Russell Breweries Inc. Announces $400,000 Secured Loan

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">VANCOUVER, BRITISH COLUMBIA--(Marketwired - Dec. 13, 2013) -

THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT AUTHORIZED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Russell Breweries Inc. (TSX VENTURE:RB) (the "Company") is pleased to announce that on December 13, 2013 it entered into a loan agreement (the "Loan Agreement") with Weichun Ye (the "Lender") and FVI Capital Inc. (the "Guarantor") whereby subject to regulatory approval, including the approval of the TSX Venture Exchange (the " Exchange"), the Lender will loan to the Company the principal amount of $400,000 (the "Loan") bearing interest at a rate of 9.0% per annum calculated and compounded semi-annually (the "Interest").

The principal amount of the Loan will be due and payable on the earlier of December 31, 2015 and the occurrence of an Event of Default (as defined in the Loan Agreement). The Interest will be payable on January 1 and June 1 of each year beginning June 1, 2014. The Loan and all interest thereon may be prepaid, at any time, without premium or penalty, upon seven days' written notice.

The Company's obligations under the Loan Agreement will be guaranteed by the Guarantor and, in consideration for acting as guarantor, the Company will grant to the Guarantor 3,200,000 non-transferable warrants (the "Warrants"), each Warrant entitling the Guarantor to purchase one common share in the capital of the Company (a "Warrant Share") at an exercise price of $0.05 per share until December 31, 2015, subject to regulatory approval.

Pursuant to the terms of the Loan Agreement, the Company will execute a security agreement in favour of the Lenders granting a security interest in all present and future undertaking and property of the Company to the Lender subordinated to any existing security interests.

The proceeds of the Loan will be used to meet its near term working capital commitments and to continue operations. The Loan proceeds will also allow the Issuer to launch new products as planned.

Related Party Transaction

On the basis that the principals of the Guarantor are Benjamin Li Yu, a director and the interim CEO of the Company, and Dongbing (Derrick) Ma, a director of the Company, the proposed grant of the Warrants is a "related party transaction" within the meaning of Multilateral Instrument 61-101 ("MI 61-101").

The review and approval process that has been adopted by the directors of the Company in connection with the proposed grant of the Warrants is as follows:

In conducting their review and approval process with respect to the proposed grant of the Warrants, the board of directors of the Company determined that the distribution of an information circular to shareholders, the preparation and distribution of a formal valuation and the seeking of shareholder approval for, and in connection with, the proposed grant of the Warrants are not necessary under MI 61-101 because:

  1. for the purposes of Section 5.5(a) of MI 61-101 the board of directors of the Company have determined, in good faith, that the fair market value of the Warrants (when granted) will not exceed 25% of the market capitalization of the Company, and on that basis the proposed grant of the Warrants fall within an exemption from the formal valuation requirement of Section 5.4 of MI 61-101;


  2. for the purposes of Section 5.7(1)(a) of MI 61-101 the board of directors of the Company have determined, in good faith, that the fair market value of the Warrants (when granted) will not exceed 25% of the market capitalization of the Company, and on that basis the proposed grant of Warrants fall within an exemption to the minority shareholder approval requirement of Section 5.6 of MI 61-101; and


  3. the disinterested directors of the Company (i.e., those other than Benjamin Li Yu and Dongbing (Derrick) Ma) have all approved the Loan and the proposed grant of the Warrants.


The Guarantor currently owns 6.4% of the issued and outstanding common shares in the capital of the Company. If the Warrants (when granted) are exercised, the Guarantor would own 10% of the issued and outstanding common shares in the capital of the Company. The Warrants (when granted) and the Warrant Shares will be subject to a four month and a day hold period from the date of grant of the Warrants.

About Russell Breweries Inc.

Russell Breweries Inc. is a leading Western Canadian brewer. It brews, markets, sells and distributes a diverse portfolio of award-winning beers that are produced by its wholly-owned regional breweries: Russell Brewing Company in British Columbia and Fort Garry Brewing Company in Manitoba. Both breweries are dedicated to producing high-quality, flavourful ales and lagers. Russell Breweries Inc. is publicly listed on the TSX Venture Exchange (TSX VENTURE:RB).

Forward-Looking Information

This release includes certain statements that are deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address events or developments that the Company expects to occur, are forward--looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include: the ability of the Company to complete the Loan and repay the Loan based on sales and working capital and general economic, market or business conditions, the receipt of the required regulatory approvals and the use of the proceeds of the Loan. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. Except as required by applicable securities laws, the Company undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.

Contact:
Russell Breweries Inc.
Benjamin Li Yu
Director
604.599.1190
benjamin.yu@russellbeer.com

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