CONTRACT BREWING AGREEMENT
This Contract Agreement ("Agreement") is made this 23rd day of March
2000, by and between Rello, Inc. d/b/a Gluek Brewing Company, a Colorado
corporation, with its principal place of business at 219 North Red River
Avenue, Cold Spring, Minnesota 56320 ("Brewer") and Hard Energy Company, a
corporation, with its principal place of business at 2380 Railroad Street,
Suite 101, Corona, California 92880 ("Company").
RECITALS
WHEREAS, Brewer is engaged in the business of brewing, packaging,
marketing and distributing malt beverages in the United States, including
the District of Columbia.
WHEREAS, Company owns, controls or possesses certain recipes, formulae
and/or specifications for beverage products as well as the right to use
certain names, design, slogans, logos or logotypes as brand names in
conjunction therewith; and
WHEREAS, Company desires to have certain of such beverage products
brewed, packaged, marketed and distributed by Brewer under the brand names
identified below and Brewer desires to do so.
NOW, THEREFORE, in consideration of the promises and covenants set
forth herein, the adequacy and sufficiency of which are hereby
acknowledged, the parties, in good faith, agree as follows:
1. GRANT. Company hereby grants, and Brewer hereby accepts, the right
and license to brew, package, label and distribute malt beverage products
under the brand name "HARD ENERGY" ("the Trademark"), such products
hereinafter referred to as "the Products", for which Company owns, controls
or possesses all recipes, formulae, specifications, names, designs,
slogans, logos and logotypes in the fifty states of the United States and
the- District of Columbia (the "Territory").
2. TERM This Agreement shall become effective and binding upon the
parties on the date set forth above and shall remain in effect for a period
of twenty (20) months from such date, unless earlier terminated as provided
herein ("the Initial Term"). Either party shall be entitled, not less than
ninety (90) days prior to the expiration of the Initial Term, to give
notice to the other of the termination of this agreement upon the
expiration of the Initial Term. In the absence of such written notice from
either party to the other terminating this Agreement on the expiration of
the Initial Term, this Agreement shall continue indefinitely thereafter
subject to the right to either party to terminate this Agreement at any
time, without cause, upon the giving to the other of not less than ninety
(90) days notice of such termination, and, in such event, this Agreement
shall be terminated on the date specified in such notice.
3. DUTIES OF COMPANY.
a. Proprietary Information. Company shall provide Brewer with recipes,
formulae and specifications for the Products as well as the Product flavor
profiles, packaging materials and instructions and such other information
and materials as are required under the terms of this Agreement or as may
be reasonable and necessary for Brewer to carry out the terms of this
Agreement (the "Proprietary Information").
b. Product Orders and Shipments. Brewer shall produce the Products in
quantities sufficient to meet the needs of customers in the Territory,
provided that it is furnished with a written firm order for Products (the
"Order") not less than thirty (30) days in advance of the requested Product
packaging date (the "Requested Packaging Date") which Orders shall be in
writing and addressed to Brewer at P.O. Box 476, 219 North Red River
Avenue, Cold Spring, Minnesota 56320, Attention: Order Processing
Department; fax number (320) 685-8313. Each Order shall state the quantity
of each Product to be brewed and packaged and shall provide detailed pack
aging instructions, including but not limited to, specific instructions in
regard to any packaging requirements. Brewer shall not be required to brew
and package less than 1500 cases (24 packs) with respect to any individual
Order.
c. Packaging Materials. Company will provide packaging materials
(labels, crowns, 6-pack carriers, mother cartons and cans) to Brewer no
later than ten (10) days prior to the Requested Packaging Date, all of
which packaging materials shall be suitable for use in Brewer's packaging
equipment. Brewer and Company will cooperate in the purchasing of such
Packaging Materials so as to achieve the best possible prices. If the
packaging Materials are not received as required herein, Brewer shall have
no obligation to have the Products ready for packaging on the Requested
Packaging Date and Brewer and Company shall mutually agree on a new
packaging date for the Products. Upon the termination of this Agreement,
all packaging materials in Brewer's possession relating to the Products
shall be shipped to Company at Company's sole expense. Alternatively,
Company can prepay the cost of such packaging materials and Brewer will
obtain same.
d. State Taxes and Recycling Fees. Company shall reimburse Brewer for
any sales taxes aid recycling fees required by state government regulations
and which have been paid by Brewer.
4. DUTIES OF BREWER.
a. Brewing and Packaging of Products. Brewer shall brew and package
the Products according to Company's instructions/specifications. Brewer
possesses certain proprietary recipes, formulas, procedures and processes
for production of clear malt, which shall be made available to the Company
as part of this contractual agreement.
b. Sample Analysis of Products. If required by the Bureau of Alcohol,
Tobacco and Firearms ("BATF") and/or any state alcoholic beverage
regulatory authority, Brewer shall provide an appropriate sample of the
Products for analysis. All costs associated with such, federal and state
Product analysis shall be borne by the Company.
c. Label Approvals. Brewer shall obtain a BATF Certificate of Label
Approval as well as the appropriate state label approvals and/or
registrations for each of the Products' labels. All costs incurred in
obtaining such label approval and/or registration shall be borne by
Company. Brewer agrees to sell the Products in those states in which the
Brewer is currently licensed and in those other states which Company
requests. If Brewer is not licensed to sell the Products in any state in
which Company requests it to sell the Products, Brewer undertakes, at its
cost, to apply for and obtain the necessary license(s) within a reasonable
period of time after request therefor by the Company.
d. Delivery of Products. Brewer shall arrange for the Products to be
delivered to licensed distributors in the Territory approved of by Company.
Company shall reimburse Brewer for the cost of delivering the Products.
Brewer shall not sell any Products to any person or entity within the
Territory which Brewer knows or has reason to know intends to sell the
Products outside the Territory.
e. Brewer will invoice sales of Products in all states to licensed
distributors appointed by Brewer, all of whom shall be subject to approval
by Company. Each of the distributors will be required to make payment for
all Products purchased from Brewer by way of electronic transfer, whenever
possible, or by check, within 30 days from date of invoice, or such shorter
period as may be prescribed by law in the states concerned, and will be
subject to such credit limits as may be set by Brewer after consultation
with the Company. In respect of-all sales of Products in excess of such
approved credit limits, distributors will be required to make payment
therefor to Brewer prior to shipping of Products by Brewer. Brewer shall
provide the necessary administrative services and assistance to manage and
administer the invoicing of all sales of the Products, collection of
receivables, and reconciliation of payments therefor from distributors and
Brewer will provide Company with an accounting thereof not less frequently
than once a month. Brewer shall open a separate bank account in its name
with First National Bank of Cold Spring, Minnesota. All payments received
from distributors of the Products shall be electronically transferred into
such bank account and/or deposited directly into such account, immediately
upon receipt thereof by Brewer. At the end of each business day, the amount
standing to the credit of Brewer in such bank account shall be
automatically transferred from such bank account, by way of a standing
instruction, to a separate bank account that will be opened and maintained
by the Company in its own name, at the same bank. The Company shall be and
remain the sole owner of such bank Account and all monies deposited
therein. The separate bank account opened by the Brewer in accordance with
this paragraph shall not be used for any purpose, other than the receipt of
payments as contemplated above and payment over of such payments to the
Company as contemplated above. Bank statements reflecting deposits into and
transfers between Brewer's and Company's separate bank account shall be
provided to the Company not less frequently than once a week.
f. Brewer's obligation to receive and. transfer all payments from
distributors of the Products pursuant to paragraph 4(e) above, shall not be
subject to right of set-off, counterclaim, recoupment, defense or other
right which the Brewer may have against the Company.
g. All distribution agreements and/or appointments of distributors for
the sale of Products within the Territory shall be subject to the approval
of the Company, notwithstanding that such agreements and appointments shall
be concluded by the Brewer in its own name. Each such agreement shall
include a provision that Brewer may assign its interests thereunder. Upon
the termination of this Agreement, all distributor contracts and
appointments shall be assigned by Brewer to the Company and/or any other
party nominated by the Company, to the extent permitted by law. The Brewer
undertakes to execute any instruments or documents that the Company may
require in order to give effect to such assignments.
5. INSURANCE. Brewer and Company shall each, at its own expense,
obtain and maintain a adequate product liability insurance during the term
of the Agreement, and an) extension hereof (collectively referred to as the
"Policy"), in an amount not less than One Million Dollars ($1,000,000.00)
per incident and One Million Dollars ($1,000,00(.00) in the aggregate. Each
party shall provide the other with a certificate of insurance evidencing
the existence of the Policy no later than fifteen (15) days prior to the
fir3t Requested Ship Date and the Policy shall provide that the other party
shall be given notice by said insurance company at least ten (10) days
prior to the cancellation of expiration of the Policy.
Brewer shall procure and maintain in full force and effect workmans
compensation, public liability bodily injury and public liability property
damage insurance policies wit a limits customary in the trade. Brewer shall
add Company to such policies as an additional insured as applicable and
Brewer shall provide company with proof of such insurance annually.
6. PRICE AND PAYMENT.
a. During the term of this agreement Brewer shall charge Company the
price set forth on EXHIBIT A ("Price"). The Price is F.O.B. Brewer's
warehouse dock and includes applicable Federal Excise Tax and certain
packaging materials, as more fully described on EXHIBIT A. The Price does
not include any state sales tax or recycling fees.
b. Brewer shall invoice Company for the Products on the date the
Products shipped, or if Product has been in Brewer's warehouse for at least
fifteen (15) days following the date the Products are packaged (the
"Packaging Date"). All payments are due fifteen (15) days from Brewer's
invoice on all shipments or nonshipped invoices per paragraph 6c. If
Company has not tendered payment thirty (30) days from Brewer's invoice,
Brewer may charge Company interest on the due amount from the thirty-first
(31st) day from Brewer's invoice until such payment is made at a rate of
10% per annum. Brewer's right to charge such interest is not in lieu of any
other right Brewer may have against Company for breach of this agreement.
c. Company is responsible for the cost of warehousing any Products
that have not been shipped within sixty (60) days of the Packaging Date. In
the event that any Products are, for any reason, still being warehoused by
Brewer sixty (60) days after the Packaging Date, Brewer shall be entitled
to levy a warehousing and handling surcharge of _________ ($___) per case
per month to Company for so long as such Products are stored by Brewer (the
"Warehousing Charge"). The Warehousing Charge shall accrue in full on the
sixty-first (61st) day after the Production Date and on the first day of
each month thereafter, and shall be prorated for partial months. If the
Products are not shipped within one hundred and twenty (120) days after the
Packaging Date, Brewer may, after the expiration of thirty (30) days after
written notice to Company, sell or dispose of such Products at Company's
sole expense. Proceeds from the sale of the Products will be applied to the
Company's outstanding balance due, but Company will remain liable for any
outstanding balance due after such application of sales proceeds.
7. REPRESENTATIONS AND WARRANTIES.
a. Company represents, warrants and covenants to Brewer that:
(i) it will assist Brewer in obtaining the necessary federal and state
label approval, and registrations for the Products, and shall provide
Brewer with copies of all federal and state label approvals, if any, held
by Company for the Products prior to shipment, and
(ii) it is the legal owner or holder of all rights to the Trademark,
any and all trademarks and copyrights associated with the Products, whether
registered, pending or common law, including but not limited to the brand
names of the Products, Company's name used in connection with the Products,
and all other names, designs, slogans, logos or logotypes used to identify
the' Products (collectively referred to as the "Trademarks"), an that the
Trademarks do not, to the best of Company's knowledge, infringe upon any
copyrights, patents, trademarks, trade dress, or other property rights of
any person, firm or entity.
b. Brewer represents warrants and covenants to Company that:
(i) it currently has, and shall maintain during the term of this
Agreement, a Brewer's Notice issued by the BATF as well as all other
licenses, permits, registrations and certificates of approval as are
necessary to brew, package and distribute the Products in the Territory.
Brewer currently holds state licenses authorizing it to sell the Products
in the states set forth on Exhibit B.
(ii) all Products will be brewed and packaged in accordance with
Company's specifications. Company may inspect Brewer's records or processes
used in production of the Products upon request.
(iii) it will follow good manufacturing practices in the production of
the Products and; all Products shall be of a good and merchantable quality
and fit for the purpose for which they are intended to be used.
(iv) the production, packaging, distribution and marketing by it of
the Products, pursuant to the terms and conditions of this Agreement, are
in accordance with all applicable laws and regulations dealing with the
production, storage, distribution and sale of Products containing alcohol
and/or malts.
9 TRADEMARKS Brewer recognizes the great value of the goodwill
associated with the Trademarks and acknowledges that the Trademarks and all
accompanying rights therein, and the goodwill attached thereto, belong
exclusively to the Company. Brewer shall not, during the term of this
agreement or thereafter, assert any right of ownership of the Trademarks or
use the Trademarks other than in accordance with the terms of to is
agreement, or disparage or diminish the image and quality of the Trademarks
among the public. Brewer shall cooperate with Company in preserving and
protecting Company's rights in and to the Trademarks.
10. RELATIONSHIP OF THE PARTIES. The parties shall be deemed
independent contractors. Nothing herein contained shall be construed to
create any partnership, joint venture, agency or employment relationship
between the parties. Neither party shall have the power or right to bind
the other party to any third party, and each party shall be responsible
exclusively for its own taxes and expenses related to doing business.
11. INDEMNIFICATION. If any demand, claim or action is made or
threatened against Brewer for (a) trademark infringement, unfair
competition or interference with a contract to which Company is a party,
asserted as a result of Brewer's lawful performance of its obligations
under the terms of this Agreement, or (b) violation of Federal or State
alcohol laws and regulations due to marketing practices of the Company in
respect of the Products, Company shall defend, indemnify and hold Brewer
harmless from any loss, damage, liability, or expense, including reasonable
attorneys fees, for which Brewer may be liable and pay in response to any
such demand, claim or action, including but not limited to Brewer's cost
for any products that must be destroyed, recalled or otherwise not saleable
as a result of the resolution of any such demand and claim or action, and
Brewer's cost for packaging materials and labels for any such materials
that must be destroyed, recalled or are otherwise not useable as a result
of any such demand, claim or action. If Company should fail or refuse, for
any reason, to defend, indemnify, or seek to preserve for Brewer the right
to use the Trademarks, as provided herein, Brewer shall have the right but
shall not the obligation to defend against any such demand, claim in place
of Company. If Brewer does undertake to defend against a trademark
Infringement claim, or to otherwise preserve and protect the rights granted
herein to use the Trademarks, Brewer shall have the right to collect from
Company by way of separate action, any and all amounts expended by Brewer
in connection with such, action including but not limited to actual,
direct, out-of-pocket costs and expense of investigation, litigation, and
all its reasonable outside attorneys fees directly related to such claim,
provided, that Company shall, under no circumstances, be liable for any
loss, damage, liability or expense resulting from the negligence or willful
or reckless misconduct of Brewer, its employees, agents or representatives.
Brewer agrees to defend, indemnify and hold Company harmless against
any and all claims, costs, expenses, losses, causes of action (including
reasonable attorneys fees and costs), damages or liabilities on account of the
death and/or injury to any person(s) or damage to any property arising out of,
due to, or in any way connected with (a) Brewer's failure to produce and package
the Products in accordance with the Proprietary Information and other
specifications and processes provided to Brewer by Company, and/or b) any act,
omission or failure to act by Brewer, its employees, agents or representatives.
which act, omission or failure to act is in violation of Brewer's obligations
under this Agreement and/or (c) any violation of Federal or State alcohol laws
and regulations by Brewer or due to any act or omission of the Brewer in respect
of the Products.
12. TERMINATION. Notwithstanding anything else herein to the contrary,
either party may, at anytime, terminate this Agreement, with cause, upon thirty
(30) days prior written notice to the other party. The warranties and
representations set forth herein shall survive the termination of this
Agreement. Cause must be a serious breach and not corrected after notification
during the thirty (30) day period. If there is an inability to agree on any
major issue, it must be submitted to arbitration.
13. CONFIDENTIALITY. All Proprietary Information, material,
information, data or records (the "Materials") provided by one party to the
other shall be the sole and exclusive property of the party providing such
Materials. The parties agree that any information that may be received from the
other party, including but not limited to, Proprietary Information, customer
lists, product recipes, formulae, specifications and pricing information,
promotional or marketing materials, or the like in connection with the Products
or this Agreement or the rights and obligations provided for hereunder (the
"Confidential Information"), shall not be disclosed by such party to any other
person and is only to be used in the performance of the obligations under this
Agreement and for no other reason. Each party shall return the original and all
copies of the Materials and Confidential Information received from the other
party promptly following the termination of this Agreement.
In the event of any breach of this provision by either party, the
injured party may obtain an injunction against the other party's disclosure of
the data and shall be entitled to any damage or loss occasioned by such
disclosure. This application of confidentiality and non-disclosure shall not
apply to information which (a) is in the public domain at the time of the
receipt from the other party, or which comes into the public domain without
breach of an obligation hereunder; (b) is known and can be shown to be known by
one party at the time of receipt from the other party; or (c) becomes known to
one party through a third source whose acquisition was independent of the other
party and not in breach of any obligation hereunder.
14. GENERAL PROVISIONS.
a. Entire Agreement. This Agreement and the exhibits referred
to herein and to be delivered pursuant hereto, constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior agreements, understandings, negotiations and discussions of the parties,
whether oral or written, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof,
except as specifically set forth herein.
b. Severability. If any term or provision of this Agreement
shall, to any extent, be determined to be invalid or unenforceable, the
remainder of this Agreement shall not be affected thereby, and each remaining
term and provision of this Agreement shall be valid and enforceable to the
greatest extent permitted by law.
c. Captions. The captions and paragraph numbers appearing in
this Agreement are inserted as a matter of convenience only and shall not in any
way limit, amplify or otherwise affect the term of provisions hereof.
d. Governing Law and Venue. This Agreement shall be construed
and interpreted according to the laws of the State of California and Company
agrees that it is subject to personal jurisdiction in California.
e. Arbitration. Any dispute hereunder shall be settled by
arbitration in Los Angeles Court, California pursuant to the rules, then
obtaining, of the American Arbitration Association.
f. Attorneys' Fees. If either party brings an action to
enforce this Agreement, or to declare rights under this Agreement, the
prevailing party in any such action shall be entitled to its reasonable
attorneys' fees to be paid by the losing party.
g. Assignment. Either party may assign this Agreement, subject
to all of the terms and provisions hereof and to the written consent of the
non-assigning party, which may bc withheld by the Company in its sole discretion
but may not be unreasonably withheld by the Brewer. All provisions of this
Agreement shall be binding upon the respective employees, delegates, successors,
heirs and permitted assignees of the parties.
h. Notices. Unless otherwise specifically provided herein,
all communications or notices required or permitted by this Agreement shall be
in writing and shall be deemed to have been given at the earlier of the date
when actually delivered to an officer of the other or three days after deposit
in the United States mail, certified or registered mail, postage prepaid, return
receipt requested, and addressed as follows, unless and until either party
notifies the other of a change of address:
If to Brewer: Rello, Inc. d/b/a Gluek Brewing Company
PO Box 476
219 North Red River Avenue
Cold Spring, Minnesota 56320
Attention: Order Processing Department
Fax# (320) 685-8318
If to Company:
Hansen's Beverage Company
2380 Railroad Street, Suite 101
Corona, California 92880
Telephone: (909) 739-6200
Facsimile: (909) 739-6210
I. Waiver and Modifications. Unless otherwise specifically
provided herein, no waiver or modification of any of the terms of this Agreement
shall be valid' unless in writing and signed by both parties. No waiver by
either party of a breach hereof or default hereunder shall be deemed a waiver by
such party of a prior or subsequent breach or default of like or similar nature.
j . Force Majeure. In the event that either party is prevented
or delayed from performing its obligations under the terms of this Agreement by
virtue of one or More events or contingencies beyond its reasonable control,
whether or not presently occurring or contemplated by either party, including
but not limited to, fires, labor strikes, labor disputes, accidents, sabotage,
federal or state legislation or any regulations or orders thereunder, judicial
action, acts of God, war, or civil commotion, such nonperformance shall be
excused and shall not constitute a default under the terms of this Agreement,
provided, however, that in the event that such nonperformance continues for a
period in excess of three (3) consecutive months, either party shall have the
option thereunder to terminate this Agreement immediately upon written notice to
that effect.
k. Further Instruments. The parties shall execute and deliver
any and all other instruments and shall take any and all other actions as may be
reasonably necessary to carry out the intent of the Agreement into full force
and effect.
l Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as of the day and year first above written.
RELLO, INC. d/b/a GLUEK BREWING COMPANY
By: /s/Maurice Bryan
Name: Maurice Bryan
Title: President
HARD ENERGY COMPANY
By: /s/Rodney Sacks
Name: Rodney Sacks
Title: Chairman
<PAGE>
EXHIBIT "B",
STATES IN WHICH BREWER LICENSED
ALASKA WASHINGTON
ARIZONA WISCONSIN
CALIFORNIA
COLORADO
DELAWARE
FLORIDA
HAWAII
ILLINOIS
KANSAS
MARYLAND
MASSACHUSETTS
MICHIGAN
NEVADA
NEWMEXIC0
NEWYORK
NORTH CAROLINA
OHIO
OREGON
SOUTH CAROLINA
TEXAS
UTAH
VIRGINIA
