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How to Raise Equity
An Easy Guide to
Private Placements
Why You Need Capital
• Opening a brewery
• Expanding a brewery
Funding options
• Debt
– Benefits:
• Maintains your ownership
• Creates leverage effect
• Can be inexpensive capital if you grow rapidly
– Drawbacks:
• Raises your overhead, increases risk
• Negative covenants
Funding options (continued)
• Equity
– Angel investors
• Usually a bad deal for you
– Public offering
• Expensive, tons of filing requirements. Not an option.
– Private offering
• Family & Friends – easy access, but limited number
• Customers & Community
What Saint Arnold did
• At capacity in 2007
• Got $5.1 million in debt financing
– $2.3 million 3.17% SBA debenture
– $2.8 million 6.28% bank note
• Raised $1.5 million in equity
– Goal was $500,000
– Raised the $1.5 million in about 2 weeks
– Raised an addition $1 million in subsequent offerings
• Built $8 million newery with 120 bbl brewhouse
Why Private Offering is Doable
Beer & breweries have a unique appeal
Craft beer segment is growing
You have a loyal following (existing breweries)
Strong equity investment increases your
appeal to banks
• Boston Beer Company stock price
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– $20 two years ago, $90 today [check]
What You Need
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Valuation
Financial Model
Selling Memo
List of Potential Investors
Valuation Definitions
• Market Value (MV)
– Value of the total stock
• Total Enterprise Value (TEV)
– Value of entire company
– Stock Value + Debt – Excess Cash
Public Market Comparables Method
One good comparable: Boston Beer Company
BBC Valuation Multiples:
• TEV / Revenues:
2.6x
• TEV / EBIT:
16x
• TEV / EBDIT:
13x
• MV / Net Income: 27x (Price / Earnings)
How to Value Brewery X
Brewery X
Financial
Result
BBC
Valuation
Multiple
Total
Enterprise
Value
Minus Debt
Market
Value
$2,500,000
2.6x
$6,500,000
$1,200,000
$5,300,000
EBIT
$400,000
16x
$6,400,000
$1,200,000
$5,200,000
Net
Income
$150,000
27x
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Revenues
$4,050,000
How to Value Brewery X (cont’d)
Revenue Multiple Value
EBIT Multiple Value
Net Income Multiple Value
Average Valuation
Less Liquidity Discount (25%)
Value of Brewery X
$5,300,000
$5,200,000
$4,050,000
$4,850,000
$1,200,000
$3,650,000
Financial Model
• Historical Results
• Projections
– Show assumptions
– Income Statement
– Balance Sheet
– Cash Flow Statement
• See model handout or download at
www.saintarnold.com/cbc/model
Three Statements Tie Together
Balance
Sheet
Change in Cash
Equals Change in
Cash
Net Income
Increases Equity
Income
Statement
Net Income is
the Top Line
Cash Flow
Statement
Make Sure Balance Sheet Balances!
Give Realistic but Aggressive
Projections
• Don’t negotiate against yourself.
• Make sure you can back up and explain your
assumptions.
• Small tweaks in assumptions can have large
changes in projected profits.
Selling Memo
• Legal document
• Make people excited to invest
• Gives valuation
Selling Memo Chapters
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Summary of Offering
Executive Summary
Risk Factors
Market Overview
Company Description
Financials
Summary of Offering
Issuer
Brewery X
Shares Offered by the Company:
Up to 50,000 Shares of Common Stock, par value
$0.01
Offering Price:
$20.00 per Share
Use of Proceeds:
To acquire and improve a new building for the
brewery, to acquire new brewing equipment, to
move existing brewing equipment and for general
corporate purposes.
Desired Subscription Amount:
1,250 shares, or $25,000
Minimum Subscription Amount:
500 shares, or $10,000
Expected Closing Date:
March 31, 2011
Executive Summary
• Some people will read only this
• Make sure to answer the questions
– Why invest in this industry?
– Why invest in Brewery X?
– Why invest now?
– Why invest in the people running Brewery X?
• Show summary financials & valuation
Risk Factors
• Don’t hold back! Put everything in.
• Look at Boston Beer Company 10K.
• Risk factors protect you and rarely discourage
investment.
Market Overview
• Brewers Association is an excellent data
source.
• Show growth of market.
• Show growth of comparable breweries.
• Show your position in the market (if it’s
strong).
• Show where your market position can be.
Company Description
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History of your brewery
Beers you make
Staff
Awards
Exciting things you do
What makes you exceptional
Financials
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Historical & Projected
Project budget
Explain assumptions
Model results
Valuation
Ownership summary – current & projected
Know & Follow Securities Laws
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In no way am I offering legal advice.
Federal securities laws
State securities laws
Important terms
Filings
Have an attorney review all offering materials
and procedures
Federal Securities Laws
• $1 million limitation if you want to advertise
the offering (Rule 504)
– No limit on number of investors
– No limit on non-accredited investors
• $5 million limitation without advertising (Rule
505)
– No limit on number of investors
– Limited to 35 non-accredited investors
State Securities Laws
• State laws differ and are in addition to federal
laws. Sometimes called “Blue Sky” rules.
• Texas laws for a private offering
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Up to $5 million in 12 month period
Limited to 35 non-accredited investors
Unlimited number of accredited investors
Investors can be in state or out of state
– If offering to investors in other states, you have to comply with
that state’s Blue Sky rules too
• No advertising
Filings
• Federal Filings
– Form D
– Form U-2 Uniform Consent to Service of Process
• State Filings
– In Texas, a notice of securities exemption must be
filed with state securities commissioner
– Each state where securities are offered or sold
may require additional filings
Terms
• Accredited investor
– $1 million in net worth, or
– $200,000 in income for individual in each of
previous 2 years and expect the same in current
year, or
– $300,000 in income for a couple (same time
requirements)
• Investors must be “well informed & with a
relationship to the issuer”
I am not a lawyer
• I am not offering legal advice.
Finding Potential Investors
In states that don’t allow advertising:
• DO NOT:
– Post information about offering on website
– Send out information on mass email
Finding Potential Investors (cont’d)
Things that are probably OK (I’m not a lawyer):
• Anybody who has ever asked about investing
in the brewery.
• Anybody that you know well enough to
approach individually.
• Facebook is a gray area. Ask a lawyer.
Offering Paperwork
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Confidentiality Agreement
Subcription Agreement
Investor Questionnaire
Shareholders Agreement
Examples of these (except Shareholders
Agreement) can be seen at
www.saintarnold.com/cbc/offeringdocs
Confidentiality Agreement
This Confidentiality Agreement ("Agreement") is between Brewery X ("BX") and
_______________________ (“Potential Investor”) regarding the confidentiality of
the information, including the Private Offering document, furnished by BX to
Potential Investor relating to the offering of stock in BX. Potential Investor
agrees not to reproduce, distribute or divulge any of the information furnished
by BX to Potential Investor. This information may only be viewed by Potential
Investor and any advisors necessary to assist Potential Investor in the review of
this material. Potential Investor assumes full responsibility for the compliance of
any such advisors to the terms of this Agreement. Potential Investor agrees to
return all information given to it under this Agreement to BX immediately upon
request.
Date:
By:
Potential Investor
Printed Name:
Mailing Address:
Date:
By:
President
Brewery X
SIGNATURE PAGE
BREWERY X
Execution of this Signature Page constitutes execution of (a) the Subscription Agreement, (b) the
Prospective Offeree Questionnaire (the "Questionnaire"), (c) the Shareholder Agreement of Brewery X (the
"Company") and the Substitute W-9 below. The undersigned hereby certifies that he has read and understands the
Subscription Agreement, the undersigned's representations and warranties therein are accurate on the date hereof
and the information contained in the Questionnaire is complete and accurate on the date hereof. The undersigned
will notify the Company immediately of any inaccuracy in his representations or warranties in the Subscription
Agreement and any material change in any of the information provided by him in the Questionnaire which occurs
prior to the closing of the Offering and will promptly confirm any such change in writing.
$ ___________ Subscription Amount (Capital Commitment)
Substituted W-9
Under penalties of perjury, I certify that:
1.
The number shown on this form is my correct social security number/taxpayer identification number (or I
am waiting for a number to be issued to me);
2.
I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service (“IRS”) that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding; and
3.
I am a U.S. person (includes a U.S. resident alien) and agree to notify the Company within 60 days of the
date that I cease to be a U.S. person.
_____________________
Purchaser #1 Name (Please Print)
Purchaser #2 Name (Please Print)
Residence Address (City, State and Zip Code):
____________________________________
____________________________________
__________________________
Social Security/Tax I.D. Number
__________________________
Telephone Number
__________________________
E-Mail Address
__________________________
Fax Number
Residence Address (City, State and Zip Code):
_________________________________________
_________________________________________
__________________________
Social Security/Tax I.D. Number
__________________________
Telephone Number
__________________________
E-Mail Address
__________________________
Fax Number
Purchaser #1:
Purchaser #2:
________________________________/____
/ DATE
___________________________/____
SIGNATURE
/ DATE
S-1
(1)
If a partnership, limited liability company, corporation or other qualified association, an authorized
representative on behalf of such entity must sign on the signature line above. Please print the name of organization
and the state of formation above the signature and print the name and title of such person below the signature line.
(2)
Second signature required for any joint investment.
TYPE OF OWNERSHIP (Check One):
( )
INDIVIDUAL OWNERSHIP (one signature required on prior page)
( )
TENANTS IN COMMON (both or all parties must sign prior page)
COMMUNITY PROPERTY
( )
One signature (required if the shares of Common Stock are to be held in the name of one spouse and are to
be purchased with funds under the sole management and control of that spouse)
( )
Two Signatures (required if the Shares of Common Stock are to be issued in the joint name of husband and
wife or are to be purchased with funds held in the joint name of husband and wife)
( )
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP (both or all parties must sign, which
signatures shall acknowledge and represent their agreement to acquire the shares of Common Stock as joint
tenants with right of survivorship)
( )
CORPORATION (please attach copies of the corporation's certificate or articles of incorporation, bylaws
and authorizing resolutions)
( )
LIMITED LIABILITY COMPANY (attach certificate or articles of organization, regulations or
operating agreement and authorizing resolutions)
( )
PARTNERSHIP (attach copy of Partnership Agreement with authorizing signature)
( )
TRUST, AGENT OR OTHER PERSON ACTING IN A REPRESENTATIVE CAPACITY (list the
name of the person or entity who will be the record holder and provide (i) copy of Trust Agreement, power
of attorney or other instrument granting the power and authority to subscribe, or (ii) an opinion of counsel
as to such power and authority)
_______
INITIAL
AGREED AND ACCEPTED:
BREWERY X
By:
President, Brewery X
Date:______________, 2009.
674818.01
S-2
BREWERY X
SUBSCRIPTION DOCUMENTS
(COMMON STOCK)
THESE ARE EXAMPLE DOCUMENTS.
PLEASE CONSULT AN ATTORNEY
BEFORE ISSUING ANY MATERIALS TO
ANY POTENTIAL INVESTORS.
DATE
BREWERY X
$500,000 PRIVATE PLACEMENT OFFERING
SUBSCRIPTION INSTRUCTIONS
One copy of the Subscription Agreement and Prospective Offeree Questionnaire (only
required for those who have not previously submitted one), each of which is included in this separate
subscription document booklet, must be properly completed and signed. If an investment in the
Common Stock is to be made out of funds which are in the joint name of husband and wife, or if the
shares of Common Stock are to be issued in the joint name of husband and wife, both spouses must
sign all documents.
Subscription Agreement: Print or type the Subscriber's name(s).
Subscriber(s) sign(s) as "Purchaser." Signatures of both husband and wife are required if the
shares of Common Stock are to be issued in the joint name of husband and wife, or are to be
purchased from funds held in the joint name of husband and wife. All trustees or partners must sign
according to the signature requirements of the trust or partnership.
Prospective Offeree Questionnaire: Each subscriber (other than the spouse of a person who has
completed a questionnaire) must complete, date and sign a separate questionnaire.
Corporations, partnerships, trusts and other business entities must also furnish recent
financial statements, and must attach complete and unabridged appropriate authorizing instruments
(corporate resolutions, certificate of incorporation and by-laws, employee benefit plan, partnership
agreement or trust instrument).
Deadline: These documents (i.e., the Subscription Agreement and the Prospective Offeree
Questionnaire) must be delivered to Brewery X at [Brewery Address] on or before 5:00 p.m. CDT,
April 21, 2009. Failure to deliver the documents by the deadline will be deemed an election not to
subscribe. Following receipt of the documents, Brewery X will provide notice to the Prospective
Offeree that the subscription has been accepted by the Company.
Payment: On or before 11:00 a.m. CDT on April 23, 2009, the Prospective Offeree shall remit by
check or wire transfer immediately available funds in the amount of the Prospective Offeree's Capital
Commitment to:
Wire transfer to:
ABA number (routing):
For credit:
Account number:
Bank X
Brewery X
IF YOU HAVE ANY QUESTIONS ABOUT THESE SUBSCRIPTION DOCUMENTS,
PLEASE CONTACT [BREWERY X CONTACT] (TELEPHONE: (
).
SUBSCRIPTION AGREEMENT
Brewery X
Ladies and Gentlemen:
The undersigned ("Subscriber") has received and read the $X,XXX,XXX Brewery X Private Offering
Memorandum or else is a current shareholder and has reviewed materials sent to existing shareholders ("Offering
Materials"). This information contains a description of the offer (the "Offering") by Brewery X, a [STATE] corporation
(the "Company"), to sell shares of Common Stock (the "Common Stock") of the Company. Capitalized terms used and
not otherwise defined herein have the same meaning as in the Offering Materials.
1.
Introduction. The undersigned has been offered the Common Stock in a "private offering" under the
Securities Act of 1933, as amended ("Securities Act"), and particularly Section 4(2) thereunder, as implemented by Rule
506 of the Securities and Exchange Commission (such rules are collectively referred to as "Regulation D"). The offer of
the Common Stock to the undersigned and any other person, if any, who is executing a counterpart of this Subscription
Agreement has been made solely by means of the Offering Materials and any exhibits attached thereto.
It is expressly agreed hereby that each subscriber to the Offering must enter into this Subscription Agreement as
a condition to the issuance of the Common Stock. This Subscription Agreement is binding with respect to the Common
Stock described in the Offering Materials.
2.
Subscription. Subject to the terms and conditions of this Subscription Agreement and the provisions
of the Offering Materials, the undersigned hereby subscribes for the shares of Common Stock specified on the signature
page hereof (the "Subscription").
Simultaneously with the execution of this Subscription Agreement, the undersigned is submitting a completed
Prospective Offeree Questionnaire (the Subscription Agreement and the Prospective Offeree Questionnaire, collectively,
the "Subscription Documents") or has done so previously. Following receipt of notice to the Prospective Offeree that the
subscription has been accepted by the Company, the Prospective Offeree will be notified of its subscription amount and,
on or before 11:00 a.m. CDT on April 23, 2009, the Prospective Offeree shall remit by wire transfer immediately
available funds in the amount of the Prospective Offeree's Capital Commitment. If this Subscription is not accepted or
the Offering is terminated by the Company for reasons set forth in the Offering Materials, all documents will be returned
to the Subscriber, along with any Capital Contribution paid by such Subscriber, without interest or deduction.
3.
Acceptance of Subscription. The undersigned acknowledges and agrees that the Company has the
right to accept or reject this Subscription, and that this Subscription shall be deemed to be accepted on behalf of the
Company only when a copy of the Signature Page to these Subscription Documents is executed by the Company and
returned to the Subscriber and the payment to be made in accordance with such Subscription has been made to the
Company. The undersigned agrees that Subscriptions need not be accepted in the order they are received. Subscriptions
can be rejected by the Company for any reason.
4.
Representations, Warranties and Covenants of the Undersigned. The undersigned hereby
represents and warrants to and covenants with the Company, its agents and employees, as follows:
(a)
The undersigned has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of purchasing the shares of Common Stock and (i) is an "Accredited Investor,"
as defined in Rule 501 in Regulation D or (ii) is well-informed with respect to the Company as reflected by subparagraph
(e) and (f) below.
(b)
The undersigned understands that the information in the Subscription Documents is being
furnished to determine whether the Company may issue the Common Stock to the undersigned pursuant to Section 4(2) of
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the Securities Act and Regulation D promulgated thereunder, and the requirements of the securities laws of certain states.
The undersigned understands that (i) the information contained herein will be relied upon for purposes of such determination and (ii) the Common Stock will not be registered under the Securities Act in reliance upon the exemption from
registration afforded by Section 4(2) of the Securities Act and Regulation D. The undersigned represents and warrants
that:
(i)
The information contained in the Subscription Documents is complete and accurate
as of the date hereof and may be relied upon by the Company.
(ii)
The undersigned will notify the Company immediately of any material change in any
information contained in the Subscription Documents occurring prior to the closing of the issuance of the Common
Stock.
(c)
The undersigned has evaluated the merits and risks of his proposed acquisition of Common
Stock of the Company. The undersigned has adequate means of providing for his current needs and possible personal
contingencies, and he has no need, and anticipates no need in the foreseeable future, to sell or transfer the Common Stock
for which he hereby subscribes. In deciding to invest in the Common Stock, the undersigned has carefully evaluated his
financial resources and investment position and the risks associated with an investment in the Common Stock and is able
to bear the economic risks of this investment and, consequently, without limiting the generality of the foregoing, he is
able to hold the Common Stock for an indefinite period of time and has a sufficient net worth to sustain a loss of his
entire investment in the Common Stock in the event such loss should occur.
(d)
The undersigned has made other investments of a similar nature and, by reason of his
knowledge and experience in financial and business matters or the knowledge and experience of those persons he has
retained to advise him with respect to his investment in the Common Stock, he has the capacity to protect his own interest
in investments of this nature and is capable of evaluating the merits and risks of such an investment.
(e)
The undersigned has received and read and is familiar with the Offering Materials, including
any exhibits attached thereto and any amendments or supplements thereto, and he confirms that all documents, records,
and books pertaining to this proposed investment in the Common Stock have been made available to him.
(f)
The Company has made available to the undersigned such financial and other information
concerning the Company and the Common Stock as the undersigned has deemed necessary in connection with its
decision to purchase the Common Stock and the opportunity to ask questions of and obtain additional information from
the Company, or any person or persons acting on behalf of the Company, concerning the terms and conditions of this
investment and the accuracy of the information contained in the Offering Materials, and all such questions have been
answered to the full satisfaction of the undersigned and are sufficient for the undersigned to evaluate the merits and risks
of the investment.
(g)
The Common Stock for which the undersigned hereby subscribes will be acquired for his own
account for investment and not with the view toward resale or redistribution in a manner which would require registration
under the Securities Act.
(h)
The undersigned represents that it has been called to his attention, both in the Offering
Materials and by those individuals with whom he has dealt in connection with his investment in the Common Stock, that
his investment in the Common Stock involves a high degree of risk which may result in the loss of the total amount of his
investment.
(i)
The undersigned has received no representations or warranties (other than any contained in the
Offering Materials) from the Company, or its affiliates, or employees or agents, and, in making his investment decisions,
he is relying solely on the information contained in the Offering Materials and investigations made by him.
(j)
The undersigned is now a bona fide resident of the state set forth on the signature page hereto
and in the Prospective Offeree Questionnaire, and the address and social security or federal tax identification number set
forth therein are his true and correct residence and social security or federal tax identification number. The undersigned
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has no present intention of becoming a resident of any other state or jurisdiction. If the undersigned is a corporation,
partnership, trust or other form of business organization, it represents and warrants that its principal place of business is
within such state, that it was formed under the laws of such state or as otherwise indicated on the signature page and that
it was not organized for the purpose of acquiring the Common Stock.
(k)
The undersigned acknowledges that the shares of Common Stock have not been registered
under the Securities Act or under applicable state securities laws and may not be offered or sold except as provided in
Section 6 herein.
(l)
The undersigned understands that neither the Securities and Exchange Commission (the
"Commission") nor the securities administrator of any state has made any finding or determination relating to the fairness
of the Offering and that neither the Commission nor the securities administrator of any state has or will recommend or
endorse any offering of securities.
(m)
The undersigned is not acquiring the Common Stock for, or on behalf of, and shall not sell or
otherwise transfer such Common Stock to, any pension or welfare plan (as defined in Section 3 of the Employee Retiree
Income Security Act of 1974 ("ERISA")), except to the extent that an investment in the Common Stock is a permitted
investment for such pension or welfare plan under ERISA and the terms of such plan, in light of other investments and
commitments of such plan at the time of the proposed investment in the Common Stock.
(n)
The undersigned agrees that the Company may disclose such information regarding the
undersigned and its investment in the Common Stock as may be contained in the books and records of the Company as
determined by the Company in the Company's sole discretion.
(o)
The undersigned acknowledges that the Company and others will rely upon the truth and
accuracy of the foregoing acknowledgments, representations, and agreements. If the undersigned is acquiring the
Common Stock as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment
discretion with respect to each such account and it has full power to make the foregoing acknowledgments,
representations, and agreements on behalf of each account.
(p)
The undersigned further represents and warrants that the representations and warranties set
forth herein shall remain true and accurate from the time that the undersigned executes this Subscription Agreement until
the issuance of the Common Stock to the undersigned and that he will neither take any action nor permit any action to be
taken during such period which would cause such representations and warranties to be no longer true; and that in the
event any representation or warranty set forth herein shall be untrue during such period, the undersigned immediately
shall deliver to the Company a written statement to that effect and such other information, statements, and grants of
power of attorney as may be requested by the Company for the purpose of causing such representation and warranty to be
true.
5.
Indemnification. The undersigned acknowledges that he understands the meaning and legal
consequences of the representations, warranties and covenants in Sections 4, 6 and 7 hereof and that the Company has
relied upon such representations, warranties and covenants, and he hereby agrees to indemnify and hold harmless the
Company and its respective partners, officers, managers, controlling persons, agents and employees from and against any
and all loss, damage or liability due to or arising out of a breach of any such representation, warranty or covenant.
Notwithstanding the foregoing, however, no representation, warranty, acknowledgment or agreement made herein by the
undersigned shall in any manner be deemed to constitute a waiver of any rights granted to the undersigned under federal
or state securities laws. All representations, warranties and covenants contained in this Subscription Agreement and the
indemnification contained in this Section 5 shall survive the acceptance of this Subscription and the issuance of the
Common Stock to the undersigned.
6.
Limitations on Transfer of Common Stock. The undersigned acknowledges that he is aware that
there are substantial restrictions on the transferability of the Common Stock. The undersigned agrees that shares of
Common Stock shall not be sold unless (a) such sale is pursuant to an effective registration statement under the Securities
Act and all relevant state securities laws or (b) such sale is made in accordance with the terms and conditions of the
Shareholder Agreement and the Company shall have been advised by its counsel that such registration is not required and
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that such sale is exempt from registration under the Securities Act and any applicable state securities laws. The
undersigned further acknowledges that the Company is under no obligation to aid him in obtaining any exemption from
the registration requirements. The undersigned also acknowledges that he shall be responsible for compliance with all
conditions on transfer imposed by any securities administrator of any state and for any expenses incurred by the Company
for legal or accounting services in connection with reviewing such a proposed transfer and issuing opinions in connection
therewith, and agrees that he will give appropriate notice of these restrictions to each person to whom he transfers such
Common Stock.
7.
Compliance with Securities Laws. The undersigned understands and agrees that (i) the Common
Stock of the Company will be uncertificated, unless otherwise determined by the Board of Directors, and (ii) the
following restrictions and limitations are applicable to his purchase and his resales, pledges, hypothecations or other
transfers of the Common Stock pursuant to the Securities Act, as amended:
(a)
The undersigned agrees that shares of Common Stock shall not be sold, pledged, hypothecated
or otherwise transferred unless registered under the Securities Act and applicable state securities laws or exempted
therefrom.
(b)
A legend in substantially the following form has been or will be placed on certificates
representing shares of Common Stock: (if the Board of Directors elects to have the Common Stock of the Company
certificated) or other instruments of the Company:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS DOCUMENT HAVE NOT
BEEN REGISTERED UNDER ANY SECURITIES LAWS AND THE TRANSFERABILITY OF SUCH
SHARES IS RESTRICTED.
SUCH
SHARES MAY NOT BE SOLD, ASSIGNED, OR
TRANSFERRED, NOR WILL ANY ASSIGNEE, VENDEE, TRANSFEREE, OR ENDORSEE
THEREOF BE RECOGNIZED AS HAVING ACQUIRED ANY SUCH SHARES BY THE ISSUER FOR
ANY PURPOSES, UNLESS (1) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, WITH RESPECT TO SUCH SHARES SHALL THEN BE IN EFFECT AND
SUCH TRANSFER HAS BEEN QUALIFIED UNDER ALL APPLICABLE STATE SECURITIES
LAWS, OR (2) THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION SHALL BE ESTABLISHED TO THE SATISFACTION OF COUNSEL TO THE
COMPANY. THE SALE, PLEDGE OR OTHER TRANSFER OF THE SHARES IS ALSO SUBJECT
TO CONTRACTUAL RESTRICTIONS AND CONDITIONS SET FORTH IN THE SHAREHOLDER
AGREEMENT. THE COMPANY WILL FURNISH TO ANY SHAREHOLDER WITHOUT CHARGE
A COPY OF THE SHAREHOLDERS AGREEMENT UPON WRITTEN REQUEST TO THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE."
(c)
The legend described in subparagraph (b) above will be placed on any new document or
instrument evidencing ownership of the Common Stock upon presentment by the undersigned of any portion of his
Common Stock for transfer.
8.
Adoption of Shareholder Agreement. The undersigned hereby adopts, accepts and agrees to be
bound by the terms and provisions of the Shareholder Agreement and to perform all obligations therein imposed upon the
undersigned. Upon acceptance of the Subscription by the Company, the undersigned shall become a shareholder of the
Company.
9.
Grant of Power of Attorney. The undersigned hereby irrevocably constitutes and appoints the
President, with full power of substitution, the true and lawful agent and attorney-in-fact of the undersigned, with full
power and authority in his name, place and stead, to execute and deliver on behalf of the undersigned the Shareholder
Agreement and any and all other documents and agreements necessary in connection therewith. The power of attorney
granted to the President hereby shall be in addition to the powers of attorney granted to the President in the Shareholder
Agreement.
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10.
Notices. All notices or other communications given or made hereunder shall be in writing and shall be
delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the undersigned or the
Company at the respective addresses set forth below.
11.
State of Texas.
Governing Law. This Agreement shall be governed and construed in accordance with the laws of the
12.
Signature. THE SIGNATURE PAGE TO THIS SUBSCRIPTION AGREEMENT IS CONTAINED
AS PART OF THE SUBSCRIPTION BOOKLET AND ENTITLED "SIGNATURE PAGE."
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PROSPECTIVE OFFEREE QUESTIONNAIRE
Brewery X
Gentlemen:
The information contained in this Prospective Offeree Questionnaire (this "Questionnaire") is being furnished to
you in order for you to determine whether Brewery X, a Texas corporation (the "Company"), may sell to the undersigned
(the "Subscriber") shares of Common Stock (the "Common Stock"), under certain exemptions from registration under
Section 4(2) of the Federal Securities Act of 1933, as amended (the "Securities Act"), and Regulation D thereunder, and
under state securities laws in states where the Common Stock may be offered. The undersigned understands that (a) you
will rely on the accuracy and completeness of the information contained herein for purposes of such determination, (b)
the Common Stock will not be registered under the Securities Act or state securities law in reliance upon the foregoing
exemptions from registration and (c) this Questionnaire by itself is not an offer of securities to the undersigned, which
offer can only be made pursuant to the Confidential Offering Materials (the "Offering Materials") relating to the
Company. Terms used but not otherwise defined herein shall have the same meaning as in the Offering Materials, the
receipt of which is hereby acknowledged by the undersigned.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE SHALL BE TREATED
CONFIDENTIALLY. However, the undersigned understands that you may present this Questionnaire to such parties as
you, in your discretion, deem necessary if called upon to establish that the proposed issuance of the Common Stock is
exempt from registration under the Securities Act or meets the requirements for exemption from registration of applicable
state securities laws.
•
INDIVIDUALS SHOULD COMPLETE SECTIONS I, II, III AND V.
•
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHER ENTITIES SHOULD
COMPLETE SECTIONS I, II, VI, AND V.
•
TRUSTEES AND INVESTMENT REPRESENTATIVES WITH INVESTMENT AUTHORITY
SHOULD COMPLETE ALL SECTIONS.
In accordance with the foregoing, the following representations and information are hereby made and provided:
I.
GENERAL INFORMATION (to be completed by all subscribers)
Name of Investor(s):
Name of trustee or investment representative with discretionary investment authority:
Residence Address (if other than an individual, principal office address):
City:
Telephone: (
State:
) ___________
Zip Code:
Facsimile: (____) ___________
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E-Mail: ______________________
Business Address:
City:
State:
Telephone: (
)___________
Zip Code:
Facsimile (
)______________
E-Mail: _____________________
Place and Date of Birth (if other than an individual, place and year of organization or incorporation):
Social Security No.:
Taxpayer Identification No.: _______________________________________________________________
Communications should be sent to (check one):
Business Address:
Residence Address: _____
II.
CERTAIN CERTIFICATIONS - PLEASE INITIAL (to be completed by all subscribers)
1.
I am a citizen of the United States or a corporation, partnership, limited liability partnership or trust formed
under the laws of a state of the United States, and except as described below, my Subscription for the Common
Stock will be solely for my own account and not for the account of any other person.
INITIAL
Exceptions:
2.
I have never filed or been involved in personal or corporate bankruptcy proceedings and there are no suits
pending or judgments outstanding against me which, individually or in the aggregate, could impair my ability to
fulfill my obligations under the Subscription Agreement.
INITIAL
3.
The Subscriber represents that the Subscriber is (check one)
[
4.
] an "Accredited Investor" 1
[
] not an "Accredited Investor"
To be completed by "Accredited Investors" only: The Subscriber represents that the Subscriber is (check
each category of "Accredited Investor" below, if any, which is applicable to the Subscriber):
( )
(A)
a natural person whose individual net worth, or joint net worth with that person's spouse, at
the time of his purchase exceeds $1,000,000;
( )
(B)
a natural person who had an individual income in excess of $200,000 in each of the two most
recent years or joint income with that person's spouse in excess of $300,000 in each of those years and
has a reasonable expectation of reaching the same income level in the current year.
1
An accredited investor is an investor who meets any one or more of the criteria outlined in Question
II(4).
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( )
(C)
a bank as defined in Section 3(a)(2) of the Securities Act or a savings and loan association or
other institution as defined in Section 3(a)(5) (A) of the Securities Act, whether acting in its individual
or fiduciary capacity; broker or dealer registered pursuant to Section 15 of the Securities Exchange Act
of 1934; an insurance partnership as defined in Section 2(13) of the Securities Act; an investment
partnership registered under the Investment Partnership Act of 1940 (the "1940 Act") or business
development partnership as defined in Section 2(a) (48) of the 1940 Act; a Small Business Partnership
licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such
plan has total assets in excess of $5,000,000; or an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 ("ERISA"), if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of ERISA, which fiduciary is either a bank, savings and
loan association, insurance partnership or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are Accredited Investors (as listed in categories (A) - (H));
( )
(D)
a private business development partnership as defined in Section 202(a) (22) of the
Investment Advisors Act of 1970;
( )
(E)
a corporation, Massachusetts or similar business trust, partnership, or an organization
described in Section 501 (c)(3) of the Internal Revenue Code, with total assets in excess of
$5,000,000, and which was not formed for the specific purpose of acquiring the Common Stock;
( )
(F)
a trust, with total assets in excess of $5,000,000 not formed for the specific purposes of
acquiring the Common Stock whose purchase is directed by a person who has such knowledge and
experience in financial and business matters that he is capable of evaluating the merits and risks of an
investment in the Common Stock;
( )
(G)
( )
(H)
an entity in which all of the equity owners are Accredited Investors (as listed in categories
(A) - (G)).
any director or executive officer of the Company.
INITIAL
III.
PROSPECTIVE INVESTOR INFORMATION (to be completed only by Individuals, Trustees and
Investor Representatives with discretionary investment authority)
1.
EDUCATION BACKGROUND
School(s) and Degrees:
2.
BUSINESS AND EMPLOYMENT INFORMATION
Name of Employer or Business:
Nature of Business:
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Position and Duties:
Prior occupations during past five years:
3.
INVESTMENT INFORMATION
a.
I have personally invested in excess of $
during such period in excess of $
applicable federal and state securities laws.
b.
I consider myself to be an experienced and sophisticated investor and I have such knowledge and experience in
financial and business matters that I am capable of evaluating the merits and risks of an investment in the
Common Stock offered by the Company:
[
over the past five years, including investments
in investments not registered for sale to the public under
] Yes
[
] No
c.
Set forth below are the types of private investments I have made in the past five years, with particular attention
to investments in nonmarketable investment participations:
4.
CONFIDENTIAL FINANCIAL INFORMATION (to be completed by Individuals only)
a.
My personal net worth (including homes, home furnishings and personal automobiles, together with my spouse)
is estimated to be in excess of (check one):
[ ] more than $1,000,000
b.
[ ] less than $1,000,000
My individual income for 2006 and 2007 (or joint income with my spouse in each of those years) and my
anticipated income for 2008 are as set forth below (check one for each year):
2006
[ ] more than $200,000 or more than $300,000 jointly with my spouse
[ ] less than $200,000 and less than $300,000 jointly with my spouse
2007
[ ] more than $200,000 or more than $300,000 jointly with my spouse
[ ] less than $200,000 and less than $300,000 jointly with my spouse
2008
[ ] more than $200,000 or more than $300,000 jointly with my spouse (anticipated)
[ ] less than $200,000 and less than $300,000 jointly with my spouse (anticipated)
5.
ADDITIONAL INFORMATION
a.
My Bank is:
Address:
Phone:
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Officer familiar with my account:
b.
To your knowledge, will you have any family or business relationship with any other investor in the Offering?
[ ] Yes
[ ] No
If yes, please describe:
c.
Do you have any family or pre-existing business relationship with the officers or directors of the Company or
their affiliates?
[ ] Yes
[ ] No
If yes, please describe:
IV.
PROSPECTIVE INVESTOR INFORMATION (to be completed by corporations, partnerships, trusts
investor representatives with discretionary investment authority and other entities only)
1.
The total assets of the entity are estimated to be (check one):
[ ] more than $5,000,000
2.
[ ] less than $5,000,000
Do you have any family or pre-existing business relationship with the officers or directors of the Company or
their affiliates?
[ ] Yes
[ ] No
If yes, please describe:
3.
To be completed by trustees only: I consider myself to be an experienced and sophisticated investor and I
have such knowledge and experience in financial and business matters that I am capable of evaluating the merits
and risks of an investment in the Common Stock offered by the Company:
[
] Yes
[
] No
V.
INFORMATION CONCERNING THE OFFERING (to be completed by all subscribers)
1.
Do you understand the full nature and risk of investment in the Common Stock offered by the Company, and
feel you (or the corporation, trust or other entity) can afford the complete loss of the investment:
[
2.
] Yes
[
] No
Have you been afforded an opportunity to investigate the Company and review relevant factors and documents
pertaining to the officers, directors and the Company and its business and to ask questions of a qualified
representative of the Company regarding this investment and the properties, operations and methods of doing
business of the Company.
[
] Yes
[
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] No
3.
Do you understand that there is no guarantee of any financial return on this investment and that you (or the
corporation, trust or other entity) incur the risk of losing the entire investment?
[
4.
[
] No
[
] No
Do you understand that this investment is not liquid?
[
5.
] Yes
] Yes
Are you aware of the Company's business affairs and financial condition, and have you acquired all such
information about the Company as you deem necessary and appropriate to reach an informed and
knowledgeable decision to acquire Common Stock?
[
] Yes
[
] No
The undersigned represents to you that (a) the information contained in the Questionnaire is complete and
accurate on the date hereof and may be relied upon, and (b) the undersigned will notify you immediately of any material
changes in any of such information occurring prior to the closing of the Offer and will promptly confirm any such change
in writing.
The undersigned hereby certifies that he has read and understands the Subscription Agreement, and the
undersigned's representations and warranties therein are accurate on the date hereof.
SIGNATURE: THE SIGNATURE PAGE TO THIS PROSPECTIVE OFFEREE QUESTIONNAIRE IS
CONTAINED AS PART OF THE SUBSCRIPTION BOOKLET AND ENTITLED "SIGNATURE PAGE."
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