<PAGE> 1
US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
( )TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM ____TO ___
COMMISSION FILE NUMBER 33-62038NY
SARATOGA BEVERAGE GROUP, INC.
Delaware 14-1749554
(State of Incorporation) (IRS Employer Identification Number)
11 Geyser Road, Saratoga Springs, New York 12866
(Address of principal executive offices)
(518) 584-6363
(Issuer's telephone number)
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) for the Exchange Act during the past 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 ___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock - 1,691,224 shares of Class A Common Stock,
$.01 par value, and 1,036,036 shares of Class B
Common Stock, $.01 par value,
were outstanding as of September 30, 1996
This document contains 11 pages
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SARATOGA BEVERAGE GROUP, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1996 (UNAUDITED) 1
AND AS OF DECEMBER 31, 1995
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT FOR 2
THE THREE MONTH AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
1995 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE NINE MONTHS ENDED 3
SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4-5
ITEM 2 - MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND 6-8
RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 9
ITEM 2 - CHANGES IN SECURITIES 9
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5 - OTHER INFORMATION 9
ITEM 6 - Exhibits and Reports on Form 8-K 9-10
SIGNATURES 11
</TABLE>
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
---------------- -----------------
(Unaudited) (a)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 109,969 $ 352,797
Accounts receivable, net of allowance for doubtful
accounts of $80,000 and $57,540 703,443 286,360
Inventories 297,824 405,208
Prepaid expenses and other current assets 54,832 24,920
----------- -----------
Total current assets 1,166,068 1,069,285
Property, plant and equipment, net 1,705,023 1,813,843
Deferred financing costs, net 72,385 85,158
Other assets 17,272 22,090
----------- -----------
Total assets $ 2,960,748 $ 2,990,376
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and accrued liabilities $ 666,311 $ 662,995
Short-term debt 59,992
Long-term debt - Currently callable 91,000
Current portion of obligation under capital lease 5,077
----------- -----------
Total current liabilities 671,388 813,987
Long-term Debt:
Obligation under capital lease 10,013
Revolving credit facility 100,000
----------- -----------
Total long-term debt 110,013
Total liabilities 781,401 813,987
----------- -----------
Commitments and contingencies
Stockholders' Equity
Preferred Stock, $.01 par value; 5,000,000 shares authorized,
no shares issued and outstanding
Class A Common Stock, $.01 par value; 50,000,000 shares
authorized; 1,691,224 issued and outstanding in 1996 and
1,686,224 issued and outstanding in 1995 16,912 16,863
Class B Common Stock, $.01 par value, 2,000,000 shares
authorized, 1,036,036 shares issued and outstanding in 1996
and 1,041,036 issued and outstanding in 1995 10,360 10,410
Paid-in capital 9,237,448 9,268,874
Accumulated deficit (7,082,373) (7,119,758)
Treasury stock at cost 2,000 shares of Class A, in 1996 (3,000)
----------- -----------
Total stockholders' equity 2,179,347 2,176,389
----------- -----------
Total liabilities and stockholders' equity $ 2,960,748 $ 2,990,376
=========== ===========
</TABLE>
(a) Condensed from audited financial statements
The accompanying notes are an integral part of the consolidated financial
statements
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Product Sales $ 1,382,928 $ 767,657 $ 3,177,333 $ 2,259,149
Co-pack Revenue 243,385 164,188 695,899 305,238
----------- ----------- ----------- -----------
Total Revenue 1,626,313 931,845 3,873,232 2,564,387
Cost of Goods Sold, exclusive of
depreciation and amortization shown
separately below 903,793 630,760 2,206,769 1,891,004
----------- ----------- ----------- -----------
Gross Profit 722,520 301,085 1,666,463 673,383
----------- ----------- ----------- -----------
Operating Expenses:
Marketing and sales 366,895 190,300 757,591 512,993
General and administrative 245,715 241,966 646,847 783,374
Depreciation and amortization 95,484 85,430 278,091 252,515
----------- ----------- ----------- -----------
Total Operating Expenses 708,094 517,696 1,682,529 1,548,882
----------- ----------- ----------- -----------
Operating Income (Loss) 14,426 (216,611) (16,066) (875,499)
----------- ----------- ----------- -----------
Other Income (Expense):
Commission Income 19,598 69,757 60,164 239,539
Interest income 312 7,657 4,091 20,254
Interest expense (3,328) (10,804)
Net (loss) on disposal of equipment (5,392)
----------- ----------- ----------- -----------
Other Income (Expense) 16,582 77,414 53,451 254,401
----------- ----------- ----------- -----------
Net Income (loss) 31,008 (139,197) 37,385 (621,098)
Accumulated Deficit:
Beginning of period (7,113,381) (6,678,229) (7,119,758) (6,196,328)
----------- ----------- ----------- -----------
End of Period ($7,082,373) ($6,817,426) ($7,082,373) ($6,817,426)
=========== =========== =========== ===========
Per Share Information:
Primary earnings per share $ 0.01 ($ 0.05) $ 0.01 ($ 0.24)
Fully-diluted earnings per share $ 0.01 $ 0.01
Weighted average number of common
and equivalent shares outstanding:
Primary 4,224,449 2,627,194 4,224,449 2,625,815
Fully diluted 4,224,449 4,224,449
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 37,385 ($621,098)
Adjustment to reconcile net income (loss) to cash
used in operating activities:
Depreciation and amortization 278,091 252,515
Provision for doubtful accounts 22,460 10,000
Net loss (gain) on sale of equipment 5,392
Changes in operating assets and liabilities:
Accounts receivable (439,543) 18,557
Inventories 107,384 2,474
Prepaid expenses and other current assets (29,912) (9,419)
Accounts payable and accrued liabilities 3,316 41,003
--------- ---------
Net cash used in operating activities (20,819) (300,576)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 4,500
Purchase of property, plant, and equipment (154,410) (10,129)
Decrease (increase) in other assets 2,729 (3,798)
--------- ---------
Net cash used in investing activities (151,681) (9,427)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 80,000
Proceeds from revolving credit facility 100,000
Proceeds from capital lease obligations 18,393
Principal payments on long-term borrowings (91,000) (45,500)
Principal payments on short-term borrowings (59,992)
Principal reductions on capital lease obligations (3,302) (5,151)
Cost of equity financing (69,184)
Deferred financing costs (3,760)
Proceeds from exercise of stock options 24,798
Purchase of treasury stock at cost (3,000)
Distribution of minority interest (31,427) (128,549)
--------- ---------
Net cash used in financing activities (70,328) (147,346)
--------- ---------
Decrease in cash and cash equivalents (242,828) (457,349)
Cash and cash equivalents at beginning of period 352,797 985,440
--------- ---------
Cash and cash equivalents at end of period $ 109,969 $ 528,091
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid during the period $ 8,220 $ 13,687
========== =========
</TABLE>
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The accompanying notes are an integral part of the consolidated financial
statements.
SARATOGA BEVERAGE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the
three-month and nine-month periods ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996.
The accompanying financial statements include Saratoga Beverage Group,
Inc., and its wholly-owned subsidiary, Saratoga Springs Distribution
Corporation. Saratoga Springs Distribution Corporation owns a 51% interest in
Sample New Age Distributors ("Sample," a non-operating partnership in 1996 and
1995).
Certain items have been reclassed from general and administrative
expense to cost-of-goods sold in 1995 to conform with the 1996 presentation.
2. WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING
The calculations of weighted average shares of common and common stock
equivalents excludes outstanding options and warrants in 1995, since these
securities effect on per share data is anti-dilutive and include certain options
and warrants in 1996 because of their dilutive effect on per share data.
3. RELATED PARTY TRANSACTIONS
Included in cash and cash equivalents at September 30, 1996 is
approximately $23,651 of cash equivalents invested in a money market account
with Dean Witter Reynolds, Inc. A principal stockholder of the Company is an
officer of Dean Witter Reynolds, Inc.
The Company signed a Sales and Marketing Services Agreement with Royal
Crown Company, Inc. ("RCC"), a wholly-owned subsidiary of Triarc Companies, Inc.
("Triarc"), in May 1995 wherein RCC handles all sales and marketing in return
for a fee of $.50 on each case sold of the Company's branded product. The
Company incurred commission expense of $7,517 and $186,586 for the three and
nine month periods ending September 30, 1996, ($223,171 for the twelve month
period ended September 30, 1996), of which $21,947 remained unpaid at September
30, 1996. The Company also entered into a Credit Agreement with Triarc dated
July 13, 1995 pursuant to which Triarc agreed to supply the Company with a
$3,000,000 revolving credit facility in return for warrants to purchase 51% of
the Company's outstanding stock on a fully-diluted basis. Borrowings under the
Credit Facility bear interest
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at a rate per annum equal to the prime rate plus 2% if paid in cash quarterly,
or the prime rate plus 3% if not paid in cash quarterly. The entire principal
amount outstanding under the Credit Facility is due December 12, 2000 and may
become due immediately upon the occurrence of an event of default. The note is
collateralized by substantially all of the assets of the Company. For the period
ending September 30, 1996, the Company has $100,000 outstanding on the revolving
credit facility and incurred $2,584 and $6,403 of interest expense for the three
and nine month periods, respectively, all of which was paid in October 1996.
During the third quarter of 1996, the Company entered into an agreement
("Agreement") with Mistic Brands, Inc. ("Mistic"), a wholly-owned subsidiary of
Triarc, wherein the Company, owner and licenser of the trademark Saratoga Splash
("Trademark"), granted Mistic an exclusive license to manufacture, package and
sell beverages using the Trademark in return for a royalty of $.50 per case of
product sold. Royalty revenue recorded in the third quarter was $2,988 of which
$2,844 is included in accounts receivable at September 30, 1996. This Agreement
shall remain in force indefinitely unless terminated by either party in
accordance with the Agreement.
During the third quarter of 1996 the Company performed co-packing of
spring water for Mistic under their label. Revenue recorded in the third quarter
was $157,368 of which $75,552 is included in accounts receivable at September
30, 1996.
4. PROPERTY, PLANT, EQUIPMENT AND INTANGIBLE ASSETS
Property, plant, equipment and intangible assets are carried at cost
less allowances for accumulated depreciation and amortization. The cost of
properties held under capital leases is equal to the lower of the net present
value of the minimum lease payments or the fair market value of the leased
property at the inception of the lease. Significant additions or improvements
extending the assets' useful lives are capitalized. Normal maintenance and
repair costs are expensed as incurred. When assets are sold, retired, or
otherwise disposed of, the applicable costs and accumulated depreciation are
removed from the accounts and resulting gain or loss recognized.
Organizational and trademark costs are included in the caption "Other
assets." These costs are amortized over periods of 5 to 15 years on the
straight-line basis. Deferred financing costs are amortized over five years, the
life of the related credit agreement. When intangible assets become fully
amortized, the applicable costs and accumulated amortization are removed from
the accounts.
The Company evaluates impairment of intangible and long lived assets
whenever circumstances indicate that the carrying amount of the assets exceeds
its fair value.
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SARATOGA BEVERAGE GROUP, INC.
FORM 10-QSB
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
BUSINESS
GENERAL
The Company is primarily engaged in the bottling, marketing and
distribution of natural spring and mineral water products from naturally
free-flowing springs located on the Company's property in Saratoga Springs, New
York and in the packaging of products for others (co-packing). The Company's
product line currently includes five water products, including a sparkling
spring water product, three sparkling essence- flavored spring water products
and a non-carbonated spring water product. All of the Company's products are
marketed as premium domestic bottled water under the proprietary name
"Saratoga." The Saratoga brand name has been in existence for over 120 years.
Pursuant to the Sales and Marketing Services Agreement effective May 1,
1995, RCC has become the sole and exclusive sales agent for the purposes of
marketing and selling the Company's products. In connection therewith, RCC
agreed to use commercially reasonable efforts at all times to promote the sale
of the Company's products. In return for such services, the Company pays RCC a
commission of $.50 per case of product sold.
The Company's springs and bottling facilities have been operated
through the years by a number of owners, including Anheuser-Busch and, most
recently, Evian Waters of France, a division of BSN, S.A. Anheuser-Busch and
Evian Waters of France each operated the business for approximately two years.
The Company was organized and acquired the assets of its business in April 1992
from the owners of Evian Waters of France. The Company's bottling facilities,
which had been closed since May 1991 by the previous owners, recommenced
operations in May 1992. Since that time, the Company has undertaken the task of
rebuilding a distribution network and customer base for the Saratoga brand
beverage products.
MANUFACTURING AND DISTRIBUTION AGREEMENT
On July 25, 1996, the Company entered into an agreement with Mistic
wherein the Company, as owner of the Trademark, granted Mistic an exclusive
license to manufacture, package and sell certain sweetened, flavored,
non-carbonated beverages made with Saratoga spring water. In return, the Company
will be paid a royalty of $.50 for each physical case of the beverage sold in
any part of the Territory east of the Mississippi River, and $.25 for each case
sold west of the Mississippi. The Territory is defined as the United States and
its territories, excluding the New York counties of Kings, Queens, Bronx,
Richmond, Nassau and Suffolk, as well as islands located in the Caribbean Sea.
The per case royalties will be reduced by 20% for each case sold after the first
500,000 cases.
CO-PACKING
During the first quarter of 1995, the Company was selected by Cott USA,
Inc. to co-pack Cott's private label spring water products at its Saratoga
Springs bottling facility. Cott Corp., Cott USA, Inc.'s parent company, is the
nation's largest producer of retailer brand carbonated soft drinks and other
beverages. Actual co-packing began in April 1995.
During the third quarter of 1996, the Company agreed to co-pack spring
water for Mistic under the Mistic label.
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RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results for the three and nine month periods ended September 30, 1996.
NET REVENUE
Net revenue for the three month period ended September 30, 1996 was
$1,626,313, an increase of $694,468 or 75%, as compared to net revenue of
$931,845 for the same period in 1995. Net revenue for the nine month period
ended September 30, 1996 was $3,873,232, an increase of $1,308,845 or 51% as
compared to net revenue of $2,564,387 for the same period in 1995. The increase
for both the three and nine month periods is primarily attributable to a
substantial increase in both Saratoga branded product sales and co-pack revenue
during the third quarter of $615,271 (80%) and $79,197 (48%), respectively.
GROSS PROFIT
Gross profit margin, exclusive of depreciation and amortization, was
44% and 43%, respectively, for the three and nine month periods ended September
30, 1996. Gross profit margin was 32% and 26% for the comparable periods ended
September 30, 1995. The increased gross profit margins are primarily
attributable to a decrease in the fixed cost per case resulting from the
increased volume of cases produced.
MARKETING
Marketing and selling expenses increased $176,595 and $244,598 to
$366,895 and $757,591, or 23% and 20% of net sales, for the three and nine month
periods ended September 30, 1996, respectively. This compares with $190,300 and
$512,993, or 20% of net sales, for both the three and nine month periods ended
September 30, 1995. The increase in marketing and sales expenses for the three
and nine month periods ended September 30, 1996 is attributable to: (i)
increased discounts on distributor sales and (ii) increased commissions accrued
for RCC as part of the Sales and Marketing Services Agreement, both resulting
from the increased sales volume.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three and nine month
periods ended September 30, 1996 were $245,715 and $646,847, respectively, an
increase of $3,749 (2%) and a decrease of $136,527 (17%) from the same periods
in 1995. This increase for the three and decrease for the nine month period is
primarily attributable to the elimination in 1996 of all General and
Administrative expenses attributable to Sample's active distribution business
that was eliminated at the end of the first quarter of 1995, and a reduction in
certain insurance expenses, utilities, and legal fees, partially offset by
increases in salaries and payroll-related expenses, investor relations expenses,
property taxes and bad debt expense..
OTHER INCOME AND EXPENSE
Net other income for the three and nine month periods ended September
30, 1996 decreased $60,832 and $200,950, respectively, from the same periods in
1995. The decrease for both the three and nine month periods is primarily
attributable to: (i) a $50,159 and $179,375 decrease in commission income; (ii)
a $7,345 and $16,163 decrease in interest income; (iii) and a $3,328 and $10,804
increase in interest expense, respectively. The decrease in commission income
for both the three and nine month periods is due to a decrease of $.50 per case
in royalties beginning in February 1996 generated from the sale of the Mistic
Distribution Agreement by Sample in the first quarter of 1995. The decreases in
interest income for the three and nine month periods is primarily attributable
to a decline in capital available for investment. The increase in interest
expense for the three and nine month periods is primarily attributable to
reduced interest subsidy from the New York State Energy Office in 1996 on an
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equipment loan, and interest incurred in 1996 on $100,000 outstanding balance on
its revolving credit facility.
NET INCOME AND LOSS
Net income for the three and nine month periods ended September 30,
1996 was $31,008 and $37,385 respectively, an increase of $170,205 and $658,483,
respectively. The increase in net income for the three and nine month periods is
primarily attributable to the substantial increase in sales, resulting in a
decrease in cost of goods sold as a percentage of sales, with operating expenses
remaining stable. This was partially offset by the decrease in other income.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1996 and 1995, cash flows used
in operating activities were $20,819 and $300,576, respectively. At September
30, 1996, cash and cash equivalents was $109,969, while working capital was
$494,680. The current ratio at September 30, 1996 was 1.74 : 1. The Company
believes that it has sufficient liquidity to meet anticipated needs for the next
twelve (12) months. However, there can be no assurance that, after such time,
the Company will achieve the sales and maintain the profitability necessary to
generate sufficient cash flow for its operations.
The Company entered into a Credit Agreement with Triarc dated July 13,
1995 pursuant to which Triarc agreed to supply the Company with a $3,000,000
revolving Credit Facility in return for warrants to purchase 51% of the
Company's outstanding stock on a fully-diluted basis. Borrowings under the
Credit Facility bear interest at a rate per annum equal to the prime rate plus
2% if paid in cash quarterly, or the prime rate plus 3% if not paid in cash
quarterly. The entire principal amount outstanding under the Credit Facility is
due December 12, 2000 and may become due immediately upon the occurrence of an
event of default. The note is collateralized by substantially all of the assets
of the Company. For the period ending September 30, 1996, the Company has
$100,000 outstanding on the revolving Credit Facility.
There are no material commitments or contingencies at this time not
disclosed in the financial statements.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
NONE.
ITEM 2 - CHANGES IN SECURITIES
NONE.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4 - SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
ITEM 5 - OTHER INFORMATION
NONE.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Exhibits included herein:
a) Exhibits and Index
Exhibit No.
2.1* Agreement and Plan of Merger
3.1* Restated Certificate of Incorporation of the Company
3.2* By-Laws of the Company
4.1* Specimen of Class A Common Stock Certificate
4.2*** Non-Callable Warrant A dated December 13, 1995 by the Company to Triarc
to purchase 25% of the number of shares of Class A Common Stock of
Saratoga then issued and outstanding, on a fully-diluted basis
4.3*** Non-Callable Warrant B dated December 13, 1995 by the Company to Triarc
to purchase 26% of the number of shares of Class A Common Stock of
Saratoga then issued and outstanding, on a fully-diluted basis
4.4* Form of Underwriter's Warrant
4.5* Form of Escrow Agreement entered into by the current stockholders of
the Company and the Underwriter
9.1* Agreement, dated August 12, 1992, by and between Anthony Malatino and
Robin Prever, as amended by Amendment No. 1 thereto dated as of April
30, 1993
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10.1* Asset Purchase Agreement, dated as of March 31, 1992, by and between
Saratoga Springs Mineral Water Company and Mineral Springs
Acquisition Group, Inc.
10.2* General Assignment and Bill of Sale, dated April 3, 1992, by
Saratoga Springs Mineral Water Company to Mineral Springs
Acquisition Group, Inc.
10.3* Assignment and Assumption Agreement, dated April 3, 1992, by and
between Saratoga Springs Mineral Water Company and Mineral Springs
Acquisition Group, Inc.
10.4* Assignment, dated April 3, 1992, by Saratoga Springs Mineral Water
Company to Mineral Springs Acquisition Group, Inc.
10.5* Assignment, dated April 3, 1992, by Saratoga Springs Mineral Water
Company to Mineral Springs Acquisition Group, Inc.
10.6* Letter Agreement, dated as of May 1, 1993, by and between the
Company and Mark Wiggins
10.7** Employment Agreement, entered into by the Registrant and Robin
Prever
10.8* Form of the Saratoga Spring Water Company 1993 Stock Option Plan
10.9** Consulting Agreement entered into by the Company and Leonard
Toboroff
10.10* Form of consulting agreement entered into by the Company and the
Underwriter
10.11* Note, dated August 31, 1992, from the Company to Fleet Bank of New
York, including guarantees
10.12* Letter from Fleet Bank of New York to the Company regarding waiver
of defaults
10.13* Letter Agreement between the Company and Owens-Brockway Glass
Containers
10.14* Form of Mergers and Acquisitions Agreement entered into by the
Company and the Underwriter
10.15** Partnership Agreement, dated July 21, 1993, by and between JNJ
Distributors, Inc. and Saratoga Springs Distribution Corp., as
amended by Amendment of Partnership Agreement thereto dated November
9, 1993
10.16** Stock agreement, dated July 21, 1993, by and between JNJ
Distributors, Inc. and Saratoga Spring Water Company
10.17** Distribution Agreement, dated March 25, 1993, by and between Joseph
Victori Wines, I Inc. and JNJ Distributors, Inc.
10.18*** Credit Agreement, dated as of July 13, 1995, by and between the
Company and Triarc
10.19*** Amendment, Waiver and Acknowledgment Agreement, dated as of December
13, 1995, by and between the Company and Triarc
10.20*** Sales and Marketing Services Agreement, dated as of May 1, 1995,
between the Company and RCC
10.21*** Cott Co-pack Agreement, dated as of June 8, 1995
10.22***** Manufacturing and Distribution Agreement, dated as of July 23, 1996,
by and between the Company and Mistic Brands, Inc.
22** Subsidiaries
24*** Power of Attorney
27**** Financial Data Schedule for the nine months ended September 30, 1996
(*) Incorporated herein by reference to the Company's Registration
Statement on Form SB-2 filed with the Commission on June 16, 1993
(Registration No. 33-62038NY)
(**) Incorporated herein by reference to the Company's form 10-KSB
filed with the Commission on March 30, 1994
(***) Incorporated herein by reference to the Company's Form 10-KSB
filed with the Commission on March 29, 1996
(****) Incorporated herein by reference to the Company's Form 10-QSB
filed with the Commission on August 9, 1996
(*****) Filed herewith
(b) Reports on From 8-K: No reports on Form 8-K were filed in the quarter ended
September 30, 1996
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SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE EXCHANGE ACT, THE REGISTRANT CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREINTO DULY
AUTHORIZED.
SARATOGA BEVERAGE GROUP, INC.
(REGISTRANT)
DATE: NOVEMBER 08, 1996 BY: /S/ ROBIN PREVER
------------------ ------------------------------
ROBIN PREVER
CHIEF EXECUTIVE OFFICER
DATE: NOVEMBER 08, 1996 BY: /S/ ANTHONY PRINCIPE
------------------ ------------------------------
ANTHONY PRINCIPE
CHIEF FINANCIAL OFFICER
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
------- ---
<S> <C>
Manufacturing and Distribution Agreement..............10.22
</TABLE>
<PAGE> 1
EXHIBIT 10.22
MANUFACTURING AND DISTRIBUTION AGREEMENT BY
AND BETWEEN THE COMPANY AND MISTIC BRANDS, INC.
<PAGE> 2
MANUFACTURING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of July , 1996 , between SARATOGA BEVERAGE GROUP, INC.,
a Delaware corporation ("SARATOGA"), and MISTIC BRANDS, INC., a Delaware
corporation ("MISTIC").
WITNESS:
WHEREAS, SARATOGA is the owner and the licensor of the trademark Saratoga Splash
(the "TRADEMARK"); and
WHEREAS, MISTIC is desirous of being granted a license by SARATOGA to
manufacture and package certain sweetened, flavored, non-carbonated beverages
made with spring water, as specifically set forth in Exhibit A hereto (the
"BEVERAGES") for sale under the TRADEMARK within the defined and limited
territory described in Exhibit B hereto (the "TERRITORY"); and
WHEREAS, SARATOGA is willing to grant such license to MISTIC upon the terms and
subject to the conditions herein set forth:
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
SARATOGA and MISTIC hereby agree as follows:
SECTION 1. GRANT OF LICENSE BY SARATOGA TO MISTIC
(1.1) EXCLUSIVE LICENSE. SARATOGA hereby grants to MISTIC an
exclusive license to manufacture, package, and sell the
BEVERAGES within the TERRITORY, subject to the terms set forth
in this Agreement.
(1.2) MANUFACTURING. The BEVERAGES shall be manufactured in
accordance with the standards, formulae, and procedures
established and revised by MISTIC from time to time, subject
to approval by SARATOGA, which approval will not be withheld
unreasonably. MISTIC and/or third party co-packers contracted
by MISTIC shall furnish all ingredients other than water
necessary to manufacture the BEVERAGES, including sweetener,
sodium benzoate, potassium sorbate, citric acid and packaging
materials. MISTIC will obtain water either from SARATOGA or
from another spring source in accordance with Section 2.3
hereof.
(1.3) PACKAGING. The BEVERAGES shall be packaged in containers of
the types, designs and sizes specified in Exhibit A.
(1.4) SALE. MISTIC is authorized to distribute and sell the
BEVERAGES within the TERRITORY. Any sub-distributorship
arrangements of MISTIC for the BEVERAGES shall be subject to
approval by SARATOGA, which approval will not be withheld
unreasonably.
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<PAGE> 3
(1.5) USE OF TRADEMARK. MISTIC is authorized and licensed to use the
TRADEMARK on containers for the BEVERAGES in such form and
manner as shall be permitted by SARATOGA.
(1.6) ROYALTIES. For each physical case of BEVERAGES sold in any
part of the TERRITORY east of the Mississippi River, MISTIC
shall pay to SARATOGA a royalty of $.50, and for each physical
case of BEVERAGES sold in any part of the TERRITORY west of
the Mississippi River, MISTIC shall pay to SARATOGA a royalty
of $.25, provided, however, that the per case royalties shall
be reduced by 20% for each case sold after the first 500,000
physical cases in any calendar year. Royalties will be
calculated based on shipments to MISTIC customers, net of
returns for sub-standard product and shall be payable thirty
(30) days after the end of each month. For purposes of this
Section 1.6, a "physical case" will consist of either 24
16-ounce or 16.9-ounce bottles or 12 one-liter bottles.
SECTION 2. MISTIC'S COVENANTS
(2.1) MANUFACTURE AND PACKAGING. MISTIC shall comply with all
instructions, formulae, standards, manufacturing
specifications, production and warehousing procedures and
quality control criteria and procedures in the manufacture and
packaging of the BEVERAGES which are from time to time
prescribed by MISTIC for the purpose of assuring production
and sale of BEVERAGES of uniform standards and quality. The
standards, specifications, criteria and procedures prescribed
by MISTIC shall be consistent with industry standards. MISTIC
will comply with all applicable laws and regulations with
respect to the manufacture, packaging and labeling of the
BEVERAGES and the operation of its business.
(2.2) SUB-STANDARD PRODUCT. In the event of a failure by MISTIC to
comply with any required standards, formulae and procedures
which would cause the BEVERAGES to be sub-standard, or should
any of the BEVERAGES not comply with the standards for any
reason, then MISTIC will immediately cease all further
production and shipment of the subject BEVERAGES until such
failure is corrected and, if requested by SARATOGA, MISTIC
will promptly recall to MISTIC's warehouse(s) or plant(s) any
such sub-standard product, at MISTIC's sole expense. MISTIC
will conduct any such recall in accordance with industry
standards.
(2.3) SARATOGA WATER. MISTIC may, but is not obligated to, purchase
water necessary to manufacture BEVERAGES from SARATOGA.
SARATOGA shall fill all orders placed by MISTIC for water
necessary to manufacture the BEVERAGES. The price for such
water supplied by SARATOGA shall be equal to SARATOGA's direct
costs, i.e. the cost incurred by SARATOGA to get the water
from the ground into a tanker or other container for shipment.
MISTIC shall bear the costs of freight to the production
location. Any water obtained by MISTIC from sources other than
SARATOGA used in the manufacture of the BEVERAGES shall be
subject to approval by SARATOGA, which approval will not be
withheld unreasonably.
(2.4) QUALITY CONTROL. MISTIC shall develop quality control sampling
and reporting procedures for the BEVERAGES which are similar
to the quality control sampling and
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<PAGE> 4
reporting procedures MISTIC uses with respect to its branded
products. At SARATOGA's request, MISTIC shall furnish product
samples to SARATOGA.
(2.5) SALES PROMOTION AND ADVERTISING. MISTIC shall develop
point-of-sale material bearing the TRADEMARK. MISTIC shall
submit such material and all other sales, promotional and
advertising materials not prepared by SARATOGA and depicting
the TRADEMARK in writing to SARATOGA for its prior written
approval.
(2.6) BOOKS AND RECORDS. MISTIC shall maintain full and accurate
books and records showing production and sales of the
BEVERAGES and shall furnish monthly reports with respect
thereto to SARATOGA.
(2.7) INDEMNIFICATION OF SARATOGA. MISTIC shall protect, indemnify
and save and hold SARATOGA harmless from and against any and
all fines, claims, costs, expenses (including attorney fees
and court costs), demands, damages, actions, causes of action
and other liabilities of every kind and nature whether
involving negligence, breach of warranty, product liability,
strict liability of other underlying theory of liability,
arising or resulting directly or indirectly from the
manufacture, distribution and sale of any BEVERAGES and not
due to any impurity, adulteration or misbranding of water
supplied by SARATOGA as of the time of delivery to MISTIC by
SARATOGA. At the request of SARATOGA, MISTIC will defend
SARATOGA in connection with any claim, suit, action or
proceeding covered by such indemnification.
(2.8) PRODUCT LIABILITY INSURANCE. MISTIC will obtain and maintain
product liability insurance at least in the amounts of
$10,000,000 for bodily injury to any person per any one
occurrence, $10,000,000 for bodily injury sustained by two or
more persons per any one occurrence, and $5,000,000 for
property damage per any one occurrence, and shall furnish to
SARATOGA within fifteen (15) days after the date of this
Agreement a certificate of insurance establishing that such
insurance is in effect and shall not be canceled or modified
on less than thirty (30) days' prior written notice to
SARATOGA.
SECTION 3. SARATOGA COVENANTS
(3.1) FOOD, DRUG, AND COSMETIC ACT AND OTHER GUARANTEES. SARATOGA
hereby guarantees to MISTIC that all articles comprising each
shipment or other delivery of water pursuant to this
Agreement, as of the time of delivery, shall not be
adulterated or misbranded within the meaning of the Federal
Food, Drug, and Cosmetic Act and shall not be an article or
articles which may not under the provisions of said Act be
introduced into interstate commerce. SARATOGA further
guarantees that all said articles shall comply with and be
manufactured and shipped under and in accordance with all
other applicable federal laws, rules and regulations as of the
time of delivery, and that such articles shall be merchantable
and fit for the intended purpose as of the time of delivery.
(3.2) INDEMNIFICATION OF MISTIC. SARATOGA shall indemnify and save
harmless LICENSEE from and against any loss, claim or damage,
including reasonable attorney's fees, resulting from any
breach of the above stated warranties by SARATOGA in
connection with the shipment and delivery of water sold to
MISTIC.
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<PAGE> 5
(3.3) THE TRADEMARK.
(1) SARATOGA represents and warrants to MISTIC that
SARATOGA has the right to grant the license with
respect to the use of the TRADEMARK hereby granted in
accordance with the terms hereof.
(2) SARATOGA agrees that it will indemnify and hold
MISTIC harmless from and against any and all costs,
losses and liabilities, including reasonable attorney
fees, arising out of or resulting from any claims
that the authorized use by MISTIC of the TRADEMARK
pursuant hereto, and any and all other of SARATOGA's
distinctive markings, designs, labels or other marks
used by LICENSEE pursuant to this Agreement infringe
the trademarks of another, and SARATOGA will defend
any such trademark infringement claim, suit, action
or proceeding by any person, firm or corporation
against MISTIC.
(3) Subject to Section 3.3 (1) hereof, MISTIC
acknowledges the validity of and ownership by
SARATOGA of the TRADEMARK and in connection with the
sale of the BEVERAGES agrees to take no action which
would prejudice or interfere with such validity or
such ownership.
(3.4) OTHER LICENSEES. So long as this Agreement remains in effect,
SARATOGA agrees that it will not license any other individual,
corporation, partnership, unincorporated association or other
entity to manufacture or package and to distribute, sell or
deal in the BEVERAGES for sale under the TRADEMARK within the
TERRITORY and SARATOGA will not itself distribute, sell or
deal in the BEVERAGES for sale under the TRADEMARK within the
TERRITORY.
(3.5) RIGHTS TO DESIGN AND FORMULAE. SARATOGA acknowledges that
MISTIC owns the rights to the formulae, design and processes
of the BEVERAGES.
SECTION 4. COVENANTS OF BOTH PARTIES
(4.1) FORCE MAJEURE. Neither MISTIC nor SARATOGA shall be held
liable for any failure to comply with any of the terms of this
Agreement to the extent any such failure is caused directly or
indirectly by fire, strike, union or other labor problems, war
(whether or not declared), riots, insurrection, government
restrictions or other acts, or other causes beyond the control
of or without fault on the part of either of them. Upon the
occurrence of any event of the type referred to herein, the
party affected thereby shall give prompt notice thereof to the
other party, together with a description of such event and the
duration for which such party expects its ability to comply
with the provisions of this Agreements to be affected thereby.
The party affected shall thereafter devote its best efforts to
remedy to the extent possible the condition giving rise to
such event and to resume performance of its obligations
hereunder as promptly as possible.
(4.2) INDEPENDENT CONTRACTOR. Nothing herein shall be deemed to
constitute MISTIC and SARATOGA as partners, joint venturers or
otherwise associated in or with the business of the other.
MISTIC is and shall always remain an independent contractor
and neither party shall be liable for any debts, accounts,
obligations or other liabilities of the other party, its
agents or employees. Neither party is authorized to incur
debts or other obligations of any kind on the part of or as
agent for the other except as may be
6 of 9
<PAGE> 6
specifically authorized in writing. It is expressly recognized
that no fiduciary relationship exists between the parties.
SECTION 5. THIRD PARTY PRODUCTION
(5.1) MISTIC ARRANGEMENTS. MISTIC will arrange for the manufacture
and packaging of the BEVERAGES by third party producers. Such
third party producers shall be subject to approval by
SARATOGA, which approval will not be withheld unreasonably.
SECTION 6. TERMINATION OF LICENSE
(6.1) TERMINATION WITHOUT NOTICE. This Agreement and any and all
rights of MISTIC hereunder and any and all obligations of
SARATOGA hereunder shall immediately terminate upon the
occurrence of any of the following:
(1) The cessation by MISTIC of its business; or
(2) The insolvency of MISTIC, the filing by or against
MISTIC of a voluntary or involuntary petition
pursuant to any present or future act of the Federal
Congress on the subject of bankruptcy, or the
institution of any proceeding or arrangement by or
against MISTIC relating to or in the nature of a
bankruptcy, insolvency or assignment for the benefit
of creditors, which proceeding or arrangement is
consented to by MISTIC or is not dismissed or
discontinued within thirty (30) days after the
institution of such proceeding or arrangement.
(6.2) TERMINATION BY SARATOGA UPON NOTICE. This Agreement may be
terminated at any time by SARATOGA in the event that MISTIC
shall fail to perform any of the covenants and obligations
herein contained to be performed by MISTIC by written notice
of such failure delivered to MISTIC by SARATOGA, stating the
nature and character thereof and allowing MISTIC a reasonable
period of time as determined and specified by SARATOGA in such
notice to correct such failure, unless such failure of
performance has resulted from an event of the type described
in Section 4.1, in which case such notice shall allow MISTIC
the period of time specified in the notice of such event from
MISTIC to SARATOGA as necessary to correct such failure. If
such failure has not been corrected by MISTIC within the
period specified in the notice given under this Section 6.2,
or under Section 4.1, SARATOGA may terminate this Agreement
forthwith.
(6.3) TERMINATION BY SARATOGA UPON CHANGE IN CONTROL. In the event
of a change in control of MISTIC, SARATOGA may terminate this
Agreement immediately upon written notice. For purposes of
this Agreement, the term "change in control" shall mean (i)
the acquisition by any person of 50% or more of the combined
voting power of MISTIC or Triarc Companies, Inc. ("Triarc") or
(ii) a majority of the directors of MISTIC or Triarc being
individuals who are not nominated by the board of directors of
MISTIC or Triarc, as the case may be. The acquisition of any
portion of the combined voting power
of MISTIC or Triarc by Triarc Acquisition Group, L. P., Nelson
Peltz or Peter May, or by any person affiliated with such
persons, shall in no event constitute a change in control.
(6.4) TERMINATION BY MISTIC UPON NOTICE. This Agreement may be
terminated at any time by MISTIC in the event that SARATOGA
shall fail to perform any of the covenants and obligations
herein contained to be performed by SARATOGA upon sixty (60)
days
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<PAGE> 7
prior written notice to SARATOGA by MISTIC stating the nature
and character thereof and allowing SARATOGA ninety (90)
consecutive calendar days from the date of such notice to
correct such failure, unless such failure of performance has
resulted from an event of the type described in Section 4.1,
in which case such notice shall allow SARATOGA the period of
time specified in the notice of such event from SARATOGA to
MISTIC as necessary to correct such failure. If such failure
has not been corrected by SARATOGA within the period specified
in the notice given under this Section 6.3, or under Section
4.1, MISTIC may terminate this Agreement forthwith.
(6.5) VOLUNTARY TERMINATION BY MISTIC. MISTIC may elect at any time
to cease its business under this Agreement entirely. If it so
elects, it shall give SARATOGA sixty (60) days' prior written
notice of its intention to do so. The termination of this
Agreement shall be effective as of the expiration of such
sixty (60) day period or such earlier date as any new licensee
appointed by SARATOGA may commence business.
(6.6) WAIVER. The failure of either party to give notice of
non-performance or termination shall not constitute a waiver
of the covenants, terms or conditions herein, or of the rights
of either party thereafter to enforce such covenants, terms or
conditions or to terminate this Agreement upon any subsequent
occurrence or date.
SECTION 7. MISCELLANEOUS
(7.1) TERM. This Agreement shall commence on the date this Agreement
has been signed by both parties hereto and shall remain in
force indefinitely unless terminated in accordance with
Section 6 of this Agreement.
(7.2) NOTICES. Any notice to be given pursuant to the provisions of
this Agreement shall be in writing and shall be sent by
registered mail, addressed in the case of SARATOGA to:
Saratoga Beverage Group, Inc.
Attention: President
11 Geyser Road
Saratoga, New York
and in the case of notice to MISTIC to:
Mistic Brands, Inc.
Attention: President
709 Westchester Avenue
White Plains, NY 10604
(7.3) ONLY AGREEMENT. This Agreement (which terms for the purpose
hereof shall mean and include any and all Exhibits hereto)
contains the complete agreement between the parties in respect
of the subject matter hereof, and any and all prior agreements
relating to the subject matter hereof are superseded in their
entirety hereby. Except as specifically provided herein, this
Agreement may not be amended or supplemented , nor
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<PAGE> 8
any of the provisions hereof waived, except by an agreement in
writing signed by SARATOGA and MISTIC.
(7.4) GOVERNING LAW. This Agreement shall be interpreted and
governed by the laws of the State of New York.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized representative as of the date first above
written.
SARATOGA BEVERAGE GROUP, INC.
Attest:
By: /s/
- -------------------------- --------------------------
Robin Prever
(CORPORATE SEAL)
MISTIC BRANDS, INC.
Attest:
By: /s/
- -------------------------- -------------------------
Michael Weinstein
(CORPORATE SEAL)
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<PAGE> 9
EXHIBIT A
SARATOGA SPLASH FLAVORS:
CONTAINERS: 16-ounce, 1/2 liter and 1 liter colored PET bottles with sports
caps.
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<PAGE> 10
EXHIBIT B
TERRITORY: The United States and its territories, excluding the New York
counties of Kings, Queens, Bronx, Brooklyn, Richmond, Nassau and Suffolk, plus
the islands located in the Caribbean Sea.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 109,969
<SECURITIES> 0
<RECEIVABLES> 783,443
<ALLOWANCES> 80,000
<INVENTORY> 297,824
<CURRENT-ASSETS> 1,166,068
<PP&E> 2,961,285
<DEPRECIATION> 1,256,262
<TOTAL-ASSETS> 2,960,748
<CURRENT-LIABILITIES> 671,388
<BONDS> 110,013
0
0
<COMMON> 27,272
<OTHER-SE> 2,152,075
<TOTAL-LIABILITY-AND-EQUITY> 2,960,748
<SALES> 3,873,232
<TOTAL-REVENUES> 3,937,487
<CGS> 2,206,769
<TOTAL-COSTS> 2,964,360
<OTHER-EXPENSES> 924,938
<LOSS-PROVISION> 56,357
<INTEREST-EXPENSE> 10,804
<INCOME-PRETAX> 37,385
<INCOME-TAX> 0
<INCOME-CONTINUING> 37,385
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,385
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
