time and place of any sale of the
Collateral, or reasonable notification of the time after which any private sale
or other intended disposition of the Collateral is to be made (including
retention thereof in satisfaction of the Indebtedness), shall be sent to the
Debtor, and to any other person entitled to notice, as set forth in Section 21
below. It is agreed that notice sent or given at least ten (10) calendar days
prior to the taking of the action to which the notice relates is reasonable
notification and notice for the purposes of this paragraph.
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<PAGE>
10. Securities Acts. Because of the Securities Act of 1933, as
amended, or any other laws or regulations, there may be legal restrictions or
limitations affecting the Secured Party in any attempts to dispose of the
Collateral, or certain portions thereof, in the enforcement of its rights and
remedies hereunder. For these reasons the Secured Party is hereby authorized by
the Debtor, but not obligated, in the event of any Default hereunder giving rise
to the Secured Party's rights to sell or otherwise dispose of the Collateral, to
sell all or any part of the Collateral at private sale, subject to investment
letter or in any other manner which will not require the Collateral, or any part
thereof, to be registered in accordance with the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder, or any other law
or regulation, at the best price reasonably obtainable by the Secured Party at
any such private sale or other disposition in the manner mentioned above. The
Secured Party is also hereby authorized by the Debtor, but not obligated, to
take such actions, give such notices, obtain such consents, and do such other
things as the Secured Party may deem required or appropriate in the event of a
sale or disposition of any of the Collateral. The Debtor clearly understands
that the Secured Party may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances may yield a lower
price for the Collateral, or any part or parts thereof, than would otherwise be
obtainable if the Collateral were registered and sold in the open market. The
Debtor agrees (i) that in the event the Secured Party shall, upon any Default
hereunder, sell the Collateral, or any portion thereof, at such private sale or
sales, the Secured Party shall have the right to rely upon the advice and
opinion of any member firm of a national securities exchange as to the best
price reasonably obtainable upon such a private sale thereof, and (ii) that such
reliance shall be conclusive evidence that the Secured Party handled such matter
in a commercially reasonable manner under the Code.
11. Limitations on Interest. It being the intention of the parties
hereto to strictly conform to the applicable usury laws, all agreements between
the Debtor and the Secured Party, whether now existing or hereafter arising and
whether written or oral, are hereby expressly limited so that in no event,
whether by reason of acceleration of the maturity of the Note or otherwise,
shall the amount paid, or agreed to be paid to the Secured Party for the use,
forbearance or detention of money hereunder or otherwise exceed the maximum rate
permitted by applicable law. If due to any circumstance or reason whatsoever,
fulfillment of any provision hereof or of the Note or of any mortgage, loan
agreement, or other document evidencing or securing the indebtedness evidenced
by the Note, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then, ipso facto,
the obligation to be fulfilled shall be reduced to the limit of such validity,
and if the Secured Party shall ever receive anything of value deemed interest
under the applicable law which would exceed interest at the maximum rate
permitted by applicable law, such amount which would have been excessive
interest shall instead automatically be applied to the reduction of the
principal amount owing under the Note in the inverse order of its maturity and
not to the payment of interest, and if such amount which would have been
excessive interest exceeds the unpaid balance of principal of the Note, such
excess shall be refunded to the Debtor. All sums paid or agreed to be paid to
the Secured Party for the use, forbearance or detention of the indebtedness of
the Debtor to the Secured Party shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full stated
term of such indebtedness so that the rate of interest on such indebtedness does
not exceed the maximum permitted by applicable law. The provisions of this
paragraph shall control all agreements between the Debtor and the Secured Party.
12. Rights Cumulative. All rights and remedies of the Secured Party
hereunder are cumulative of each other and of every other right or remedy which
the Secured Party may otherwise have at law or in equity or under any other
contract or other writing for the enforcement of the security interest herein or
in the collection of the Note or the Indebtedness, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
13. Assignment. The rights, powers and interests held by the Secured
Party hereunder, together with the Collateral, may be transferred and assigned
by the Secured Party, in whole or in part, at such time and upon such terms as
the Secured Party may deem advisable.
14. Power of Attorney. The Secured Party is hereby appointed the
attorney-in-fact of the Debtor for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instruments which the
Secured Party may deem necessary or advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and coupled with an
interest.
15. No Waivers. No failure on the part of the Secured Party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Secured Party of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
16. Binding Effect. This Agreement shall be binding on the Debtor
and the Debtor's successors and assigns and shall inure to the benefit of the
Secured Party, and the Secured Party's successors and assigns.
17. Termination. This Agreement and the security interest in the
Collateral will terminate when the Indebtedness secured hereby has been paid in
full by extinguishment thereof but not by renewal, modification or extension
thereof.
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<PAGE>
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument, but in making proof of this Agreement,
only one counterpart must be accounted for or produced.
19. Facsimile Signature. Each party to this Agreement is entitled to
rely on a facsimile signature of any other party to this Agreement upon receipt
of facsimile transmission via telecopier. Any party initially providing his or
her signature via telecopier will deliver an original signature page to the
other party promptly after transmission of the facsimile.
20. Governing Law. The law governing this Agreement will be that of
the State of Delaware in force on the date of execution of this Agreement. All
obligations of the Debtor under the terms of this Agreement shall be performable
in Louisiana.
21. Notice. Any notice, request, instruction or other document
required or permitted to be delivered hereunder by either party hereto to the
other will be made in writing by express overnight courier or registered first
class mail, and telecopied, initially to the address set forth below, and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 21:
IF TO DEBTOR:
American Craft Brewing International Limited
One Galleria Blvd., Suite 1714
Metaire, Louisiana 70001
Attn: Peter W. H. Bordeaux, Chairman or
James Ake, Executive Vice-President
Telephone: (504)849-2739
Telecopier: (504)849-2740
IF TO SECURED PARTY:
Entrepreneurial Investors, Ltd.
Citibank Building, Second Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Mr. Robert E. Cordes, Director
Telephone: (242)352-7063
Telecopier: (242)352-3932
All such notices and communications shall be deemed to have been duly given: (i)
when delivered by hand, if personally delivered; (ii) three (3) business days
after being deposited in the mail, postage prepaid, if mailed; (iii) the next
business day after being deposited with an overnight courier, if deposited with
a nationally recognized, overnight courier service; or (iv) upon receipt, if
telecopied.
22. Agreement as Financing Statement. The Secured Party shall have
the right at any time to execute and file this Agreement as a financing
statement, but the failure of the Secured Party to do so shall not impair the
validity or enforceability of this Agreement. Additionally, Debtor agrees to
perform or cause to be performed any and all further acts as may be reasonably
necessary to perfect the security interests in and to the Collateral.
23. Release of Portion of Collateral. It is contemplated that the
Four Thousand Seven Hundred Forty Nine (4,749) shares of South China Brewing
Company Limited will be sold by Debtor to a third party during the term of the
Loan. If the sale of such shares is consummated, Debtor will certify this fact
in writing to Secured Party. Upon receipt of such written certification from
Debtor, Secured Party will release its security interest in and to the Four
Thousand Seven Hundred Forty Nine (4,749) shares of South China Brewing Company
Limited by written notice to Locke, Purnell, Rain, Harrell, P.C. authorizing the
release of the Four Thousand Seven Hundred Forty Nine (4,749) shares of South
China Brewing Company Limited. Any such release is a partial release and will
not release, affect or impair the rights of Secured Party in and against the
remaining Collateral.
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<PAGE>
DEBTOR:
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
By: /s/ PETER W. H. BORDEAUX
-------------------------------
PETER W. H. BORDEAUX, Chairman
SECURED PARTY:
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ ROBERT E. CORDES
-------------------------------
ROBERT E. CORDES, Director
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