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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) March 18, 1996
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ASIA MEDIA COMMUNICATIONS, LTD.
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(Exact Name of Registrant as Specified in Charter)
Nevada 0-23462 88-0207089
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(State or Other (Commission (IRS Employer
Jurisdiction of File No.) Identification No.)
Incorporation)
Rue-Fritz-Courvoisier 40, 2300 La Chaux-de-Fonds, Switzerland
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code 011-4139-7656
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None
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(Former Name or Former Address, if Changed Since Last Report)
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Item 1. Changes in Control of Registrant.
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Prior to the merger with Kremlyovskaya Group, Inc., a Delaware
corporation ("KGI"), as described in Item 2 below, and prior to the
cancellation of shares described in Item 5 below, the Registrant's Chairman,
Ian Rice, owned beneficially in excess of 51% of the Registrant's total issued
and outstanding shares of common stock and therefore he controlled the
Registrant. In connection with such merger, the Registrant issued an
aggregate of 89,125,000 shares of its common stock to the former shareholders
of KGI, none of which owns 10% or more of the Registrant's total issued and
outstanding shares of common stock. As a result of such issuance and the
cancellation of shares described in Item 5, Mr. Rice's percentage ownership of
the registrant was reduced to approximately 2% of the total issued and
outstanding shares of common stock. Therefore, he no longer controls the
Registrant although he remains its Chairman.
Item 2. Acquisition or Disposition of Assets.
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On March 18, 1996 (the "Effective Date"), the Registrant, completed a
merger (the "Merger") with Kremlyovskaya Group, Inc., a privately held Delaware
corporation ("KGI"). Pursuant to the terms and provisions of an Agreement and
Plan of Merger, dated the Effective Date (the "Merger Agreement"), by and among
the Registrant, AMC Merger Co., Inc., a Nevada corporation and a wholly owned
subsidiary of the Registrant ("MergerCo"), KGI and Riccardo Fanchini and Robert
Gaspar, two principal shareholders of KGI, on the Effective Date, MergerCo was
merged with and into KGI, with KGI being the surviving entity. In connection
therewith, the shares of MergerCo's common stock outstanding immediately prior
to the Merger were converted into shares of KGI's common stock and each of the
15,500 shares of KGI common stock outstanding immediately prior to the Merger
was converted into the right to receive 5,750 shares (89,125,000 in the
aggregate) of the Registrant's common stock.
KGI, through its wholly owned subsidiary, Kremlyovskaya Group NV, a
Belgium corporation, is engaged in the distribution of Kremlyovskaya vodka, a
proprietary brand of premium vodka manufactured by others pursuant to KGNV's
formula and specifications. The primary market for such vodka during 1995 was
Russia, where the Kremlyovskaya brand was the number one imported vodka in
quantity. KGNV also distributes, primarily in Russia, luxury consumer goods
such as chocolates, fine cigars and liquors, and general merchandise such as
cigarettes, beer and wine.
In connection with the Merger, Melissa Rice and Charles Buhlmann
resigned as directors of the Registrant and Robert Bruloot, Kurt Schlapfer,
Valentin Kassatkine and Anthony Cataldo were appointed to the Registrant's
board of directors and Mr. Cataldo was appointed as the Registrant's Chief
Executive Officer.
Item 5. Other Events.
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On January 31, 1994, Registrant issued 3,800,000 shares of its common
stock in connection with the acquisition of a video library. Such library has
not proved commercially exploitable and the Registrant has been negotiating a
rescission of such acquisition with the recipients of the shares issued in
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connection therewith. Two of the recipients, Marlow Properties Inc., a
corporation owned by the Registrant's Chairman, Ian Rice, and Melissa Rice,
Mr. Rice's daughter, have agreed to the cancellation, respectively, of
3,040,000 and 152,000 shares of the Registrant's common stock. Registrant
anticipates some or all of the remaining recipients will agree to the
cancellation of the shares issued to such parties in connection with the
acquisition of the video library, but there can be no assurances that any such
agreements will be obtained.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Financial Statements.
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It is impracticable to provide the required financial statements
concurrently with the filing of this report. The Registrant expects
to file the required financial statements as soon as practicable, but
in no event later than sixty (60) days after the due date of this
Current Report on Form 8-K.
(b) Pro-Forma Financial Information.
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It is impracticable to provide the required pro-forma financial
information concurrently with the filing of this report. The
Registrant expects to file the required pro-forma financial
information as soon as practicable, but in no event later than sixty
(60) days after the due date of this Current Report on form 8-K.
(c) Exhibits.
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(c)(1) - Agreement and Plan of Merger, dated March 18, 1996, by and
among Asia Media Communications, Ltd., AMC Merger Co., Inc.,
Kremlyovskaya Group, Inc., Riccardo Fanchini and Richard Gaspar
(omitting all schedules and exhibits except for Schedules 2.3, 2.5,
2.8 and 2.10).*
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* The Registrant shall furnish all omitted schedules and exhibits to the
Agreement and Plan of Merger, dated March 18, 1996, by and among Asia Media
Communications, Ltd., AMC Merger Co., Inc., Kremlyovskaya Group, Inc.,
Riccardo Fanchini and Robert Gaspar, upon the request of the Securities and
Exchange Commission.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ASIA MEDIA COMMUNICATIONS, LTD.
By: /s/ Ian Rice
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Chairman
Date: April 2, 1996
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated March 18,
1996, is made and entered into by and among ASIA MEDIA COMMUNICATIONS, LTD., a
Nevada corporation ("AMC"), AMC MERGER CO., INC., a Nevada corporation wholly
owned by AMC ("MergerCo"), KREMLYOVSKAYA GROUP, INC., a Delaware corporation
("KGI"), RICCARDO FANCHINI ("Fanchini") and ROBERT GASPAR ("Gaspar"; Fanchini
and Gaspar are hereinafter referred to individually as a "Principal
Shareholder" and collectively as the "Principal Shareholders").
RECITALS
A. The Board of Directors and all of the shareholders of KGI have
approved the proposed merger of MergerCo with and into KGI (the "Merger") in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and on the terms and conditions set forth herein.
B. The Board of Directors of MergerCo, and AMC as the sole
shareholder of MergerCo, have each approved the Merger in accordance with the
General Corporation Law of the State of Nevada (the "NGCL") and on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter expressed, the parties hereto agree as follows:
ARTICLE I
TERMS AND PLAN OF MERGER
1.1 Merger and Effect of Merger.
(a) The constituent corporations of the Merger are KGI and
MergerCo. The name, address and place of organization and governing law of KGI
are as follows: Kremlyovskaya Group, Inc., 9 East Loockerman Street, Dover,
Delaware, 19901, a corporation organized under and governed by the the laws of
Delaware. The name, address and place of organization and governing law of
MergerCo are as follows: AMC Merger Co., Inc., 245 Park Avenue, 40th Floor, New
York, NY 10167, a corporation organized under and governed by the laws of
Nevada.
(b) Upon the terms and subject to the conditions hereof, and in
accordance with the DCGL and the NGCL, at the Effective Date (as hereinafter
defined) MergerCo shall be merged into KGI and the separate corporate existence
of MergerCo thereupon shall cease. KGI shall be the surviving corporation in
the Merger (the "Surviving Corporation"), and the separate corporate existence
of KGI, with all its rights, privileges, powers and franchises, shall continue
unaffected and unimpaired by the Merger. The name, place of organization and
governing law and kind of entity of the Surviving Corporation shall be as
follows: Kremlyovskaya Group, Inc., a corporation organized under and governed
by the laws of Delaware.
(c) At and after the Effective Date, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises and be subject
to all the restrictions, disabilities and duties of both MergerCo and KGI, as
provided more particularly in the DGCL.
1.2 Method of Effecting Merger; Effective Date. Consummation of this
Agreement and the Merger shall be effected on the close of business on the date
on which a Certificate of Merger in substantially the form of Exhibit 1.2(a)
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(the "Delaware Certificate of Merger") is filed in the office of the Secretary
of State of the State of Delaware and Articles of Merger in substantially the
form of Exhibit 1.2(b) (the "Nevada Certificate of Merger") are filed in the
office of the Secretary of State of the State of Nevada, all after satisfaction
of the applicable laws of such states prerequisite to such filing. The date
and time when this Agreement and the Merger shall become effective as aforesaid
is herein called the "Effective Date").
1.3 Conversion of MergerCo Stock. At the Effective Date, by virtue of
the Merger and without any action on the part of any holder thereof, the
outstanding shares of the Common Stock, $.01 par value per share, of MergerCo
shall be converted into one share of the common stock of the Surviving
Corporation, which share shall be the only issued and outstanding capital stock
of the Surviving Corporation, and shall be owned by AMC.
1.4 Conversion of KGI Common Stock. At the Effective Date, by virtue
of the Merger and without any action on the part of any holder thereof, each of
the shares of the common stock, $.01 par value per share, of KGI (the "KGI
Common Stock") issued and outstanding immediately prior to the Effective Date
shall automatically be converted into the right to receive, upon surrender of
the certificate representing each such share, a certificate representing 5,750
shares of the common stock, par value $.01 per share, of AMC (the "AMC Common
Stock"). From and after the Effective Date, each certificate theretofore
evidencing one or more shares of KGI Common Stock shall no longer evidence KGI
Common Stock, but shall evidence only the right to receive, in exchange
therefor, AMC Common Stock in the manner provided in Section 1.5 of this
Agreement.
1.5 Manner of Exchange of Stock.
(a) As of the Effective Date, no transfer of certificates
representing KGI Common Stock outstanding immediately before the Effective Date
shall thereafter be made.
(b) After the Effective Date, each holder of an outstanding
certificate or certificates, which, prior thereto, represented KGI Common Stock
will surrender the same to AMC's transfer agent, American Share Transfer Inc.
of Denver, Colorado, which shall act as the exchange agent (the "Exchange
Agent" for such shareholders to effect the exchange of certificates on their
behalf, and each such holder will be entitled to receive in exchange therefor a
certificate or certificates representing the number of shares of AMC Common
Stock for which the KGI Common Stock theretofore represented by the certificate
or certificates so surrendered shall have been exchanged as provided above.
Until so surrendered, each such outstanding certificate which, prior to the
Effective Date, represented KGI Common Stock shall be deemed for all corporate
purposes, subject to further provisions of this Section, to evidence the
ownership of the shares of AMC Common Stock for which such shares have been so
exchanged. Unless and until any such certificates shall have been so
surrendered, dividends payable to holders of record of shares of AMC Common
Stock shall not be paid to the holder of such certificate, but there shall be
paid to the record holder of the certificate, with respect to the shares of AMC
Common Stock issued in exchange therefore, (i) upon such surrender, the amount
of dividends which shall have become payable, but without interest, and
(ii) after such surrender and the payment date of which shall be subsequent to
surrender, such amount to be paid on such payment date.
(d) On the Effective Date AMC shall issue and deliver to the
Exchange Agent one certificate representing the aggregate number of shares of
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AMC Common Stock to which all holders of KGI Common Stock shall be entitled
pursuant to this Agreement. The certificate so delivered shall thereafter be
divided into certificates of such denominations and registered in such names as
the Exchange Agent may require in order to make the exchange hereinabove
provided for.
(e) If any shares of AMC Common Stock are to be issued to a person
other than the person in whose name the certificate surrendered in exchange
therefor is registered, it shall be a condition to such issuance that the
person requesting such issuance pay to AMC any transfer or other similar taxes
required by reason of the issuance of such AMC Common Stock to a person other
than the registered holder of the certificate surrendered, or such person shall
establish to the satisfaction of AMC that such tax has been paid or is not
applicable. The certificates representing shares of AMC Common Stock issued in
the Merger shall bear any legends required by law or otherwise appropriate
under the circumstances, including, where applicable, a legend stating the
resale restrictions under Rule 145 promulgated under the Securities Act of
1933, as amended (the "1933 Act").
1.6 Certificate of Incorporation and By-Laws of the Surviving
Corporation. The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall be the Certificate of Incorporation and By-Laws of KGI in
effect at the Effective Date. unless and until amended as therein provided.
1.7 Directors and Officers of the Surviving Corporation. The
directors and officers listed on Schedule 1.7 shall be the directors and
officers of the Surviving Corporation, until their successors shall have been
duly elected and qualified or until their earlier death, resignation or
removal.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF KGI AND THE PRINCIPAL SHAREHOLDERS
KGI, and the Principal Shareholders, jointly and severally, hereby
make the following representations and warranties, each of which shall survive
the Effective Date and the Merger as provided in Section 5.3. Unless otherwise
specifically provided herein, each reference to KGI in this Agreement shall be
deemed a reference to KGI and to each of its subsidiaries, as listed on
Schedule 2.3 (the "Subsidiaries"), such that each representation, warranty or
covenant with respect to KGI, whether contained in this Article II or elsewhere
in this Agreement, shall also be a representation, warranty or covenant with
respect to each of the Subsidiaries.
2.1 Corporate Organization, Qualification and Power. KGI (excluding
the Subsidiaries) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws of its state, country or other jurisdiction of incorporation, as listed on
Schedule 2.3. KGI has all requisite corporate power and authority to own,
lease and use its assets and properties and to conduct the business in which it
is engaged and holds all authorizations, licenses and permits necessary and
required therefor. KGI is duly licensed or qualified to do business as a
foreign corporation and is in good standing in each state, country or other
jurisdiction where the location of its assets or the nature of its business
requires it to be so qualified. The jurisdictions where KGI are so qualified
are listed on Schedule 2.1 (or Schedule 2.3 with respect to the Subsidiaries).
KGI is not required to be registered, licensed or qualified to do business in
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any other jurisdiction in which the failure to be so registered, licensed or
qualified will or may reasonably be expected to have a material adverse effect
upon the business, assets, results of operations or condition, financial or
otherwise (collectively, the "Business Condition") of KGI. KGI has delivered
to AMC true, complete and correct copies of the constituent documents (e.g.,
articles or certificate of incorporation, by-laws, etc.), as currently in
effect, of KGI.
2.2 Capitalization and Related Matters.
(a) Capital Stock. The entire authorized capital stock of KGI
(excluding the Subsidiaries) consists solely of (i) 15,500 shares of KGI Common
Stock, all of which are issued and outstanding. No other capital stock of KGI
(excluding the Subsidiaries) is authorized or issued. Schedule 2.2(a) sets
forth the names, addresses and holdings of the record holders of all KGI Common
Stock. All of the issued and outstanding shares of the KGI Common Stock are
duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights, without restriction on the transfer thereof other than
pursuant to applicable federal and state securities laws, and all of such
shares have been so issued in full compliance with all applicable federal and
state securities laws.
(b) Options and Other Securities. There are no outstanding
subscriptions, rights, options, warrants, conversion privileges or agreements
of any kind entitling any person or entity to acquire from KGI any shares of
KGI Common Stock or any other type of security of KGI.
2.3 Subsidiaries. Except as listed on Schedule 2.3, KGI does not,
directly or indirectly, own or have the right to acquire any capital stock or
other equity interest in any other corporation, partnership, joint venture or
other entity. Except as described on Schedule 2.3, KGI owns all right, title
and interest in and to all capital stock and all rights with respect to all
capital stock of the Subsidiaries. The capitalization and the state, country
or other jurisdiction of incorporation of each Subsidiary is accurately
described and identified on Schedule 2.3. There are no outstanding
subscriptions, rights, options, warrants, conversion privileges or agreements
of any kind entitling any person or entity to acquire any shares of any of the
Subsidiaries.
2.4 Corporate Power and Authority.
(a) KGI has full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by KGI have been duly
authorized by all requisite corporate action, except for the filing of the
Certificates of Merger pursuant to Section 1.2 above, and no person or entity
has any claim arising out of the authorization or execution of this Agreement
or the Merger against or in the name of KGI or any of its shareholders,
officers, directors or employees. This Agreement constitutes the valid and
binding obligation of KGI and the Principal Shareholders, enforceable against
each in accordance with its terms except as such enforceability may be limited
by (a) bankruptcy, insolvency, or other similar laws affecting the enforcement
of creditors' rights generally, and (b) equitable principles of general
applicability (whether considered in a proceeding at law or in equity).
(b) Neither KGI nor either of the Principal Shareholders is a
party to, subject to or bound by any note, bond, mortgage, indenture, deed of
trust, agreement, lien, contract or other instrument or obligation or any
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statute, law, rule, regulation, judgment, order, writ, injunction, or decree of
any court, administrative or regulatory body, governmental agency, arbitrator,
mediator or similar body, franchise or license, which would (i) conflict with
or be breached or violated or the obligations thereunder accelerated or
increased (whether or not with notice or lapse of time or both) by the
execution, delivery or performance by KGI or the Principal Shareholders of this
Agreement or (ii) prevent the carrying out of the transactions contemplated
hereby. No waiver or consent of any third person or governmental authority is
required for the execution of this Agreement or the consummation of the
transactions contemplated hereby, except for the filing of the Certificates of
Merger. The execution of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation of any lien,
claim, encumbrance, security interest, charge, pledge, or other restriction or
adverse claim of whatever nature (collectively, "Liens") against KGI or any of
its properties or assets.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
true, complete and correct copies of the following: (a) the unaudited
consolidated balance sheet of Kremlyovskaya Group NV, a Belgium company and a
subsidiary of KGI ("KGNV"), as of December 31, 1995 (the "1995 Balance Sheet")
together with the related consolidated statements of income and cash flows (or
the equivalent) for the fiscal year then ended (collectively, the "1995
Financials," and t(b) the audited balance sheet of KGNV as of December 31,
1994, together with the related consolidated statements of income and cash
flows (or the equivalent) for the fiscal year then ended (collectively the
"1994 Financials; the 1995 Financials and the 1994 Financials are collectively
referred to as the "Financial Statements"). Except as set forth on
Schedule 2.5, each of the Financial Statements (including in all cases the
notes thereto, if any) has been based upon the information contained in KGNV's
books and records (which books and records are correct and complete), is
accurate and complete and presents fairly the financial condition, results of
operations and cash flows of KGNV as of the times and for the periods referred
to therein, and such Financial Statements (including all reserves included
therein) have been prepared in accordance with Belgium generally accepted
accounting principles, consistently applied except that the 1995 Financials are
subject to year-end auditing adjustments which, in any event, will not be
material in amount.
2.6 Inventories; Consignment. The inventory of KGNV consists of goods
usable and salable in the ordinary course of business, is not defective or
damaged, is merchantable and fit for its intended use, is in compliance with
all applicable regulations and certifications in the market for which it is
intended to be sold, whether domestic or foreign, and is in conformity with all
applicable product registrations and specifications, subject only to the
inventory reserves, if any, for inventory write-down set forth in the 1995
Balance Sheet. Except as set forth on Schedule 2.6 and except for materials
located at subcontractors in the normal course of business, KGI does not hold
any materials on consignment or have title to any materials in the possession
of others.
2.7 Accounts and Notes Receivable. Subject to applicable reserves for
bad debts shown in the 1995 Balance Sheet, all accounts and notes receivable of
KGNV are properly reflected on the 1995 Balance Sheet. All of such accounts
and notes receivable are, and all accounts and notes receivable subsequently
accruing to the Effective Date will be, (a) receivables arising in the ordinary
course of business, (b) valid, genuine and subsisting, (c) subject to no
defenses, set-offs or counterclaims and (d) collectible in full, net of
reserves. Except as set forth on Schedule 2.7, no agreement for deduction, free
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goods, discount or other deferred price or quantity adjustment has been made
with respect to any such receivables.
2.8 Undisclosed Liabilities. KGI does not have any liabilities or
obligations whatsoever, whether accrued, absolute, contingent, unliquidated or
otherwise, and there is no basis for any such liability or obligation or any
claim in respect thereof, other than: (a) to the extent reflected on the 1995
Balance Sheet; (b) liabilities or obligations incurred in the normal and
ordinary course of business of KGI since the date of the 1995 Balance Sheet
(the "1995 Balance Sheet Date") (none of which is a liability for breach of
contract, tort, infringement, lawsuit or warranty and none of which will or may
reasonably be expected to have a material adverse effect upon the Business
Condition of KGI); (c) obligations for performance (but not for breach) under
Contracts (as hereinafter defined) disclosed on Schedule 2.15 (or not required
to be disclosed on Schedule 2.15 due to the disclosure thresholds set forth
therein); and (e) other obligations and liabilities specifically disclosed on
Schedule 2.8.
2.9 Taxes.
(a) KGI has timely filed or caused to be filed with the
appropriate Government (as hereinafter defined) entity all tax returns and
reports required to be filed, including estimated tax and informational returns
("Tax Returns"). All Tax Returns are true, correct, and complete.
(b) All Taxes (as hereinafter defined) (whether or not reflected
in Tax Returns as filed) payable by KGI with respect to all periods reflected
on Tax Returns have been timely and fully paid, and there are no grounds for
the assertion or assessment of any additional Taxes against KGI. There are no
audits, litigation or other disputes in respect of any Tax Returns of KGI
pending or threatened. There is no waiver of any statute of limitations in
effect with respect to any Tax Returns.
(c) All unpaid Taxes for all periods up to and including the
Effective Date are or will be properly accrued on the books of KGI.
(d) There are no Liens for Taxes upon any assets of KGI, except
Liens for Taxes not yet due and payable.
(e) As used in this Agreement, "Taxes" means all taxes, charges,
fees, levies, or other like assessments, including without limitation income,
gross receipts, ad valorem, value added, premium, excise, real property,
personal property, windfall profit, sales, use, transfer, license, withholding,
employment, payroll, and franchise taxes imposed by: the United States or any
other nation, state, or bilateral or multilateral governmental authority, any
local governmental unit or subdivision thereof, or any branch, agency, or
judicial body thereof ("Government"); and shall include any interest, fines,
penalties, assessments, or additions to tax resulting from, attributable to, or
incurred in connection with any such Taxes or any contest or dispute thereof.
2.10 Events Subsequent to the 1995 Balance Sheet Date. Except as
set forth on Schedule 2.10 or as otherwise expressly contemplated by this
Agreement, since the 1995 Balance Sheet Date, KGI has not:
(a) conducted its business or entered into any transaction or
Contract other than in the usual, regular and ordinary course consistent with
past practice;
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(b) declared, set aside or paid any dividend or made any other
distributions to its shareholders, whether or not upon or in respect of any
shares of its capital stock;
(c) redeemed, purchased or otherwise acquired any shares of its
capital stock or issued or sold any capital stock or any option, warrant or
right relating thereto or any securities convertible into or exchangeable for
any shares of capital stock, or modified the terms of or waived any provision
of its capital stock or any such option, warrant, right or other securities;
(d) sold, leased, transferred or assigned any of its assets,
tangible or intangible, other than for fair consideration, or abandoned or
permitted to lapse any of its Intellectual Property (as hereinafter defined) or
granted any license or sublicense of any of its Intellectual Property, other
than licenses associated with sales of its products to customers in the
ordinary course of business in the form(s) included as part of Schedule 2.13;
(e) permitted, allowed or suffered any of its assets to be subject
to any Lien;
(f) acquired or made any investment in (by merger, exchange,
consolidation, purchase or otherwise) any corporation or partnership or
interest in any business organization or entity, or acquired any assets outside
of the ordinary course of business or which are material (except for material
purchases of inventory and supplies in the ordinary course of business),
individually or in the aggregate, to KGI;
(g) canceled or forgiven any indebtedness or waived any claims or
rights of a substantial nature;
(h) adopted or amended any plan or agreement of the sort described
in Section 2.24;
(i) terminated or modified any Contract or any Government license,
permit or other authorization or entered into any new Contracts, except for:
(1) any Contract requiring aggregate payments during the term thereof of less
than $25,000; (2) any Contract terminated, modified or entered into in the
ordinary course of business consistent with past practices; and (3) except as
otherwise disclosed on a Schedule hereto;
(j) disclosed any confidential or proprietary information to any
person or entity other than AMC and AMC's representatives, agents, attorneys
and accountants or KGI's own employees, representatives, agents, attorneys and
accountants in the ordinary course of business;
(k) made or committed to make any expenditure for capital assets
(or series of such related expenditures) involving more than $25,000;
(l) made any loan or advance to, or guarantee for the benefit of,
any other person or entity, other than advances to employees in the ordinary
course of business consistent with past practice;
(m) granted any bonus or any increase in wages, salary or other
compensation to any director, officer or employee (other than any increase in
wages or salaries (i) required under existing Contracts which are listed on
Schedule 2.24 or (ii) otherwise not unusual in character, timing or amount made
in the ordinary course of business to employees who are not directors or
officers);
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(n) suffered or experienced any damage, destruction or loss to, or
other adverse change in the condition of, its property which, in the aggregate,
exceeds $25,000 or is material to its business (whether or not covered by
insurance);
(o) made or authorized any amendment to its Certificate of
Incorporation or By-Laws or the constituent documents of the Subsidiaries;
(p) instituted or permitted any change in the conduct of its
business, or any change in its method of purchase, sale, lease, management,
marketing, promotion or operation, or delayed or postponed the payment of
accounts payable or other liabilities other than as required by the
availability of funds;
(q) made any change in any method of accounting or accounting
policies, other than those required by generally accepted accounting
principles, or made any write-down in its accounts receivable other than in the
usual, regular and ordinary course of business consistent with past practice;
(r) incurred or assumed any liabilities, obligations or
indebtedness for borrowed money or guaranteed any such liabilities or
indebtedness other than trade accounts payable incurred in the ordinary course
of business consistent with past practices;
(s) taken any action which will or may reasonably be expected to
cause or constitute a breach of any provision of this Agreement; or
(t) agreed, whether in writing or otherwise, to do any of the
foregoing.
2.11 Real Property. KGI does not own or lease any real property
other than that set forth on Schedule 2.11. Schedule 2.11 lists all real
property owned by KGI, all real property leased or subleased to KGI and all
other real property which is used by KGI and not owned by KGI (the "Real
Property"). Except as otherwise described on Schedule 2.11: (a) there is no
pending or, to the knowledge of KGI or the Principal shareholders, threatened
condemnation proceeding, administrative action or judicial proceeding of any
type relating to the Real Property or other matters affecting adversely the
current use, occupancy or value of the Real Property; (b) all material permits,
licenses, approvals and other authorizations required in connection with the
past and present operation of its business on the Real Property have been
lawfully issued to KGI and are, as of the date hereof, and will be following
the consummation of the transactions contemplated hereby, in full force and
effect, and KGI and such Real Property are in compliance with all material
applicable laws, including zoning ordinances and regulations.
2.12 Assets. KGI has good and marketable title to, or a valid
leasehold interest in, all properties and assets used by it, located on its
premises or shown on the 1995 Balance Sheet or acquired after the date thereof,
free and clear of all Liens, except for Liens disclosed on the 1995 Balance
Sheet or Schedule 2.11 (as to real property) or Schedule 2.12 or as
specifically disclosed on Schedule 2.15 (as to all other properties and assets)
and except for properties and assets disposed of for fair consideration in the
ordinary course of business since the 1995 Balance Sheet Date. KGI owns or
leases or has the valid and enforceable right to use all assets, tangible or
intangible, necessary for the conduct of its business as presently conducted
and, upon the Effective Date, the Surviving Corporation will have the same
rights with respect to such assets. All of KGI's tangible assets are in good
<PAGE> 9
operating condition and repair (subject to normal wear and tear), and are
suitable for the purposes for which they are presently used.
2.13 Intellectual Property.
(a) Schedule 2.13 contains a true, complete and accurate list of
all the Intellectual Property (as hereinafter defined). Schedule 2.13(a)
accurately identifies, where appropriate, one or more of the following for each
item of the Intellectual Property: filing date, issue date, classification of
invention or goods covered, country of origin, licensor, license date and
licensed subject matter. Schedule 2.15 contains a complete and accurate list
of all licenses and other rights granted by KGI to any third party with respect
to any item of the Intellectual Property, other than licenses associated with
sales of products to customers in the ordinary course of business. True,
complete and correct copies of the forms of such customer licenses are included
as part of Schedule 2.13.
(b) Except as set forth on Schedule 2.13(b), (i) the Intellectual
Property is valid and enforceable and encompasses all proprietary rights
necessary or desirable for the operation of KGI's business as presently
conducted (in each case free and clear of all Liens); (ii) KGI has taken all
actions necessary to maintain and protect KGI's rights to any Intellectual
Property; (iii) to the knowledge of KGI, the owners of the Intellectual
Property licensed to KGI have taken all actions necessary to maintain and
protect the Intellectual Property subject to such licenses; (iv) there has been
no claim made against KGI asserting the invalidity, misuse or unenforceability
of any of the Intellectual Property or challenging KGI's right to use or
ownership of any of the Intellectual Property, and there are no grounds for any
such claim or challenge; (v) KGI is not aware of any infringement or
misappropriation of any of the Intellectual Property or of any facts raising a
likelihood of infringement or misappropriation; (vi) the conduct of KGI's
business has not infringed or misappropriated, and does not infringe or
misappropriate, any intellectual property or proprietary right of any other
entity; (vii) no loss of any of the Intellectual Property is pending or to the
knowledge of KGI threatened or reasonably foreseeable; and (viii) the
consummation of the transactions contemplated by this Agreement will not alter,
impair or extinguish any of the Intellectual Property.
(c) For purposes of this Agreement, "Intellectual Property" shall
mean all of the following (in whatever form or medium) which are owned by or
licensed to KGI: (i) patents, trademarks, service marks and copyrights, (ii)
applications for patents and for registration of trademarks, service marks and
copyrights, (iii) trade secrets and trade names, and (iv) all other items of
proprietary information or know-how but shall not include any widely available
off-the-shelf software.
2.14 No Breach of Law or Governing Document; Licenses and Permits.
KGI has complied with and is not in default under or in violation of any
material applicable statute, law, ordinance, decree, order, rule, or regulation
of any Government ("Law"), or the provisions of any franchise or license, or in
default under or in violation of any provision of its Certificate of
Incorporation or its By-Laws, or, with respect to the Subsidiaries, any of
their respective constituent documents. KGI holds all material licenses or
permits required to conduct its business as presently conducted, and each such
license or permit is valid, in full force and effect, and listed on
Schedule 2.14. Upon the Effective Date, the Surviving Corporation and the
Subsidiaries will have all right and authority to conduct their respective
businesses pursuant to such licenses and permits subject to the terms thereof.
<PAGE> 10
2.15 Contracts and Commitments. Except as set forth in
Schedule 2.15, KGI is not a party to or otherwise obligated under any of the
following, whether written or oral:
(a) Any single contract or purchase order providing for an
expenditure by KGI in excess of $25,000 or contracts or purchase orders with
the same or known affiliated vendor(s) providing for an expenditure by KGI in
excess of $25,000.
(b) Any other contract providing for an expenditure by KGI for the
purchase of real property.
(c) Any contract, bid or offer to sell products or to provide
services to third parties which (i) KGI knows or has reason to believe is at a
price which would result in a net loss on the sale of such products or
provision of such services or (ii) contains terms or conditions KGI cannot
reasonably expect to satisfy or fulfill in whole or in part.
(d) Any purchase commitment for materials, supplies, component
parts or other items or services in excess of the normal, ordinary, usual and
current requirements of KGI or at a price in excess of the current reasonable
market price available to KGI at the time of such commitment.
(e) Any license or other right granted by KGI to any third party
or granted by any third party to KGI with respect to any Intellectual Property
(other than licenses for widely available, off-the-shelf software).
(f) Any contract pursuant to which KGI is the lessee or sublessee
of, or holds or operates, any real or personal property owned or leased by any
other person or entity (other than leases of personal property leased in the
ordinary course of business with annual lease payments no greater than
$25,000).
(g) Any contract pursuant to which KGI is the lessor or sublessor
of, or permits any third party to operate, any real or personal property owned
or leased by KGI.
(h) Any revocable or irrevocable power of attorney granted to any
person, firm or corporation for any purpose whatsoever, excluding powers of
attorney granted in connection with United States and foreign patents,
trademarks, service marks, copyrights and applications therefor.
(i) Any loan agreement, indenture, promissory note, conditional
sales agreement, security agreement, letter of credit arrangement, guarantee,
indemnity, surety, foreign exchange contract, accommodation or other similar
type of agreement.
(j) Any arrangement or other agreement (other than pursuant to a
plan described on Schedule 2.24) which involves (i) a sharing of profits,
(ii) future payments of $25,000 or more per annum to other persons, or
(iii) any joint venture or similar contract or arrangement.
(k) Any sales agency, sales representation, distributorship or
franchise agreement that is not terminable without penalty within 60 days.
(l) Any contract providing for the payment of any cash or other
benefits upon the sale or change of control of KGI or a substantial portion of
its assets.
<PAGE> 11
(m) Any contract prohibiting KGI from freely engaging in any
business anywhere in the world, or prohibiting KGI from the disclosure of trade
secrets or other confidential or proprietary information.
(n) Any contract or commitment not made in the ordinary course of
business.
2.16 Validity of Contracts. Except as set forth on Schedule 2.16,
each written or oral contract, agreement, indenture and evidence of
indebtedness (including but not limited to the contracts and commitments
required to be disclosed on Schedule 2.15) to which KGI is a party or is
otherwise obligated (collectively, the "Contracts") is a valid and binding
obligation of KGI and to the knowledge of KGI the other parties thereto in
accordance with its terms and conditions, except as such enforceability may be
limited by (a) bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights generally and (b) equitable principles of
general applicability (whether considered in a proceeding at law or in equity).
Except as set forth on Schedule 2.16, neither KGI nor any other party to a
Contract is in material default under or in violation of such Contract, and
there are no disputes with regard to any Contract. Except as set forth on
Schedule 2.16 no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute, and neither the execution of this
Agreement nor the Closing hereunder do or will constitute or result in, a
default under or a violation of any Contract by KGI or any other party to such
Contract or would cause the acceleration of any obligation of any party thereto
or the creation of a Lien upon any asset of KGI. KGI has delivered to AMC a
true, complete and accurate copy of each written Contract and a true, complete
and accurate description of each oral Contract, and none of the Contracts has
been modified or amended in any respect, except as reflected in such disclosure
to AMC.
2.17 Customers and Suppliers. Schedule 2.17 sets forth a true,
complete and correct list of KGI's 10 largest customers and suppliers by volume
of sales (by dollar volume) and purchases (by dollar volume), respectively, for
each of the years ended December 31, 1995 and December 31, 1994. KGI has not
received any indication from any supplier of KGI (including those listed on
Schedule 2.17) to the effect that, and has no reason to believe that, such
supplier will stop, or materially decrease the rate of, supplying materials,
products or services to KGI. Except as set forth on Schedule 2.17 KGI has not
received any indication from any customer of KGI (including those listed on
Schedule 2.17) to the effect that, and has no reason to believe that, such
customer will stop, or materially decrease the rate of, buying materials,
products or services from KGI.
2.18 Litigation and Arbitration. Except as set forth on
Schedule 2.18, there is no suit, claim, action or proceeding now pending or, to
the best knowledge of KGI, threatened before any court, grand jury,
administrative or regulatory body, Government agency, arbitration or mediation
panel or similar body to which KGI is a party or which may result in any
judgment, order, decree, liability, award or other determination which will or
may reasonably be expected to have a material adverse effect upon the Business
Condition of KGI. Except as set forth on Schedule 2.18, no such judgment,
order, decree or award has been entered against KGI which has, or may
reasonably be expected to have, such effect. There is no claim, action or
proceeding now pending or, to the best knowledge of KGI, threatened before any
court, grand jury, administrative or regulatory body, Government agency,
arbitration or mediation panel or similar body involving KGI which will or may
<PAGE> 12
reasonably be expected to prevent or hamper the consummation of the
transactions contemplated by this Agreement.
2.19 Officers, Directors, Employees and Consultants. Set forth on
Schedule 2.19 is a complete list of: (a) all directors of KGI; (b) all officers
(with office held) of KGI; (c) all key employees of KGI; and (d) all business
consultants to KGI; together, in each case, with the current rate of
compensation payable to each.
2.20 Indebtedness to and from Officers, Directors and Others.
Except as set forth on Schedule 2.20: (a) KGI is not indebted to any
shareholder, director, officer, employee or agent of KGI except for amounts due
as normal salaries, wages, employee benefits and bonuses and in reimbursement
of ordinary expenses on a basis consistent with the past practices of KGI; and
(b) no shareholder, director, officer, employee or agent of KGI is indebted to
KGI except for advances for ordinary business expenses on a basis consistent
with the past practices of KGI.
2.21 Affiliated Transactions. Except as set forth on Schedule 2.21
no director, officer, executive employee or affiliate of KGI or any individual
related by blood, marriage or adoption to any such individual or any entity in
which any such individual or entity is known by KGI to own any material
beneficial interest, is a party to any agreement, contract, commitment or other
form of transaction or arrangement with KGI or has any interest in any property
used by or in connection with KGI's business.
2.22 Outside Financial Interests. Except as set forth on
Schedule 2.22, no director or officer of KGI has any direct or indirect
financial interest in any competitor with or supplier or customer of KGI;
provided, however, that for this purpose ownership of corporate securities
having no more than 5% of the outstanding voting power of any competitor,
supplier or customer, which securities are listed on any national securities
exchange or authorized for quotation on the Nasdaq National Market, shall not
be deemed to be such a financial interest, provided that such person has no
other connection or relationship with such competitor, supplier or customer.
2.23 Payments, Compensation and Perquisites of Agents and
Employees. All payments to agents, consultants and others made by KGI have
been in payment of bona fide fees and commissions and not as bribes or illegal
or improper payments. KGI has properly and accurately reflected on its books
and records: (a) all compensation paid to and perquisites provided to or on
behalf of its agents and employees; and (b) all compensation and perquisites
which are due and payable to such persons but which have not been paid or
provided. Such compensation and perquisites have been properly and accurately
disclosed in the financial statements and other public or private reports,
records or filings of KGI, to the extent required by Law.
2.24 Labor Agreements, Employee Benefit Plans and Employment
Agreements. Schedule 2.24 identifies each Employee Plan/Agreement (as
hereinafter defined) covering any employee or former employee outside of the
United States ("International Plan"). KGI has furnished AMC with copies of
each International Plan. Each International Plan has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all applicable statutes, orders, rules and regulations (including any
special provisions relating to qualified plans where such International Plan
was intended to so qualify) and has been maintained in good standing with
applicable regulatory authorities. According to the actuarial assumptions and
valuations most recently used for the purpose of funding each International
<PAGE> 13
Plan, as of the Effective Date the total amount or value of the funds available
under such International Plan to pay benefits accrued thereunder or segregated
in respect of such accrued benefits, together with any reserve or accrual with
respect thereto, exceeded the present value of all benefits (actual or
contingent) accrued as of such date of all participants and past participants
therein who are employees of former employees of KGI. From and after the
Effective Date, AMC (or the Surviving Corporation) shall have the full benefit
of any such funds, accruals or reserves. As used herein, "Employee
Plans/Agreements shall mean all pension, thrift, savings, profit sharing,
retirement, incentive bonus or other bonus, medical, dental, life, accident
insurance, benefit, employee welfare, disability, group insurance, consulting,
stock appreciation, stock option, stock purchase, executive or deferred
compensation, hospitalization and other similar fringe or employee benefit
plans, programs and arrangements, whether or not written, and any, whether
written or unwritten, employment or consulting contracts, "golden parachutes,"
union collective bargaining agreements, works council or similar agreements,
severance agreements or plans or vacation and sick leave plans, programs,
arrangements and policies.
2.25 Labor Disputes; Unfair Labor Practices. There is neither
pending nor, to the best knowledge of KGI or the Principal shareholders,
threatened any labor dispute, strike or work stoppage which affects or which
reasonably may be expected to affect the Business Condition of KGI.
2.26 Insurance Policies. Set forth on Schedule 2.26 is a list of
all insurance policies and bonds in force covering or relating to the
properties, operations or personnel of KGI. All of such insurance policies are
in full force and effect and such policies or substantially equivalent policies
will continue in full force and effect for the benefit of the Surviving
Corporation following the Merger with respect to claims and occurrences
relating to pre-Merger periods, and KGI is not in default with respect to any
of its obligations under any of such insurance policies.
2.27 Guarantees. KGI is not a guarantor, indemnitor, surety or
accommodation party or otherwise liable for any indebtedness of any other
person, firm or corporation, except as endorser of checks received and
deposited in the ordinary course of business.
2.28 Product Warranties. Since January 1, 1993, no product warranty
or similar claims have been made against KGI except routine claims. No person
or party (including, but not limited to, Government agencies of any kind) has
any valid claim, or valid basis for any action or proceeding, against KGI under
any Law relating to unfair competition, false advertising or other similar
claims arising out of product warranties, guarantees, specifications, manuals
or brochures or other advertising materials used by KGI.
2.29 Product Liability Claims. Since January 1, 1993, KGI has
never received notice or information as to any claim or allegation of personal
injury, death, or property or economic damages, any claim for punitive or
exemplary damages, any claim for contribution or indemnification, or any claim
for injunctive relief in connection with any product manufactured, sold or
distributed by, or in connection with any service provided by, KGI. KGI has in
full force and effect insurance of the type and amount adequate to cover all
claims of the sort described in this Section.
2.30 Bank Accounts. Set forth on Schedule 2.30 is a list of all
bank accounts, investment accounts and safe deposit boxes maintained by KGI,
<PAGE> 14
together with the names of all persons who are authorized signatories or have
access thereto or control thereover.
2.31 Books and Records. The books of account, stock record books
and minute books and other corporate records of KGI are in all respects
complete and correct, have been maintained in accordance with good business
practices and the matters contained therein are accurately reflected on the
Financial Statements, to the extent appropriate.
2.32 Full Disclosure. No representation or warranty of KGI herein
and no statement, information or certificate furnished or to be furnished by or
on behalf of KGI or its counsel, accountants or other agents pursuant hereto or
in connection with the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMC AND MERGERCO
AMC and MergerCo hereby make the following representations and
warranties, each of which shall survive the Effective Date and the Merger as
provided in Section 5.3.
3.1 Corporate Organization, Qualification and Power.
Each of AMC and MergerCo is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada. Each of AMC and
MergerCo has all requisite corporate power and authority to own, lease and use
its assets and properties and to conduct the business in which it is engaged.
3.2 Capitalization.
(a) AMC. The entire authorized capital stock of AMC consists of
100,000,000 shares of AMC Common Stock, of which 4,845,586 shares will be
outstanding immediately prior to the Effective Date. There are no outstanding
subscriptions, rights, options, warrants, conversion privileges or agreements
of any kind entitling any person or entity to acquire from AMC any shares of
AMC Common Stock or any other type of security of AMC.
(b) MergerCo. The entire authorized capital stock of MergerCo
consists solely of 1,000 shares of Common Stock, par value $.01 per share, of
which 1,000 shares are issued and outstanding. AMC owns all of the issued and
outstanding capital stock of MergerCo.
3.3 Corporate Power and Authority.
(a) Each of AMC and MergerCo has full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of AMC and MergerCo have been duly authorized by all requisite
corporate action, except for the filing of the Certificates of Merger pursuant
to Section 1.2 above. This Agreement constitutes the valid and binding
obligation of AMC and MergerCo, enforceable in accordance with its terms.
(b) Neither AMC nor MergerCo is a party to, subject to or bound by
any note, bond, mortgage, indenture, deed of trust, agreement, lien, contract
or other instrument or obligation or any statute, law, rule, regulation,
<PAGE> 15
judgment, order, writ, injunction, or decree of any court, administrative or
regulatory body, governmental agency, arbitrator, mediator or similar body,
franchise or license, which would (i) conflict with or be breached or violated
or the obligations thereunder accelerated or increased (whether or not with
notice or lapse of time or both) by the execution, delivery or performance by
either of AMC or MergerCo of this Agreement or (ii) prevent the carrying out of
the transactions contemplated hereby. Except for compliance with the
provisions of applicable federal and state securities laws, no waiver or
consent of any third person or governmental authority is required for the
execution of this Agreement or the consummation of the transactions
contemplated hereby. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not result in the creation of any
Lien against AMC or MergerCo or any of their respective properties or assets.
3.4 The AMC Common Stock. The shares of AMC Common Stock to be issued
in connection with the Merger, when delivered hereunder, will be duly
authorized, validly issued, and fully paid and nonassessable, and will not be
subject to any preemptive rights of AMC's shareholders.
3.5 SEC Reports. AMC has filed in a timely manner with the United
States Securities and Exchange Commission (the "SEC") all reports and other
documents required by the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or the Securities Act of 1933, as amended (the "1933 Act"), since
April 21, 1994 (the "SEC Reports"). As of their respective dates of filing,
the SEC Reports (including all exhibits and schedules therein and documents
incorporated by reference therein) (i) complied as to form in all material
respects with all requirements of applicable law, including the 1933 Act and
the 1934 Act, as appropriate, and the rules and regulations thereunder, and
(ii) did not contain any untrue statement of, or omit 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.
ARTICLE IV
COVENANTS OF THE PARTIES
AMC and MergerCo, on the one hand, and KGI, on the other hand, hereby
covenant and agree with each other as follows:
4.1 Definition. As used in this Article IV, "Registrable Stock", at
the time reference is made thereto, shall mean all shares of AMC Common Stock
issued to the shareholders of KGI in connection with the Merger, the sale or
disposition of which shares then requires registration under the 1933 Act.
4.2 Piggy-Back Registration. If at any time prior to the third
anniversary of the Effective Date, AMC proposes to file a registration
statement to register shares of its common stock (other than shares of its
common stock issued with respect to any acquisition or any employee stock
option, stock purchase or similar plan) under the 1933 Act for sale to the
public in a manner or on a form which would permit registration of the
Registerable Stock for sale to the public under the 1933 Act, AMC will, each
such time, give written notice to each holder of such shares at its address as
shown on the stock transfer records of AMC of its intention to do so ("Notice
of Intent") and, upon the written request of any holder of such shares (any
such holder hereinafter a "Seller" and such requests hereinafter collectively
a "Registration Right) made within 15 calendar days after the giving of any
such notice by AMC, AMC will use its best efforts to cause all of the
Registerable Stock with respect to which it has received a Registration right
<PAGE> 16
within the time permitted which shall be not less than 25,000 shares
individually and 100.000 shares in the aggregate (both such figures being
subject to adjustment in respect of any stock split or other change in the
outstanding shares of common stock of AMC)(hereinafter referred to as the
"Rights Stock") to be registered under the 1933 Act to the extent requisite to
permit the disposition by each Seller of the Rights Stock to be so registered;
provided, however, AMC need not include any or all of the Rights Stock in such
registration statement if and to the extent that (a) in the opinion of counsel
to AMC the Rights Stock may be sold pursuant to the exemption afforded by Rule
144 promulgated by the SEC pursuant to the 1933 Act or (b) the managing
underwriter, if any, of the offering to which such registration statement
relates advises AMC in writing that the inclusion of such shares may interfere
with the orderly sale and distribution of the security proposed to be offered
under such registration statement; provided, further, that if AMC is able only
to include some but not all of the Rights Stock. then the shares to be included
by each Seller and the other parties whose shares of AMC Common Stock were
intended to be sold pursuant to such registration statement (but not AMC) shall
be reduced proportionately. Notwithstanding the provisions of this Section
4.2, AMC shall have the right at any time after it shall have given written
notice of a proposed registration as provided herein (irrespective of whether
it shall have received a Registration Right) to elect not to file any such
proposed registration statement, or to withdraw the same after filing but prior
to the effective date thereof.
4.3 Registration Expenses. The costs and expenses (other than
underwriting discounts and commissions) of all registrations and qualifications
under the 1933 Act and of all other actions AMC is required to take or effect
in connection with the registration rights described herein, shall be paid by
AMC (including, without limitation, all registration and filing fees, printing
expenses, fees and expenses of complying with Blue Sky laws, and fees and
disbursements of counsel for AMC and of AMC's independent public accountants);
provided, however, that fees and expenses of complying with Blue Sky laws in
those states where shares of Registrable Stock and no other securities of AMC
covered by the registration statement will be offered for sale, shall be paid
by the Sellers whose shares of Registrable Stock are covered by the
Registration Statement.
4.4 Registration Procedures. If and whenever AMC is required to effect
the registration of any shares of Registrable Stock under the 1933 Act in
accordance with the registration rights described herein, AMC will promptly:
i) prepare and file with the SEC a registration statement
with respect to such shares of Registrable Stock and use its best efforts to
cause such registration statement to become effective;
ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the 1933 Act with respect to the
disposition of all such shares of Registrable Stock until such time as all of
such shares have been disposed of in accordance with the intended methods of
disposition by the Sellers, but in no event for a period of more than nine
months after such registration statement becomes effective;
iii) furnish to each Seller such number of copies of such
registration statement and of each such amendment and supplement thereto and
such number of copies of the prospectus included in such registration statement
as shall reasonably be requested by each;
<PAGE> 17
iv) use its best efforts to register or qualify the shares of
Registrable Stock covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions within the United States of
America (including territories and commonwealths thereof) as each Seller shall
reasonably request, except that AMC shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, to subject itself to taxation in
any such jurisdiction or to consent to general service of process in any
jurisdiction;
v) notify each Seller when a prospectus relating to the
Rights Stock included in such registration statement is required to be
delivered under the Act within the period mentioned in subdivision (ii) of this
paragraph, of the happening of any event as a result of which such prospectus,
as then in effect, 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 not misleading in light of the circumstances then existing
(and upon receipt of such notice and until a supplemented or amended prospectus
as set forth below is available, the Sellers shall not offer or sell any
securities covered by such registration statement and shall return all copies
of such prospectus to AMC if requested to do so by it); and
vi) furnish to each Seller, at the time of the disposition of
any Rights Stock, a signed copy of an opinion of counsel to the effect that:
(a) a registration statement covering such shares has been filed with the SEC
under the Act and has been made effective by order of the SEC, (b) said
registration statement and the prospectus contained therein comply as to form
in all material respects with the requirements of the Act, (c) no stop order
has been issued by the SEC suspending the effectiveness of such registration
statement and (d) the applicable provisions of the securities or Blue Sky laws
of each state in which AMC shall be required, pursuant to clause (iv) of this
paragraph, to register or qualify such shares, have been complied with,
assuming the accuracy and completeness of the information furnished to such
counsel with respect to each filing relating to such laws; it being understood
that such opinion may contain such qualifications and assumptions as are
customary in the rendering of similar opinions, and that such counsel may rely,
as to all factual matters treated therein, on certificates of AMC.
AMC may require each Seller to furnish AMC such information regarding
such Seller's identity and its intended distributions of Registrable Stock as
AMC may from time to time reasonably require in writing and as shall be
required by law to effect such registration.
4.5 Availability of Information. AMC will use its best efforts to
comply with the reporting requirements of Sections 13 and 15(d) of the Exchange
Act to the extent it shall be required to do so pursuant to such Sections, and
at all times while so required shall use its best efforts to comply with all
other public information reporting requirements of the SEC (including reporting
requirements which serve as a condition to utilization of Rule 144 promulgated
in effect and relating to the availability of an exemption from the 1933 Act
for the sale of any shares of Registrable Stock). AMC will also cooperate with
the Sellers in supplying such information and documentation as may be necessary
for them to complete and file any information reporting forms presently or
hereafter required by the SEC as a condition to the availability of an
exemption from the 1933 Act for the sale of any shares of Registrable Stock.
(7) Indemnity. AMC shall indemnify and hold harmless each Seller in
accordance with these registration rights provisions from and against any and
<PAGE> 18
all losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or any post-effective amendment thereto or any registration statement
under the securities laws, or any prospectus included therein required to be
filed or furnished in connection with these registration rights provisions or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished or required to be furnished
in writing to AMC by such Seller expressly for use therein; provided, however,
that AMC shall not be obliged to so indemnify any such Seller unless such
Seller shall at the same time indemnify AMC its directors, each officer signing
the related registration statement and each person, if any, who controls AMC
within the meaning of such law, from and against any and all losses, claims,
damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or any
prospectus required to be filed or furnished in connection with these
registration rights provisions or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, insofar as such losses, claims, damages or liabilities
are caused by any untrue statement or alleged untrue statement or omission
based upon information furnished in writing to AMC by any such Seller expressly
for use therein.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification by Principal Shareholders. The Principal
Shareholders agree to indemnify and hold AMC and the Surviving Corporation and
their respective affiliates, shareholders, directors, officers, successors,
permitted assigns, or agents (the "Indemnified Parties"), harmless from and
against, after the Effective Date, any claims, losses, damages, liabilities,
expenses or costs (including reasonable legal and other fees and expenses
incurred in connection with the enforcement of this Agreement and taking into
account the tax effect thereof) ("Losses") resulting from or arising out of any
breach of or default under KGI's or the Principal Shareholders'
representations, warranties, covenants and agreements contained herein;
provided, however, that such indemnification shall be severable only in
proportion to, and shall be limited to the shares of AMC Common Stock received
by each upon consummation of the Merger or the value thereof (such value to be
equal to the average closing bid and asked price of AMC's Common Stock during
the five trading days immediately following the Merger. The Principal
Shareholders shall also be deemed to have waived any right of contribution or
other similar right against the Surviving Corporation arising out of KGI's
representations, warranties, covenants and agreements contained herein.
5.2 Indemnification by AMC. AMC agrees to indemnify and hold each of
the shareholders of KGI who receive shares of AMC Common Stock upon
consummation of the Merger harmless from against, after the Effective Date, all
Losses resulting from or arising out of any breach of or default under AMC's or
MergerCo's representations, warranties, covenants and agreements contained
herein.
5.3 Survival of Representations and Warranties. All representations
and warranties made in this Agreement or in any exhibit, statement, Schedule,
certificate, instrument or any document delivered pursuant hereto shall survive
<PAGE> 19
the Closing and shall remain in effect for a period of one year after the
Effective Date and shall thereupon terminate and be of no further force or
effect. In the case of any representation, warranty and agreement of KGI
contained in Sections 2.9, the same shall survive until the later of (a) the
final resolution of any judicial or administrative proceeding involving any
such Tax or (b) expiration of any applicable statute of limitations (including
any suspensions, tollings or extensions thereof). In the case of a
representation or warranty made by any party hereto which is not true when made
and which was made by such party fraudulently or with intent to defraud or
mislead, the same shall survive without limitation as to time. All rights and
remedies of the parties under this Agreement are cumulative and without
prejudice to any other rights or remedies under Law. All representations and
warranties hereunder shall be deemed to be material and relied upon by the
parties with or to whom the same were made, notwithstanding any investigation
or inspection made by or on behalf of such party or parties.
ARTICLE VI
MISCELLANEOUS
6.1 Assignment; Binding Agreement. Neither this Agreement nor any
rights or obligations of the parties hereto may be assigned by any party
without the prior written consent of the other party hereto. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
to their respective successors and permitted assigns.
6.2 Amendments. This Agreement may be amended with the approval of
the Boards of Directors of the parties hereto (or any officer of any such party
authorized by its Board of Directors to approve such amendment) provided that
no amendment prior to the Effective Date which would materially adversely
affect the shareholders of KGI may be made without the further approval of such
shareholders.
6.3 Entire Agreement and Modification. This Agreement, including the
Schedules delivered hereunder, the other agreements and documents delivered
pursuant hereto constitutes the entire agreement between the parties. No
changes of, modifications of, or additions to this Agreement shall be valid
unless the same shall be in writing and signed by all of the parties hereto.
6.4 Notices. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made upon being delivered either by courier
or fax delivery to the party for whom it is intended, provided that a copy
thereof is deposited, postage prepaid, certified or registered mail, return
receipt requested, in the United States mail, bearing the address shown in this
Section for, or such other address as may be designated in writing hereafter
by, such party:
(a) If to AMC or MergerCo:
Asia Media Communications, Ltd.
<PAGE> 20
with a copy to:
Bryan Cave LLP
245 Park Avenue
New York, NY 10167
Attention: Steven A. Saide
Telephone: (212) 692-1852
Facsimile: (212) 692-1900
(b) If to KGI:
c/o Kremlyovskaya Group N.V.
Von Putlei 41
2018 Antwerp, Belgium
Attention:
Telephone:
Facsimile:
(c) If to the Principal shareholders:
Attention:
Telephone:
Facsimile:
6.5 Severability. If any provision of this Agreement shall be
determined to be contrary to law and unenforceable by any court of law, the
remaining provisions shall be severable and enforceable in accordance with
their terms to the fullest extent permitted by applicable law.
6.6 Counterparts. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
6.7 Headings; Interpretation. The table of contents and article and
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of the Agreement.
All parties hereto have participated substantially in the negotiation and
drafting of this Agreement and each party hereby disclaims any defense or
assertion in any litigation or arbitration that any ambiguity herein should be
construed against the draftsman.
6.8. Governing Law, Jurisdiction and Venue.
(a) This Agreement shall be governed by and construed and interpreted
in accordance with the substantive laws of the State of Delaware, without
reference to its principles of choice of law.
(b) The parties agree that any legal action, suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby shall be instituted in a Federal or state court located in the Southern
District of New York as the case may be, and each party hereto waives any
objection which such party may now or hereafter have to the laying of venue of
any such action, suit or proceeding, and irrevocably submits to the
jurisdiction of any such court in any such action, suit or proceeding. Any and
all service of process and any other notice in any such action, suit or
<PAGE> 21
proceeding shall be effective against such party when transmitted in accordance
with Section 9.4 hereof. Nothing contained herein shall be deemed to affect
the right of any party hereto to serve process in any manner permitted by law.
6.9 Payment of Fees and Expenses.
(a) AMC and MergerCo shall pay all fees and expenses of their
counsel, accountants and other experts and all other expenses incurred by them
incident to the negotiation, preparation and execution of this Agreement, the
Registration Statement and the consummation of the transactions contemplated
hereby.
(b) KGI shall pay all fees and expenses of KGI's counsel,
accountants and other experts and all other expenses incurred by KGI incident
to the negotiation, preparation and execution of this Agreement and the
consummation of the transactions contemplated hereby.
6.10 No Third Party Beneficiaries. Nothing herein shall grant or
create in any person not a party hereto, or any such person's dependents or
heirs, any right to be offered or to continue employment or to receive any
other benefits, and no such party shall be entitled to sue any party to this
Agreement with respect hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
as of the day and year first above written.
ASIA MEDIA COMMUNICATIONS, LTD.
By: /S/ IAN RICE
-------------------------------------
Chairman
AMC MERGER CO., INC.
By: /S/ IAN RICE
-------------------------------------
President
KREMLYOVSKAYA GROUP, INC.
By: /S/ BRIAN JELLEY
-------------------------------------
President
/S/ RICCARDO FANCHINI
-----------------------------------------
Riccardo Fanchini
/S/ ROBERT GASPAR
-----------------------------------------
Robert Gaspar
<PAGE> 22
Schedule 2.3
------------
List of subsidiaries
1. Germany
KREMLYOVSKAYA Getranke und Handels GmbH
Reichenbachstrabe 32a
80169 Munchen
Incorporated under the laws of Germany to do business in Germany. Issued
and outstanding capital DM 200,000 (approx. US$ 136,700). KG holds 50% of
this capital.
2. Romania
KREMLYOVSKAYA ROMANIA S.R.L.
Sos Electronicu nr 19, Sector 2, Bucharest, Romania
Incorporated under the laws of Romania to do business in Romania. Issued
and outstanding capital LEI 210,000,000 (US$ 120,000). Represented by 200
shares. Shares held by KG 45 shares representing 22.5% of the capital.
3. Belgium
KREMLYOVSKAYA GROUP N.V.
Van Putlei 41
2018 Antwerp
Belgium
Incorporated under the laws of Belgium. Issued and outstanding shares
owned by Kremlyovskaya Group, Inc., a Delaware corporation.
<PAGE> 23
Schedule 2.5
------------
Financial Statements
a) Audited Statements attached for year ended 31st December 1994.
b) Unaudited Statements attached for year ended 31st December 1995.
Note
- ----
There are interests in companies in Germany and Romania as per Schedule 2.3.
Company law requirements and accountancy practice in Belgium require that those
interests be consolidated into the accounts of Kremlyovskaya Group N.V. Antwerp
within 6 months of that company's year end date of 31st December 1995.
<PAGE> 24
<TABLE>
Kremlyovskaya Group nv
Results on December 31 1995
20,03,96
<C> <C> <C> <C>
Balance sheet (expressed in US$) rate S/BEF 29,445
ASSETS LIABILITIES
Current assets Current liabilities
- -------------- -------------------
Cash and deposits 254788 Trade crediters 9321009
Trade receivables 18949317 Taxes 95 2903039
Stock in hand 2624112 Loans due - year 3789911
Notes - 1 year 1197304 23025522 Wages/holiday 112725
-------- Interest payable 5731 16132416
-------
Fixed assets
- ------------
Plant/equipment/machines/cars 455362 Loans + 1 year 718581
Real estate 3258568 --------------
Notes + 1 year 1285703 4999634 Discount on capital gain 145000
-------- ------------------------
Intangible assets 12842 Shareholders equity
-------------------
Issued capital at par 5264052
Retained earnings 363749
Profit 95 5414199 11042000
-------- --------
28037997 28037997
-------- --------
0
</TABLE>
<PAGE> 25
Kremlyovskaya Group nv
Results on December 31 1995
20,03,96
Profit & losses account (expressed in US$)
rate $/BEF 29,445
Turnover 51190541
Cost of sales -39016918
----------
Gross profit 31,20% 12173624
Other income 136107
Charged to Benitex 11191429
Advert/exchange/bond -11191429 0
Selling & marketing cost 2098466
Overhead 2036410
Salaries & Staff 1444997
Depreciations 309688
Taxes & costs 111167 -6000729
-------
Interest/bank charges/
foreign exchange 5012
---------
Net income before taxes 6314014
Taxes payable -3046048
---------
Net after taxes 3267965
Other income/capital gain 2146234
---------
Net total income 1995 5414199
=========
0
<PAGE> 26
<TABLE>
SCHEDULE 2.5
KREMLYOVSKAYA GROUP nv December 31, 1995
13,03,96
BALANCE 29,445 RATE 31,12,95
<CAPTION>
BALANCE USD BALANCE BEF
ACC NAME ASSETS LIABILITIES ASSETS LIABILITIES
- --------- ----------------------------------------------- ---------- ----------- ---------- -----------
<C> <C> <C> <C> <C> <C>
000001 GUARANTEE CUSTOMS GERMANY 186789 5500000
000002 GUARANTEE RABO 186789 5500000
100000 ISSUED CAPITAL 5264052 155000000
10 TOTAL 5264052 155000000
130000 LEGAL RESERVES 304672 8971054
132000 UNTAXED RESERVES 2146234 63195850
133000 RESERVES AVAILABLE FOR DISTRIB 3327043 97964787
13 TOTAL 5777948 170131691
172003 FINANCING BMW (BBL) 32365 952979
172101 LEASING COPIER (JVBR) 6984 205648
173000 MORTGAGE VAN PUTLEI 679232 20000000
17 TOTAL (payable + 1 year) 718581 21153627
1 TOTAL 11760581 346290318
211000 CONCESSIONS, PATENTS 21403 630200
211009 DEPRECIATION PATENTS 8561 252080
21 TOTAL 12842 378120
220000 LAND VALUE 899436 26483900
221000 BUILDING VAN PUTLEI 2315218 68171600
221009 DEPRECIATION BUILDING V. PUTLEI 115761 3408580
221010 RENOVATION VAN PUTLEI 199593 5877027
221019 DEPRECIATION RENOVATION V. PUTLEI 39919 1175407
22 TOTAL 3258568 95948540
230000 MACHINERY AND EQUIPMENT 150858 4442021
230009 DEPRECIATION MACH. EQUIPMENT 42449 1249903
230010 EQUIPMENT V. PUTLEI 2602 76604
230019 DEPRECIATION EQUIPMENT V. PUTLEI 520 15321
230020 INSTALLATION EQUIPM. VLADIMIR 205568 6052937
230029 DEPRECIATION EQUIPM. VLADIMIR 68522 27017645
23 TOTAL 247536 7288693
240000 FURNITURE 204400 6018583
240009 DEPRECIATION FURNITURE 50540 1488151
24 TOTAL 153860 4630412
252000 VEHICLES 57056 1680000
252009 DEPRECIATION VEHICLES 11411 336000
252100 OFFICE ASSETS UNDER LEASING 10402 306300
252109 DEPREC. OFFICE EQUIPM. LEASING 2080 61260
25 TOTAL 53966 1589040
<PAGE> 27
KREMLYOVSKAYA GROUP nv December 31, 1995
13,03,96
BALANCE 29,445 RATE 31,12,95
280010 SHARES KREMLYOVSKAYA GETRANKE 69831 2056177
288000 DEPOSIT IN CASH 2776 81737
288001 GUARANTEE CAR IBL 19481 573610
288003 GUARANTEE POLMOS 193615 5701000
28 TOTAL 286703 8412524
290000 GREENMORE PROPERTY LTD. 1000000 29445000
29 TOTAL (receivable + 1 year) 1000000 29445000
2 TOTAL 5012475 147592329
340000 GOODS PURCHASED FOR RESALE 2461864 72489593
340009 (STOCK) CAR TO SELL 162248 4777394
34 TOTAL 2624112 77266987
3 TOTAL 2624112 77266927
400000 TRADE DEBTORS 16273406 479170431
400010 SUPPLIERS ADVANCE 1255119 36956973
400400 INVOICES TO BE DRAWN UP 420792 12390231
401000 GREENMORE PROPERTY LTD. 1000000 29445000
40 TOTAL (receivable - 1 year) 18949317 0 557962635 0
411000 VAT RECOVERABLE 345893 10184815
411001 VAT RECOVERABLE IBL LUX. 27593 812469
411002 VAT RECOVERABLE GERMANY 24095 709468
411003 VAT RECOVERABLE ITALY 20164 593717
411004 VAT RECOVERABLE NETHERLANDS 1099 32372
411005 VAT RECOVERABLE FRANCE 11974 352564
411006 VAT RECOVERABLE SWITZERLAND 20363 599586
411007 VAT RECOVERABLE U.K. 4104 120856
413000 RECOVERABLE PBC HOLDING 4901 144313
414000 ADVANCE ANOPINO 205977 6064989
416100 LOAN KREMLYOVSKAYA GETRANKE 146773 4321730
416110 LOAN KREMLYOVSKAYA POLGKA 34485 1015420
416130 LOAN HANS DANSER 34949 1029078
416140 LOAN ROGER FRITZ 17455 513962
416150 LOAN TIME MOTIONS 96859 2852000
416600 R/C FANCHINI RICARDO 62138 1829652
416670 R/C PARTNERS CASTLE DRIVE 40660 1193998
41 TOTAL 1099371 32370989
422203 FINANCING BMW (BBL) 14971 440831
422302 LEASING PHOTOCOPIER (JVBR) 1868 54996
423000 MORTGAGE VAN PUTLEI 84004 2500000
424210 BBL - TAXES PAYMENTS 47564 1400532
42 TOTAL (payable in - 1 year) 149307 4396359
<PAGE> 28
KREMLYOVSKAYA GROUP nv December 31, 1995
13,03,96
BALANCE 29,445 RATE 31,12,95
433191 RABO BANK BEF 1993784 58706963
433192 RABO BANK USD 1548891 45607090
439000 LOAN KASIMIR 96519 2842000
439030 R/C MR TILIPMAN 1410 41532
3640604 107197585
440000 SUPPLIERS 7393868 217712457
440010 CUSTOMERS CREDIT 1000 29445
444000 INVOICES TO BE RECEIVED 1941008 57152988
444100 CREDIT NOTES TO RECEIVE 14868 437788
44 TOTAL 9321009 0 274457102
450095 INCOME TAX PAYABLE OVER 1995 2903039 85479989
455000 SALARY PAYABLE 1023 30111
456000 PROVISION HOLIDAY PAY 111703 3289088
45 TOTAL 3015765 88799188
471000 DIVIDENDS CURRENT YEAR 0 0
0 0
490000 DEFERRED CHARGES 88269 2010184
492000 ACCRUED CHARGES 5731 168744
492001 ACCRUED INTERESTS ON C/A 13018 383305
492003 DISCOUNT ON SELLING SHARES BENITEX 145000 4269525
498000 DEPOSIT RALLY MONTE CARLO 16646 490150
49 TOTAL 97933 150731 2883639 4438269
4 TOTAL 20146621 16277416 593217263 479288603
530110 BBL BANK 0 MONTHS 55939 1647137
53 TOTAL 55939 1647137
550110 BBL BANK BEF 60045 1768012
550120 BBL BANK USD 2136 62903
550140 BBL BANK DEM 10837 319089
550150 AMRO BANK BEF 2853 83998
550160 AMRO BANK USD 932 27452
550193 RABO BANK DEM 111725 3289737
55 TOTAL 188527 0 5551191 0
570000 CASH IN HAND 10321 303914
57 TOTAL 10321 303914
5 TOTAL 245788 0 7502242d 0
TOTAL BALANCE 28037997 28037997 825578821 825678821
0 0
</TABLE>
<PAGE> 29
<TABLE>
KREMLYOVSKAYA GROUP nv December 31, 1995
13,03,96
BALANCE 29,445 RATE 31,12,95
PROFIT AND LOSS ACCOUNT 29,445 rate 9/2/96
PROFIT AND LOSS ACCOL PROFIT AND LOSS ACC
ACCNO NAME DEBIT CREDIT DEBIT CREDIT
- --------- ----------------------------------------------- ---------- ----------- ---------- -----------
<C> <C> <C> <C> <C> <C>
601010 PURCHASE BOTTLES 1218565 35880647
601020 PURCHASE BOTTLE CAPS 01556 1812502
601030 PURCHASE ALCOHOL 260218 7662110
601040 PURCHASE PACKAGING MATERIAL 122546 3608375
602090 PURCHASE SERVICES 639038 18816475
604010 PURCHASE WINES & SPIRITS 28119495 827978526
604019 CORRECTION STOCK 2461864 72489593
604020 PURCHASE SIGARS 38226 1125565
604030 PURCHASE SUNDRIES 147298 4337193
604031 PURCHASE SUNDRIES GLASSES 251005 7390848
604032 PURCHASE COOLERS 335834 9888645
604040 PURCHASE SWEETS 181563 5346134
604060 PURCHASE BEER 3087918 90923759
604080 PURCHASE JUICE 560699 16509783
604090 PURCHASE PUBLICITY MATERIAL 294641 8675714
606000 COSTS ON PURCHASE 43275 1274231
606010 TRANSPORT INSURANCE 213476 6285795
606020 FREIGHT CHARGES 5829261 171642580
606030 CLEARANCE CHARGES 37003 1089550
606031 CUSTOMS GERMANY 32857 967461
606040 WAREHOUSING AND STORAGE 4308 126840
60 TOTAL 39016918 0 1148853140 0
611120 OFFICE RENT AND CHARGES 104085 3064786
611121 RENT HQ WILRIJK 53551 1576801
611320 MAINTENANCE & REPAIR OFFICE 43867 1291658
611321 MAINT. & REPAIR VAN PUTLEI 38133 1122816
611322 MAINT. & REPAIR EQUIPMENT 2032 59845
611331 MAINTENANCE OFFICE MACHINERY 2429 71533
611350 MAINTENANCE VEHICLES 92790 2732195
612130 ELECTRICITY 6220 183138
612210 MAINTENANCE PRODUCTS 2808 85343
612300 BOOKS & MAGAZINES 476 14019
612400 STATIONERY 19571 576276
612410 PRINTED MATTER 7444 219199
612420 COMPUTER CHARGES 9572 281844
612600 FUEL (VEHICLES) 10394 306039
613210 FEES COUNCIL 59897 1763668
613220 FEES NOTARY PUBLIC 97123 2859800
613221 EXECUTION COSTS 128 3780
613250 FEES EXPERTS 408 12000
613260 FEES ACCOUNTANT 72808 2143835
613261 FEES REVISOR 6792 200000
613310 SOCIAL SECRETARY 2382 70142
613390 RENTED SERVICES 684888 20166524
613391 RENTAL CARS (STAFF) 71429 2103236
613392 RENTAL CARS (VISITORS) 3303 97265
613510 FIRE INSURANCE 4432 130512
<PAGE> 30
BALANCE 29,445 RATE 31,12,95
613530 INSURANCE VEHICLES 36467 1073785
613580 LEGAL PUBLICATIONS 393 11568
615100 TRANSPORT STAFF 891 26246
615110 RESTAURANT COSTS (BELGIUM) 25556 752510
615120 RESTAURANT COSTS (FOREIGN) 40995 1207096
615140 BUSINESS TRAVEL (FOREIGN) 255211 7514688
615141 BUSINESS TRAVEL (VISITORS) 92132 2712839
615200 ADVERTISING 42498 1251363
615210 PROMOTION 2055968 80537983
615230 PUBLICITY GIFTS 212 6245
615240 REPRESENTATION COSTS 178 5255
615400 MEMBERSHIP FEES 5802 170834
615600 OTHER SALES CHARGES 3932 115768
616100 POST COSTS 5490 161667
616110 COURIER COSTS 36076 1062263
616120 DHL COSTS 276 8120
616200 TELEPHONE 135023 3975755
616400 TV COSTS 720 21213
61 TOTAL 4134877 121751452
620000 RENUMERATION DIRECTORS 255836 7533096
620005 CHARGES DIRECTORS 1600 47113
620200 RENUMERATION (EMPLOYEES) 631830 18604247
620300 RENUMERATION MANUAL WORKERS 15487 456000
621000 EMPLOYERS CONTRIB. SOC. SECURITY 187669 5525607
621310 INSURANCE EMPLOYEES 6433 189422
623000 OTHER PERSONNEL CHARGES 2462 72479
623220 CANTEEN 5842 172027
623231 TRANSPORT CHARGES EMPLOYEES 6442 189686
623260 DOUBLE HOLIDAY PAY 69223 2038260
623290 GROUP INSURANCE 262114 7717949
623314 MEDICAL INSPECTION 70 2056
62 TOTAL 1444997 42547942
630211 DEPRECIATION PATENTS 4281 126040
630220 DEPRECIATION BUILDINGS 115761 3408580
632210 DEPRECIATION RENOVATION V. PUTL. 39919 1175407
630230 DEPRECIATION MACHINERY & EQUIPM. 26314 774805
630231 DEPRECIATION ASSETS VAN PUTLEI 520 15321
630232 DEPRECIATION EQUIPMENT VLADIMIR 68522 2017645
630240 DEPRECIATION OF FURNITURES 40880 1203714
630241 DEPREC. OFFICE EQUIPM. LEASING 2080 61260
630250 DEPRECIATION VEHICLES 11411 336000
63 TOTAL 309688 9118772
640100 TAXES ON VEHICLES 13023 383468
640110 RADIO TAX 79 2316
640300 FISCAL STAMPS 85 2500
640400 REGISTRATION COSTS 686 20203
640410 OFFICIAL FORMALITIES 1602 47173
640540 OTHER TAXES 421 12400
640700 V.A.T. NOT RECOVERABLE 6208 182782
641000 LOSSES ON DISPOSAL CARS 80545 2371646
641010 LOSSES ON PATENTS 7309 215200
644200 FINES 1210 35616
647000 INTEREST CHARGED 327885 9654571
<PAGE> 31
BALANCE 29,445 RATE 31,12,95
647001 EXCHANGE LOSS CHARGED 175503 5167684
647002 PROMOTION COSTS CHARGED 10688042 314709384
64 TOTAL 11302596 332804943
653000 CHARGES FOR DISCOUNTS 252 7433
656000 BANKCOSTS 68743 2024135
65 TOTAL 68995 2031568
670000 INCOME TAX PAID OVER 1995 141991 4180921
670001 PROV TAXES 1995 2903039 85479989
671093 REGULATION
INCOME TAXES 1018 29978
67 TOTAL 3046048 89690888
680000 TRANSF. TO UNTAXED RESERVES 2146234 63195850
68 TOTAL 2146234 63195850
691000 TRANSF. TOT LEGAL RESERVE 270710 7971054
692000 TRANSF. TO AVAILABLE RESERVES 2182177 64254190
694000 TRANFS. TO DIVIDENDS 815079 24000000
69 TOTAL 3267965 96225244 132691723
6 84738319 0 1906219799 0
700010 SALES ALCOHOL 46211734 1360704509
700011 SALES BOTTLES 580021 17078720
700012 SALES CAPS 30401 895172
700013 SALES ALCOHOL 44703 1316273
700020 SALES CIGARS 57353 1688747
700030 SALES SUNDRIES 536009 15782776
700040 SALES SWEETS 381911 11245362
700060 SALES BEER 1915833 56411695
700080 SALES JUICES 1126110 33158297
700685 CHARGED ON COSTS 222879 6562685
700700 CHARGED ON TRANSPORT COSTS 83588 2461248
70 TOTAL 51190541 1507305484
741001 SALES SHARES BENITEX 2148234 63195850
744000 RENTING HOUSEKEEPER 1630 48000
745500 CHARGED AUTO COSTS 5550 163408
745501 CHARGED YACHT KREMLIN 50000 1472250
746000 RECUPARATION CAR ACCIDENTS 67160 1977522
746200 RECUP. INSUR. STAF ACCIDENTS 1903 56029
747000 INTEREST CHARGED 327885 9654571
747001 EXCHANGE LOSSES CHARGED 175503 5167684
747002 PROMOTION COSTS CHARGED 10688042 314709384
74 TOTAL 13463906 396444698
751300 INCOME CURRENT ASSETS 74007 2179145
75 TOTAL 74007 2179145
765000 RECUPER. INCOME MODERATION 2712 79849
76 TOTAL 2712 79849
<PAGE> 32
BALANCE 29,445 RATE 31,12,95
771094 ADJUSTMENT INCOME TAXES 94 7153 210623
77 TOTAL 7153 210623
7 64738319 1906219799
TOTAL PROFIT 64738319 64738319 1906219799 1906219799
BALANCE 0 0
CONTROL 92776316 92776316 2731798620 2731798620
0
TOTAL PROFIT 1995
TRANSF. TO UNTAXED RESERVES 2146231 63195850
TRANSF. TOT LEGAL RESERVE 270710 7971054
TRANSF. TO AVAILABLE RESERVES 2182177 64254190
TRANSF. TO DIVIDENDS 015079 24000000
---------- ----------
5414199 159421094
---------- ----------
</TABLE>
<PAGE> 33
BALANCE SHEET AS AT 31 DECEMBER, 1994
1,994 1,993
BEF BEF
------------ ------------
FIXED ASSETS
INTANGIBLE
Concessions and patents 719,360 0
TANGIBLE
Plant, machinery and equipment 1,694,882 811,434
Furniture 519,463 494,628
Motor vehicles 4,739,203 0
Fixed assets under leases 0 1,200,000
------------ ------------
6,953,548 2,506,062
INVESTMENTS 43,866,880 826,710
------------ ------------
51,538,788 3,332,772
CURRENT ASSETS
Stock 1,131,810 0
Debtors 165,949,314 6,215,666
Cash at bank and in hand 30,507,347 28,476,700
------------ ------------
197,588,471 34,692,366
CREDITORS (amounts due within one year) (194,324,557) (25,922,961)
------------ ------------
NET CURRENT ASSETS 3,263,914 8,769,105
------------ ------------
NET ASSETS 54,802,702 12,102,177
============ ============
CAPITAL AND RESERVES
Issued Capital 10,000,000 10,000,000
revaluation reserve 34,002,105 0
Legal reserve 1,000,000 200,000
Reserves available for distribution 9,710,597 1,902,177
------------ ------------
54,802,702 12,102,177
============ ============
<PAGE> 34
KREMYLOVSKAYA GROUP NV
Debtors 1,994 1,993
Trade debtors 146,742,688 4,088,103
Loans 2,855,480
Other debtors 3,516,947 1,252,791
Prepayments 12,834,199 874,772
------------ ------------
165,949,314 6,215,666
Creditors
Bank loans and overdrafts 35,229,744 21,919
Trade 96,622,614 22,672,175
Other loans 48,616,238
Hire purchase 5,121,664 1,463,069
Other creditors 0 1,765,768
Taxation 8,734,299
------------ ------------
194,324,557 25,922,961
<PAGE> 35
KREMLYOVSKAYA GROUP nv
prev.
Trading Unlimited
Annual Account December 31, 1994
Report
<PAGE> 36
1. General remarks
The company Trading Unlimited was founded by deed dated 14 October, 1992,
executed by notary public D. Verbert, with office at Antwerpen.
The parties of this partnership deed were:
1. Trading Unlimited Inc.
Elana Drive, 41 Jackson, New Jersey, United States 97
2. Riccardo Fanchini
Luxembourg (Grand Duchy of Luxembourg)
Rue des Girondins 5-7 1
3. Leonid Baranchuck
Elana Drive, 41 Jackson, New Jersey, United States 1
4. Yakov Tilipman
South Orange Avenue, 185, South Orange, United States 1
being a total of one hundred no-par-ordinary shares, for the subscribed and
paid up capital of ten million Belgian Francs.
By deed of 12 April 1995 executed by Notary public D. Verbert at Antwerpen, the
extraordinary general assembly decided to change the company's name into:
- - KREMLYOVSKAYA GROUP previously TRADING UNLIMITED
or
- - KREMLYOVSKAYA GROUP - TRADING UNLIMITED
or
- - KREMLYOVSKAYA GROUP
Managing Director: R. Fanchini, fore mentioned
Kasteeldreef, 57 at 270 Schilde
Members of the Board
- - from foundation till the general assembly of 19 October, 1993:
L. Baranchuck
Y. Tilipman, both fore-mentioned
- - as from 19 October, 1993:
T. Tonley, Konijnenberg, 51, 2180 Ekeren-Antwerpen
K. Braksator, Ehrenbreiterstreet 61, 8 Munchen (BRD)
Registered office
as from foundation till December 1992:
De Keyserlei 5, Box 17, 2010 Antwerpen
as from 15 December, 1992
Berkenlaan 9a, 2020 Antwerpen
<PAGE> 37
Objects of the company
The company has as main object:
wholesale and retail trade, hire and rental, import and export of and in
various products and commodities (...), publicity material (...).
As a change of the objects of the company is planned, I will make up a separate
report concerning the assets and liabilities as per 30.1.1995. At the same
time there will be an increase of capital of one hundred forty-five million
Belgian Francs (145,000,000 BEF) in cash, to bring the total share capital to
one hundred fifty-five million Belgian Francs (155,000,000 BEF).
2. Comments on the assets
II. Intangible fixed assets (716,360 BEF)
The lists of requested licenses, as well as the applicable depreciations were
checked in detail.
It concerns mainly licenses in connection with the brandname (bureau Gevers).
Total cost price 1994 amounted to 899,200 BEF to be written off over a period
of five years, amounting for 1994: 20% of 899,200 is 179,840 F, leaving a
residual value of 719,360 F.
III. Tangible fixed assets (6,953,548 BEF)
b. Installation, machines and equipment (1,694,882 BEF)
These installations represent several small purchases spread over 1993 and
1994, as well as the purchase of a work of art in 1994, proved by necessary
documents. For this last item no depreciations were applied.
- - purchases 1993 1,028,542 depreciations 93 217,108
depreciations 93 217,108
- - purchases 1994 594,445 depreciations 94 118,889
625,000 depreciations nihil 0
- ---------------------------------------------------------
total: 2,247,987 depreciations 553,105
residual value 1,694,882
c. Furniture (519,463 BEF)
- - purchases 1993: 618,000 depreciations 93 123,657
depreciations 94 123,657
- - purchases 1994: 185,615 depreciations 94 37,123
- ---------------------------------------------------------
total: 803,900 depreciations 284,437
residual value 519,463
d. leasing-cars (4,739,202 BEF)
- - purchases 1994: 5,924,003 depreciations 94 1,184,801
residual value: 4,739,202
Concerns financing contracts for a Ferrari and a Landrover
<PAGE> 38
IV. Financial fixed assets (43,865,880 F)
The financial fixed assets comprise:
- - shares in related companies 43,041,970 F
- - other financial fixed assets 823,910 F
------------
43,865,880 F
Related companies:
- - participation related company 7,304,625 F
- - plus value 34,092,105 F
- - participation Kremlyovskaya Getranke 1,645,240 F
------------
43,041,970 F
The two first items relate to the private company under Russian law, founded in
27 April, 1994.
The articles of partnership concerning the foundation and activity of this
private trading company:
"BENITEX"
state that the founders,
- - Trading Unlimited nv, corporate body under Belgian law, Antwerp
Tower Building, de Keyserlei 5, 2018 Antwerpen
- - Kobatex AG, corporate body under Swiss law, Goethestrasse 61,
CH-9008 Saint Gallen
decided on 27 April, 1994 to create a private company, with 100 pct foreign
capital, on the territory of the Russian federation in the city of Moscou. The
contribution of Trading Unlimited represents a value of 250,000 (two hundred
and fifty thousand) US-dollars, being 50 pct of the statutory capital. This
contribution consists of a cash amount of 7,500 US-dollars, equipment valued at
202,500 US-dollars and other assets for value of 40,000 American Dollars.
The provisional balance dated 31 December 1994 of Trading Unlimited (without
taking into account the plus value on the financial fixed assets) gives in
connection with participation in BENITEX following account:
- - participation associated companies 7,304,625 BEF
being a total of:
payment (AMRO bank USD) 514,800 BEF
goods supplied 6,789,825 BEF
For determination of the plus value I refer to the report dated 25 March, 1995
by Mr. R. Croux, accountant, Kardinaai Sterckxstraat 40, 2530 Boechout.
I quote the following:
"The revaluation was restricted to five times the total of the subscription
value, reduced with the not paid up amount, and gives a total of 34,092,105
BEF. On the basis of these details I am of the opinion that the shares of A/O
Benitex in portfolio at Trading Unlimited on 31.12.1994 can be revaluated as
suggested by the Board of Directors."
<PAGE> 39
The same report, however, also says, I quote:
"In persuance of a business meeting in Moscou in October 1994 between different
parties (...) the following pre-agreement has been concluded:
- - Trading Unlimited will become 100% shareholder of Beniteks a/o, and
will take over the 50 pct of the other shareholder for the amount of
500,000 USD.
- - Beniteks a/o will obtain 50 pct in the NO CONSTO, with same address.
This company has a long-term concession with the city of Moscou for
warehouses with a space of 50,000 m2 and a total land surface of about
110,000 m2. The exact juridical construction regarding this concession
right is not very clear to me; however, it should be real according to
parties concerned."
The transfer of shares of BENITEKS by KOBATEX AG to TRADING UNLIMITED was
signed on 6 April 1995 for Kobatex and on 7 April 1995 for Trading Unlimited,
however with retroactivity up to 1 January 1995.
I presume that the participations of Trading Unlimited in the Russian company
BENITEKS, and via BENITEKS in the other company under Russian law CONSTO, are
justified in the context of the commercial activities of the company. The fact
that CONSTO has a longterm concession with the city of Moscou regarding
warehouses with a considerable capacity can be of fundamental importance for
the good functioning and expansion of the business. Therefore this can be
approached and appreciated on the basis of industrial economic value. Doubts
about the exact legal construction in connection with property and management
rights, as well as the absence of a reliable structure, urge me however to have
some reserve regarding the possibility to realise this plus value.
- - participation Kremlyovskaya Getranke 2,056,550 BEF
This amount corresponds with a payment of 100,000 DM as participation in the
share capital of Kremlyovskaya Getrankehandels Gmbh.
From the deed before notaries public M. Oleslar and W. Reiss residing at
Munchen, it appears that a company KREMLYOVSKAYA Getrankehandeis GmbH
(Gesselschaft mit Beschrankter Hattung) was founded.
The share capital of this company is 100,000 DM (one hundred Deutsche Mark),
subscribed as follows:
1. Mr. Hans Danzor, Fertigstrasse 7, 81477 Munchen
for an amount of 20,000 DM
2. the firm Trading Unlimited, with head office at Wilrijk
for an amount of 80,000 DM
The amount of 100,000 DM represents a value of 2,056.550 BEF.
The part of Trading Unlimited consequently amounts to:
0,8 x 2,056.550 BEF = 1,645.240 BEF,
and the part of Mr. H. Danzer to:
0,2 x 2,056.550 BEF = 411.310 BEF.
This transaction, originally wrongly booked, was adjusted with final entries
closing the accounts for the fiscal year.
With bookkeeping voucher nr. 115 dated 30.12, 1994 transaction 550, an amount
of 20.000 DM (411,300 BFF) was transferred to account 416100
<PAGE> 40
R/C Hans Danzel and registered as a loan of TRADING to Danzer.
Subsequently the participation of Trading Unlimited was reduced to 80.000 DM,
in conformity with the partnership deed.
The remaining financial fixed assets (823.910 F) concern several
deposits/guarantees paid in cash.
VI Stocks (1.131.810 F)
Concerns containers of bottled vodka without "TAX LABELS", in deposit with
Edmond Depaire. This was confirmed in fax dated 15.4.95 from E. Depaire -
Brussels to Trading Unlimited.
VII Accounts Receivable (max. 1 year) - (153.194.946 BEF):
- - commercial 146,444,677 BEF
- - other 6,750,287 BEF
---------------
Total 153,194,964 BEF
Full details of the commercial receivable/debtor accounts as per 31 December
1994 was submitted. From some of the debtors written confirmation of this
outstanding balance was obtained.
For some foreign debtors this method was not applied. Instead, the history of
these accounts was checked in detail.
The most important foreign debtor is Natsionalny Fond Sporta.
For 1994 sales figures of this customer with Trading Unlimited amount to 1.218
million francs. This is approximately 65% of the total turnover which amounts
to 1.872 million. The outstanding balance of Natsionalny Fond Sporta per 31
December 1994 amounted to 128 million. This is 91% of the total of the
receivables for commercial transactions.
The global average term of outstanding commercial credit to buyers is 27 days.
For Natsionalny Fond Sporta this average is 38 days.
Other receivables:
- - TVA to be reclaimed
- - creditnotes to be received
- - several outstanding loans.
These loans are outstandings in current account, for which no written
agreements exist.
- - loan Kremlyovskaya Getranke 2,056.420 BEF
- - loan Kalwitzky 386.970 BEF
- - loan Hans Danser 412.090 BEF
- - R/C Fanchini R. 408.457 BEF
- - R/C Mrs. Fanchini Y. 129.742 BEF
The loan to Kremlyovskaya Getranke corresponds to an amount of DEM 100.000.
The loan to Hans Danser amounts to 20.000 DEM. This represents his
subscription to the share capital of Kremlyovskaya Getranke at foundation. I
refer to the discussion under the reference Financial Fixed Assets -
Participation into companies.
<PAGE> 41
IV Liquidity (30.507.347 BEF).
These assets comprise:
- - Bank Brussels Lambert (BEF) 49.231 BEF
- - Bank Brussels Lambert (USD) 477 BEF
- - Bank Brussels Lambert (DEM) 36.674 BEF
- - AMRO Bank (BEF) 3.857 BEF
- - AMRO Bank (USD) 319.631 BEF
- - AMRO Bank (DEM) 478 BEF
- - AMRO Bank (BEF) 116.805 BEF
- - AMRO Bank (USD) 30.954 BEF
- - RABO Bank (BEF) 29,916.766 BEF
- - cash register 32.474 BEF
--------------
30,507.347 BEF
These balances on bank accounts were confirmed by the daily statements of the
financial institutions. The balance Rabo Bank amounting to: 29,916.766 BEF,
was confirmed in the standard bank statement passed on to me by RABOBANK
BELGIUM at my request.
X. Transitory accounts (12.834.199 BEF)
Account nr, 490000 "costs to be transferred" shows an amount of 12,834.199 F.
The most important entry under this heading refers to publicity costs amounting
to 10.360.477 BEF, booked in 1994, but transferred later to the profit and lost
account 1995. I refer in this respect to bookkeeping voucher 155 dated 30
December 1994 (nr. 545).
3. Analysis of liabilities
I. Share Capital 10,000.000
III. Revaluations 34,092.105
IV. Reserves
legal 1,000.000
available 9,710,597
---------
10,710.597
This brings the own assets/resources to 54,802.702 BEF.
Composition of the original share capital was discussed in Chapter I of this
report.
The reevaluation amounting to 34,092.105 BEF represents not realized plus
values on financial fixed assets, and were discussed in detail in Chapter 2 of
this report.
VIII. Long term debts (more than 1 year) - (3,344.992 BEF)
These are leasing debts BBL, relating to the lease of Ferrari and Land Rover.
See also under Chapter 2: Material Fixed Assets.
<PAGE> 42
IV. Short term debts (less than 1 year) - (190.079.565 BEF)
These debts can be detailed as follows:
- - long term debts coming to term in less than one year 50,392.908F
- - financial debts - credit institutions 35,229.744F
- - suppliers 96,622.614F
- - taxes, social security 8,734.299F
-----------
190,979.565F
The long term debts coming to term in less than one year result from:
- - financing Ferrari 1,250.004 BEF
- - financing Land Rover 526.668 BEF
- - financing First Flanders 1,239.811 BEF
- - financing Cora 31,837.500 BEF
- - financing MGM International 15,538.925 BEF
--------------
50,392.908 BEF
The financing of Ferrari and Landrover were discussed in Chapter 2.
The financing by First Flanders Finance nv, Boomsesteenweg 510,2020 Antwerpen,
concerns a loan of twice 50.000 USD, being 100,000 USD, to Trading Unlimited nv
(loan contract PLH/001/94 dated 15 February, 1994); where already payment by
installments took place.
The financing by Coro Enterprises Ltd (UK) results froma contract made up at
Antwerpen on 2 August 1994 between Trading Unlimited and Coro Enterprises Ltd.
Full identification of Coro Enterprises Ltd. not available.
The financing of MGM International was not properly identified, so that the
rights and obligations of Trading Unlimited could not be described completely.
Financial debts with credit institutions (35.229.744 BEF) are:
- - AMRO BANK DEM 12.667 BEF
- - RABO BANK USD 1,979.806 BEF
- - RABO BANK DEM 33,237.271 BEF
--------------
35,229.744 BEF
The opening of a credit with RABO BANK was effected by deed dated 24 June 1994
executed by notary public Verbert at Antwerpen, whereby appeared:
- - on the one hand the "Cooperative Centrale Raiffeisen-Roerenleen-bank b.a. in
short RABOBANK NEDERLAND.
- - on the other hand - Trading Unlimited
- Mr. Riccardo Fanchini and his wife
- Mrs. Jolanta Kozina.
The bank opens a credit on behalf of Trading Unlimited in the amount of
71,233.392 BEF and to Mr. & Mrs. Fanchini a credit of 21,276.608 BEF. Both
borrowers are jointly and severally responsible for each of both credit
tranches.
As security for this credit, a mortgage has been granted on the villa with
grounds and accessories situated Berkenlaan 9a (corner Frans De Cortlaan) at
Wilrijk-Antwerpen, owned by Mrs. Jolanta Fanchini; and a priority pledge has
been given on the business and goodwill of Trading Unlimited.
<PAGE> 43
This creditline was, after balance date, changed as follows:
Mixed creditline of 80,000.000 BEF (eighty million), whereof 50,000.000 BEF can
be withdrawn after the receipt of a bank guarantee.
Securities provided: a personal guarantee of Mr.G. Liberman, a personal
guarantee of Mr. R. Fanchini, a registration of mortgage on the real estate
asset of Castle Drive nv and bank guarantees (situation as known to us on 30
April 1995).
The commercial debts to suppliers amount to 96,260,614 BEF:
- -creditors/suppliers 94,260,982 BEF
- -customers' credit 17,717 BEF
- -suppliers-invoices to be received 2,944,343 BEF
- -creditnotes to be received 60,428 BEF
--------------
96,622,614 BEF
The detailed list of outstandings with suppliers was examined and as a test
several suppliers were addressed to obtain balance statements. Number of days
of supplier's credit granted; an outstanding balance as per 31 December 1994 of
94,260,982 BEF against a yearly cumulative of 1,601,288,692 BEF, results in an
average of 21 days of supplier's credit.
Debts with relation to taxes, wages and social charges (8,734,299 BEF) are
restricted mainly to owed taxes (7,483,471 BEF) and provisions for vacation
allowances (1,250,828 BEF).
4. Profit and loss account
The total company income/turnover amounted in 1994 to: 1,523,483,613 BEF
([+-] 1.5 milliard BEF), against 1.1 milliard in 1993, being an increase of
about 34 pct. This turnover was almost realized by normal sales.
The impact of other company income (401,948 BEF), resulting out of charged car
expenses, discounts and reversals, was indeed neglectable.
In the same way the company outlays (1,491,556,638 BEF) were dominated by the
purchase of commercial goods (about 1.4 milliard BEF).
The control of these purchases and sales was restricted to some random
sampling, whereby the flow of goods was traced by consulting purchase invoices,
transport documents and sales invoices.
Costs under the heading "services and ad hoc goods" were also checked at
random. Furthermore contracts for rent and lease, for buildings as well as for
equipment, were checked.
The depreciation lists of the material assets were requested and presented.
The financial results were checked ad random. The applied exchange rates as
per 31 December 1994 are:
USD 31,83/8500 BEF
DEM 20,553500 BEF
ITL 0.019608 BEF
NLC 18,349000 BEF
FRF 5,955500 BEF
<PAGE> 44
Dr W. J. Huybrechts
Actuary
Auditor (I.B.R. 0683)
Report to the General Assembly
Undersigned, W. Huybrechts, auditor, appointed auditor of KREMLYOVSKAYA GROUP
n.v. (Trade register Antwerpen 292.371 TVA 448,376,164), herewith reports as
legally foreseen on control tasks effected in above-mentioned company over the
fiscal year 1994.
Special attention has been given to the company balance dated 31 December 1994,
to the profit & loss account and to the explanatory statements to the balance
sheets given.
This permanent control assignment was effected according to the rules of the
I.B.R. (Institute of Belgian Auditors), whereby all requested information and
clarifications were received.
My investigation confirmed that the accounts were kept as prescribed by Belgian
law, taking into account the applicable legal and company rules and
regulations.
This implies that the presented annual account with a balance total of BEF
249,207,108 and a profit of the financial year of 8,608,420 BEF, reflects the
situation of the company on 31 December 1994.
As the financial fixed assets (43,865,880 BEF) mainly consists of
participations in a related companies in the Russian federation, and this
participation underwent a revaluation, which revaluation was based on the
report of Mr. Croux, accountant, Kardinaal Sterckxstraat, 40, 2530 Boechout,
considering the doubts expressed about the exact legal construction in
connection with the proprietary rights of certain financial assets situated in
the Russian federation (Moscou);
considering the lack of a clear picture of reliable and/or legal structure in
this respect, I have to formulate reserves concerning the liquidity and
realization value of these financial assets.
Edegem, 24 May 1995 W.J. Huybrechts
Auditor
<PAGE> 45
Schedule 2.8
------------
Undisclosed liabilities
a) Contract to acquire a new vodka production line from Bonte S.A.R.L., L-9678
Nothum, Luxembourg. Cost estimated at approximately US$ 1.4M including
transportation and installation. Deposit of US$ 86,690 paid.
b) Contract to acquire second hand bottling line for installation at Vladimir
(but now intended for Raminskaya).
Estimated cost approx. BEF 4 M (US$ 130,000)
c) Contract to acquire a labelling machine at a cost of BEF 5 M (US$ 165,000).
d) Contracts to purchase bottles:
i) From Gerresheimer Glashutte, Dusseldorf, Germany. If minimum purchase
levels are not met, a penalty of maximum DM 227,000 (US$ 160,000)
being the residual costs of molds, will be levied at KGI.
ii) From Euroverreries, Sentis, France. Liability of maximum BEF 3.3M
(US$ 110,000) if minimum order levels are not met.
iii) From Vetropack Austria, Pochlarn, Austria. Liability estimated at
BEF 3 M (US$ 100,000) if minimum order levels are not met.
<PAGE> 46
Schedule 2.10
-------------
Events subsequent to 31st December 1995
i) Dividend
A dividend was declared by Kremlyovakaya Group N.V. on 12th February to
shareholders of Kremlyovskaya Group N.V. presenting the appropriate coupon
for payment from 4th of March 1996. The dividend payable is equivalent to
15% of the pre-tax trading profit for the 12 months ended 31st December
1995 and amounts to the equivalent of BEF 24 M (US$ 815,078).
ii) Capital expenditure
Committed
Second hand vodka manufacturing production line. Cost including
transportation and installation estimated at BEF 3 M (approx. US$ 130,000).
New bottle labelling machine. See Schedule 2.8 - Cost estimated at BEF 4 M
(US$ 165,000).
New vodka manufacturing production line. See Schedule 2.8. Cost estimated
at US$ 1.1m.
