<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended July 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to _________
Commission File Number 1-12119
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
--------------------------------------------
(Exact name of registrant as specified in its charter)
Bermuda 72-1323940
State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification No.)
One Galleria Boulevard, Suite 1714,
Metairie, Louisiana 70001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 849-2739
Indicate by a check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- ---------
Number of shares of common stock outstanding
At September 12, 1997: 3,696,876
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
--------------------------------------------
FORM 10-Q
---------
PART I FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements (unaudited):
Consolidated Balance Sheets-
July 31, 1997 and October 31, 1996
Consolidated Statements of Operations-
Three and nine months ended July 31, 1997 and 1996
Consolidated Statements of Cash Flows-
Nine months ended July 31, 1997 and 1996
Notes to Consolidated Financial Statements (unaudited)
ITEM 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
PART II OTHER INFORMATION
- -------- -----------------
ITEM 6. Exhibits and Reports on Form 8-K
2
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
- ----------------------------
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts expressed in United States Dollars)
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
----------- -----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 50,306 $5,780,672
Accounts receivable, net of
allowance for doubtful accounts
of $37,500 and $1,500 176,388 73,581
Inventories 299,776 35,508
Prepaids and other current assets 276,899 126,465
----------- ----------
Total current assets 803,369 6,016,226
Equipment and capital leases, net 3,333,412 663,830
Other assets 1,341,744 235,749
Notes receivable from
officer/shareholder 35,000 ---
Deferred tax assets 109,538 85,501
----------- ----------
Total assets $ 5,623,063 $7,001,306
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 642,571 $ 242,014
Capital lease obligations, current
portion 17,549 12,858
----------- ----------
Total current liabilities 660,120 254,872
Capital lease obligations, net of
current portion 16,637 17,364
----------- ----------
Total liabilities 676,757 272,236
Minority Interests 393,824 ---
Commitments and Contingencies
Shareholders' equity:
Preferred stock, $0.01 par,
500,000 shares authorized, none
issued --- ---
Common stock, $0.01 par, 10,000,000
shares authorized, 3,696,876 shares
issued and outstanding 36,969 36,969
Common stock warrants, 2,090,876
outstanding 181,906 181,906
Additional paid-in capital 7,388,205 7,388,205
Cumulative translation adjustment (46,525) ---
Accumulated deficit (3,008,073) (878,010)
----------- ----------
Total shareholders' equity 4,552,482 6,729,070
----------- ----------
Total liabilities and
shareholders' equity $ 5,623,063 $7,001,306
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31, July 31, July 31,
1997 1996 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 546,012 $ 110,954 $ 879,413 $ 355,707
Cost of sales 428,111 31,692 645,891 74,747
------------ ---------- ------------ ----------
Gross profit 117,901 79,262 233,522 280,960
Selling, general and administrative
expenses 1,261,185 153,932 2,405,971 361,026
Interest (income) expense, net (9,180) 11,178 (41,273) 36,086
Other (income) expense, net (2,181) 146 66,368 1,034
------------ ---------- ------------ ----------
Total expenses 1,249,824 165,256 2,431,066 398,146
Loss before income taxes (1,131,923) (85,994) (2,197,544) (117,186)
Income tax benefit --- 7,682 24,037 12,829
------------ ---------- ------------ ----------
Loss after income taxes (1,131,923) ( 78,312) (2,173,507) (104,357)
Minority interests 24,215 --- 43,444 ---
------------ ---------- ------------ ----------
Net loss ($1,107,708) ($78,312) ($2,130,063) ($104,357)
============ ========== ============ ==========
Net loss per common share ($0.30) ($0.04) ($0.58) ($0.05)
============ ========== ============ ==========
Weighted average number of shares
outstanding 3,696,876 2,071,422 3,696,876 2,071,422
============ ========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
July 31, July 31,
1997 1996
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($2,130,063) ($104,357)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 118,220 48,335
Deferred income taxes (24,037) (12,829)
Minority interests (43,444) ---
Increase in operating assets,
net of assets acquired:
Accounts receivable, net (101,066) (61,040)
Inventories (244,397) (8,346)
Prepaids and other
current assets (156,806) (23,971)
Other assets (1,034,467) (575)
Notes receivable from
officer/shareholder (35,000) ---
Increase in operating
liabilities, net of
liabilities acquired:
Accounts payable and
accrued liabilities 403,760 41,287
------------ ----------
Net cash used in operating
activities (3,247,300) (121,496)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (2,849,133) (69,953)
Investment in AmBrew USA, net of
cash received (90,502) ---
------------ ----------
Net cash used in investing
activities (2,939,635) (69,953)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution from joint venture
partner 470,749 ---
Payment of capital lease
obligations (10,953) (9,424)
Proceeds from issuance of stock --- 117,231
Proceeds from bridge notes --- 370,000
Stock issuance costs paid --- (254,035)
Repayment of bank loan --- (56,500)
Repayment of shareholders' loans --- (20,638)
------------ ----------
Net cash provided by financing
activities 459,796 146,634
------------ ----------
Effect of exchange rate changes on cash
and cash equivalents (3,227) ---
------------ ----------
Decrease in cash and cash equivalents (5,730,366) (44,815)
Cash and cash equivalents at beginning
of period 5,780,672 102,248
------------ ----------
Cash and cash equivalents at end of
period $ 50,306 $ 57,433
============ ==========
SUPPLEMENTAL DISCLOSURE TO STATEMENTS
OF CASH FLOWS:
Cash interest paid $ 2,329 $ 36,421
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts expressed in United States Dollars)
(Unaudited)
1. Basis for Preparation of the Consolidated Financial Statements
The consolidated financial statements have been prepared by American Craft
Brewing International Limited ("AmBrew International") and its subsidiaries
(collectively, the "Company"), without audit, with the exception of the October
31, 1996 consolidated balance sheet. The financial statements include
consolidated balance sheets, consolidated statements of operations and
consolidated statements of cash flows. In the opinion of management, all
adjustments, which consist of normal recurring adjustments, necessary to present
fairly the financial position, results of operations and cash flows for all
periods have been made.
These financial statements should be read in conjunction with the
consolidated financial statements as of and for the fiscal year ended October
31, 1996, and the footnotes thereto included in the Company's Annual Report on
Form 10-K (the "Form 10-K").
As discussed in Management's Discussion and Analysis of Financial Condition
and Results of Operations, the Company is actively seeking additional sources of
working capital in both the debt and equity markets. The Company presently has
no major short or long term debt other than trade payables. Should the Company
be unable to obtain financing it may not be able to pay its trade creditors on a
timely basis or meet its various commitments related to future equipment
purchases.
2. Basis of Presentation
The consolidated financial statements include the accounts of AmBrew
International and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
3. Net Loss per Common Share
Net loss per common share is computed by dividing net loss by the weighted
average common shares outstanding during the periods, on the basis that the
Share Exchange, the Share Split and the Merger (as defined in the Form 10-K) had
been consummated prior to the periods presented. Average common equivalent
shares for common stock warrants and options have not been included, as the
computation would not be dilutive.
4. Inventories
Inventories are composed of the following:
July 31, October 31,
1997 1996
-------- -----------
Raw materials $144,175 $31,451
Work-in-process and finished goods 155,601 4,057
-------- -------
$299,776 $35,508
======== =======
6
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts expressed in United States Dollars)
(Unaudited)
5. Related Party Transactions
In January 1997, the Company obtained the U.S. distribution rights for the
Cerveza Mexicali brand from a shareholder/director. A $250,000 deposit was
placed with the shareholder/director as a down payment on the final purchase
price to be determined by independent appraisal in June 1998. The deposit is
recorded as an other asset in the accompanying balance sheet. The existing
inventory was purchased from the shareholder/director for $114,667, and a
royalty will be paid to this individual on all sales through June 1998. To date,
sales of the Cerveza Mexicali brand have been invoiced and collected by the
shareholder/director on behalf of AmBrew USA. Certain expenses incurred by the
shareholder/director related to these sales are reimbursed using the cash
receipts collected by the shareholder/director. The same shareholder/director
holds the lease on the Cerveceria Rio Bravo facility.
During fiscal 1997, AmBrew International entered a joint venture with Aidan
McGuinness to operate Celtic Brew LLC ("Celtic Brew"), a brewery located in
Enfield, county Meath, Ireland. AmBrew International has a 60% interest in the
venture. Aidan McGuinness is also a partner in Twin Meadows, another joint
venture that produces beer. The Celtic Brew and Twin Meadows breweries are both
located in a building that is leased from Aidan and Mark McGuinness. Various
operating costs are shared by Celtic Brew and Twin Meadows and are allocated
between the companies. At July 31, 1997 accounts receivable includes $20,017 and
accounts payable and accrued liabilities includes $25,245 due from/ to Twin
Meadows.
6. Commitments
In May 1997, the Company entered an agreement to market and distribute the
products of Dixie Brewing Company ("Dixie"). As part of this agreement, the
Company has committed to certain monthly minimum case purchases that accelerate
over the three year term of the agreement. At July 31, 1997, $147,099 was
recorded as other assets to reflect minimum payments made through that date,
that can be applied to future purchases under the agreement. In connection with
the agreement, the Company has made a $192,000 deposit and has provided Dixie a
$100,000 advance to be repaid through future per case price reductions. At July
31, 1997 these amounts are recorded as other assets in the accompanying balance
sheet. The Company has also agreed to purchase kegging equipment to be
installed at Dixie, which will be repaid by Dixie through per keg price
reductions beginning in the second year of the agreement.
7. Subsequent Events
Subsequent to July 31, 1997, the following events took place:
a. The Company has signed a Test Brewing Agreement with Anheuser-Busch,
Incorporated that contains a provision for possible future contract
brewing operations, at its Tecate, Mexico facility.
b. AmBrew International reached a settlement with a non-related party
arising from a previous claim, which was approved by the board of
directors. The Company made a provision for the settlement of $153,700
during the period ended July 31, 1997.
c. In August 1997, AmBrew International entered two 30-day promissory
notes totaling $85,000, which bear interest at 12% per annum. Both
notes are with shareholders, one of which is a director of the
Company. In September 1997, AmBrew International entered a 30-day
promissory note totaling $15,000, which bears interest at 12% per
annum. The note is with the same non-director shareholder. The due
date for the note maturing September 14, 1997, has been extended 30
days.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following discussion addresses the Company's consolidated financial
condition and results of operations as of and for the three months and nine
months ended July 31, 1997, which includes the operations of AmBrew
International, AmBrew USA, the Company's U.S. beer distributor acquired in
December 1996, Cerveceria Rio Bravo, S.A. de C.V. ("Cerveceria Rio Bravo") which
commenced operations in May 1997 but had no sales as of July 31, 1997, Celtic
Brew which commenced operations in May 1997 and had minimal sales beginning in
June 1997, and the South China Brewery ("South China") which commenced
operations in June 1995 and sales in November 1995. Expenses relating to the
construction and startup of these operations at Cerveceria Rio Bravo and Celtic
Brew are included in the results of operations for the three months and nine
months ended July 31, 1997. In addition, the period-to-period presentation set
forth under "Results of Operations" will not necessarily be indicative of future
results. Future net losses can be expected as increased expenses are incurred in
connection with the start up phase of the expansion breweries that the Company
has established and operates.
With the exception of historical information, the matters discussed herein
are "forward looking statements" within the meaning of the Private Litigation
Reform Act of 1995. Such forward looking statements are subject to risks,
uncertainties and other factors which could differ materially from future
results implied by such forward looking statements. Potential risks and
uncertainties include, but are not limited to, the Company's ability to operate
the existing breweries on a profitable basis, the Company's ability to establish
and operate additional breweries on a timely basis, increased acceptance by
consumers of the Company's brands and development by the Company of new brands
of beer and the Company's ability to obtain additional financing for its
operations and working capital requirements.
In an effort to address initial start up costs and the need for working
capital the Company has taken steps to: 1) implement more focused marketing and
sales designed to increase sales of Cerveza Mexicali and Dixie products; 2) hire
and retain highly qualified employees; 3) use bridge loans from
shareholder/directors and others to fund operations until permanent financing
can be obtained; and 4) reduce operating expenses. While management believes
that these steps will be sufficient to sustain operations until permanent
financing can be secured, no assurance can be given that permanent financing
will be obtained. See Liquidity and Capital Resources below for a further
discussion of the Company's current activities to address its cash position and
its need for working capital.
RESULTS OF OPERATIONS
Sales. For the three months ended July 31, 1997 and 1996 the Company had
sales of $546,012 and $110,954, respectively, which represents an increase in
sales of $435,058. For the nine months ended July 31, 1997 and 1996 the Company
had sales of $879,413 and $355,707, an increase in sales of $523,706. The
increase in sales for the three month and nine month periods ended July 31, 1997
is primarily due to the addition of AmBrew USA. Though the combined sales for
the three months and nine months ended July 31, 1997 increased compared to the
same periods in 1996, the Company's subsidiaries had varying sales results as
described below.
For the three months ended July 31, 1997 the South China Brewery
experienced a decline in sales of $23,582 compared to the same period in 1996.
One factor that resulted in lower sales during the current third quarter was the
retrofitting of the brewery. During the retrofit, the South China Brewery was
equipped with new electrical and other utility connections, and the floor, walls
and ceiling were upgraded to comply with health standards. Additionally, the
flash pasteurization unit arrived on site. These projects necessitated the
suspension of brewery operations for an extended period of time during the
current third quarter.
Despite the retrofit, the South China Brewery was able to slightly increase
sales compared to the second quarter of fiscal 1997. The South China Brewery
experienced an increase in sales of $6,917 for the three months ended July 31,
1997 compared to the three months ended April 30, 1997. The increase in sales
was partly due to the continued acceptance of the South China Brewery's
proprietary brands and the introduction of its new commemorative ale, Red Dawn
Ale.
8
<PAGE>
For the nine months ended July 31, 1997 the South China Brewery experienced
a decrease in sales of $120,705 compared to the same period in 1996. This
decrease in sales resulted from a variety of factors including: 1) significant
competition from import beer products in the Hong Kong market; 2) reduced
production of the brewery for an extended period of time for upgrades and
installation of new equipment; 3) consolidation by a significant customer of its
operations and purchases; and 4) change in brewery management including the
general manager, head brewer and sales personnel.
The proprietary brands of South China Brewery accounted for 13% of the
Company's sales and contract brewing accounted for 3% of the Company's sales for
the three months ended July 31, 1997. The South China Brewery's recent
introduction of Red Dawn Ale, an ale created to commemorate the historic
"Handover" of Hong Kong to China, had a positive impact on sales. For the
three months ended July 31, 1997 Red Dawn Ale accounted for 6% of the Company's
sales and 35% of the South China Brewery's sales.
The South China Brewery is a party to custom brewing contracts with
Delaney's (Wanchai) Limited, owner of Delaney's Irish Pub ("Delaney's"), and
Iconic America ("Iconic"). The custom brewing contract with Delaney's expires
in September 1997 and the contract with Iconic expired in August 1997.
Discussions are underway to renew the contracts. The South China Brewery is
also seeking other contract brewing relationships in Hong Kong.
During the quarter ended July 31, 1997 aggregate sales of Celtic Brew were
$3,332. The sales of Celtic Brew accounted for less than 1% of the Company's
total sales for the quarter. Celtic Brew experienced the normal delays and
start-up issues associated with any new venture. Subsequent to test brewing and
recipe development the actual operational production and sales of beers did not
begin until late June 1997. During the rest of the current third quarter,
customers in Ireland were fitted with draft equipment and the Celtic Brew
products began their introduction into the Irish pubs.
Another factor affecting Celtic Brew's sales was the delay experienced in
obtaining the bottling equipment and labeling equipment, which delayed sales of
bottled products and the start date of export sales. The pasteurizer was
installed during the third quarter and the bottling equipment has been delivered
during the fourth quarter. Technicians from the labeler supplier are involved
in fitting and starting the entire line. Bottled products for both domestic and
export markets are expected to be available prior to the end of the current
fiscal year.
Customers have also been obtained in the United Kingdom for export by
Celtic Brew of the Finian's brand. Exports to these locations will begin with
the installation of the draft equipment at the establishments. The United
Kingdom market is expected to be a significant portion of the Finian's brand
sales. Export shipments to the United States will also have a significant
impact on sales of the Finian's Brand.
Operations at Cerveceria Rio Bravo began in late May 1997. Cerveceria Rio
Bravo also experienced the normal start-up issues associated with any new
venture. Since then Cerveceria Rio Bravo has been instrumental in the
development of two test beers for the Company and for Anheuser-Busch. The first
shipment of Mexican produced Cerveza Mexicali was made in September 1997. The
Company believes that the advent of Mexican produced Cerveza Mexicali will have
a significant positive impact on the sales and revenues of the Company.
The sales of AmBrew USA accounted for $455,308 or approximately 84% of the
Company's sales for the three months ended July 31, 1997. For the nine months
ended July 31, 1997, the sales of AmBrew USA accounted for $641,078 or 73% of
the Company's sales. The increased sales for the current quarter are primarily
attributed to AmBrew USA's distribution of products brewed by Dixie Brewing
Company. There were very little sales of the Cerveza Mexicali brand as the
Company continued to purge the existing product in wholesalers' and retailers'
inventory, in preparation for the Cerveceria Rio Bravo production of Cerveza
Mexicali.
With the introduction of Mexican produced Cerveza Mexicali, new branding
for Charles Wells, and Dixie Brewing Company's products in the portfolio, the
Company expects its sales to increase during the fourth quarter, and beyond.
In an effort to increase sales of Charles Wells products, AmBrew USA is
currently working towards improving the package design.
AmBrew USA is also actively seeking new products, both alcohol and non-
alcohol based, to add to its sales mix. As part of that effort, AmBrew USA
recently announced that it will handle the distribution of Tizer and Irn
9
<PAGE>
Bru soft drinks in the United States, both of which are A.G. Barr PLC products.
It is anticipated that distribution of these products will have a positive
impact on the sales of the Company.
As part of its developing national distribution network, AmBrew USA has
added three field salespeople to its employee base to increase sales of existing
AmBrew USA products as well as the introduction of all new products. AmBrew USA
plans to add two additional field salespeople by the end of the next quarter.
The combination of field sales personnel, quality products, and marketing ideas
have been highly instrumental in securing distribution partners. AmBrew USA
believes that this infrastructure will allow it to increase sales volume for its
products.
While the Company expected to begin importing its products into the United
States and other markets by the end of the third quarter, due to equipment
delays beyond the Company's control, that goal was not achieved. The Company is
proceeding with its efforts to import into the United States and other markets
the products from all its breweries. Barring any further delays with ordered
equipment, the Company believes it will be importing products from all its
breweries during the fourth quarter of the current calendar year. The Company
believes that the anticipated international distribution of its products will
have a significant positive impact on sales.
Cost of Sales. Cost of sales increased as a percentage of sales to 78%
for the three months ended July 31, 1997 from 29% in the corresponding period in
1996. The increase is primarily the result of the operations of AmBrew USA,
which was acquired in December 1996. AmBrew USA's cost of sales is higher than
that of the South China Brewery as it functions solely as a distributor. AmBrew
USA's cost of sales for the three months ended July 31, 1997 was $394,471 or 87%
of its sales.
The South China Brewery's cost of sales for the three months ended July 31,
1997 increased to 36% of sales from 29% in the three months ended July 31, 1996
as a result of underutilized capacity. The underutilized capacity was a result
of many contributing factors, including but not limited to the retrofit and
intense competition from import beer products.
For the nine months ended July 31, 1997, cost of sales increased as a
percentage of sales to 73% from 21% in the corresponding period in 1996. This
increase is primarily due to the addition of the operations of AmBrew USA and
the less efficient use of equipment at the South China Brewery as described
above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended July 31, 1997 and 1996 were
$1,261,185 and $153,932, respectively. The increase is primarily attributable
to the addition of the operations of AmBrew International, with expenses of
$665,721 (including the settlement of a claim with a non-related party in the
amount of $153,700), AmBrew USA, with expenses of $77,951, Cerveceria Rio Bravo,
with expenses of $253,817 and Celtic Brew, with expenses of $59,371. The
selling, general and administrative expenses for both Cerveceria Rio Bravo and
Celtic Brew were mainly associated with the start up and grand openings for the
respective facilities. The remainder of the increase, $50,393, relates to
additional salaries and marketing costs at the South China Brewery. Selling,
general and administrative expenses for the nine months ended July 31, 1997 and
1996 were $2,405,971 and $361,026, respectively. The increase is due to the
addition of AmBrew International, AmBrew USA, Celtic Brew and Cerveceria Rio
bravo and their corresponding selling, general and administrative expenses,
which included depreciation and amortization of $60,554.
The Company experienced the high general and administrative expenses
associated with being a publicly traded company. Such expenses include, but are
not limited to salaries, director's fees, legal fees, audit fees and the
preparation of required quarterly and annual reports. During the quarter ended
July 31, 1997, AmBrew International also awarded salary increases to certain key
personnel. Additional costs were also incurred as AmBrew International
continued to aggressively identify suitable joint venture partners, future
brewery sites and sources of additional financing.
The increase in the selling, general and administrative expenses for the
Company was also caused in part by the addition of two field salespersons and
one clerk to the AmBrew USA organization. During the quarter ended July 31,
1997, AmBrew USA has company salespersons located in the Los Angeles and Chicago
areas. A third field salesperson was added in August in the New York / New
Jersey area.
10
<PAGE>
Net Interest (Income) Expense. Net interest (income) expense for the three
months ended July 31, 1997 and 1996 was ($9,180) and $11,178, respectively, and
for the nine months ended July 31, 1997 and 1996 was ($41,273) and $36,086,
respectively. The increased income relates to the investment of the proceeds
from the Company's initial public offering. Additionally, loans payable were
eliminated with proceeds from the Company's initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company's material commitments for future capital expenditures relate
primarily to the financing of the proposed expansion breweries. The Company
previously placed an order for twenty micro-brewery systems with JV Northwest
and made a $200,000 non-refundable deposit on the equipment. During the period
ended July 31, 1997, the Company made down payments of $15,895 and $16,945 to
VBW Brewing Services for the labeling machines for Celtic Brew and South China,
respectively. During the period ended July 31, 1997, the Company paid the
balance due of $285,630 on the completed brew system; $1,594 to Beverage
Machinery Service for kegging equipment; $59,861 to SMB Technik for the bottling
and labeling equipment; and $44,980 to Aeroglide for a tunnel pasteurizer for
Cerveceria Rio Bravo. The Company made an additional payment of $33,255 for
the bottling equipment shipped to Celtic Brew, a ten percent balance remains
due. In addition, the Company made a final payment of $127,635 to JV Northwest
for flash pasteurizing equipment for all three breweries. The Company is
required to pay the remaining balances of $32,840 for the equipment in
production, as it is completed and ready for shipment.
In addition to the deposits and down payments placed for brewery equipment,
the Company has also placed deposits totaling $350,000 in connection with the
distribution rights of the Cerveza Mexicali label.
In connection with the marketing and distribution of the Dixie Brewing
Company products the Company has placed a $192,000 security deposit, has
extended a $100,000 advance and has made advance product purchases in the amount
of $147,099. The Company has also committed to certain monthly minimum case
purchases that accelerate over the three year term of the agreement.
At July 31, 1997, the South China Brewery had fixed capital lease
obligations of $2,897, $17,172 and $6,885 respectively, for each of the three
years in the period ending October 31, 1999. At July 31, 1997, the South China
Brewery had $21,535 in operating lease commitments over the period ending
October 31, 1998 relating to its warehouse and brewery facility.
At July 31, 1997, AmBrew International had an operating lease obligation of
$203,384 over the period ending June 14, 2002 relating to the lease of its
corporate office. AmBrew International also had operating lease obligations of
$43,175 for the period ending February 28, 2000 relating to company vehicles.
Additionally, the Company has fixed annual salary expenses of $748,259 related
to various employment agreements with its employees.
At July 31, 1997, Cerveceria Rio Bravo had obligations of $348,000 for the
period ending September 10, 2001 in connection with a related party operating
lease for its brewery site.
At July 31, 1997, Celtic Brew had obligations of $62,498 for the period
ending March 30, 2002 in connection with a related party operating lease for its
brewery site.
At July 31, 1997, approximately $30,649 of the proceeds from the initial
public offering remained invested in tax-exempt interest-bearing accounts and
$2,467 was invested in interest bearing accounts. In August 1997, the Company
borrowed $35,000 from a shareholder and $50,000 from a shareholder/director of
the Company so that the Company could meet its short-term cash requirements.
The loan from the shareholder originally matured on September 14, 1997, but the
maturity date was recently extended to October 14, 1997. The loan from the
shareholder/director will initially mature on September 27, 1997. The Company
borrowed an additional $15,000 from the same shareholder during September 1997
due on October 8, 1997.
The Company's projections indicate that it needs approximately one million
dollars to fund operations through the middle of the first quarter of calendar
1998, at which time the Company projects it will achieve positive cash flow. In
order for the Company to continue its operations and to address the current cash
position and the need for working capital, the Company is pursuing both
immediate and long term financial assistance in both the debt and
11
<PAGE>
equity markets. Specifically, the Company is 1) currently having discussions
with domestic and foreign banks for debt financing (it should be noted that the
Company has no long term debt), 2) utilizing the resources of its individual
members of its Board of Directors and shareholders, 3) having discussions with
investors about both debt and equity investments, and 4) looking for joint
venture partners for the South China Brewery and for Cerveceria Rio Bravo to
purchase minority shareholdings from the Company in each location. There can be
no assurance that such debt financing or capital will be available or, if
available, under terms and conditions acceptable to the Company. The Company's
inability to obtain additional capital would result in a material adverse effect
on the Company's ability to pay creditors on a timely basis or meet its various
commitments related to future equipment purchases and operations.
The Company believed it would be able to finance up to six expansion
breweries in 1997 or its equivalent capacity. The Company currently has the
equivalent capacity of three prototype expansion breweries at its Tecate site
and the equivalent of one prototype brewery at each of its Hong Kong and Ireland
sites. In total the Company has the equivalent capacity of five prototype
breweries. If the Company is able to obtain additional financing, the Company
intends to expand its capacity at the Tecate, Mexico facility to 30,000 barrels,
which is the equivalent capacity of six prototype expansion breweries, bringing
the Company's total equivalent capacity to 8 prototype breweries by the end of
its 1997 fiscal year. The Company has postponed any further expansion until 1998
and until it can obtain additional working capital.
12
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
3.1 - Memorandum of Amalgamation of the Company (incorporated by reference
to Exhibit 3.1 of the Company's registration statement on Form S-1
(file no. 333-6033) (the "Registration Statement").
3.2 - By-Laws of the Company (incorporated by reference to Exhibit 3.2 of
the Registration Statement).
10.21- Amended and Restated Stock Option Plan of the Company (previously
filed as Exhibit Number 10.1 to the Company's Form 10-Q for the
fiscal quarter ended April 30, 1997 and hereby renumbered as Exhibit
No. 10.21).
10.22- Brewmaster Employment Agreement between South China Brewing Company
Limited and Cory O'Neel, effective March 20, 1997 (previously filed
as Exhibit Number 10.2 to the Company's Form 10-Q for the fiscal
quarter ended April 30, 1997 and hereby renumbered as Exhibit No.
10.22).
10.23- General Manager Employment Agreement between South China Brewing
Company Limited and Scott Ashen, effective February 1, 1997
(previously filed as Exhibit Number 10.3 to the Company's Form 10-Q
for the fiscal quarter ended April 30, 1997 and hereby renumbered as
Exhibit No. 10.23).
10.24- Employment and Non-Competition Agreement between the Company and
Peter W. H. Bordeaux (previously filed as Exhibit Number 10.4 to the
Company's Form 10-Q for the fiscal quarter ended April 30, 1997 and
hereby renumbered as Exhibit No. 10.24).
10.25- Contract Brewing and Packaging Agreement between Anheuser-Busch,
Incorporated and the Company, dated April 29, 1997 (previously filed
as Exhibit Number 10.5 to the Company's Form 10-Q for the fiscal
quarter ended April 30, 1997 and hereby renumbered as Exhibit No.
10.25).
10.26- Consulting Agreement among the Company, the South China Brewing
Company Limited, David K. Haines and Lunar Holdings, Limited, dated
February 14, 1997 (previously filed as Exhibit Number 10.6 to the
Company's Form 10-Q for the fiscal quarter ended April 30, 1997 and
hereby renumbered as Exhibit No. 10.26).
10.27- Employment Agreement between the Company and C. Brooks Hamaker,
effective March 10, 1997 (previously filed as Exhibit Number 10.7 to
the Company's Form 10-Q for the fiscal quarter ended April 30, 1997
and hereby renumbered as Exhibit No. 10.27).
10.28- Employment Agreement between the Company and William R. Jenkins,
effective March 24, 1997 (previously filed as Exhibit Number 10.8 to
the Company's Form 10-Q for the fiscal quarter ended April 30, 1997
and hereby renumbered as Exhibit No. 10.28).
10.29- General Manager/Brewmaster Employment Agreement dated July 18, 1997
between Cerveceria Rio Bravo and Clint D. Stromberg.*
10.30- Exclusive Agency Agreement dated as of May 2, 1997 between AmBrew
U.S.A., Inc. and Dixie Brewing Company, Inc.*
10.31- Franchise Agreement dated June 30, 1997 between American Craft
Brewing International Limited and A. G. Barr p.l.c.*
10.32- Franchise Agreement dated June 30, 1997 between American Craft
Brewing International Limited and A. G. Barr p.l.c.*
13
<PAGE>
10.33- Operating lease dated May 1, 1997 between Celtic Brew LLC and Aidan
McGuinness and Mark McGuinness.*
27 - Financial Data Schedule.*
*filed herewith
(b) Reports on Form 8-K. None
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
Date: September 15, 1997 /S/ James L. Ake
-------------------------------------
James L. Ake
Executive Vice President,
Chief Operating Officer and Secretary
/s/ Nancy R. Hernandez
-------------------------------------
Nancy R. Hernandez
Controller
15
<PAGE>
INDEX TO EXHIBITS
NUMBER EXHIBIT
- ------ -------
10.29 General Manager/Brewmaster Employment Agreement
dated July 18, 1997 between Cerveceria Rio Bravo and
Clint D. Stromberg
10.30 Exclusive Agency Agreement dated as of May 2, 1997
between AmBrew U.S.A., Inc. and Dixie Brewing Company, Inc.
10.31 Franchise Agreement dated June 30, 1997 between
American Craft Brewing International Limited and A. G. Barr p.l.c.
10.32 Franchise Agreement dated June 30, 1997 between
American Craft Brewing International Limited and A. G. Barr p.l.c.
10.33 Operating lease dated May 1, 1997 between Celtic Brew LLC and Aidan
McGuinness and Mark McGuinness.
27 Financial Data Schedule
16
<PAGE>
CERVECERIA RIO BRAVO
GENERAL MANAGER/BREWMASTER EMPLOYMENT AGREEMENT
Cerveceria Rio Bravo (the Company), and Clint D. Stromberg (the General
Manager/Brewmaster) desire to set forth the terms upon which the General
Manager/Brewmaster will be employed by the Company during the term of this
Agreement, and therefore agree as follows:
1. Working Relationship
1.1 Term. Unless terminated sooner pursuant to paragraph 4 below, the
term of this Agreement is two (2) years with effect from August 18, 1997 (the
Commencement Date). This term may be extended once or more for such length of
time as agreed in a written instrument signed by the parties.
1.2 Location. The General Manager/Brewmaster shall perform his employment
at the brewing facilities of the Company located at Tecate, Baja California,
Mexico (the Brewery).
1.3. Supervisor. The General Manager/Brewmaster shall report to and his
activities shall be supervised by Chief Operating Officer of AmBrew
International.
1.4. Duties. The General Manager/Brewmaster shall use his best efforts,
skill and abilities to faithfully and effectively perform his duties as the
manager and administrator for the Company of the Brewery. The General Manager/
Brewmaster shall perform such supervisory, management and administrative
functions as may be commensurate with his position and such other duties as may
from time to time reasonably be delegated to him by the Company. The General
Manager/Brewmaster shall use his best efforts, skill and ability to expand and
promote the business of the Company, to properly service the Company's business
and to protect the Company's good will, both as now enjoyed and hereafter
acquired. The General Manager/Brewmaster shall use his best efforts, skill and
abilities to faithfully and effectively perform his duties as a master brewer
for the Company. The General Manager/Brewmaster shall perform such functions as
may be commensurate with his position and such other duties as may from time to
time reasonably be delegated to him by the Company. It is intended that for the
most part the General Manager/Brewmaster shall perform his duties hereunder
during normal business hours. However, it is agreed by the General
Manager/Brewmaster that he may be required from time to time to perform his
duties hereunder at times other than normal business hours, and that the General
Manager/Brewmaster shall not be entitled to additional compensation for work
performed during other than normal business hours. Included among the duties of
the General Manager/Brewmaster is the training of local Mexican nationals to
learn and function effectively and efficiently for positions as General Manager
and Brewmaster. This may entail one individual for both positions or separate
individuals.
1.5. Full Time. The General Manager/Brewmaster shall devote full and
exclusive business time and energies to the performance of his duties under this
Agreement, except that he shall be free to devote reasonable time and attention
to public and charitable affairs and to his personal affairs, consistent with
his duties hereunder, but only if the handling of such charitable and personal
affairs do not interfere with the normal day-to-day operations of the Company.
2. Compensation.
As full compensation to the General Manager/Brewmaster for performance of
his services hereunder, the Company agrees to pay General Manager/Brewmaster,
and General Manager/Brewmaster agrees to accept, the following:
2.1 Salary. The Company will pay the General Manager/Brewmaster a salary
of Forty five thousand U.S. Dollars (US$45,000.00) per annum by monthly
installments in arrears from the Commencement Date, less any amounts required to
be withheld under any applicable federal, state or
<PAGE>
local income tax laws or by any other withholding requirements, and any other
amounts which by agreement may be withheld for fringe benefits. This salary
shall be subject to review 6 months from the Commencement Date.
Stock Option Plan. The General Manager/Brewmaster shall be eligible to
participate in the 1996 Stock Option Plan of American Craft Brewing
International Limited on the basis described therein.
3. Benefits.
3.1 Business Expenses. The Company will reimburse the General Manager/
Brewmaster for pre-approved expenses actually incurred in connection with the
performance of the duties hereunder, against receipts or other appropriate
written evidence of such expenditures, all in accordance with the policies of
the Company as adopted from time to time.
3.2. Leave. The General Manager/Brewmaster is entitled to two weeks
leave during the first year and three weeks in the second year of the term of
this Agreement, which shall be taken as determined by the Company, as well as
holidays in accordance with applicable policies from time to time adopted by the
Company. Time at which leave is taken is dependent on seniority, family
circumstances and the exigencies of the Company's business but subject thereto,
leave shall be scheduled insofar as is practicable so as to meet the General
Manager/Brewmaster's convenience. Leave cannot be accumulated and any unused
leave at the end of the term of this Agreement, or upon termination of this
Agreement for any reason, shall not be compensated.
<PAGE>
4. Termination
4.1 By The General Manager/Brewmaster. The General Manager/Brewmaster
may terminate this Agreement by giving the Company not less than three (3)
months written notice or payment of three months' salary in lieu of notice.
4.2 By the Company Without Cause. The Company may terminate this Agreement
without cause at anytime by giving to the General Manager/Brewmaster three (3)
months' written notice or by paying him three (3) months' salary in lieu of
notice.
4.3. By the Company With Cause. The Company may at anytime terminate this
Agreement for cause on immediate written notice and without payment or
compensation whatsoever.
For the purposes of this paragraph and of this Agreement, "cause" shall
mean: (1) fraud, dishonesty or any other intentional wrongful act, whether or
not in connection with employment under this Agreement; (2) any violation of law
(excluding minor traffic violations) conviction thereof or plea of guilty or
nolo contendere thereto, moral turpitude or other willful misconduct by the
General Manager/Brewmaster; (3) accepting or undertaking any outside
employment without prior written permission of the Company; (4) incompetence or
negligence in the performance of any duties or obligations hereunder; or (5) the
failure or refusal to perform, carry out or comply with any duties or
obligations hereunder.
Because of Death or Ill Health. This Agreement shall terminate immediately upon
the death or disability of the General Manager/Brewmaster. "Ill health" shall
mean the inability of the General Manager/Brewmaster to properly perform his
duties hereunder for a period of ninety (90) or more days by reason of a health
condition not self-induced as certified by a medical practitioner chosen by the
Company.
No Further Payments by Company. Except for the payment in lieu of notice
provided in paragraph 4.2, upon termination of this Agreement for any reason the
General Manager/Brewmaster shall not be entitled to any further payments or
compensation from the Company except unpaid salary prorated to the date of
termination.
4.6. Cooperation with the Company after Termination. Following
termination of this Agreement for any reason, the General Manager/Brewmaster
shall fully cooperate with the Company in all matters relating to the winding up
of his pending work and the orderly transfer of pending work to others as may be
designated by the Company.
<PAGE>
5. Confidentiality and Non-Disclosure. The General Manager/Brewmaster
acknowledges that during the term of this Agreement he will receive
confidential, proprietary information and trade secrets from the Company, and
from parents and affiliates of the Company and from the respective clients
thereof (each a Relevant Entity). Accordingly, the General Manager/Brewmaster
agrees that during the term of this Agreement (as it may be extended) and
thereafter for a period of two years, the General Manager/Brewmaster and his
affiliates shall not, except in the performance of his obligations to the
Company hereunder or as may otherwise be approved in advance by the Company,
directly or indirectly disclose or use any Trade Secret that he may learn or has
learned by reason of his association with any Relevant Entity. Upon termination
of this Agreement, the General Manager/Brewmaster shall promptly return to the
Company any and all property, records or papers of any Relevant Entity that may
be or have been in his possession, whether prepared by him or others, including,
but not limited to, trade secrets and keys. For purposes of this Agreement,
"trade secrets" includes all data, analyses, reports, interpretations,
forecasts, documents and information concerning a Relevant Entity and its
affairs, including, without limitation, with respect to clients, customers,
products, policies, procedures, methodologies, any other intellectual property,
systems, personnel, confidential reports, technical information, financial
information, business transactions, business plans, prospects or opportunities,
(i) that the Company reasonably believes are confidential or (ii) the disclosure
of which could be injurious to a Relevant Entity or beneficial to competitors of
a Relevant Entity, but shall exclude any information that the General Manager/
Brewmaster is required to disclose under any applicable laws, regulations or
directives of any government agency, tribunal or authority having jurisdiction
in the matter or under subpoena or other process of law. For purposes of this
Agreement, "affiliate" means any entity that, directly or indirectly, is
controlled by, or under common control with the General Manager/Brewmaster;
for purposes of this definition, the terms "controlled by" and "under common
control with" means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such person, whether
through the ownership of voting stock, by contract or otherwise. For purposes
of this Agreement, parent of the Company is defined herein as American Craft
Brewing International Limited.
6. Non-Competition.
6.1 The General Manager/Brewmaster agrees that during the term of this
Agreement (as it may be extended) and for a period of two years thereafter he
shall not within fifty miles of any location which the Company, its parent or
any of its subsidiaries or affiliates is operating and/or has a letter of intent
to form an operating venture and/or has an agreement for a microbrewery (a)
engage in any activity competitive with the business of the Company, its parent
or subsidiaries or affiliates, for or on behalf of the General Manager/
Brewmaster or any other person or entity engaged in a line of business which
competes with the Company, its parent or subsidiaries or affiliates; (b) solicit
or attempt to solicit the business of any clients or customers of the Company,
its parent or subsidiaries or affiliates, for products that are the same or
similar to those offered, sold or produced at any time by the Company, its
parent or subsidiaries or affiliates; (c) otherwise divert or attempt to divert
from the Company, its parent or subsidiaries or affiliates, any business
whatsoever; (d) hire or attempt to hire for any business endeavor any employee
or prior employee of any of the Company, its parent or subsidiaries or
affiliates; or (e) interfere with any business relationship of the Company, its
parent or subsidiaries or affiliates, with any other person or entity.
6.2. Severability and Reform. If any portion of Section 6.1 shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of Section 6.1, but Section 6.1 shall be construed as if such invalid, illegal
or unenforceable provision had never been contained therein. It is the
intention of the parties hereto that if any of the restrictions or covenants
contained in Section 6.1 is held to cover a geographic area or to be for a
length of time that is not permitted by applicable law, or in any way construed
to be too broad or invalid, such provision shall not be construed to be null,
void and of no enforceable effect, but to the extent such provision would be
valid or enforceable under applicable law, a court of competent jurisdiction
shall
<PAGE>
construe and interpret or reform Section 6.1 to provide for a covenant having
the maximum enforceable geographic area, time period and other provisions (not
greater than those contained herein) as shall be valid and enforceable under
such applicable law.
7. Intellectual Property. All ideas, innovations, inventions, processes,
and other developments or improvements conceived or reduced to practice by the
General Manager/Brewmaster, alone or with others, during the term of this
employment agreement, whether or not during working hours, that are within the
scope of the Company's, its parents' or subsidiaries' or affiliates', business
operations or that relate to any of the Company's, its parents' or subsidiaries'
or affiliates' work or projects, shall be the exclusive property of the Company.
The General Manager/Brewmaster agrees to assist the Company, at its expense,
to obtain patents, trademarks or licenses on any such ideas, inventions,
processes, and other developments, and agrees to execute all documents necessary
to obtain such patent, trademark, and license for the sole use of the Company,
its parents or subsidiaries or affiliates.
<PAGE>
8. Notices.
8.1. Addresses. Any notice or communication required or permitted to be
given under this Agreement shall be in writing, and conveyed by hand, air
courier, facsimile, or return receipt registered mail, addressed as follows:
Company: The General Manager/Brewmaster
Clint D. Stromberg
Cerveceria Rio Bravo. 9950 Grosalia Ave.
Boulevard Morelos #750 La Mesa, California 91941
Tecate Baja California Tel: 619 698 7731
Mexico 21430
8.2. Date of Notice. Any notice given in accordance with paragraph 8.1
shall be deemed to have been received on, and is effective as of, the date it
was delivered by hand or sent by facsimile, two business days after the date it
was deposited with an air courier, and the date on the return receipt if by
registered mail.
9. Governing Law; Consent to Jurisdiction. This Agreement, and any matter
arising under or related to it, shall be governed by and construed in accordance
with the laws of the State of Louisiana, U.S.A., without regard to its choice or
conflict of law provision. The General Manager/Brewmaster irrevocably
submits to personal jurisdiction in the courts of Louisiana with respect to any
matter arising under or related to this Agreement or his employment by the
Company
10. General Provisions.
10.1. Amendments. This Agreement may be amended only pursuant to an
instrument in writing signed by each of the parties hereto.
10.2. Headings. The headings in this Agreement are for convenience only
and are in no way intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement or any of its provisions.
10.3. Waivers; Rights and Remedies Cumulative. The failure of any party
to pursue any remedy for breach, or to insist upon the strict performance of any
covenant or condition contained in this Agreement shall not constitute a waiver
thereof of any right with respect to any subsequent breach. Except as otherwise
expressly set forth herein, rights and remedies under this Agreement are
cumulative, and the pursuit of any one right or remedy by any party shall not
preclude, or constitute a waiver of, the right to pursue any or all other
remedies. All rights and remedies provided under this Agreement are in addition
to any other rights the parties may have by law, in equity or otherwise.
10.4. Successors and Assigns. All of the covenants, terms, provisions and
agreements contained in this Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and, in the case of the Company, its respective
successors and assigns.
10.5. No Third-Party Beneficiaries The covenants, obligations and rights
set forth in this Agreement are not intended to benefit any third person or
entity.
<PAGE>
10.6. Entire Agreement This Agreement embodies the entire understanding
and agreement between the parties and supersedes any and all prior negotiations,
understandings or agreements between the parties concerning the subject matter
hereof with respect hereto.
10.7. Attorney's Fees In the event that either the General Manager/
Brewmaster or the Company commences a legal proceeding (including arbitration)
to enforce or interpret any of the terms of this Agreement or to terminate this
Agreement, the prevailing party in such action shall receive from the other
party reasonable attorney's fees as may be fixed by the arbitrator, court or
jury.
10.8. Arbitration. Any controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration administered by the American
Arbitration Association in accordance with its applicable rules. Any judgment
upon the award rendered in such arbitration may be entered in any court of
competent jurisdiction.
10.9. Counterparts This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument. The Agreement may be
assembled into a single document by attaching each page bearing a party's
original signature.
Company General Manager/Brewmaster
Cerveceria Rio Bravo Clint D. Stromberg
By: ________________________________ ____________________________
Name Name
Date: 7-18-97 Date: 7-18-97
<PAGE>
EXCLUSIVE AGENCY AGREEMENT
This AGREEMENT is made effective as of the 2nd day of May, 1997,
("Effective Date"), between the DIXIE BREWING COMPANY, INC., a corporation
existing under the laws of the State of Louisiana with its principal place of
business at 2401 Tulane Avenue, New Orleans, Louisiana, 70119 ("BREWERY"), and
AMBREW USA, INC., a corporation existing under the laws of the State of
Louisiana with its principal place of business at One Galleria Blvd. Suite 1714,
Metairie Louisiana, 70001, ("Company"):
WHEREAS:
A. Brewery manufactures and sells beer.
B. Company is a selling and marketing agent of beverages.
C. Brewery and Company are willing to enter into this agreement on the
following terms and conditions.
WHEREBY IT IS AGREED as follows:
1. DEFINITIONS
A. "Territory" shall mean the United States of America excluding the State of
Louisiana until resolution of the Crown Beverage lawsuit, at which time an
agreed upon addendum shall be negotiated, if possible, depending on the
outcome of said lawsuit. Company shall have the right to export Products
under the terms and conditions as set forth in Exhibit B.
B. "Product" or "Products" shall mean Dixie Beer, Dixie Jazz Amber Light Beer,
Dixie Blackened Voodoo Lager, Dixie Crimson Voodoo Ale and Dixie White
Moose. The Company shall have the right of first refusal to purchase any
new Dixie Products hereafter developed by Brewery, so long as Company is in
full compliance with all of the terms and provisions of this Agreement.
C. "Trademarks" shall mean the trademarks used on or in relation to the
Products whether registered or unregistered, which term shall include trade
names, patents, copyrights, designs and all other intellectual property
rights which may be applicable to the Product and which are vested in Dixie
Brewing Company, Inc. and as listed on Exhibit A attached hereto and such
other trademarks and trade names as the Brewery shall allow company to use
in connection with the distribution and marketing of the Products during
the term of this Agreement, provided, however, that Company shall not have
the right to produce or sell or the right to allow others to produce or
sell promotional materials using the Trademarks without Brewery's prior
written consent.
<PAGE>
D. "Term" means the duration of this Agreement as set out in Section 14:
"TERM."
2. APPOINTMENT AND ACCEPTANCE AS EXCLUSIVE AGENT
A. Subject to the terms and conditions of this Agreement, Brewery hereby
appoints Company as Brewery's exclusive Agent to arrange for the marketing,
sale and resale of the Products including all current Dixie products
("Dixie", "Jazz", "Voodoo", and "White Moose") in the Territory on behalf
of Brewery. Company accepts such appointment on the terms herein. Company
acknowledges that it is aware of the fact the Brewery has previously
contracted with other wholesalers, distributors and retailers in various
states and territories. In the case of states within the Territory where
Brewery has sold or is currently selling the Products through approved
wholesalers, distributors, or retailers, Company agrees that such existing
wholesalers, distributors, or retailers may continue to purchase the
Brewery's Products until such time as their contracts expire or are
terminated by Brewery.
In the event any claim is made by any of Brewery's existing distributors,
wholesalers or retailers concerning the exercise by Company of any of the
rights granted by Brewery to Company under this Agreement, Company agrees
to cease and desist immediately from exercising such rights as are the
subject of such claim upon written notice from Brewery. In the event that
Company fails to cease and desist from exercising such rights, Company
agrees that it shall indemnify, defend and bold Brewery harmless against
any and all such claims. Brewery and Company shall mutually agree on any
appointments and/or terminations of wholesalers for Dixie Products.
B. Company will not arrange for the sale or shipment of the products to
locations outside the Territory without the prior written consent of
Brewery other than as agreed to in Exhibit B. During the Term of this
Agreement and provided that Company is in full compliance with all of its
obligations hereunder, Brewery will neither appoint another marketing agent
to arrange for marketing, sale or resale of the products in or for the
Territory nor sell the Products to any customer in the Territory without
the prior written consent of Company.
3. CERTAIN OBLIGATIONS OF COMPANY
A. Company agrees to establish, promote and arrange for the resale and
distribution of the products in accordance with all Federal, State and
local requirements and to obtain and pay for all necessary permits and
licenses in accordance with the laws of the United States of America and
any other state, local and governmental authorities and in accordance with
the terms and conditions of this Agreement. Company agrees to forward
copies of
-2-
<PAGE>
all such permits and licenses to Brewery within fourteen (14) days of
receipt.
B. Company further agrees to use its best efforts to market, advertise,
merchandise and promote the sale of the Products with the aim of
maintaining, developing and extending the market for the Products,
increasing the placement of orders and the sale of Products within the
Territory and will endeavor to meet the sales targets for orders of the
Products for each calendar year as set forth in Exhibit C, as well as
cooperate with Brewery to make reviews of the marketplace with respect to
sales of the Products.
C. The means of advertising and promoting the Products shall be in two stages,
(i) The initial 1997 Marketing Plan attached as Exhibit C hereto in which
Company agrees to acquire point of sale promotional materials for the
products with a total laid in cost to Company of at least US$42,500
including neon signs with a laid in cost to Company of at least US$22,500
as well as US$60,000 as additional post-offs/deals from Company to
distributors during the first year; and (ii) a further plan which shall be
mutually agreed upon as part of an annual national marketing plan to be
proposed to Brewery by Company in writing prior to November 1st of each
year for the following calendar year. Said plan will include expenditures
equal to or greater than those of the first year. Any and all means of
advertising, promoting, and marketing of Products used by Company must gain
prior written approval from Brewery on the form, content and substance of
all major promotions and campaigns.
D. During the Initial Term, Company agrees to maintain Brewery's sales of
Products in the Territory at the following minimum levels during the Term
of this Agreement:
(i) during the first twelve-month period following the effective
date of this Agreement, at least one hundred ninety two thousand (192,000)
cases of Product consisting of twenty-four (24) twelve (12) ounce glass
containers of Products at the rate of sixteen thousand (16,000) cases per
month;
(ii) during the second twelve-month period following the effective
date of this Agreement, at least two hundred ten thousand (210,000) cases
of Product consisting of twenty-four (24) twelve (12) ounce glass
containers of Products at the rate of seventeen thousand five hundred
(17,500) cases per month; and
(iii) during the third twelve-month period following the effective
date of this Agreement, at least two hundred thirty thousand (230,000)
cases of Product consisting of twenty-four (24) twelve (12) ounce glass
containers of Products at the rate of nineteen thousand one hundred sixty
seven (19,667) cases per month.
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In order to guarantee Company's performance of its marketing obligations,
Company agrees that it will itself purchase or pay for the foregoing minimum
quantities in the event that the Brewery's Wholesale customers do not make
sufficient purchases during a given period to meet these minimum quantity
levels.
Sales of draft beer are not to be included in calculations for the determination
of guaranteed minimum product quantities, but for the purposes of this
Agreement, sales of White Moose beer in cases of twenty-four (24) seven (7)
ounce glass containers shall be considered sales of beer in twenty-four (24)
twelve (12) ounce glass containers of Products in determining guaranteed minimum
product quantities.
E. Company shall monitor the performance of its wholesalers relating to the
adequacy of their facilities for handling and storage of the products and
shall provide to Brewery on a monthly basis a full accounting of all
resales of the Products during the previous month, including the names and
addresses of each purchaser from Company, customer profiles, and the
quantities of such purchases by each customer, including depletion reports
received from wholesalers.
F. Company shall establish, organize, and maintain sufficient inventory of
Products, a competent well-trained and experienced force of sales,
supervisory, and promotional personnel sufficient to supervise and promote
the sale of Brewery's Products in the Territory.
G. Company shall promptly investigate and immediately relay to Brewery all
complaints relating to products, and cooperate with Brewery in the prompt
and appropriate disposition of such complaints.
H. Company shall at its own expense, maintain products liability, general
liability, workmen's compensation, and such other types of insurance as
reasonably necessary for Company's business operations and properties used
in marketing and arranging the distribution of the products.
I. Company shall not represent itself as being Brewery's partner or joint
venturer, nor shall Company incur any liability on behalf of Brewery, in
any way pledge or propose to pledge Brewery's credit, or accept or make any
contract binding upon Brewery.
J. Notwithstanding any other provisions hereof, Company shall be solely
responsible for all expenses incurred by Company in performance of its
duties hereunder.
K . Should Company decide to contract brew/manufacture and/or package
beer/beverages in the United States during the term of this
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Agreement, Brewery shall be given the first opportunity for the manufacture
and/or packaging of such beer/beverage.
4. CERTAIN OBLIGATIONS OF BREWERY
A. Brewery represents and warrants that the Products shall be merchantable,
free from defects or adulteration, and shall comply with all applicable
government regulations and standards.
B. With respect to all Brewery's trademarks, service marks, formulas,
processes, recipes, customer lists, sales data, marketing plans, trade
secrets, reports, patents, patent applications, copyrights, trademarks and
licenses thereof or therein regarding the products, Brewery further
represents and warrants that Brewery owns the same or has the right,
subject to the foregoing, to license, sell, sub-license and otherwise use
the same without restriction. Brewery hereby agrees to allow Company a
limited non-assignable and nontransferable right to use the Brewery's
trademarks and trade names solely in advertising and promoting the sale and
marketing of the products. Brewery shall fully indemnify and hold harmless
Company for all claims made against Company for its authorized use of the
Brewery Trademarks.
C. Brewery recognizes that a principal purpose of this Agreement is to
increase the sale of Brewery's Products through Brewery's distribution
system in the United States. To that end, Brewery shall use its best
efforts to accept and fill promptly orders for the products as they shall
be submitted by Company or its authorized customers and will take all steps
necessary to maintain and improve upon the quality of its response to
increased demand for such products as a result of Company's efforts. In the
event that Brewery is unable to fulfil its minimum production obligations,
then the Guarantee shall be adjusted accordingly.
D. Brewery shall, at its own expense, maintain in full force and effect
product liability insurance in an amount reasonably necessary for Brewery's
operations and insuring against all liabilities arising out of the
production, manufacture or consumption of products covered by this
agreement.
E. Brewery shall: 1) sell the Products to Company at the prices set forth in
Exhibit D, or as otherwise permitted by this agreement; 2) remit shipments
to Company's designated freight forwarder responsible for consolidation of
shipments; 3) forward all bills of lading and other papers in a timely
manner; 4) ship Company and authorized customers the Products set forth on
purchase orders submitted to Brewery; 5) comply with product labeling
provisions of all applicable national, state and local laws, rules and
regulations and label the Products accordingly; 6) supply products in new
glass bottles; 7) unless otherwise agreed, supply Products containing
pasteurized contents; 8) supply all draft
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Products in Sankey kegs, and; 9) notify Company promptly of any
interruption in Brewery's source of supply or production which may affect
its ability to perform under this agreement.
F. Brewery shall not represent itself as being Company's partner or joint
venturer, nor shall Brewery incur any liability on behalf of Company, in
any way pledge or propose to pledge Company's credit, or accept or make any
contract binding upon Company.
5. INDEMNIFICATION
A. Brewery represents and warrants that all Products sold shall be
merchantable and salable. Brewery shall indemnify and defend the Company,
its officers, directors and employees, against all claims, demands, losses,
liabilities, damages, costs and expenses resulting from:
1) any inaccuracy in or breach of the foregoing representation and
warranty;
2) any breach or inaccuracy in any representation, warranty, covenant or
agreement made by Brewery in this agreement;
3) any products liability or other claim by third parties arising from
defective products sold to Company by Brewery.
Indemnification under Subparagraph 5(A) will not extend to claims for which
Company shall indemnify Brewery under Subparagraph 5(B).
B. Company shall indemnify Brewery, its affiliates, officers, directors and
employees against all claims, demands, losses, liabilities, damages, costs,
and expenses resulting from Company's acts or omissions in performing under
this Agreement resulting from:
1) Company's marketing, distribution and advertising activities;
2) any breach or inaccuracy in any representation, warranty, covenant or
agreement made by Company in this Agreement.
Indemnification under Subparagraph 5(B) will not extend to claims for which
Brewery shall indemnify Company under Subparagraph 5(A).
C . If either party intends to seek indemnification under this Paragraph 5,
that party shall promptly notify the other party of any claim within five
(5) days of its receipt. The indemnifying party shall conduct, at its
expense, the settlement or defense of the claim, but:
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1) the indemnifying party shall permit the other party to participate in
any settlement or defense through that party's counsel at that party's expense,
and
2) the other party may pay or settle any claim prior to settlement, but it
will automatically waive all rights to indemnification for that claim.
If the indemnifying party does not notify the other party within a
reasonable period after its receipt of a claim that it intends to defend the
claim (unless a shorter period is required by law), or gives such notice but
fails to undertake the defense promptly and in good faith, the other party may
take all actions, in its reasonable judgment, at the expense of the indemnifying
party without waiving its rights to indemnity.
D. The indemnifying party shall promptly reimburse the other party for the
full amount of any loss resulting from the claim and all related expenses
incurred by the indemnified party within the limits of paragraph 5.
E. The indemnification and hold harmless provisions of this Agreement will
survive termination or expiration of this Agreement for a period the longer
of two (2) years or the expiration of any statute of limitations on the
claim for which indemnity is sought.
6. TERMS OF SALE TO COMPANY
A. Company shall obtain orders from Brewery's existing distributors and others
and Company shall, in turn, place orders with Brewery for the Products in
accordance with the cost price list set forth on Exhibit C attached hereto,
as said list may be amended pursuant to the terms of this Agreement from
time to time. Company shall give Brewery at least four (4) weeks notice of
each order for Products. Orders shall be made on the form of purchase order
attached as Exhibit E hereto and be accompanied by a copy of the
distributor's purchase order.
B. Brewery shall from time to time issue a Product Cost Price List for the
Products, F.O.B. Brewery's plant. Brewery shall sell and Company shall
purchase Products at the F.O.B. Brewery prices listed therein. Prices
shall include the entire cost of packing. Prices for the Products in effect
as of the date of this Agreement are set forth in Exhibit C attached
hereto. Brewery may, from time to time and upon sixty (60) days' written
notice to Company, increase prices to Company for the Products. Said
increases not to occur more often than every six months. Should Brewery
adjust prices to Company during the term of this agreement, Company and
Brewery shall negotiate in good faith to adjust the Guarantees if deemed
necessary by Company. Company shall pay for pallet deposit at prices set
forth on Exhibit D.
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7. SHIPMENTS
A. Delivery, shipment and other terms with respect to the products shall be in
accordance with the terms and conditions of the purchase orders issued by
Company. Brewery agrees that it will fulfill Company's purchase orders for
Products in a timely manner as set forth in this Agreement.
B. Delivery to Company shall be deemed to occur upon delivery of the products
into a freight container at Brewery's loading dock. Company or its
authorized customers shall be responsible for the availability of a carrier
FOB Dixie warehouse on the date of shipment, shall arrange all
transportation FOB Dixie warehouse and shall assume all risk of loss or
damage to the Products purchased by it from Brewery upon delivery to the
carrier.
C. Kegs. All kegs and other bulk containers ("Kegs") in which Products are
shipped shall be and remain the property of the Brewery. Company shall
arrange and pay for all empty Kegs to be promptly returned to Brewery in
substantially the same condition as when Company received such Kegs.
Brewery shall establish and maintain records of receipt of empty Kegs from
Company, and shall provide regular statements reflecting such records to
Company. Company shall reimburse Brewery the sum of $15.00 for each Keg
which is not returned to Brewery within 180 days of shipment.
8. PAYMENT TERMS
All payments for Products made by Company to Brewery shall be by electronic
funds transfer in United States dollars, payable at fourteen (14) days from date
of Bill of Lading. Brewery shall provide Company with an invoice, a Bill of
Lading, and any additional documents reasonably requested by Company. It is
understood that the Bill of Lading date will be the date the Company's
designated freight forwarder picks up the Products FOB Dixie warehouse at 2537
Tulane Avenue, New Orleans, LA. If Company places any orders prior to a price
increase taking effect, for shipment after the price increase takes effect, the
Bill of Lading date, for purposes of starting the fourteen (14) day payment
period, will be no longer than fourteen days from the date the order is placed,
regardless of the actual date the Products are shipped if Company wishes to
receive the pre-increase prices. As security for Company's obligations to
Brewery to pay for Products Company orders under this Agreement, Company hereby
agrees to cause an irrevocable three-year letter of credit (LC) to be issued in
the amount of US$150,000 for the first fifteen (15) months following the
Effective Date and in the amount of US $200,000 for months sixteen (16) through
thirty-six (36) following the Effective Date, such LC to be issued by Hibernia
National Bank, or other mutually
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agreed financial institution, as issuer, and with Brewery as sole beneficiary.
Said LC shall provide that Brewery shall be entitled to draw on the LC at any
time during the term of this Agreement if any one or more of the following
conditions occurs:
(a) If Company or third parties have not purchased from Brewery or paid
Brewery for at least one hundred ninety-two thousand (192,000) cases of Products
consisting of twenty-four (24) twelve (12) ounce glass containers of Products
for resale in the Territory by the end of one year from the Effective Date;
(b) If Company or third parties have not purchased from Brewery or paid
Brewery for at least two hundred ten thousand (210,000) cases of Products
consisting of twenty-four (24) twelve (12) ounce glass containers of Products
for resale in the territory during the second twelve-month period following the
Effective Date;
(c) If Company or third parties have not purchased from Brewery or paid
Brewery for at least two hundred thirty thousand (230,000) cases of Products
consisting of twenty-four (24) twelve (12) ounce glass containers of Products
for resale in the territory during the third twelve-month period following the
Effective Date;
(d) If Company or third parties have not purchased from Brewery or paid
Brewery for at least sixteen thousand (16,000) cases of Products consisting of
twenty-four (24) twelve (12) ounce glass containers of Products for resale in
the Territory during any one calendar month ("Monthly Minimum") during the first
twelve-month period following the Effective Date;
(e) If Company or third parties have not purchased from Brewery or paid
Brewery for at least seventeen thousand five hundred (17,500) cases of Products
consisting of twenty-four (24) twelve (12) ounce glass containers of Products
for resale in the Territory during any one calendar month ("Monthly Minimum")
during the second twelve-month period following the Effective Date;
(f) If Company or third parties have not purchased from Brewery or paid
Brewery for at least nineteen thousand one hundred sixty seven (19,167) cases of
Products consisting of twenty-four (24) twelve (12) ounce glass containers of
Products for resale in the Territory during any one calendar month ("Monthly
Minimum") during the third twelve-month period following the Effective Date; or
(g) If Company fails to make timely payment for any Products ordered from
Brewery during the term of this Agreement.
Brewery shall be entitled to draw on the LC such amounts as are necessary,
according to Brewery's calculations, to remedy any shortfall in purchases or
payments. The LC shall provide that Brewery, in order to remedy any shortfall
in payments, may draw up
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to the full amount of the LC at any time, upon two days written notice to
Company, and from time to time, regardless of the amount(s) previously drawn on
the LC by Brewery. Brewery shall be entitled to draw on the LC by issuing a
sight draft to the issuing bank, upon above mentioned two days written notice to
Company, to remedy the shortfall by purchasing any required minimum amount of
Products or paying for products ordered but not yet paid for. The proceeds of
draws on the LC shall be applied by Brewery as payment for Products and credited
to Company's account with Brewery. If Company disputes the amount of a draw on
the LC, Brewery shall provide to Company its calculations of the amount of the
draw within seven days of request. Brewery shall refund to Company any amount
which the parties agree should not have been drawn on the LC.
Company's failure to establish or to maintain the LC in full force and
effect as required by this Agreement shall be deemed a material breach of this
Agreement by Company.
Company shall pay Brewery the average price per case invoiced to Company
during the year times the difference between the number of cases purchased and
paid for and the Minimum Monthly Purchase Guarantee for the month. If the
Company fails to pay Brewery this amount within five (5) business days, after
written notice from Brewery, Brewery shall be entitled to draw on the entire
amount then due.
Company shall be responsible for invoicing customers and shall provide to
Brewery by the end of the next business day, copies of all invoices it issues
for sales of the Products, as well as copies of any invoice, credit memorandum,
bill of lading or other documents reflecting the amount and terms of any
transaction involving Products that Company sells or delivers for promotional
purposes, whether by way of discounts, "deals", donations, depletions or
other terms pertaining to marketing or promotion of the Products.
9. MONTHLY MINIMUM AND PREPAYMENT
In order to assure that Brewery receives a minimum guaranteed level of
revenues, for twelve (12) months from the Effective Date, Company agrees to
purchase from Brewery and pay Brewery for each month a minimum of sixteen
thousand (16,000) cases of Products; for months thirteen (13) through twenty-
four (24) from the Effective Date, Company agrees to purchase from Brewery and
pay Brewery for each month a minimum of seventeen thousand five hundred (17,500)
cases of Products, and; for months twenty-five (25) through thirty-six (36) from
the Effective Date, Company agrees to purchase from Brewery and pay Brewery for
each month a minimum of nineteen thousand one hundred sixty seven (19,167) cases
of Products. In any of the first twelve months that Company purchases less than
sixteen thousand (16,000) cases of Products, Company agrees to pay
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Brewery within three (3) business days of the end of the month, the difference
between sixteen thousand (16,000) cases of Products and the actual number of
cases purchased by Company during the month times the month's average invoiced
price per case. In any of the thirteenth through twenty fourth months that
Company purchases less than seventeen thousand five hundred (17,500) cases of
Products Company agrees to pay Brewery within five (5) business days of the end
of the month the difference between seventeen thousand five hundred (17,500)
cases of products and the actual number of cases purchased by Company during the
month times the month's average invoiced price per case. In any of the twenty-
fifth through thirty-sixth months that Company purchases less than nineteen
thousand one hundred sixty seven (19,167) cases of Products, Company agrees to
pay Brewery within five (5) business days of the end of the month, the
difference between nineteen thousand one hundred sixty seven (19,167) cases of
Products and the actual number of cases purchased by Company during the month
times the month's average invoiced price per case. Any such payments made as
provided above shall be deemed "Monthly Shortfall Payment". Any and all Monthly
Shortfall Payments may be credited by Company against any future invoices from
Brewery for Products purchased by Company that exceed the Minimum Monthly
Guarantee of cases in any month.
In each month of the first fifteen (15) months from the Effective Date, Company
agrees to pay to Brewery US$50,000 at the beginning of each month ("Monthly Pre-
Payment"). Brewery will credit the Monthly Pre-payment against its invoices for
Products purchased by Company during that month and against any Monthly
Shortfall Payments. Payment by Company for Products purchased in a single month
in excess of US$50,000 will be made as provided in Paragraph 8 above.
As used in this Paragraph 9, the term "month" shall mean a calendar month and
the term "case(s)" shall mean cases of Products consisting of twenty-four (24)
twelve (12) ounce glass containers of Products for resale in the Territory.
If Brewery is required to institute legal proceedings to collect any Monthly
Shortfall Payment or any Monthly Pre-payment, Company shall be responsible for
Brewery's reasonable attorney's fees but no less than twenty percent (20%) of
the amount sought to be collected.
10. INTEREST FREE LOAN
On the Effective Date, Company will make and fund an interest free loan
to Brewery of US$100,000. The loan will be repaid to Company by Brewery by the
Company reducing each invoice payment to Brewery by US$.37.5 per case invoiced
until the loan is repaid in full. After eight months, Company will consider
other terms if necessary at the request of Brewery. If Company defaults in the
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performance of any of Company's obligations under this agreement, then Brewery
shall be relieved of any obligations to repay the loan. If this Agreement is
terminated by Brewery for any reason, the unpaid balance of the loan becomes
immediately due and payable and if Brewery then fails to repay the loan balance
within thirty (30) days, the unpaid balance shall bear interest at the rate of
1.5% per month until paid. Additionally, if Company is required to refer the
loan to attorneys for collection, Brewery shall be responsible for all
attorney's fees but no less than twenty percent (20%) of the amount sought to be
collected.
11. NEW GLASS BOTTLES GUARANTEE
If required by the vendor(s) of new glass bottles for the Products, Company
agrees to provide a guarantee of payment of vendor's invoices to Supplier for
new glass bottles in the form of a letter of credit (LC), or other agreed
instrument, not to exceed US$50,000 at any time. If the vendor(s) draw on the
guarantee to fund invoices to Brewery, then Brewery agrees that the Company
shall receive credit against any unpaid invoices from Brewery then existing and
thereafter until all amounts drawn down by vendors are repaid to Company.
12. KEG EQUIPMENT
Company agrees to sell to Brewery, and have installed at Brewery's facility
at 2401 Tulane Avenue, New Orleans, LA, equipment for the pasteurization and
filling of products into kegs ("Keg Equipment") as reflected on Exhibit F.
Brewery shall pay Company for the Keg Equipment in installments of US$6.00 per
keg of Products invoiced by Brewery to Company, starting one year after the
Effective Date, to be credited against Brewery's invoices. Keg Equipment shall
remain the property of Company until repaid in full by Brewery.
13. TRADEMARKS
E. Company will not use Brewery's trademarks, trade names, service marks or
trade dress except as approved by Brewery. For the purpose of advertising
and selling Products, Company recognizes the validity of Brewery's
trademarks, service marks and trade names, and acknowledges that Brewery
has the sole and exclusive right to said trademarks, service marks, and
trade names, and further, that such trademarks, service marks, and trade
names are the sole and exclusive property of Brewery. Company gains no
proprietary rights in such trademarks, service marks, or trade names under
this Agreement. Company shall not infringe upon, dilute or harm the rights
of Brewery and its trademarks, service marks, and trade names. Company
shall not use any marks or names
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other than the authorized Brewery trademarks and trade names with reference
to the Products. Company shall, in connection with the use of such
trademarks or trade names use "R" or "TM," or such other approved
designation to protect such marks and/or names.
B. Company shall promptly notify Brewery of any use by a third party of the
Trademarks or any use by a third party of similar marks which may
constitute and infringement or passing off of Brewery's marks. In its sole
discretion, Brewery may institute any proceedings against such third
parties and Company will cooperate with Brewery in any infringement action
against third parties. All expenses of any infringement action shall be
borne by Brewery and all damages or recoveries in such actions shall accrue
to Brewery.
C. Upon termination of this Agreement for any reason Company shall immediately
cease the use of any of Brewery's trademarks, service marks, and trade
names, and shall return to Brewery all documents or materials in its
possession bearing Brewery's trademarks, service marks, and/or trade names.
Brewery shall be authorized to cancel any registration of Company as a user
of such trademarks, service marks or trade names. The obligations of this
Section shall survive the termination of this Agreement.
14. TERM
Except in the case of earlier termination in accordance with the provisions
of this Agreement, the initial term of this Agreement shall be for a period of
three (3) years from the Effective Date ("Initial Term"). By the mutual
agreement of Brewery and Company, this Agreement may be renewed for three (3)
additional five-year periods ("Each Renewal period"). As a condition of renewal,
Company shall be required to demonstrate that it has complied with all of its
obligations under this Agreement prior to the date of a renewal and, in
particular, that Company has satisfied its minimum purchase obligations during
the initial Term. Company shall advise Brewery and Brewery shall advise Company
in writing at least six (6) months prior to the end of the initial Term of
Company's desire to renew this Agreement. In the event of renewal, Brewery and
Company shall agree upon sales goals for the five (5) year renewal period and
any successive five (5) year period thereafter.
15. TERMINATION
Notwithstanding any of the other terms of this Agreement, either party may
terminate this Agreement immediately by giving notice to the other party if:
A. If either (i) a material breach of a party's payment obligations under this
Agreement shall occur (without benefit of
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cure) or (ii) a material breach of a party's non-monetary payment
obligations under this Agreement shall occur and continues unremedied for a
period of thirty (30) days following such party's receipt of a written
notice of the nature of the breach, then the aggrieved party may terminate
this Agreement;
B. The other party applies for or consents to the appointment of a receiver,
trustee or liquidator for such party or for all or a substantial part of
such party's property;
C. The other party makes a general assignment for the benefit of creditors or
becomes insolvent;
D. The other party discontinues its business or the Company ceases to sell or
distribute the Product;
E. Either party is unable to perform its material obligations under this
agreement due to any newly enacted law, rule, or regulation of any
governmental or administrative agency.
F. Company fails to purchase or pay for from Brewery the following minimum
amounts of Products for resale in the Territory during the Initial Term of
this Agreement:
(i) during the first twelve-month period following the effective
date of this Agreement, at least one hundred ninety two thousand (192,000)
cases of Product consisting of twenty-four (24) twelve (12) ounce glass
containers of Products at the rate of sixteen thousand (16,000) cases per
month;
(ii) during the second twelve-month period following the effective
date of this Agreement, at least two hundred ten thousand (210,000) cases
of Product consisting of twenty-four (24) twelve (12) ounce glass
containers of Products at the rate of seventeen thousand five hundred
(17,500) per month; or
(iii) during the third twelve-month period following the effective
date of this Agreement, at least two hundred thirty thousand (230,000)
cases of Product consisting of twenty-four (24) twelve (12) ounce glass
containers of Products at the rate of nineteen thousand one hundred sixty
seven (19,167) cases per month.
Sales of draft beer are not to be included in calculations for the determination
of guaranteed minimum product quantities, but for the purposes of this Agreement
sales of White Moose beer in cases of twenty-four (24) seven (7) ounce glass
containers shall be considered sales of beer in twenty-four (24) twelve (12)
ounce glass containers of Products in determining guaranteed minimum product
quantities.
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G. Company sells and/or distributes products to any person other than
authorized distributors; or Brewery sells Products to anyone other than
Company in accordance with this Agreement.
H. The other party fails to obtain timely, any license necessary for such
party to manufacture, sell, or distribute, as the case may be, Products
under this Agreement, or if such license expires, or is revoked or has been
suspended for more than thirty (30) days and the party has not cured its
failure within a period of ninety (90) days following written notice to
that party from the licensing authority of such revocation, suspension or
termination.
I. Any party assigns or subcontracts an interest in all or any part of this
Agreement except as expressly permitted in this agreement without the prior
written consent of the other party.
J. Upon the effective date of termination or expiration of this Agreement:
1) all rights, licenses and privileges granted in the Agreement will
cease, and Company shall immediately discontinue its sale of the Products;
2) each party shall return to the other party, all written documents and
materials constituting and containing any confidential information belonging
to the other party, and shall not make or retain any copies of such documents
and materials;
3) Company shall, at its expense, immediately discontinue all use or
display of trademarks or trade names relating to products;
4) Company shall deliver to Brewery the name and addresses of Company's
customers for Products, and shall turn over to Brewery all sales negotiations
with customers then in progress and all unfilled orders from Company to Brewery
shall be deemed terminated without further liability on the part of either
party; and
5) Brewery shall repurchase from Company any or all Products in Company's
inventory at the laid-in cost to Company (excluding, specifically, any handling
charges) for such Products less any and all amounts then owing, for whatever
reason, from Company to Brewery.
6) Brewery agrees that on termination or expiration of this Agreement,
that it shall buy back from Company, at Company's laid in cost less any
applicable credits, any equipment or unused promotional materials purchased by
Company on behalf of Brewery including but not limited to draft machines,
fillers, pasteurizers, sterilizers, and Point of Sale materials.
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7) Brewery and Company shall, following the receipt of a notice of
termination or expiration, or during the six (6) month period preceding the
expiration of the term of this agreement then in effect, maintain its general
pricing and sales policies and shall cooperate with each other in good faith to
take whatever action is reasonably necessary to wind up this agreement in an
orderly fashion.
Acceptance of orders by Brewery after notice of termination is given
shall constitute separate transactions, and shall not operate as a renewal or
revival of this Agreement or as a waiver of such termination. The obligations
of this Section shall survive the termination of this Agreement.
16. MISCELLANEOUS
A. CONFIDENTIALITY: Neither party, nor its employees, agents or affiliates,
shall disclose or make accessible to anyone, or make use of it for its own
benefit (other than as is consistent with the terms of this agreement),
either during or after the term of this Agreement, divulge any confidential
information of the other party. Upon termination of this Agreement, each
party and its agents or affiliates shall return to the other party all
confidential information.
F. FORCE MAJEURE: The parties shall not be responsible or liable for failure
to perform any part of this Agreement or for any delay in the performance
of any part of this Agreement, directly or indirectly resulting from or
contributed to by any cause beyond its reasonable control, including, but
not limited to, force majeure, unavailability of raw materials or packaging
materials, strikes, or the laws, regulations, acts or failure to act of any
governmental authority. Nothing contained in this Section shall constitute
a release of any representation or warranty made by a party under this
Agreement. In the event of the occurrence of an event of force majeure, the
party claiming the benefit of this subsection shall give prompt notice to
the other and also shall use all reasonable efforts to alleviate or
minimize the detrimental consequences of the event. An event of force
majeure shall not excuse the obligation to make payments for goods which
are delivered or tendered for delivery hereunder.
G. INDEPENDENT CONTRACTORS/NOT PARTNERS: The relationship of Company and
Brewery shall be that of independent contractors and nothing contained in
this Agreement shall be construed to imply a partnership, joint venture or
principal and agent relationship between Company and Brewery.
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H. GOVERNING LAW / ARBITRATION AND CONSENT TO JURISDICTION:
Any controversy or claim arising out of or relation to this Agreement or
the breach thereof shall be settled by binding arbitration in accordance with
the rules of commercial arbitration of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. Such binding arbitration shall occur within
New Orleans, Louisiana, unless the parties mutually agree to have such
proceedings in some other locale.
I. NOTICES: All notices, directions, or other instruments required or
permitted to be given or made under this Agreement shall be in writing and
may be effected by a) personal delivery, and deemed to have been given or
made at the time of delivery; b) registered or certified mail or courier
and shall be deemed communicated three (3) days from the mailing thereof to
the other party at the address set forth below or to such other address as
either party may specify in a written notice to other party:
To Company: AmBrew USA, Inc.
One Galleria Blvd., Suite 1714
Metairie, LA 70001
Telephone: (504) 849-2739
Fax: (504) 849-2782
Attn: Steve Armstrong
James Ake
To Brewery: Dixie Brewing Company, Inc.
2537 Tulane Avenue
New Orleans, LA 70119
Telephone: (504) 822-8711
Fax: (504) 827-0410
Attn: Joseph M. Bruno
Kendra E. Bruno
J. ATTORNEY'S FEES: In any dispute or controversy in contract or tort or
otherwise arising in any way under this Agreement or the relationship of
such parties created by the Agreement, and/or where any provision of this
Agreement is validly asserted as a defense, the successful party shall be
entitled to recover costs (including reasonable attorneys' fees) in
addition to any other available remedy. The terms of this paragraph shall
survive the termination of this Agreement.
K. SEVERABILITY: If any term, provision, covenant or condition of this
Agreement or the application thereof is held to be invalid, void, or
unenforceable, the remainder of the provisions shall remain in full force
and effect and shall in no way be affected, impaired, or invalidated
thereby, and each remaining term, provision, covenant or condition of this
Agreement shall be valid and shall be enforceable to the fullest extent
permitted by law.
-17-
<PAGE>
L. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between
the parties hereto relating to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understanding, negotiations and
discussions, whether oral or written, of parties and there are no general
or specific warranties, representations or other agreements by or among the
parties in connection with the entering into of this Agreement or the
subject matter hereof except as specifically set forth herein.
M. FURTHER ASSISTANCE: The parties hereto and each of them do hereby covenant
and agree to do such things and execute such further documents, agreements
and assurances as may be necessary or advisable from time to time in order
to carry out the terms and conditions of this Agreement in accordance with
their true intent.
N. AMENDMENTS: This agreement may be altered or amended in any of its
provisions when any such changes are reduced to writing and signed by the
parties hereto but not otherwise.
0. WAIVER: Failure on the part of either party to complain of any act or
failure to act of the other party or to declare the other party in default,
irrespective of how long such failure continues, shall not constitute a
waiver by such party of its rights hereunder unless specified herein.
P. HEADINGS: The headings in this Agreement have been inserted for reference
and as a matter of convenience only and in no way define, limit or enlarge
the scope or meaning of this Agreement or any provision hereof.
Q. ASSIGNMENT: No assignment of this Agreement or any right accruing hereunder
shall be made, in whole or in part, by either party without the prior
written consent of the other.
R. COUNTERPARTS: This Agreement may be signed in any number of counterparts,
each of which shall be original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
S. THIRD PARTY BENEFICIARIES: The parties to this Agreement do not intend
(either expressly or by implication) to confer any rights and/or benefits
upon any third parties by virtue of this Agreement and/or any rights,
duties, and/or obligations arising thereunder.
T. SUCCESSORS AND ASSIGNS: The terms of this Agreement are binding upon
Brewery and Company as well as, to the extent allowed by this Agreement,
each of their respective successors, heirs and assigns.
Q. The parties agree that this Agreement shall not be construed as a wholesale
distribution arrangement, but as a marketing agency
-18-
<PAGE>
relationship. The purposes of requiring Company to purchase Products from
Brewery are to assure a level stream of revenues to Brewery, to provide a
minimum guaranteed level of revenues to Brewery, and to facilitate the
resale of Products to Brewery's existing wholesalers through the use of
Company as a marketing agent of Brewery. Nothing in this Agreement shall in
any way confer upon Company any exclusive or non-exclusive right as a
wholesaler or distributor under the laws of any state, nor shall this
Agreement in any way affect, impair or modify the rights of the Brewery's
existing wholesalers and distributors under any agreement or letter of
appointment to which Brewery is a party. Nothing in this Agreement shall be
construed to impose on Brewery any obligation as a supplier of beer or malt
beverages under any state law regulating the business relations between
suppliers and wholesalers of beer or malt beverages, including without
limitation such state laws which impose notice, good faith, or good cause
or similar requirements for termination, amendment, modification,
discontinuance, forced resignation, cancellation, or non-renewal of
wholesaler agreements.
R. American Craft Brewing International, Ltd. hereby intervenes into this
Agreement and expressly guarantees the Company's performance of all of
Company's obligations to Brewery under this Agreement.
S. Notwithstanding anything herein to the contrary, if Brewery receives a bona
fide offer to purchase any or all of its assets, and Brewery desires to
sell such assets pursuant to such offer, then it shall notify Company and
shall provide Company with a copy of such offer, the identity of the
offeror (including such offeror's beneficial owners and such other
information as Company may request, and as is readily available to Brewery,
to substantiate the offeror's ability to consummate the proposed
transaction. Failure of Brewery to promptly provide such information
results in the tolling of the thirty day period referred to in the next
sentence until such reasonably requested information is provided to
Company. For a period of thirty days following the giving of such notice
referenced above, Company has the option to acquire any or all of the
Brewery assets on the same terms and conditions as set forth in the offer.
If Brewery desires to sell the brewery, Brewery shall first notify Company.
-19-
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement through their duly
authorized officers, effective on the day and year first above written.
ATTEST: DIXIE BREWING COMPANY, INC.
/s/ Kendra Bruno By: /s/ Joe M. Bruno
___________________________ ______________________________
Secretary Its: Chairman
ATTEST: AMBREW USA, INC.
/s/ James L. Ake By: /s/ James L. Ake
___________________________ ______________________________
Secretary Its: President
By: /s/ Stephen Armstrong
______________________________
Its: Vice-President
ATTEST: AMERICAN CRAFT BREWING INTL., LTD.
/s/ James L. Ake By: /s/ James L. Ake
___________________________ ______________________________
Secretary Its: Executive Vice President
-20-
<PAGE>
EXHIBIT A
Dixie Beer
Dixie Amber Light Beer
Dixie Blackened Voodoo Lager Beer
Dixie Jazz Amber Light
Dixie Crimson Voodoo Ale
Dixie White Moose
-21-
<PAGE>
DATE OF COMMENCEMENT 1ST AUGUST 1997
------------------------------------
FRANCHISE AGREEMENT
BETWEEN
A. G. BARR P.L.C.
AND
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
<PAGE>
FRANCHISE AGREEMENT
-------------------
THIS FRANCHISE AGREEMENT is made BETWEEN:
(1) A.G. BARR P.L.C. a company incorporated in accordance with the law of
Scotland (with registered number 5653 Scotland) whose registered office is
at 1306 Gallowgate, Glasgow, Scotland G31 4DS ("the Company"); and
(2) AMERICAN CRAFT BREWING INTERNATIONAL LIMITED. whose registered office is
at One Galleria Boulevard, Suite 1714 Metairie, Louisiana 70001 ("the
Franchisee").
It is hereby AGREED between the Company and the Franchisee as follows:-
DEFINITIONS
In this Agreement unless the context otherwise requires:-
a) "this Agreement" shall mean this Franchise Agreement and the Schedule;
b) "Concentrate" shall mean the essences and powdered material which are part
of the System and which are to be supplied by the Company pursuant to this
Agreement;
c) "the Date of Commencement" shall mean 1st August 1997 notwithstanding the
date or dates of signing this Agreement by the parties;
d) "Finished Drink" shall mean the amount of any of the Products in ready to
drink form;
e) "the Franchise" shall mean the franchise granted by the Company to the
Franchisee in terms of this Agreement;
f) "the Products" shall mean the Company's products specified in Part 1 of
the Schedule;
g) "the Schedule" shall mean the Schedule annexed hereto with its several
Parts;
h) "the System" shall mean the recipes and manufacturing procedures
established by the Company for the Products as the same may be amended or
changed from time to time;
2
<PAGE>
i) "FOB Price" shall mean the price delivered U.K. port;
j) "the Term" shall mean the period of this Agreement from the Date of
Commencement until its termination in terms hereof;
k) "the Territory" shall mean The United States of America;
l) "Year" shall mean a period of 12 months except for the first year (Year 1)
of the Agreement which will commence on 1st August 1997 and end on 31st
January 1999;
WHEREAS:
(A) The Company manufactures a range of soft drinks under various trade names
according to the System at its factories in the United Kingdom.
(B) The Franchisee wishes to manufacture certain Products in accordance with
the System and to market and distribute them with in the Territory.
(C) The Company has applied for registration of the trademark "Tizer"
Registration Application Number 695258.
1. FRANCHISE
The Company hereby grants to the Franchisee for the duration of the Term the
sole and exclusive franchise to manufacture, market and distribute the Products
in the Territory under the Company's applicable trade names and in accordance
with the System on the terms and conditions hereinafter set forth.
2. PERIOD
This Agreement shall commence on the Date of Commencement and, subject to the
provisions of Clause 12.01 and 12.02, shall continue until 31st January 2018 and
thereafter until terminated by either party pursuant to C1ause 12.02 or 12.03
hereof.
3. EXCLUSIVITY
The Company will not prior to or during the Term operate or license any person
other than the Franchisee to manufacture, market or distribute the Products in
the Territory.
3
<PAGE>
4. ESTABLISHMENT OF THE FRANCHISE
4.01 The Company shall provide the Franchisee with all information, data,
recipes and food product specifications necessary
(1) for the Franchisee to manufacture the Products in accordance with the
System to the high standards achieved by the Company in its
manufacture of the Products and
(2) to enable the Franchisee to market and distribute the Products and
shall keep the Franchisee promptly informed of any alterations or
improvements which it may make to the System from time to time.
4.02 The Company shall provide the Franchisee with such reasonable technical
assistance as may be required by the Franchisee to commence manufacture of
the Products in accordance with the System.
4.03 The Company shall provide the Franchisee when reasonably requested to do
so with the general services of its Export Department on a free-of-charge
basis. Any other specific assistance required will be paid for at cost by
the Franchisee.
4.04 The Franchisee shall at its own expense obtain such consents, licences and
permissions as may be necessary for the proper manufacture of the Products
in accordance with the System in the Territory.
4.05 The Franchisee shall endeavour to commence manufacture of the Products in
accordance with the System in the Territory and begin marketing and
distributing the Products as soon as reasonably possible and in any event
not later than six months after the Date of Commencement.
5. FRANCHISEE'S UNDERTAKINGS
5.01 The Franchisee hereby undertakes to the Company that it will at all times
during the Term and in the case of Clause 5.01 (r) for a further period of
one year after the end of the Term, observe and perform the terms and
conditions set out in this Agreement and in particular it will:
(a) manufacture the Products in conformity in all respects with the
System and the high standards of the Company as to which conformity
the Company shall be the sole judge;
(b) manufacture, market and distribute the Products in accordance with
the highest business standards and in compliance with all such
policies and operating standards as may from time to time be
specified by the Company and not do any act which will or may reflect
adversely upon the business integrity or goodwill of the Company or
upon the standards of quality of the System;
4
<PAGE>
(c) ensure that all premises and equipment used in the manufacture of the
Products are kept and maintained in a safe, efficient, clean and
presentable condition, of which condition the Company shall be the
sole judge;
(d) comply with all laws and government regulations applicable to the
manufacture, marketing and distribution of the Products, including
all statutory and other requirements relating to dispatch, labelling,
weight, quality and volume of the Products;
(e) obtain and keep in full force and effect at all times policies of
insurance covering public liability including claims arising as a
result of Products manufactured by the Franchisee failing to conform
with the System;
(f) retain 4 production samples following each occasion when production
takes place for a period of nine months from that date and during
the first 2 years of production with any given bottler to courier 2
samples at the Franchisee's expense to the Company within 7 days of
manufacture of such samples. Thereafter, to dispatch one case of
samples of Finished Drink each quarter, from each bottler, at the
Franchisee's expense, to the Company;
(g) permit the Company and its authorised representatives during normal
working hours and with prior notice to inspect the premises used by
the Franchisee for manufacture of the Products and inspect the
Franchisee's equipment and operations and call for production to them
of samples of the Products for analysis or testing by the Company for
the purpose of ascertaining whether the provisions of this Agreement
are being complied with;
(h) purchase from the Company or from suppliers nominated by the Company
in reasonably regular quantities the Concentrates required for the
manufacture of the Products in accordance with the System and not re-
sell or otherwise dispose of the said Concentrates otherwise than in
accordance with the terms of this Agreement;
(i) ensure that all Products, bottles and containers for Products and
related cartons and packaging bear a distinctive label or style, the
design and format of which shall first be approved in writing by the
Company and which shall be used by the Franchisee exclusively for the
purpose of the Franchise;
(j) use the Company's established trade names and registered trade marks
for the appropriate Products as directed by the Company and not
permit any variation to be made to such trade names or trade marks,
which shall be used by the Franchisee exclusively for the purposes of
the Franchise;
5
<PAGE>
(k) use its best endeavours (a) to promote the Products within the
Territory subject only to the prior written approval of the Company
to the form, manner and wording of all advertising material used and
(b) to achieve the minimum annual sales as set out in Part 3 of the
Schedule;
(l) not use the Company's trade names, premises, equipment, promotional
material, packaging, paper products, stationery or other items or
materials purchased, leased or obtained for the purpose of operation
of the Franchise except for that purpose;
(m) not use the Company's trade names or any other mark or name used in
connection with the Franchise as a corporate or company name or as
part of a corporate or company name without the prior written consent
of the Company;
(n) if at any time any of the trade names of the Company shall be
registered as trade marks or service marks, do all such acts and
things and enter into all such deeds and documents as may be
necessary for the protection of the validity or registration of such
trade marks or service marks (including, where appropriate, a
registered user agreement to enable the Franchisee to be registered
as a registered user of the trade or service marks);
(o) establish and maintain a distribution system to make the Products
available to customers throughout the whole of the Territory;
(p) supply to the Company in respect of each period of three months
during the Term (and within twenty days after the end of such
period), a short report as to the operation of the Franchise
including sales figures expressed in litres of Finished Drink in the
Territory and on such matters on which the Company may reasonably
require regular reporting from time to time and permit the Company's
representatives at any time during normal business hours on
reasonable notice to the Franchisee to inspect, and if required, to
provide copies to the Company of its accounts and records with regard
to the manufacture and sale of the Products;
(q) by 28th February in each year of this Agreement provide to the
Company a certificate signed by the Chief Executive Officer of the
Franchisee as to the amount of literage sales of Finished Drink sold
by the Franchisee in the Territory during the preceding year (or in
respect of the first year from the Date of Commencement until 31st
January 1999);
(r) not be engaged, concerned or interested either directly or indirectly
in the manufacture in the Territory of any product similar in taste,
colour, name or design to the Products which might compete or
interfere with the Franchise or with the business of a successor to
the Franchisee as franchisee of the Company in the Territory.
6
<PAGE>
5.02 If during the Term the Franchisee shall discover or devise any
improvements to the System or which may otherwise be applicable to the
Franchise, it shall forthwith provide the Company with full details
thereof and the Company shall be entitled to make use thereof (and to
permit other franchisees to make use thereof) both during and after the
termination of this Agreement. If required by the Company the Franchisee
shall grant and deliver to the Company any documents required to transfer
to the Company all rights to such improvements.
5.03 For the avoidance of doubt, the Franchisee shall not knowingly sell the
Products or offer the Products to any person for re-sale outside the
Territory.
6. COMPANY'S UNDERTAKINGS
6.01 The Company hereby undertakes to the Franchisee that (subject to the
provisions of Clause 6.02) it will at all times during the Term:
(a) permit the Franchisee to operate the Franchise under the Company's
trade names and to use the trade names (or such other names or words
as may from time to time be specified or approved in writing by the
Company) in advertising the Products and in telephone, trade and
other directory entries provided that the use of such names or words
shall make it clear that the Franchisee is a franchisee of the
Company;
(b) consult with the Franchisee and give to the Franchisee the benefit of
its knowledge and experience of problems relating to the manufacture,
marketing and distribution of the Products;
(c) extend to the Franchisee the benefit of such advertising as the
Company shall in its discretion provide in relation to the Products
generally;
(d) use all reasonable endeavours so far as permitted by law to safeguard
the Franchise including the taking of such steps as may be available
to it to prevent the infringement of the Franchisee's rights under
the Franchise;
(e) deliver the Concentrates required for manufacture of the Products in
accordance with the System FOB U.K. port within a reasonable time of
an order being received in writing from the Franchisee unless
prevented from so doing by circumstances out of the Company's
control.
6.02 Notwithstanding anything herein contained the Company reserves the rights
to add to, withdraw or change any part of the System from time to time
after having due regard to the interests of the Franchisee.
7
<PAGE>
6.03 Risk in the Concentrate supplied by the Company shall pass to the
Franchisee once goods have passed over the ship's rail at the U.K port of
shipment.
7. INTELLECTUAL PROPERTY RIGHTS
7.01 The Company warrants that it is entitled to franchise the intellectual
property rights comprised in the System in accordance with the provisions
of this Agreement.
7.02 The Company acknowledges that during the Term the Franchisee shall have
exclusive rights in the Territory:
(a) to the System and all copyrights, trade mark registrations, patents
and other intellectual property rights now or hereafter existing,
applied for or granted in connection with the System;
(b) to use and franchise others to use the System within the limits of
this Agreement and, in particular, the trade names and all goodwill
therein including all goodwill accruing to the use of the trade names
by the Franchisee but the foregoing right shall be strictly subject
to the prior written consent and approval of any appointment and its
term by the Company, which shall not be unreasonably withheld;
7.03 (a) The Franchisee will notify the Company forthwith of any circumstances
coming to its attention which may constitute an infringement of any
trade mark belonging to the Company which may have been registered to
protect the trade names or any copyright applicable to the trade
names and shall take such reasonable action in connection therewith
as the Company may direct at the expense of the Company. The Company
shall not be obliged to take any action following an infringement and
will have the sole right to control any legal proceedings concerning
its trade names;
(b) The Franchisee shall at the expense of the Company take such action
in relation to the use of the trade names belonging to the Company in
the operation of the Franchise as the Company may from time to time
direct in order to make clear that such trade names are the subject
of copyright or trade mark protection.
8. PAYMENTS AND PAYMENT PROCEDURE
8.01 In consideration of the Franchise and other rights granted and assistance
agreed to be rendered hereunder the Franchisee shall pay:
8
<PAGE>
(a) the price for the Concentrate required for the manufacture of the
Products in accordance with the System.
(b) all seafreight charges, import duty, tax and other charges in
relation to the Concentrate including landing charges at the port of
disembarkation, demurrage and inland freight charges within the
Territory.
8.02 The FOB Price for Concentrate shall be as set out in Part 2 of the
Schedule as varied from time to time by the Company giving written notice
thereof to the Franchisee.
8.03 The price for each consignment of Concentrate ordered by the Franchisee
shall be paid in US dollars (or in such other currency as the Company
shall direct) to the Company in Glasgow by the sixtieth day from date of
invoice.
9. INDEMNITY
9.01 The Franchisee shall indemnify and keep indemnified the Company against
all liabilities, losses, proceedings, claims, costs and expenses of
whatever nature which may arise in any way whatsoever or which the Company
may suffer, incur or sustain out of any act, neglect or default of the
Franchisee or its agents or employees in the conduct of the Franchise in
the Territory provided that such losses are not due to any act or default
of the Company.
9.02 In the event of any claim being made or threatened against the Franchisee
for its authorised use of the trademark Tizer, then the Franchisee shall;
(a) intimate such claim in writing forthwith to the Company providing
full details thereof and an assessment of the validity and
seriousness of the claim;
(b) permit the Company if it wishes to conduct the defence of such claim
on behalf of the Franchisee (and the Franchisee shall co-operate
fully with the Company in relation thereto) including the right to
settle such claim on such terms as shall be within the sole
discretion of the Company subject to the Company meeting the whole
cost of dealing with such defence or settlement, including all legal
expenses;
(c) comply with the Company's written directions in relation to such
claim.
Subject to the Franchisee implementing its obligations under this
Agreement, if the Franchisee suffers any loss as a direct consequence of
any such claim having complied with the Company's requirements and
directions in respect of any such claim (but not otherwise) the Company
shall fully indemnify and
9
<PAGE>
hold harmless the Franchisee for that claim including its reasonable
attorney's fees and costs, related expenses and damage awards.
In the absence of any specific direction from the Company, the Franchisee
shall be obliged to take such steps as may be reasonably necessary to
mitigate its loss.
10. CONFIDENTIALITY
10.01 The Franchisee shall at all times both during the Term and afterwards
keep secret and confidential all information provided to it with regard to
the System and the Products save such as shall be or shall become in the
public domain other than by the fault of the Franchisee.
10.02 The Franchisee shall not at any time without prior written consent of the
Company disclose any information received from the Company in relation to
the Company's business or the System or the Products to any third party
other than those employees of the Franchisee or employees of any contract
bottler who are required to receive such information in the course of
their duties and who shall be bound by a similar appropriate
confidentiality undertaking.
11. FORCE MAJEURE
Neither of the parties to this Agreement shall be responsible to the other party
for any delay in performance or non-performance of its obligations hereunder due
to any cause beyond its reasonable control, but the affected party shall
promptly upon the occurrence of any such delay or non-performance inform the
other party in writing thereof and thereafter such other party shall use its
reasonable endeavours to comply with the terms of this Agreement as fully and as
promptly as possible.
12. EVENTS OF TERMINATION
12.01 The Company shall have the right
(1) to terminate this Agreement pursuant to Clause 14.01 of this
Agreement and
(2) at any time by giving notice in writing to the Franchisee to
terminate this Agreement forthwith in any of the following events:
(a) if the Franchisee commits a material breach of any of the terms
or conditions of this Agreement and fails to remedy the same
within 30 days of being required by the Company so to do;
(b) if the Franchisee is unable to pay its debts as they fall due or
a petition is presented or meeting convened for the purposes of
winding the Franchisee up or a petition is presented or an order
is made for the appointment of an administrator of the
Franchisee or the Franchisee enters into liquidation whether
compulsorily or
10
<PAGE>
voluntarily or compounds with its creditors generally or has a
receiver appointed of all or any part of its assets or takes or
suffers any similar action in consequence of debt or any event
occurs which is the legal equivalent of any of the foregoing
under the laws of the local or national jurisdiction;
(c) if without the prior consent in writing of the Company any
change shall occur in the ownership or control of the Franchisee
which in the sole opinion of the Company is a material change.
12.02 The Franchisee shall have the right to terminate this Agreement at any
time on giving at least 6 months prior notice in writing to the Company of
the date of termination.
12.03 In addition to the rights of termination conferred upon the Company under
Clause 12.01, the Company shall have the right to terminate this Agreement
on 31st January 2018 or at any time thereafter subject to the Company
giving the Franchisee at least 6 months prior written notice of the date
of termination.
13. CONSEQUENCES OF TERMINATION
13.01 On the termination of this Agreement (for whatever reason) all rights of
the Franchisee hereunder shal1 terminate and the Franchisee shall
immediately thereafter cease to use the Company's trade names and the
System and every part thereof and shall forthwith deliver to the Company
or otherwise dispose of as the Company directs all Products, Concentrate,
promotional materials, packaging, stationery, and other items and
materials related to the Franchise which are in the Franchisee's
possession or control at termination. The Company shall grant credit or
pay to the Franchisee the cost to the Franchisee of any such Products and
Concentrate so returned or delivered in a fully usable condition.
13.02 The termination of this Agreement (for whatever reason) shall not affect
the respective rights and liabilities of each of the parties hereto
accrued prior to such termination.
14. MINIMUM ANNUAL SALES EXPRESSED IN LITRES OF FINISHED DRINK
14.01 In the event that the minimum annual sales expressed in litres of Finished
Drink as set out in Part 3 of the Schedule are not achieved by the
Franchisee the Company shall have the right (but not the duty) to
terminate this Agreement on giving at least 90 days notice in writing of
termination to the Franchisee. Such notice must be given within 60 days of
receipt by the Company of the certificate described in Clause 5.01(q).
14.02 In the event that the Franchisee imports direct from the Company products
of the Company not specified in Part 1 of the Schedule, these may become
subject to a separate Distribution Agreement and will not contribute to
the sales expressed in litres of Finished Drink figures set out in Part 3
of the Schedule.
11
<PAGE>
15. STATUS OF AGREEMENT
Nothing in this Agreement shall constitute a partnership between the parties
hereto or constitute the Franchisee an agent of the Company for any purpose
whatever and the Franchisee shall have no authority or power to bind the
Company or to pledge its credit.
16. ENTIRE UNDERSTANDING
16.01 This Agreement embodies the entire understanding between the parties
hereto and there are no promises, terms or conditions or obligations, oral
or written, expressed or implied, other than those contained or referred
to herein.
16.02 Any alteration to this Agreement shall only be effective if in writing
and signed for and on behalf of both of the parties hereto.
17. WAIVER
No failure or omission by the Company to enforce any of the terms of this
Agreement shall be construed as a waiver of such terms.
18. NOTICES
Any notice required to be given hereunder shall be sufficiently given if sent by
facsimile, registered or recorded delivery post or left at the registered office
for the time being of the party to whom notice is to be given. Any such notice
shall be deemed to have been duly given
(a) if sent by post, on the seventh day following the day of posting and
(b) if sent by facsimile on transmission by the sender.
19. DISPUTE RESOLUTION
If there should be any dispute among the parties hereto arising out of or
relating to this Agreement, they will attempt in good faith to resolve the
dispute through discussion among senior managers having authority to settle it.
If the dispute is not resolved within 30 days of the start of such procedure, or
such longer period as the parties hereto agree, then it may be referred to
litigation.
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<PAGE>
20. GOVERNING LAW/CONSENT TO JURISDICTION
This Agreement and all that follows thereon shall be governed, interpreted and
construed according to the Law of Scotland and both parties hereto agree to
accept and prorogue the jurisdiction of the Court of Session in Edinburgh or the
Sheriff Court of Glasgow and Strathkelvin at Glasgow.
SIGNED BY ) /S/ M. BARR
for and on behalf of ) -------------------------
the Company: ) Director
at: Glasgow
-------------------------
on: 18 June 1997
-------------------------
WITNESSED BY:
Name: /s/ M. Hassan
-----------------------
Address: 1306 Gallowgate
-----------------------
Glasgow
-----------------------
G31 4DS
-----------------------
Occupation: Transport Administrator
-----------------------
SIGNED BY ) /s/ Peter Bordeaux
for and on behalf of ) -------------------------
the Franchisee: ) Director (Duly Authorised)
At: New Orleans
--------------------------
On: 30 June 1997
--------------------------
WITNESSED BY:
Name: /s/ James L. Ake
------------------------
Address: One Galleria Boulevard
------------------------
Suite 1714
------------------------
Metairie, LA 70001 USA
------------------------
Occupation: Chief Operating Officer
------------------------
AmBrew International
13
<PAGE>
THIS IS THE SCHEDULE REFERRED TO IN THE FOREGOING FRANCHISE AGREEMENT
BETWEEN A.G. BARR P.L.C. AND AMERICAN CRAFT BREWING INTERNATIONAL LTD
PART 1
THE PRODUCTS
------------
Tizer (Standard)
Tizer ("Diet")
PART 2
F 0 B PRICE SCHEDULE FOR CONCENTRATE
------------------------------------
$700 per 2 x Tizer Pack 493 plus 1 x Tizer Pack 020
PART 3
------
MINIMUM ANNUAL SALES EXPRESSED IN LITRES OF FINISHED DRINK
----------------------------------------------------------
During the initial five years and the tenth and fourteenth year
following the Date of Commencement.
YEAR 1 200,000 LITRES
YEAR 2 400,000 LITRES
YEAR 3 600,000 LITRES
YEAR 4 800,000 LITRES
YEAR 5 ONE MILLION LITRES
YEAR 10 TWO MILLION LITRES
YEAR 14 THREE MILLION LITRES
14
<PAGE>
DATE OF COMMENCEMENT 1ST AUGUST 1997
------------------------------------
FRANCHISE AGREEMENT
BETWEEN
A. G. BARR P.L.C.
AND
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
<PAGE>
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT is made BETWEEN:
(1) A.G. BARR P.L.C. a company incorporated in accordance with the law of
Scotland (with registered number 5653 Scotland) whose registered office is
at 1306 Gallowgate, Glasgow, Scotland G3 4DS ("the Company"); and
(2) AMERICAN CRAFT BREWING INTERNATIONAL LIMITED whose registered office is at
(One Galleria Boulevard, Suite 1714, Metairie, Louisiana 7000l ("the
Franchisee").
It is hereby AGREED between the Company and the Franchisee as follows:-
DEFINITIONS
In this Agreement unless the context otherwise requires:-
a) "this Agreement" shall mean this Franchise Agreement and the Schedule;
b) "Concentrate" shall mean the essences and powdered material which are part
of the System and which are to be supplied by the Company pursuant to this
Agreement;
e) "the Date of Commencement" shall mean 1st August 1997 notwithstanding the
date or dates of signing this Agreement by the parties;
d) "Finished Drink" shall mean the amount of any of the Products in ready to
drink form;
e) "the Franchise" shall mean the franchise granted by the Company to the
Franchisee in terms of this Agreement;
f) "the Products" shall mean the Company's products specified in Part 1 of
this Schedule;
g) "the Schedule" shall mean the Schedule annexed hereto with its several
Parts;
h) "the System" shall mean the recipes and manufacturing procedures
established by the Company for the Products as the same may be amended or
changed from time to time;
-2-
<PAGE>
i) "FOB Price" shall mean the price delivered U.K port;
j) "the Term" shall mean the period of this Agreement from the Date of
Commencement until its termination in terms hereof;
k) "the Territory" shall mean The United States of America;
I) "Year" shall mean a period of 12 months except for the first year (Year 1)
of the Agreement which will commence on 1st August 1997 and end on 31st
January 1999;
WHEREAS:
(A) The Company manufactures a range of soft drinks under various trade names
according to the System at its factories in the United Kingdom.
(B) The Franchisee wishes to manufacture certain Products in accordance with
the System and to market and distribute them within the Territory.
(C) The Company's trademark for the Product "Irn-Bru" is registered in the
Territory under Registration Number 1672002.
1. FRANCHISE
The Company hereby grants to the Franchisee for the duration of the Term the
sole and exclusive franchise to manufacture, market and distribute the Products
in the territory under the Company's applicable trade names and in accordance
with the System on the terms and conditions hereinafter set forth.
2. PERIOD
This Agreement shall commence on the Date of Commencement and, subject to the
provisions of Clause 12.01 and 12.02, shall continue until 31st January in the
year 2003 and thereafter until terminated by either party pursuant to Clause
12.02 or 12.03 hereof.
3. EXCLUSIVITY
The Company will not prior to or during the Term operate or license any person
other than the Franchisee to manufacture, market or distribute the Products in
the Territory.
-3-
<PAGE>
4. ESTABLISHMENT OF THE FRANCHISE
4.01 The Company shall provide the Franchisee with all information, data,
recipes and food product specifications necessary
(1) for the Franchisee to manufacture the Products in accordance with the
System to the high standards achieved by the Company in its
manufacture of the Products and
(2) to enable the Franchisee to market and distribute the Products and
shall keep the Franchisee promptly informed of any alterations or
improvements which it may make to the System from time to time.
4.02 The Company shall provide the Franchisee with such reasonable technical
assistance as may be required by the Franchisee to commence manufacture of
the Products in accordance with the System.
4.03 The Company shall provide the Franchisee when reasonably requested to do
so with the general services of its Export Department on a free-of-charge
basis. Any other specific assistance required will be paid for at cost by
the Franchisee.
4.04 The Franchisee shall at its own expense obtain such consents, licences and
permissions as may be necessary for the proper manufacture of the Products
in accordance within the System in the Territory.
4.05 The Franchisee shall endeavour to commence manufacture of the Products in
accordance with the System in the Territory and begin marketing and
distributing the Products as soon as reasonably possible and in any event
not later than six months after the Date of Commencement.
4.06 The Franchisee will prepare a marketing plan and deliver such plan to the
Company prior to the Date of Commencement and by 1st December of each
subsequent year of this Agreement indicating the level of marketing
expenditure proposed for the following Year (or in respect of the first
such plan, for the Period from the Date of Commencement until 31st January
1999). The Company will indicate their formal approval or otherwise within
30 days of receiving the plan. The expenditure specified in the marketing
plan, and agreed by the Company, will be shared between the Franchisee and
the Company in accordance with Part 4 of the Schedule.
4.07 The total marketing expenditure will be limited to a maximum of
(Pounds)50,000 for each of the first three years of the Agreement unless
otherwise agreed in writing by both parties and shall be shared in
accordance with the proportions laid out in Part 4 of the Schedule.
-4-
<PAGE>
5. FRANCHISEE'S UNDERTAKINGS
5.0l The Franchisee hereby undertakes to the Company that it will at all times
during the Term and in the case of Clause 5.01 (r) for a further period of
one year after the end of the Term, observe and perform the terms and
conditions set out in this Agreement and in particular it will:
(a) manufacture the Products in conformity in all respects with the System
and the high standards of the Company as to which conformity the
Company shall be the sole judge;
(b) manufacture, market and distribute the Products in accordance with the
highest business standards and in compliance with all such policies
and operating standards as may from time to time be specified by the
Company and not do any act which will or may reflect adversely upon
the business integrity or goodwill of the Company or upon the
standards of quality of the System;
(c) ensure that all premises and equipment used in the manufacture of the
Products are kept and maintained in a safe, efficient, clean and
presentable condition, of which condition the Company shall be the
sole judge;
(d) comply with all laws and government regulations applicable to the
manufacture, marketing and distribution of the Products, including all
statutory and other requirements relating to dispatch, labelling,
weight, quality and volume of the Products;
(e) obtain and keep in full force and effect at all times policies of
insurance covering public liability including claims arising as a
result of Products manufactured by the Franchisee failing to conform
with the System;
(f) retain 4 production samples following each occasion when production
takes place for a period of nine months from that date and during the
first 2 years of production with any given bottler to courier 2
samples at the Franchisee's expense to the Company within 7 days of
manufacture of such samples. Thereafter, to dispatch one case of
samples of Finished Drink each quarter, from each bottler, at the
Franchisee's expense, to the Company;
(g) permit the Company and its authorised representatives during normal
working hours and with prior notice to inspect the premises used by
the Franchisee for manufacture of the Products and inspect the
Franchisee's equipment and operations and call for production to them
of samples of the Products for analysis or testing by the Company for
the purpose of ascertaining whether the provisions of this Agreement
are being complied with;
-5-
<PAGE>
(h) purchase from the Company or from suppliers nominated by the Company
in reasonably regular quantities the Concentrates required for the
manufacture of the Products in accordance with the System and not re-
sell or otherwise dispose of the said Concentrates otherwise than in
accordance with the terms of this Agreement;
(i) ensure that all Products, bottles and containers for Products and
related cartons and packaging bear a distinctive label or style, the
design and format of which shall first be approved in writing by the
Company and which shall be used by the Franchisee exclusively for the
purpose of the Franchise;
(j) use the Company's established trade names and registered trade
marks for the appropriate Products as directed by the Company and not
permit any variation to be made to such trade names or trade marks,
which shall be used by the Franchisee exclusively for the purposes of
the Franchise;
(k) use its best endeavours (a) to promote the Products within the
Territory in accordance with the marketing plan agreed pursuant to
Clause 4.06 (subject only to the prior written approval of the Company
to the form, manner and wording of all advertising material used) and
(b) to achieve the minimum annual sales as set out in Part 3 of the
Schedule;
(l) not use the Company's trade names, premises, equipment, promotional
material, packaging, paper products, stationery or other items or
materials purchased, leased or obtained for the purpose of operation
of the Franchise except for that purpose;
(m) not use the Company's trade names or any other mark or name used in
connection with the Franchise as a corporate or company name or as
part of a corporate or company name without the prior written consent
of the Company;
(n) if at any time any of the trade names of the Company shall be
registered as trade marks or service marks, do all such acts and
things and enter into all such deeds and documents as may be necessary
for the protection of the validity or registration of such trade marks
or service marks (including, where appropriate, a registered user
agreement to enable the Franchisee to be registered as a registered
user of the trade or service marks);
(o) establish and maintain a distribution system to make the Products
available to customers throughout the whole of the Territory;
(p) supply to the Company in respect of each period of three months during
the Term (and within twenty days after the end of such period), a
short report as to the operation of the Franchise
-6-
<PAGE>
including sales figures expressed in litres of Finished Drink in the
Territory and on such matters on which the Company may reasonably
require regular reporting from time to time and permit the Company's
representatives at any time during normal business hours on reasonable
notice to the Franchisee to inspect, and if required, to provide
copies to the Company of its accounts and records with regard to the
manufacture and sale of the Products;
(q) by 28th February in each year of this Agreement provide to the Company
a certificate signed by the Chief Executive Officer of the Franchisee
as to the amount of literage sales of Finished Drink sold by the
Franchisee in the Territory during the preceding year (or in respect
of the first year from the Date of Commencement until 31st January
1999);
(r) not be engaged, concerned or interested either directly or indirectly
in the manufacture in the Territory of any product similar in taste,
colour, name or design to the Products which might compete or
interfere with the Franchise or with the business of a successor to
the Franchisee as franchisee of the Company in the Territory.
5.02 If during the Term the Franchisee shall discover or devise any
improvements to the System or which may otherwise be applicable to the
Franchise, it shall forthwith provide the Company with full details thereof
and the Company shall be entitled to make use thereof (and to permit other
franchisees to make use thereof) both during and after the termination of
this Agreement. If required by the Company the Franchisee shall grant and
deliver to the Company any documents required to transfer to the Company
all rights to such improvements.
5.03 For the avoidance of doubt, the Franchisee shall not knowingly sell the
Products or offer the Products to any person for re-sale outside the
Territory.
6. COMPANY'S UNDERTAKINGS
6.01 The Company hereby undertakes to the Franchisee that (subject to the
provisions of Clause 6.02) it will at all times during the Term:
(a) permit the Franchisee to operate the Franchise under the Company's
trade names and to use the trade names (or such other names or words
as may from time to time be specified or approved in writing by the
Company) in advertising the Products and in telephone, trade and other
directory entries provided that the use of such names or words shall
make it clear that the Franchisee is a franchisee of the Company;
(b) consult with the Franchisee and give to the Franchisee the benefit of
its knowledge and experience of problems relating to the manufacture,
marketing and distribution of the Products;
-7-
<PAGE>
(c) extend to the Franchisee the benefit of such advertising as the
Company shall in its discretion provide in relation to the Products
generally;
(d) use all reasonable endeavours so far as permitted by law to safeguard
the Franchise including the taking of such steps as may be available
to it to prevent the infringement of the Franchisee's rights under the
Franchise;
(e) deliver the Concentrates required for manufacture of the Products in
accordance with the System FOB U.K. port within a reasonable time of
an order being received in writing from the Franchisee unless
prevented from doing so by circumstances out of the Company's control.
6.02 Notwithstanding anything herein contained the Company reserves the rights
to add to, withdraw or change any part of the System from time to time
after having due regard to the interests of the Franchisee.
6.03 Risk in the Concentrate supplied by the Company shall pass to the
Franchisee once goods have passed over the ship's rail at the U.K. port of
shipment.
7. INTELLECTUAL PROPERTY RIGHTS
7.0 The Company warrants that it is entitled to franchise the intellectual
property rights comprised in the System in accordance with the provisions
of this Agreement.
7.02 The Company acknowledges that during the Term the Franchisee shall have
exclusive rights in the Territory:
(a) to the System and all copyrights, trade mark registrations, patents
and other intellectual property rights now or hereafter existing,
applied for or granted in connection with the System;
(b) to use and franchise others to use the System within the limits of
this Agreement and, in particular, the trade names and all goodwil1
therein including all goodwill accruing to the use of the trade names
by the Franchisee but the foregoing right shall be strictly subject to
the prior written consent and approval of any appointment and its term
by the Company, which shall not be unreasonably withheld;
7.03 (a) The Franchisee will notify the Company forthwith of any circumstances
coming to its attention which may constitute an infringement of any
trade mark belonging to the Company which may have been registered to
protect the trade names or any copyright applicable to the trade names
-8-
<PAGE>
and shall take such reasonable action in connection therewith as the
Company may direct at the expense of the Company. The Company shall
not be obliged to take any action following an infringement and will
have the sole right to control any legal proceedings concerning its
trade names.
(b) The Franchisee shall at the expense of the Company take such action in
relation to the use of the trade names belonging to the Company in the
operation of the Franchise as the Company may from time to time direct
in order to make clear that such trade names are the subject of
copyright or trade mark protection.
8. PAYMENTS AND PAYMENT PROCEDURE
8.01 In consideration of the Franchise and other rights granted and assistance
agreed to be rendered hereunder the Franchisee shall pay:
(a) the price for the Concentrate required for the manufacture of the
Products in accordance with the System;
(b) all seafreight charges import duty, tax and other charges in relation
to the Concentrate including landing charges at the port of
disembarkation, demurrage and inland freight charges within the
Territory.
8.02 The FOB Price for Concentrate shall be as set out in Part 2 of the
Schedule as varied from time to time by the Company giving written notice
thereof to the Franchisee.
8.03 The price for each consignment of Concentrate ordered by the Franchisee
shall be paid in US dollars (or in such other currency as the Company shall
direct) to the Company in Glasgow by the sixtieth day from date of invoice.
9. INDEMNITY
9.01 The Franchisee shall indemnify and keep indemnified the Company against
all liabilities, losses, proceedings, claims, costs and expenses of
whatever nature which may arise in any way whatsoever or which the Company
may suffer, incur or sustain out of any act, neglect or default of the
Franchisee or its agents or employees in the conduct of the Franchise in
the Territory provided that such losses are not due to any act or default
of the Company.
9.02 In the event of any claim being made or threatened against the Franchisee
for its authorised use of the trademark Irn-Bru, then the Franchisee shall;
-9-
<PAGE>
(a) intimate such claim in writing forthwith to the Company providing
full details thereof and an assessment of the validity and
seriousness of the claim;
(b) permit the Company if it wishes to conduct the defence of such claim
on behalf of the Franchisee (and the Franchisee shall co-operate
fully with the Company in relation thereto) including the right to
settle such claim on such terms as shall be within the sole
discretion of the Company subject to the Company meeting the whole
cost of dealing with such defence or settlement, including all legal
expenses;
(c) comply with the Company's written directions in relation to such
claim.
Subject to the Franchisee implementing its obligations under this
Agreement, if the Franchisee suffers any loss as a direct consequence of
any such claim having complied with the Company's requirements and
directions in respect of any such claim (but not otherwise) the Company
shall fully indemnify and hold harmless the Franchisee for that claim
including its reasonable attorneys fees and costs, related expenses and
damage awards.
In the absence of any specific direction from the Company, the Franchisee
shall be obliged to take such steps as may be reasonably necessary to
mitigate its loss.
10. CONFIDENTIALITY
10.01 The Franchisee shall at all times both during the Term and afterwards
keep secret and confidential all information provided to it with regard to
the System and the Products save such as shall be or shall become in the
public domain other than by the fault of the Franchisee.
10.02 The Franchisee shall not at any time without prior written consent of the
Company disclose any information received from the Company in relation to
the Company's business or the System or the Products to any third party
other than those employees of the Franchisee or employees of any contract
bottler who are required to receive such information in the course of
their duties and who shall be bound by a similar appropriate
confidentiality undertaking.
11. FORCE MAJEURE
Neither of the parties to this Agreement shall be responsible to the other party
for any delay in performance or non-performance of its obligations hereunder due
to any cause beyond its reasonable control, but the affected party shall
promptly upon the occurrence of any such delay or non-performance inform the
other party in writing
-10-
<PAGE>
thereof and thereafter such other party shall use its reasonable endeavours to
comply with the terms of this Agreement as fully and as promptly as possible.
12. EVENTS OF TERM1NATION
12.01 The Company shall have the right
(1) to terminate this Agreement pursuant to Clause 14.01 of this
Agreement and
(2) at any time by giving notice in writing to the Franchisee to
terminate this Agreement forthwith in any of the following events:
(a) if the Franchisee commits a material breach of any of the terms
or conditions of this Agreement and fails to remedy the same
within 30 days of being required by the Company so to do;
(b) if the Franchisee is unable to pay its debts as they fall due or
a petition is presented or meeting convened for the purposes of
winding the Franchisee up or a petition is presented or an order
is made for the appointment of an administrator of the
Franchisee or the Franchisee enters into liquidation whether
compulsorily or voluntarily or compounds with its creditors
generally or has a receiver appointed of all or any part of its
assets or takes or suffers any similar action in consequence of
debt or any event occurs which is the legal equivalent of any of
the foregoing under the laws of the local or national
jurisdiction;
(c) if without the prior consent in writing of the Company any
change shall occur in the ownership or control of the Franchisee
which in the sole opinion of the Company is a material change.
12.02 The Franchisee shall have the right to terminate this Agreement at any
time on giving at least 6 months prior notice in writing to the Company of
the date of termination.
12.03 In addition to the rights of termination conferred upon the Company under
Clause 12.01, the Company shall have the right to terminate this Agreement
on 31st January 2003 or at any time thereafter subject to the Company
giving the Franchisee at least 6 months prior written notice of the date
of termination.
13. CONSEQUENCES OF TERMINATION
13.01 On the termination of this Agreement (for whatever reason) all rights of
the Franchisee hereunder shall terminate and the Franchisee shall
immediately thereafter cease to use the Company's trade names and the
System and every part thereof and shall forthwith deliver to the Company
or otherwise dispose of as the Company directs all Products, Concentrate,
promotional materials, packaging, stationery, and other items and
materials related to the Franchise which are in the Franchisee's
possession or control at
-11-
<PAGE>
termination. The Company shall grant credit or pay to the Franchisee the
cost to the Franchisee of any such Products and Concentrate so returned or
delivered in a fully usable condition.
13.02 The termination of this Agreement (for whatever reason) shall not affect
the respective rights and liabilities of each of the parties hereto
accrued prior to such termination.
14. MINIMUM ANNUAL SALES EXPRESSED IN LITRES OF FINISHED DRINK
14.01 In the event that the minimum annual sales expressed in litres of Finished
Drink as set out in Part 3 of the Schedule are not achieved by the
Franchisee the Company shall have the right (but not the duty) to
terminate this Agreement on giving at least 90 days notice in writing of
termination to the Franchisee. Such notice must be given within 60 days of
receipt by the Company of the certificate described in Clause 5.01(q).
14.02 In the event that the Franchisee imports direct from the Company products
of the Company not specified in Part 1 of the Schedule, these may become
subject to a separate Distribution Agreement and will not contribute to
the sales expressed in litres of Finished Drink figures set out in Part 3
of the Schedule.
15. STATUS OF AGREEMENT
Nothing in this Agreement shall constitute a partnership between the parties
hereto or constitute the Franchisee an agent of the Company for any purpose
whatever and the Franchisee shall have no authority or power to bind the Company
or to pledge its credit.
16. ENTIRE UNDERSTANDING
16.01 This Agreement embodies the entire understanding between the parties
hereto and there are no promises, terms or conditions or obligations, oral
or written, expressed or implied, other than those contained or referred
to herein.
16.02 Any alteration to this Agreement shall only be effective if in writing
and signed for and on behalf of both of the parties hereto.
17. WAIVER
No failure or omission by the Company to enforce any of the terms of this
Agreement shall be construed as a waiver of such terms.
-12-
<PAGE>
18. NOTICES
Any notice required to be given hereunder shall be sufficiently given if sent by
facsimile, registered or recorded delivery post or left at the registered office
for the time being of the party to whom notice is to be given. Any such notice
shall be deemed to have been duly given
(a) if sent by post, on the seventh day following the day of posting and
(b) if sent by facsimile on transmission by the sender.
19. DISPUTE RESOLUTION
If there should be any dispute among the parties hereto arising out of or
relating to this Agreement, they will attempt in good faith to resolve the
dispute through discussion among senior managers having authority to settle it.
If the dispute is not resolved within 30 days of the start of such procedure, or
such longer period as the parties hereto agree then it may be referred to
litigation.
20. GOVERNING LAW/CONSENT TO JURISDICTION
This Agreement and all that follows thereon shall be governed, interpreted and
construed according to the Law of Scotland and both parties hereto agree to
accept and prorogue the jurisdiction of the Court of Session in Edinburgh or the
Sheriff Court of Glasgow and Strathkelvin at Glasgow.
-13-
<PAGE>
SIGNED BY ) /s/M. BARR
FOR AND ON BEHALF OF ) --------------------
THE COMPANY: ) Director
at: Glasgow
--------------------------
on: 18 June 1997
--------------------------
WITNESSED BY:
Name: /s/M. Hassan
------------------------
Address: 1306 Gallowgate
------------------------
Glasgow
------------------------
G31 4DS
------------------------
Occupation: Transport Administrator
------------------------
SIGNED BY ) /s/Peter Bordeaux
For and on behalf of ) --------------------
The Franchisee: ) Director (Duly Authorised)
At: New Orleans, LA
--------------------------
On: 30 June 1997
--------------------------
WITNESSED BY: /s/ J.L. Ake
Name: James Ake
------------------------
Address: One Galleria Boulevard
------------------------
Suite 1714
------------------------
Metairie, LA 70001 USA
------------------------
Occupation: Chief Operating Officer
------------------------
AmBrew International
-14-
<PAGE>
THIS IS THE SCHEDULE REFERRED TO IN THE FOREGOING FRANCHISE AGREEMENT
BETWEEN A.G. BARR P.L.C. AND AMERICAN CRAFT BREWING INTERNATIONAL LTD
PART I
THE PRODUCTS
------------
Irn-Bru (Standard)
Irn-Bru ("Diet")
PART 2
F 0 B PRICE SCHEDULE FOR CONCENTRATE
------------------------------------
$l450 per 1 x Irn-Bru Pack 500 and 1 x Irn-Bru Pack 120
PART 3
------
MINIMUM ANNUAL SALES EXPRESSED IN LITRES OF FINISHED DRINK
----------------------------------------------------------
During each successive year following the Date of Commencement.
YEAR 1 200,000 LITRES
YEAR 2 400,000 LITRES
YEAR 3 600,000 LITRES
YEAR 4 800,000 LITRES
Note:
-----
"Year 1" means the period from the Date of Commencement until 3lst
January 1999;
"Year 2" means the next twelve months after the expiry of Year 1;
and so on.
-15-
<PAGE>
PART 4
SHARE OF ANNUAL MARKETING PLAN EXPENDITURE
------------------------------------------
COMPANY % FRANCHISEE %
YEAR 1 50 50
YEAR 2 50 50
YEAR 3 50 50
YEAR 4 50 50
Note:
-----
"Year 1" means the period from the Date of Commencement until
31st January 1999;
"Year 2" means the next twelve months after the expiry of Year
1; and so on.
-16-
<PAGE>
THIS INDENTURE made the 1st day of May, One thousand nine hundred and ninety
seven BETWEEN Aidan McGuinness and Mark McGuinness both c/o Premier Worldwide
Beers Plc having its principal office in Ireland at Enfield Industrial Estate,
Enfield, Co. Kildare (hereinafter together called "the Lessors" which expression
shall where the context so requires or admits include their heirs administrators
executors successors and assigns) of the One Part AND Celtic Brew LLC having its
principal office at One Galleria Boulevard, Suite 912, Metairie, Louisiana,
70001, USA (hereinafter called "the Lessee" which expression shall where the
context so requires or admits include its successors and assigns) of the Other
Part.
WITNESSETH as follows:
1. That in consideration of the rent hereinafter reserved and of the covenants
and conditions by the Lessee hereinafter contained the Lessors both hereby
demise unto the Lessee ALL THAT AND THOSE the premises described in the
First Schedule hereto (hereinafter referred to as "the Demised Premises")
together with the license (in common with Twinmeadow Limited) to use the
areas marked as adjoining the Demised Premises as shown on the map annexed
hereto and thereon outlined in blue ("the Licensed Area") and the right to
walk over those portions of the premises adjoining both the Demised
Premises and the Licensed Area being those areas set out on the map
attached hereto and rooms hatched.
1
<PAGE>
All such areas are hereinafter called "the Leased Area" EXCEPTING AND
RESERVING as in the Second Schedule hereto provided TO HOLD the Demised
Premises with the appurtenances EXCEPTING AND RESERVING as aforesaid
unto the Lessee for the term set out in the Fourth Schedule hereto YIELDING
AND PAYING therefor during the said term yearly and proportionately for any
fraction of a year the rent therein provided together with such sum or sums
as shall be equal to two thirds of the amount which the Lessors may expend
in effecting and maintaining the insurance of the Leased Areas in the full
reinstatement value thereof (including Architects' and Quantity Surveyors'
fees and other incidental expenses) together with two years rent against
loss or damage by fire, explosion, aircraft, storm or tempest (including
lightning) or such other risks as the Lessors may from time to time
determine (hereinafter referred to as "the insured risks") such sum or sums
to be paid without deduction on the gale day next ensuing.
2. The Lessee to the intent that its obligations may continue throughout the
term hereby granted hereby covenants with the Lessors to observe the
Special Conditions (if any) set out in the Third Schedule hereto and:
(a) To pay during the said term the said reserved rents at all times and
in the manner aforesaid without any deduction.
2
<PAGE>
(b) To bear pay and discharge all existing and future rates including
water rates, taxes, charges, assessments, duties, impositions and
outgoings whatsoever (together "Outgoings") which are or may hereafter
be imposed upon or charged upon the Demised Premises or the owner or
occupier in respect thereof (Lessors' Property Tax only excepted) and
to pay two thirds of the outgoings in respect of the Licensed Area and
a fair proportion of the outgoings in respect of the Common Areas.
(c) To keep and maintain the Demised Premises with the appurtenances and
all doors, windows, glass in windows, partitions, boundary walls,
party walls and fences, drains, pipes, sanitary and water apparatus
and all lights, signs, electrical installations and other fixtures and
things which are now or at any time during the term may be erected or
made on the Demised Premises in good and sufficient order repair and
condition (damage by insured risks excepted).
(d) To keep the Demised Premises clean and tidy and free from deposits and
materials or refuse and not to bring or keep or suffer to be brought
or kept on the Demised Premises or any part thereof
3
<PAGE>
any dump or refuse or scrap heap or anything which in the opinion of
the Lessors is or may become unclean, unsightly, noisome or offensive
to the Lessors or to the owners or occupiers of neighbouring premises.
(e) Not without the consent in writing of the Lessors to make any
additional alteration either internal or external in the Demised
Premises.
(f) Not to build or erect or permit to be built or erected any building or
structure whatsoever whether moveable or not in or upon or abutting
upon the Demised Premises without the previous consent in writing of
the Lessors.
(g) To keep the demises premises in good decorative order repair and
condition throughout (damage by insured risks excepted) and to
maintain a clean and attractive appearance of same at all times during
this demise and in particular, but without limiting the generality of
the foregoing:
(i) to paint with three coats of good quality paint based on oil and
other suitable materials in a proper workmanlike manner
4
<PAGE>
all the interior of the Demised Premises and all additions
thereto heretofore or usually painted in each succeeding fifth
year of this demise;
(ii) after every such painting to grain, varnish, distemper, wash,
whiten and colour all such parts that are usually so dealt with;
(iii) to paint, grain, varnish and colour in a proper and workmanlike
manner all the external wood, iron and other external parts of
the Demised Premises that are usually painted, grained,
varnished and colour with three coats of good quality paint,
based on oil and other suitable materials to the approval of the
Lessors in every succeeding third year of the demise: and
(iv) To pay two thirds of the costs of carrying out similar works in
relation to Licensed Area; and
(v) To pay a fair proportion of doing much costs in relation to the
Common Areas.
(h) To permit the Lessors or its agents at all reasonable times to enter
upon the Demised Premises to view the state of repair and condition
thereof and upon notice in writing being given by the
5
<PAGE>
Lessors to repair and make good all wants of reparation which shall be
specified in such notice within three months after receipt thereof and
in accordance with the covenant on that behalf hereinbefore contained.
(i) To execute all such works as are or may be directed or required by any
Local or Public Authority to be executed during any time during the
term or in pursuance of any Act or Acts of the Oireachtas already
passed or hereafter to be passed on or in respect of the Demised
Premises in particular to comply with any obligations imposed on the
Lessee by the provisions of the Factories Act (where appropriate
Offices Accommodation Act) or any regulations thereunder and keep the
Lessors fully and effectually indemnified against all proceedings
costs expenses claims and demands in respect thereof.
(j) To permit the Lessors and its agents, officers, servants, contractors,
licencees and with all necessary appliances and at all reasonable
times during the demise (after at least twenty four hours written
notice to the Lessee except in the case of emergency) to enter the
Demised Premises to secure and exercise any of the rights excepted and
reserved in the Second Schedule
6
<PAGE>
hereto PROVIDED THAT the person or persons so entering shall cause as
little damage to the Demised Premises as may be and shall make good
all damage thereto occasioned by such entry without unreasonable delay
but without payment of compensation for any annoyance, nuisance,
damage, noise, vibration or inconvenience caused to the Lessee.
(k) To use the Demised Premises and the Licensed Area for the purpose of
the business set out in the Fifth Schedule hereto only and not without
the consent of the Lessors in writing to use or permit or suffer the
same or any part thereof to be used for any other purpose.
(l) Not to do or omit or suffer to be done or omitted anything on the
Demised Premises the doing or omission of which shall be in
contravention of the Local Government (Planning and Development) Acts
1963 to 1992 and/or the Building Control Act 1990 and any Act or Acts
for the time being in force amending or replacing the same and any
orders regulations or directions issued under or by virtue of the said
Act and to comply with any notice in relation to the Demised Premises
lawfully served by any Planning
7
<PAGE>
Authority under the said Acts and to indemnify the Lessors against all
liability in respect thereof.
(m) Not to do or suffer to be done anything in or on the Demised Premises
or any part thereof which may be or become a nuisance, damage,
disturbance, danger or inconvenience to the Lessors or the owners or
Lessees or occupiers of neighbouring or adjoining premises.
(n) Not to assign sub-let or part with or share possession of the Demised
Premises or any part thereof without the consent in writing of the
Lessors which consent shall not be unreasonably withheld.
(o) To permit the Lessors during the three months immediately preceding
the termination of this demise (whether by effluxion of time or
otherwise) to affix and retain without interference upon any part of
the Demised Premises a notice for the disposal of the same and to
permit persons with written authority from the Lessors or its agents
at all reasonable times to view the demised premises.
8
<PAGE>
(p) To give immediate notice to the Lessors of any claims made which
affect or might affect the Lessors' interest in the Demised Premises
or any part thereof.
(q) To yield up the Demised Premises with the fixtures and fittings and
additions thereto (tenant's fittings and fixtures only excepted) at
the expiration or sooner determination of the said term in good and
substantial repair and condition (Lessors' fixtures, fittings and
appurtenances being duly replaced) in accordance with the several
covenants hereinbefore contained.
9
<PAGE>
(r) Not to affix or exhibit or permit to be affixed or exhibited to or
upon the exterior of the Demised Premises or any part thereof any
sign, notices, posters, placards or advertisements whatsoever, except
such as shall have been previously approved in writing by the Lessors
and not to place or display any goods outside the Demised Premises or
on any footpath abutting same or in the entrance thereto and not to
cause any obstruction on any part of the Demised Premises.
(s) Not without the prior consent in writing of the Lessors to install any
television or other aerial on the roof or other external parts of the
Demised Premises.
(t) Not to permit or suffer any encroachment on the Demised Premises or
the acquisition of any new right of light, passage, drainage or
10
<PAGE>
other easement on, over or under the Demised Premises and if any such
encroachment or easement shall be made or acquired or threatened to be
acquired forthwith to give notice to the Lessors and at the cost of
the Lessee to do all such things as may be proper or necessary for the
purpose of preventing the making of such encroachment or the
acquisition of such easement or rights.
(u) Not to do or permit or suffer to be done any act or thing which may
render any increased premium payable for insurance of the Demised
Premises or the rent thereof or any adjoining or nearby premises or
the rent thereof which may make void or voidable any policy or
policies of insurance thereon and without prejudice to the Lessors
right of action in respect of any breach of the provision contained in
this paragraph to repay to the Lessors all sums paid by way of
increased premiums and all expenses incurred by it consequent upon any
breach of the provisions contained in this paragraph and all such
payments shall be added to the rent reserved and to the sum in respect
of insurance premium made payable by this Indenture and recoverable as
rent in arrears.
(v) Not to stuff up or obstruct or permit or suffer to be stuffed up or
obstructed or allow any deleterious matter to enter the drains,
11
<PAGE>
sewers, gutters, pipes, channels and watercourses of the Demised
Premises or any adjoining premises.
(w) To pay the Stamp Duty on this Agreement and Counterpart.
(x) Not to fix or place on or upon or suffer to be fixed or placed upon
the Demised Premises any machinery article or substance which in the
opinion of the Surveyor for the time being of the Lessors shall be
liable to overload the floors of or to damage the structure of the
buildings forming part of the Demised Premises.
(y) To pay all expenses (including Solicitors' costs and Surveyors' fees)
incurred by the Lessors incidental to the preparation and service of a
notice under Section i4 of the Conveyancing Act 1881 notwithstanding
that forfeiture is avoided otherwise than by relief granted by the
Court.
All references to the expression the "Demised Premises" in this clause
shall be deemed to include additionally the Licensed Area and the
Common Area save that the obligations of the Leesee in respect of such
areas shall be deemed to be several in conjunction with the lessee
from time to time or the other licencee entitled to
12
<PAGE>
use the Licensed Area and the other user of the Common Areas. In so
far as any financial obligation may arise against the Lessee in
relation to the Licenced Area and/or the common areas its obligations
thereunder shall be two thirds of the said financial obligation.
3. The Lessors hereby covenants with the Lessee as follows:
(1) That the Lessee paying the rent hereby reserved and additional sums
hereby made payable and observing and performing the covenants and
conditions and stipulations on its part herein contained shall
peaceably hold and enjoy the Demised Premises during this demise
without any interruption by the Lessors or any person rightfully
claiming under or in trust for him.
(2) To insure and keep insured or procure the insurance of the Demised
Premises against the insured risks and will on every reasonable
request produce or procure the production to the Lessee of the policy
or policies of such insurance and the receipt or receipts for the last
premiums paid therefor and in case the Demised Premises or any part
thereof shall be burned down or damaged by fire or such other perils
insured against as aforesaid
13
<PAGE>
will forthwith pay out or procure to be paid out the money so received
by virtue of such insurance and all such further sums of money as
shall be requisite in rebuilding and reinstating the Demised Premises
according to the plans and elevations thereof prior to such fire or
other event.
4. In case the Leased Area or any part thereof shall at any time during the
said term be destroyed or damaged by any of the insured risks so as to
render the Demised Premises unfit for occupation use and access and the
policy or policies of insurance shall not have been vitiated or payment of
the policy monies refused in whole or in part in consequence of some act or
default by the Lessee or the Lessee's servants agents licensees or invitees
the rent hereby reserved (or a fair proportion thereof according to the
nature and extent of the damage sustained) shall be suspended until the
Demised Premises shall be again rendered fit for occupation use and access
or until the expiration of two years from the date of such destruction or
damage whichever period shall be the shorter and in case of difference
touching this provision the same shall be referred to the award of a single
Arbitrator if the parties can agree upon one and otherwise to two
Arbitrators one to be appointed by each party and in either case in
accordance with the Arbitration Acts 1954 - 1980 or any statutory
modification thereof for the time being in force.
14
<PAGE>
5. If and whenever during the said term the rent hereby reserved, the
insurance premiums or any additional sums or any part thereof shall be in
arrear and unpaid for twenty-one days next after becoming payable (whether
formally demanded or not) or if and whenever there shall be any breach or
non-performance or non-observance of any of the covenants on the part of
the Lessee herein contained or if the Lessee or any of them (being
individuals) shall become bankrupt or if the Lessee (being a company) shall
enter into liquidation whether compulsory or voluntary or if the Lessee for
the time being or any of them shall enter into an arrangement or
composition for the benefit of the Lessee's creditors or shall suffer any
distress or execution to be levied on the Lessee's goods then and in any of
the said cases it shall be lawful for the Lessors at any time thereafter
and notwithstanding the waiver of any previous right or reentry into and
upon the Demised Premises or any part thereof in the name of the whole and
thereupon the said term shall absolutely cease and determine but without
prejudice to any rights or remedies which may then have accrued to either
party against the other in respect of any antecedent breach of any of the
covenants herein contained.
15
<PAGE>
FIRST SCHEDULE
(The Demised Premises)
ALL THAT AND THOSE the premises at Enfield Industrial Estate, Enfield, Co.
Kildare as more particularly shown on the map annexed hereto and outlined in
red.
16
<PAGE>
SECOND SCHEDULE
(Exceptions and Reservations)
1. The airspace above the Demised Premises or any part thereof.
2. The full free and uninterrupted passage and running of water and soil gas
electricity telephone and all other services supplied in or under the
Demised Premises.
3. Full free right and liberty to enter upon the Demised Premises at all
reasonable times in order to build on or into any dividing boundary or
party wall or fence of the Demised Premises subject to all damage thereby
occasioned being made good with all convenient speed by the person or
persons exercising such right or to gain access to any sewer, manhole,
cable or other service and to carry out repairs thereto.
17
<PAGE>
THIRD SCHEDULE
(Special Conditions)
FOURTH SCHEDULE
(Term Rent and Manner Payable)
TERM: 21 years from the 1st day of March 1997 subject to the right of the
Lessee at any time by six months notice expiring on the fifth, tenth
and fifteenth anniversaries of 1st March, 1997 to terminate this
Lease.
RENT: (a) For the first five years of the said term the yearly rent of
(Pounds)8,333.
(b) For the next five years of the said term and for each successive
period of years thereafter such rent as
18
<PAGE>
shall have been agreed between the Lessors and the Lessee to be
the current open market rental value of the Demised Premises at
that time, and the following provisions shall apply for the
purpose of ascertaining the several rents for such periods
respectively:
(1) An Agreement between the Lessors and the Lessee as to the rent to operate
for each relevant period of years (hereinafter called "the new rent") shall
be in writing signed by both parties.
(2) If such agreement has not been made six months before the commencement of
the relevant period of five years the Lessors may require an independent
Chartered Surveyor (hereinafter called "the Surveyor") to be appointed to
determine the new rent. The Surveyor may be appointed by the Chairman for
the time being of the Irish Branch of the Royal Institute of Chartered
Surveyors on the application of either the Lessors or the Lessee.
19
<PAGE>
(3) If the said Chairman shall for any reason not be available or be unable to
make such appointment at the time of application therefor the appointment
may be made by the Vice-Chairman or next senior officer of that branch then
available and able to make such appointment or if no such officer shall be
available or able, then such officer of such professional body of Surveyors
or Valuers as the Lessors shall designate and any reference hereafter to
the said Chairman shall be deemed to include a reference to such Vice-
Chairman or other Officer.
(4) Notice in writing of his appointment shall be given by the Surveyor to the
Lessors and the Lessee inviting each to submit within a specified period
(which shall not exceed four weeks) a valuation accompanied if desired by a
statement of reasons.
(5) The expression "current open market rental value" means a sum in relation
to the relevant period of years determined in manner herein provided as
being at the time of such determination the annual rent at which the
Demised Premises might reasonably be expected to be let in the open
20
<PAGE>
market by a willing Lessors on a lease for a term of years equivalent in
length to the residue then unexpired of the term of years hereby granted
with vacant possession at the commencement of the term but upon the
supposition (if not a fact) that the Lessee has complied with the
obligations as to repair and decoration herein imposed on the Lessee such
Lease being in the same terms and conditions other than as to the amount of
rent and the length of the term as are herein contained without the payment
of any fine or premium and disregarding (if applicable):
(a) Any goodwill that may exist in respect of the Demised Premises.
(b) Any improvements lawfully made by the Lessee to the Demised Premises.
(6) The Surveyor shall act as an expert and not as an arbitrator and his
decision shall be final and binding on both parties.
(7) The Surveyor shall give notice in writing of his decision to the Lessors
and the Lessee within two months of his appointment or within such extended
period as the Lessors may agree.
21
<PAGE>
(8) If the Surveyor comes to the conclusion that the current open market rental
value of the Demised Premises is less than the rent offered for the period
preceding the relevant period of five years (hereinafter called "the
current rent") the new rent shall nevertheless be the same as the current
rent and the decision of the Surveyor shall so state.
(9) If the Surveyor shall fail to determine the new rent and give notice
thereof within the time and in the manner hereinbefore provided or if he
shall relinquish his appointment or die or if it shall become apparent that
for any reason he will be unable to complete his duties hereunder the
Lessors may apply to the said Chairman for a substitute to be appointed in
his place which procedure may be repeated as many times as necessary
subject always to an ultimate power to apply to the Court for an
appointment of an Arbitrator as provided by Section 18 of the Arbitration
Act 1954 or any statutory reenactment or modification of such provisions.
22
<PAGE>
(10) Rent shall not be due at the rate of the new rent until after the Tenants
have been given such notice thereof as is hereby provided and in the event
of the relevant period of five years starting before such notice has been
given to him the rent shall continue to be due at the rate of the current
rent on each day appointed by this Lease for payment of rent until the said
notice is given to him. On the first day after the notice is given to him
which is a day appointed, by this Lease for payment of rent there shall
fall due for payment the appropriate installment of the new rent together
with, by way of additional rent, a sum equal to the difference between the
new rent and the rent actually paid for any part of the relevant period of
five years in respect of which a rent less than the new rent has been paid.
(11) The fees of the Surveyor shall be shared equally between the Lessors and
the Lessee.
(12) As respects all periods of time referred to in this Schedule time shall be
deemed to be of the essence of the Contract.
23
<PAGE>
PAYABLE: In advance by equal quarterly payments on the 1st day of January, 1st
day of April, 1st day of July and 1st day of October in each year the
first payment to be made on the execution hereof and to be in respect
of the period ending on the 30th day of June 1997.
FIFTH SCHEDULE
Brewing of Beer together with the kegging and bottling of the same.
24
<PAGE>
IT IS HEREBY CERTIFIED that the premises hereby demised are situate in the
county of Kildare.
IN WITNESS whereof the Lessors and the Lessee have executed this deed the day
and year first herein WRITTEN.
Signed Sealed and Delivered
by Aidan McGuinness /s/ Aidan McGuinness
in the presence of: /s/
Signed Sealed and Delivered
by Mark McGuinness /s/ Mark McGuinness
in the presence of: /s/
PRESENT when the Common Seal: /s/ James L. Ake
of THE LESSEE was affixed: /s/ Celtic Brew LLC
hereto:- /s/ Nancy Hernandez
25
<PAGE>
DATED THE 1ST DAY OF MAY 1997
Aidan McGuinness
and
Mark McGuinness
One Part
AND
Celtic Brew L.L.C.
Other Part
21 YEAR LEASE
RANDAL DOHERTY & ASSOCIATES
SOLICITORS
26 HERBERT PLACE
DUBLIN 2
26
<PAGE>
FIRST FLOOR
(not to scale)
_______________________________________________________________________________
| | | |
| | | |
| | | |
| MALT | TM PLANT | |
| ROOM | | HOSPITALITY |
| | | SUITE |
| | | |
| | | |
| | | |
|_____________________________|___________ |________________________|
| | | | | | | |
| | | | | | | |
| | WATER |____| | | | TOILET |
| | TREATMENT | | | |_________|
| | | | | |
| | | | | |
| | | | | |
| |______ | | | |
| | | | | |
| | | / | |
| | | / | |
| |__________| | | |
| | | | |
| | | | |
| | | | |
| | | | _________|
| |________| | | |
| | | |
| | | LAB |
| | | |
| |______________|_________|
| | |
| | |
| | |
| | |
| | OFFICE |
| | |
| | |
| | |
| ____________________ | |
|_______________| |_______________|________________________|
|____________________|
27
<PAGE>
GROUND FLOOR
(not to scale)
_____________________
________________| |________________________________________
| | |_____________________| | | |
| | | | |
| | | | |
| | | | |
| | | | |
|________| | | |
| | | |
| | | |
| | | |
| |________________________| |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | |__________| |
| | | |
| | | |
| |________________________| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |________________________| |
| | | |
| | | |
| ____________________ _____|________________________| |
|_______________| |_____|________________________|_________|
|____________________|_____|________________________|
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-01-1997
<CASH> 50,306
<SECURITIES> 0
<RECEIVABLES> 213,888
<ALLOWANCES> 37,500
<INVENTORY> 299,776
<CURRENT-ASSETS> 803,369
<PP&E> 3,542,084
<DEPRECIATION> 208,672
<TOTAL-ASSETS> 5,623,062
<CURRENT-LIABILITIES> 660,120
<BONDS> 0
0
0
<COMMON> 36,969
<OTHER-SE> 4,562,038
<TOTAL-LIABILITY-AND-EQUITY> 5,623,062
<SALES> 546,012
<TOTAL-REVENUES> 546,012
<CGS> 428,111
<TOTAL-COSTS> 1,689,296
<OTHER-EXPENSES> (2,181)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (9,180)
<INCOME-PRETAX> (1,131,923)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,131,923)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,107,708)
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> 0
</TABLE>
