<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 JUNE 30, 1997
( )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 or other jurisdiction (IRS Employer ID Number)
of incorporation or organization)
11 Geyser Road, Saratoga Springs, New York 12866
(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 - 2,225,705 shares of Class A Common Stock,
$.01 par value, and 720,055 shares of Class B Common
Stock, $.01 par value,
were outstanding as of June 30, 1997
Traditional small business disclosure format (check one):
Yes No X
--- ---
This document contains 12 pages
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SARATOGA BEVERAGE GROUP, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1997 (UNAUDITED) AND 1
AS OF DECEMBER 31, 1996
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT FOR 2
THE THREE MONTH AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE SIX MONTHS ENDED 3
JUNE 30, 1997 AND 1996 (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 MATTER TO A VOTE OF SECURITY HOLDERS 9
ITEM 5 - OTHER INFORMATION 9
ITEM 6 - Exhibits and Reports on Form 8-K 10-11
SIGNATURES 12
</TABLE>
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
----------------- -----------------
(Unaudited) (a)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,474,270 $ 387,938
Accounts receivable, net of allowance for doubtful
accounts of $133,500 and $95,000 1,324,786 398,195
Inventories 196,166 183,072
Prepaid expenses and other current assets 75,615 25,427
----------- -----------
Total current assets 3,070,837 994,632
Property, plant and equipment, net 1,472,367 1,618,397
Deferred financing costs, net 100,674
Other assets 17,876 16,859
----------- -----------
Total assets $ 4,661,754 $ 2,629,888
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and accrued liabilities $ 816,872 $ 301,667
Short-term debt and current portion of obligation
under capital lease 5,978 6,295
Revolving credit facility 300,000
----------- -----------
Total current liabilities 822,850 607,962
Long-Term Debt:
Obligation under capital lease 4,966 7,455
5% Subordinated Convertible Note 1,500,000
----------- -----------
Total Long-Term debt 1,504,966 7,455
Total liabilities 2,327,816 615,417
----------- -----------
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;
2,225,705 issued and outstanding in 1997 and
1,691,224 issued in 1996 22,257 16,913
Class B Common Stock, $.01 par value, 2,000,000 shares
authorized, 720,055 shares issued and outstanding in 1997 7,201 10,360
and 1,036,036 issued and outstanding in 1996
Paid-in capital 9,315,904 9,258,405
Treasury Stock at cost, 2,700 shares of Class A (3,990)
Accumulated deficit (7,011,424) (7,267,217)
----------- -----------
Total stockholders' equity 2,333,938 2,014,471
----------- -----------
Total liabilities and stockholders' equity $ 4,661,754 $ 2,629,888
=========== ===========
(a) Condensed from audited financial statements
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
1
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Product Sales $ 1,432,509 $ 1,070,681 $ 2,119,254 $ 1,570,971
Co-pack Revenue 679,496 244,098 1,070,574 452,514
----------- ----------- ----------- -----------
Total Revenue 2,112,005 1,314,779 3,189,828 2,023,485
Cost of Goods Sold, exclusive of
depreciation and amortization shown
separately below 1,450,269 867,575 2,113,016 1,302,976
----------- ----------- ----------- -----------
Gross Profit 661,736 447,204 1,076,812 720,509
----------- ----------- ----------- -----------
Operating Expenses:
Marketing and sales 90,184 105,964 169,110 167,262
General and administrative 264,001 205,659 481,351 401,132
Depreciation and amortization 95,522 92,764 188,675 182,607
----------- ----------- ----------- -----------
449,707 404,387 839,136 751,001
----------- ----------- ----------- -----------
Operating Income (Loss) 212,029 42,817 237,676 (30,492)
----------- ----------- ----------- -----------
Other Income (Expense):
Commission Income 18,599 13,796 40,566
Interest income 11,108 597 12,424 3,779
Interest expense (4,906) (4,792) (8,103) (7,476)
----------- ----------- ----------- -----------
Other Income (Expense) 6,202 14,404 18,117 36,869
----------- ----------- ----------- -----------
Net Income 218,231 57,221 255,793 6,377
Accumulated Deficit:
Beginning of period (7,229,655) (7,170,602) (7,267,217) (7,119,758)
----------- ----------- ----------- -----------
End of Period ($7,011,424) ($7,113,381) ($7,011,424) ($7,113,381)
=========== =========== =========== ===========
Per Share Information:
Earnings per share $0.07 $0.01 $0.09 $0.00
Weighted average number of common
and equivalent shares outstanding 2,999,886 4,224,297 3,001,282 4,224,297
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 255,793 $ 6,377
Adjustment to reconcile net income to cash
used in operating activities:
Depreciation and amortization 188,675 182,607
Provision for doubtful accounts 38,500 (27,540)
Issuance of Treasury Stock 3,990
Changes in operating assets and liabilities:
Accounts receivable (965,091) (318,344)
Inventories (13,094) 86,990
Prepaid expenses and other current assets (50,188) (70,134)
Accounts payable and accrued liabilities 515,205 29,185
----------- ---------
Net cash used in operating activities (26,210) (110,859)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (38,986) (152,081)
Decrease (increase) in other assets (1,800) 2,429
----------- ---------
Net cash used in investing activities (40,786) (149,652)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from capital lease obligations 18,393
Proceeds from long-term borrowings 1,500,000 100,000
Deferred financing costs (80,750)
Principal payments on Revolving credit facility (300,000)
Principal payments on long-term borrowings (77,300)
Principal reductions on capital lease obligation (2,805) (2,007)
Principal payments on short-term borrowings (59,992)
Proceeds from exercise of stock warrants 3,000
Proceeds from exercise of stock options 43,250
Distribution of minority interest (9,367) (21,628)
----------- ---------
Net cash provided by (used) in
financing activities 1,153,328 (42,534)
----------- ---------
Increase (decrease) in cash and cash equivalents 1,086,332 (303,045)
Cash and cash equivalents at beginning of period 387,938 352,797
----------- ---------
Cash and cash equivalents at end of period $ 1,474,270 $ 49,752
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest Paid during the period $ 4,145 $ 4,921
=========== =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
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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 six month periods ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
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 1997 and
1996).
Certain sales discounts have been reclassed from marketing and sales
expense to revenue in 1996, to conform with the 1997 presentation.
2. WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING
The calculations of weighted average shares of common stock includes
outstanding options and warrants in 1996 and 1997 because of their dilutive
effect on per share data.
3. RELATED PARTY TRANSACTIONS
Included in cash and cash equivalents at June 30, 1997 and 1996 is
approximately $1,281,000 and $16,767, respectively, 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 agreed to compensate Peter Campbell $1,667 per month for
his services as Chairman of the Board for one year commencing July 1996.
In April , 1997, the Company's President and a principal shareholder
supplied the Company with a line-of-credit for up to $250,000. This
line-of-credit was canceled and replaced on June 12, 1997 when the Company
entered into a Securities Purchase Agreement with Parley International, as
nominee for Maerki Baumann & Co., A.G. (Zurich) ("Purchaser"), pursuant to which
Purchaser acquired $1,500,000 principal amount of the Company's 5% Subordinated
Convertible Notes due 2000 (the "Note") for an aggregate purchase price of
$1,500,000 in a private placement effected under Section 4(2) of the Securities
Act of 1933. Interest on the unpaid principal amount accrues from the date of
issuance at a rate of 5% per annum. Interest becomes due and payable on each of
the first, second and third anniversaries.
The principal amount of the Note is due and payable on the third
anniversary of the Note and is convertible at the option of the holder into
shares of the Company's Class A Common Stock at a conversion price of $3.50
principal amount per share. The Note is mandatorily convertible into shares of
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Class A Common Stock in the event that the closing price of Class A Common Stock
exceeds $5.25 for three consecutive trading days.
Global Financial Group, Inc. acted as placement agent in connection
with the offering of the Note and, in connection therewith, received a cash
commission in the amount of $80,750 and was issued a warrant to acquire 30,000
shares of Class A Common Stock for an exercise price of $3.50 per share. The
warrant was determined to have a fair value of $22,800, using the Black Scholes
Valuation method, on the day of issuance. The commission and the fair value of
the warrant were recorded as deferred financing costs and will be amortized over
the life of the Note, three years.
4. NEW ACCOUNTING PRONOUNCEMENTS
Effective December 31, 1997, the Company will be required to implement
Financial Accounting Standard No. 128 (FAS 128) "Earnings Per Share". FAS 128
replaces the presentation of primary earnings per share (EPS) with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement and requires a reconciliation of
the numerator and denominator of the basic EPS calculation to the numerator and
denominator of the diluted EPS computation. Management does not anticipate that
the adopting this standard will have a material impact on the consolidated
financial statements.
1 INCOME TAX
For the quarter ended June 31, 1997, no provision for income tax has
been provided because of the anticipated use of net operating loss carryovers.
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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, and in the packaging
of products for others (co-packing). The Company's product line currently
includes natural essence flavored sparkling spring water, and non-carbonated
spring water, marketed as premium domestic bottled water under the proprietary
name "Saratoga." The Saratoga brand name has been in existence for over 120
years. The Company markets a line of fortified non-carbonated spring water
products under the name V2. The V2 line is ginseng enhanced and caffeine
enhanced spring water. The Company recently introduced Splash, a line of fruit
flavored spring water products in conjunction with an agreement with Mistic
Brands, Inc.
The Company's springs and bottling facilities have been operated
through the years by a number of owners, including Anheuser-Busch and 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.
On June 23, 1993, the Company consummated an initial public offering
(the "Offering") for the sale of 1,200,000 shares of Class A Common Stock at an
initial offering price of $5.00 per share. An additional 180,000 shares were
subsequently issued to cover over-allotments. The Company received proceeds of
$5,582,450, net of costs incurred in connection with the offering.
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.
PRODUCTS
On June 30, 1997 the Company entered into an agreement with Mistic
Brands, Inc. ("Mistic") that terminated the Manufacturing and Distribution
Agreement between Mistic Brands and Saratoga Beverage Group, Inc., dated as of
July, 1996. It also granted Saratoga Beverage Group, Inc. the non-exclusive
right to use the formulations and the exclusive right to use the graphic designs
heretofore utilized by Mistic in connection with Beverages sold under the
Saratoga Splash Trademark pursuant to the Agreement. Saratoga will pay to Mistic
on an annual basis a royalty of $.50/case on the first 50,000 cases of product
sold and $.25/case for all cases sold thereafter.
Saratoga Splash is a non-carbonated spring water product that is
sweetened and flavored. It will be available in five fruit flavors with one
flavor containing a sugar substitute.
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On June 17, 1997, the Company entered into a three-year master
distribution agreement (the "Master Distribution Agreement") with Hype
Corporation and certain affiliates of Hype Corporation (collectively, "Hype")
whereas Hype granted the Company the exclusive right and license to act as the
master distributor for Hype beverage products currently featuring the flavors
"PASSION ATTACK," "MORING RUSH," "NIGHT BOOST" and "MFP," and using the names
"SPIKED HYPE," "HYPE SPORTS," "HYPERHOLICS" and "HYPE2o" (collectively with any
future beverages using the "HYPE" name or any derivative of the "HYPE" name, the
"Products"), in the United States and its territories (the "Territory") until
June 30, 2000. The Company will receive $1.00 per case for each case of Products
sold in the Territory plus an additional $1.00 per case for the first 50,000
cases of Products sold in the Territory.
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 six month periods ended June 30, 1997
NET REVENUE
Net revenue for the three month period ended June 30, 1997 was
$2,112,005, an increase of $797,226 or 61%, as compared to net revenue of
$1,314,779 for the same period in 1996. Net revenue for the six month period
ended June 30, 1997 was $3,189,827, an increase of $1,166,343 or 58% as compared
to net revenue of $2,023,485 for the same period in 1996. The increase for both
the three and six month periods is primarily attributable to growth in both
product sales and co-pack revenue. Product sales increased 34% or $361,828 and
co-pack revenue increased 178% or $435,398 during the second quarter of 1997.
For the six months ended June 30, 1997, product sales increased 35% or $548,283
and co-pack revenue increased 137% or $618,060.
GROSS PROFIT
The gross profit margin, exclusive of depreciation and amortization,
was 31% and 34% respectively for the three and six month periods ended June 30,
1997 and 34% and 36% for the comparable periods ended June 30, 1996. The
decreased in the gross profit margins are primarily attributable to the increase
in co-pack revenue that carries a lower gross margin than product sales.
MARKETING
Marketing and selling expenses were $90,184, representing (4% of net
revenues), or a decrease of $15,780 and $169,110, representing (5% of net
revenues), or an increase of $1,848, respectively, for the three and six month
periods ending June 30, 1997, as compared with the same periods in 1996. The
decrease in marketing and sales expenses for the three month period and the
small increase for the six month period ended June 30, 1997 is primarily
attributable to the elimination of commissions paid to Royal Crown Company as
part of the Sales and Marketing Services Agreement which was terminated on
December 1, 1996, partially offset by an increase in sales salaries and
commissions.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three and six month periods
ended June 30, 1997 were $264,001 and $481,351, respectively, an increase of
$58,342 or 28% and $80,219 or 20% from the same periods in 1996. The increase
for both the three and six month periods is primarily attributable to a an
increase in salary and related expenses, utilities and bad debt expense.
OTHER INCOME AND EXPENSE
Net other income for the three and six month periods ended June 30,
1997 decreased $8,202 and $18,752, respectively, from the same periods in 1996.
The decrease for both the three and six
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month periods is primarily attributable to an $18,599 and $26,770 decrease in
commission income, partially offset by an increase of $10,511 and $8,645 in
interest income, and $114 and $627 decrease in interest expense, respectively.
The decrease in commission income is due to the elimination of royalties after
February 1997. The royalties were generated from the sale of the Mistic
Distribution Agreement by Sample New Age Distributors in the first quarter of
1995. The increases in interest income for the three and six month periods is
primarily attributable to a surplus of capital available for investing, The
surplus capital came from the $1,500,000 proceeds of the three-year Subordinated
Convertible Note. The decrease in interest expense for the three and six month
periods is primarily attributable to the $300,000 principal payment on the
Revolving Credit Facility on January 31, 1997.
NET INCOME
Net income for the three and six month period ended June 30, 1997 was
$218,231 and $255,793, respectively, an increase of $161,010 and $249,416, for
the three and six month periods ended June 30, 1996, respectively. The increase
in net income for the three and six month periods is primarily attributable to
the growth in both product sales and co-pack revenue, with only a small increase
in operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1997 and 1996, cash flows used in
operating activities were $26,210 and $110,859, respectively. At June 30, 1997,
cash and cash equivalents was $1,474,270, while working capital was $2,247,987.
The current ratio at June 30, 1996 was 3.73 : 1. The Company believes that it
has sufficient liquidity to meet anticipated needs for the next twelve (12)
months.
On June 12, 1997 the Company entered into a Securities Purchase
Agreement with Parley International, as nominee for Maerki Baumann & Co., A.G.
(Zurich) ("Purchaser"), pursuant to which Purchaser acquired $1,500,000
principal amount of the Company's 5% Subordinated Convertible Notes due 2000
(the "Note") for an aggregate purchase price of $1,500,000 in a private
placement effected under Section 4(2) of the Securities Act of 1933. Interest on
the unpaid principal amount accrues from the date of issuance at a rate of 5%
per annum. Interest becomes due and payable on each of the first, second and
third anniversaries.
The principal amount of the Note is due and payable on the third
anniversary of the Note and is convertible at the option of the holder into
shares of the Company's Class A Common Stock at a conversion price of $3.50
principal amount per share. The Note is mandatorily convertible into shares of
Class A Common Stock in the event that the closing price of Class A Common Stock
exceeds $5.25 for three consecutive trading days.
Global Financial Group, Inc. acted as placement agent in connection
with the offering of the Note and, in connection therewith, received a cash
commission in the amount of $80,750 and was issued a warrant to acquire 30,000
shares of Class A Common Stock for an exercise price of $3.50 per share. The
commission and the fair value of the warrant were determined to be $22,800 and
were recorded as deferred financing costs and will be amortized over the life of
the Note, three years.
Debt includes the outstanding balance on the Subordinated Convertible
Note of $1,500,000 and $4,966, the long-term portion of equipment under a
capital lease.
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
The annual meeting of the stockholders was held on August 6, 1997 for
the following purposes:
1 To elect directors of the Company by holders of Class A and
Class B Common Stock, voting together as a single class.
The directors elected were: Peter R. Campbell, Warren
Lichtenstein, John A. Morabito, Robin Prever, and Leonard
Toboroff.
All of the directors received 5,114,289 votes cast for and
11,275 cast against, with no abstentions, except for Peter
Campbell, who received 5,105,087 votes cast for and 11,477
cast against, with no abstentions.
2. To ratify the appointment of Coopers and Lybrand, L.L.P., as
auditors for the Company for the fiscal year ending December
31, 1997.
There were 5,102,462 votes cast for, 8,400 votes cast against
and 5,702 abstentions.
3. Other Business. There was no other business that came before
the meeting.
Stockholders of record at the close of business on June 4, 1997 were
entitled to vote at the meeting or any adjournment thereof.
ITEM 5 - OTHER INFORMATION
Pursuant to the Escrow Agreement, 100,000 shares of Class B Common
Stock were canceled on April 30, 1997 and were contributed to the Company's
capital.
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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* (P) Agreement and Plan of Merger
3.1* (P) Restated Certificate of Incorporation of the Company
3.2* (P) By-Laws of the Company
4.1* (P) Specimen of Class A Common Stock Certificate
4.2*** (P) 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*** (P) 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* (P) Form of Underwriter's Warrant
4.5* (P) Form of Escrow Agreement entered into by the current
stockholders of the Company and the Underwriter
9.1* (P) 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
10.1* (P) 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* (P) General Assignment and Bill of Sale, dated April 3, 1992, by
Saratoga Springs Mineral Water Company to Mineral Springs
Acquisition Group, Inc.
10.3* (P) Assignment and Assumption Agreement, dated April 3, 1992, by
and between Saratoga Springs Mineral Water Company and
Mineral Springs Acquisition Group, Inc.
10.4* (P) Assignment, dated April 3, 1992, by Saratoga Springs Mineral
Water Company to Mineral Springs Acquisition Group, Inc.
10.5* (P) Assignment, dated April 3, 1992, by Saratoga Springs Mineral
Water Company to Mineral Springs Acquisition Group, Inc.
10.6* (P) Letter Agreement, dated as of May 1, 1993, by and between the
Company and Mark Wiggins
10.7**+ (P) Employment Agreement, entered into by the Registrant and
Robin Prever
10.8* (P) Form of the Saratoga Spring Water Company 1993 Stock Option
Plan
10.9**+ (P) Consulting Agreement entered into by the Company and Leonard
Toboroff
10.10* (P) Form of consulting agreement entered into by the Company and
the Underwriter
10.11* (P) Note, dated August 31, 1992, from the Company to Fleet Bank
of New York, including guarantees
10.12* (P) Letter from Fleet Bank of New York to the Company regarding
waiver of defaults
10.13* (P) Letter Agreement between the Company and Owens-Brockway Glass
Containers
10.14* (P) Form of Mergers and Acquisitions Agreement entered into by
the Company and the Underwriter
10.15** (P) Partnership Agreement, dated July 21, 1993, by and between
JNJ Distributors, Inc. and Saratoga Springs Distribution
Corp., as amended by Amendment of Partnership
10.16** (P) Stock agreement, dated July 21, 1993, by and between JNJ
Distributors, Inc. and Saratoga Spring Water Company
10.17** (P) Distribution Agreement, dated March 25, 1993, by and between
Joseph Victori Wines, Inc. and JNJ Distributors, Inc.
10.18A*** (P) Credit Agreement, dated as of July 13, 1995, by and between
the Company and Triarc
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10.18B# Termination Agreement dated as of January 31, 1997 between
the Company and Triarc
10.19*** (P) Termination Agreement dated as of January 31, 1997 between
the Company and Triarc Amendment, Waiver and Acknowledgment
Agreement, dated as of December 13, 1995, by and between the
Company and Triarc
10.20*** (P) Sales and Marketing Services Agreement, dated as of May 1,
1995, between the Company and RCC
10.21*** (P) 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.
10.23## Bottling Agreement, dated April 16, 1997, by and among the
Company, Hype Corporation, Hype Beverage Corporation, World
Wide Beverage Inc., Hype Water Company, Inc., Hyperholics
Inc., R.J. Barry Cox and Nigel Spiro
10.24##+ Line of Credit dated as of April 10, 1997 to the Company from
Robin Prever and Anthony Malatino
10.25### Saratoga Splash Agreement, dated as of June 30, 1997, by and
between the Company and Mistic Brands, Inc.
10.26### The Master Distribution Agreement dated as of June 16, 1997
by and among Saratoga Beverage Group, Inc., Hype Corporation,
World Wide Beverage Inc., Global Brands AG, Hype Water
Company, Inc. and Hyperholics Inc.
22** (P) Subsidiaries
24*** (P) Power of Attorney
(*) 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 November 12, 1996
(#) Incorporated herein by reference to the Company's form 10-KSB
filed with the Commission on April 15, 1997
(##) Incorporated herein by reference to the Company's form 10-QSB
filed with the Commission on May 13, 1997
(###) Filed herewith
(+) Management Agreement
(b) Reports on From 8-K: A report on Form 8-K was filed during the second
quarter with The Commission. The report was filed on June 25, 1997 whereby the
registrant entered into a Securities Purchase Agreement with Parley
International, as nominee for Maerki Baumann & Co., A.G. (Zurich) ("Purchaser"),
pursuant to which Purchaser acquired $1,500,000 principal amount of the
Company's 5% Subordinated Convertible Notes due 2000 (the "Note") for an
aggregate purchase price of $1,500,000 in a private placement effected under
Section 4(2) of the Securities Act of 1933.
11
<PAGE> 14
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: AUGUST 8, 1997 BY: /S/ ROBIN PREVER
--------------- ----------------------------
ROBIN PREVER
CHIEF EXECUTIVE OFFICER
DATE: AUGUST 8, 1997 BY: /S/ ANTHONY PRINCIPE
-------------- ----------------------------
ANTHONY PRINCIPE
CHIEF FINANCIAL OFFICER
12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
------- ---
<S> <C>
Saratoga Splash Agreement..........................10.25
Master Distribution Agreement......................10.26
</TABLE>
Exhibit 1
<PAGE> 1
EXHIBIT 10.25
SARATOGA SPLASH AGREEMENT
Exhibit 2
<PAGE> 2
June 30, 1997
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, New York 12866
Attention: Ms. Robin Prever
President
Dear Ms. Prever:
Re: Manufacturing and Distribution Agreement dated as of July, 1996
This will confirm our agreement as follows:
1. The referenced Manufacturing and Distribution Agreement (the
"Agreement") shall be, and the same hereby is, terminated on the mutual consent
of the parties, effective June 30, 1997.
2. Subject to the other terms and conditions of this Letter Agreement,
Mistic Brands, Inc. ("Mistic") hereby grants to Saratoga Beverage Group, Inc.
("Saratoga"), in perpetuity, the nonexclusive right to use the formulations and
the exclusive right to use the graphic designs heretofore utilized by Mistic in
connection with Beverages sold under the Saratoga Splash Trademark pursuant to
the Agreement. Except as expressly set forth in para. 6 of this Letter
Agreement, Mistic makes no warranty or representation as regards such
formulations and/or graphic designs. Subject to para. 6 hereof, Saratoga agrees
to defend, indemnify and hold harmless Mistic from and against any and all loss,
damage, cost or expense (including court costs and reasonable attorney fees)
arising out of, or relating to the manufacture, sale or distribution of products
using such formulations and/or graphic designs, provided that, if such loss,
damage, cost or expense is solely or partially (in which case responsibility and
liability shall be apportioned) due to such formulations as provided by Mistic
yielding products which are adulterated or not wholesome and fit for human
consumption.
3. Saratoga shall pay to Mistic on an annual basis a royalty of
$.50/case on the first 50,000 physical cases of products sold utilizing (wholly
or in part) the formulations and/or the graphic designs referenced in para. 2
above. For case sales above 50,000 physical cases the royalty rate shall be
$.25/case. Royalties will be calculated based on shipments to customers, net of
returns for sub-standard
Exhibit 3
<PAGE> 3
product, and shall be payable within thirty (30) days after the end of each
month. For purposes of this paragraph, a "physical case" will consist of either
24 16 oz. bottles or 12 one-liter bottles.
4. Saratoga shall purchase, f.o.b. the current location of the same and
on payment terms of 2% ten (10) days, net thirty (30) days, all usable Saratoga
Splash raw materials and finished goods at Mistic's cost therefor. Exhibit A
attached hereto sets forth Mistic's inventories of such raw materials and
finished goods.
5. Mistic agrees to sell to Saratoga and Saratoga agrees to purchase
from Mistic, f.o.b. Carteret, New Jersey and on payment terms of 2% ten (10)
days, net thirty (30) days, Saratoga's requirements for the key flavoring
elements utilized in the formulations referenced in para. 2 above; such flavor
elements are set forth in Exhibit B attached hereto. Pricing for such flavor
elements shall be at Mistic's cost therefor plus five percent (5%).
6. (a) Mistic represents and warrants to Saratoga that Mistic has the
right to grant the rights set forth in para. 2 above with respect to
the use of the formulations and graphic designs described therein.
Mistic acknowledges the ownership of the Saratoga Splash Trademark by
Saratoga.
(b) Mistic agrees that it will indemnify and hold Saratoga harmless
from and against any loss, damage, cost or expense (including court
costs and reasonable attorney fees) arising out of or resulting from
any claims that the authorized use by Saratoga of the formulations
and/or graphic designs described in para. 2 infringe the rights of any
third party.
(c) Subject to para. 6 (a) above, Saratoga acknowledges the validity
of and ownership by Mistic of the formulations and graphic designs
described in para. 2 above and agrees to take no action which would
prejudice or interfere with such validity or such ownership.
7. Neither Mistic nor Saratoga shall be held liable for any failure to
comply with any of the terms of this Letter 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 reasonably expects its ability to comply with the
provisions of this Letter Agreement to be affected thereby. The party affected
shall thereafter devote its reasonable 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.
8. Nothing herein shall be deemed to constitute Mistic and Saratoga as
partners, joint ventures or otherwise associated in or with the business of the
other. Saratoga 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 specifically authorized in writing. It is expressly
recognized that no fiduciary relationship exists between the parties.
9. (a) Subject to the other terms and conditions of this Letter
Agreement, the initial term hereof shall be a period of ten (10) years.
Thereafter this Letter Agreement may be extended for further and
consecutive one (1) year renewal terms, provided that either party may
terminate this Letter Agreement without cause by written notice given
within sixty (60) days prior to the end of the initial or any renewal
term.
(b) Saratoga may elect at any time to cease its business under
this Letter Agreement entirely. If it so elects, it shall give Mistic
sixty (60) days prior written notice of its intention to do so. The
termination of this Letter Agreement shall be effective as of the
expiration of such sixty (60) day period. Saratoga shall not
subsequently re-enter the business of manufacturing, distributing or
selling the same or a similar product as covered by this Letter
Agreement for a period of at least eighteen (18) months following such
termination.
Exhibit 4
<PAGE> 4
10. This Letter Agreement and any and all rights of Saratoga hereunder
and any and all obligations of Mistic hereunder shall immediately terminate upon
the occurrence of any of the following:
(a) The cessation by Saratoga of its business; or
(b) The insolvency of Saratoga, the filing by or against
Saratoga 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 Saratoga
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 Saratoga or is not dismissed or discontinued within
thirty (30) days after the institution of such proceeding or
arrangement.
11. This Agreement may be terminated at any time by either party in the
event that the other party shall fail to perform any of the covenants and
obligations herein contained to be performed by said party by written notice of
such failure delivered to the failing party by the other, stating the nature and
character thereof and allowing the failing party sixty (60) 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 para. 7, in which case such
notice shall allow the failing party the period of time specified in the notice
of such event from the failing party to the other as necessary to correct such
failure. If such failure has not been corrected by the failing party within the
period specified in this para. 11, or under para. 7, the other may terminate
this Agreement forthwith.
12. In the event of a change in control of Saratoga, which change in
control results in any competitor of Mistic, Royal Crown Company, Inc. or
Snapple Beverage Corp. obtaining control of Saratoga, Mistic may terminate this
Letter Agreement immediately upon written notice. For purposes of this Letter
Agreement, the term "change in control" shall mean, without limitation, the
acquisition by any person of 50% or more of the combined voting power of
Saratoga.
13. Saratoga shall maintain for the benefit of both Saratoga and Mistic
occurrence basis comprehensive general liability insurance (including products
liability and contractual liability with respect to the indemnity obligations
set forth in para. 2 hereof). The insurance shall be maintained with limits of
not less than $5,000,000 bodily injury or death to any person per occurrence and
$100,000 property damage per occurrence (or $5,000,000 combined single limit per
occurrence bodily injury and property damage).
Saratoga agrees to provide a certificate of insurance acceptable to
Mistic within thirty (30) days of executing this Letter Agreement. The
certificate shall name Mistic as an additional insured and shall provide that
the insurance afforded applies as primary coverage and will not be contributory
with any other insurance available to Mistic, and that the coverage afforded
under the policy will not be canceled or changed so as to reduce or restrict the
coverage unless and until after at least thirty (30) days prior written notice
has been given to Mistic.
14. 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 Letter Agreement upon any subsequent
occurrence or date.
15. Any notice to be given pursuant to the provisions of this Letter
Agreement shall be in writing and shall be sent by registered mail, addressed in
the case of Saratoga to:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, New York 12866
Attention: President
and in the case of notice to Mistic to:
Exhibit 5
<PAGE> 5
Mistic Brands, Inc.
709 Westchester Avenue
White Plains, New York 10604
Attention: General Counsel
16. This Letter 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 Letter Agreement
may not be amended or supplemented, nor any of the provisions hereof waived,
except by an agreement in writing signed by Saratoga and Mistic.
17. This Letter Agreement shall be construed in accordance with, and
governed by, the internal laws of the State of New York, without giving effect
to the principles of conflict of laws thereof. The parties agree that any
dispute arising out of or relating to this Letter Agreement shall be resolved by
binding arbitration in the City of Albany, State of New York, under the
Commercial Arbitration Rules of the American Arbitration Association. Each of
the parties hereto consents to the jurisdiction and venue of the City of Albany,
State of New York for purposes of this Section 17 and hereby irrevocably waives
any objection, including any objection to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have to the
bringing of any dispute in the City of Albany, State of New York, under the
Commercial Arbitration Rules of the American Arbitration Association, in respect
of this Letter Agreement or any documents related thereto. Each of the parties
hereto waives personal service of any summons, complaint or other process, which
may be made by any other means permitted under New York law.
Exhibit 6
<PAGE> 6
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.
By: /s/ Robin Prever
--------------------------
Robin Prever
Chief Executive Officer
MISTIC BRANDS, INC.
By: /s/ Gary G. Lyons
--------------------------
Gary G. Lyons
contract.sarbgagr Sr. Vice President
6/30/97 & General Counsel
Exhibit 7
<PAGE> 1
EXHIBIT 10.26
MASTER DISTRIBUTION AGREEMENT
Exhibit 8
<PAGE> 2
MASTER DISTRIBUTION AGREEMENT
THIS MASTER DISTRIBUTION AGREEMENT (this "Agreement") is made and
entered into as of June 16, 1997 by and among Saratoga Beverage Group, Inc., a
Delaware corporation ("Saratoga"), Hype Corporation, a corporation incorporated
under the laws of the British Virgin Islands ("HC"), Hype Beverage Corporation,
a corporation incorporated under the laws of the Province of Ontario and a
majority-owned subsidiary of HC ("HBC"), World Wide Beverage Inc., a corporation
incorporated under the laws of the British Virgin Islands and a wholly-owned
subsidiary of HBC ("WWBI"), Global Brands AG, a corporation incorporated under
the laws of Vaduz Lichtenstein and a wholly-owned subsidiary of WWBI ("Global"),
Hype Water Company Inc., a corporation incorporated under the laws of the
British Virgin Islands and a majority-owned subsidiary of WWBI ("HWC"), and
Hyperholics Inc., a corporation incorporated under the laws of the British
Virgin Islands and a majority-owned subsidiary of WWBI ("Hyperholics";
collectively, HC, HBC, WWBI, Global, HWC and Hyperholics are collectively
referred to herein as the "Hype Entities").
WHEREAS, the Hype Entities collectively own the sole and exclusive
right to manufacture, package, sell, market and distribute beverages using the
names "HYPE" and "HYPE ENERGY," currently featuring the flavors "PASSION
ATTACK," "MORNING RUSH," "NIGHT BOOST" and "MFP," and using the names "SPIKED
HYPE," "HYPE SPORTS," "HYPERHOLICS," and "HYPE 2o" (collectively with any future
beverages using the "HYPE" name or any derivative of the "HYPE" name, the
"Products");
WHEREAS, the Hype Entities desire to grant to Saratoga, and Saratoga
desires to obtain from the Hype Entities, the exclusive right and license to act
as the master distributor of the Products in the United States of America and
its territories (collectively, the "Territory"), pursuant to the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereby agree as follows:
1. Grant of Rights to Saratoga.
(a) Subject to the terms and conditions set forth in this
Agreement, the Hype Entities hereby grant to Saratoga the exclusive right and
license to act, and Saratoga hereby agrees to act, as the master distributor of
the Products in the Territory (the grant of the rights and licenses set forth
above is hereby referred to as the "License"). Each of the Hype Entities hereby
agrees not to (i) grant to any other person or entity the right to act as a
distributor, master or otherwise, of the Products in the Territory, (ii)
directly sell any of the Products in the Territory, except through or on behalf
of Saratoga, (iii) sell any of the Products to a person or entity who, to the
knowledge of any of the Hype Entities, intends to resell the Products in the
Territory.
(b) Upon the creation of Products not in existence as of the
date hereof, Saratoga shall automatically become the master distributor for such
Products in the Territory under the terms of this Agreement, unless Saratoga
notifies the Hype Entities of its desire not to become the exclusive distributor
of such Products in the Territory, in which case the Hype Entities may appoint
another master distributor for such Products.
Exhibit 9
<PAGE> 3
(c.) The parties acknowledge that Saratoga is not acting as an
employee, partner, joint venture, representative or agent of any of the
Hype Entities. Except as specifically contemplated by this Agreement,
Saratoga shall not be entitled to incur any obligation of any kind,
whether express or implied, in the name or on behalf of any of the Hype
Entities.
(d) The Hype Entities acknowledge that Saratoga may produce,
bottle, distribute or market products which compete directly or indirectly with
the Products, both within and outside of the Territory.
2. TERM. SUBJECT TO THE PROVISIONS CONTAINED IN SECTION 6 HEREOF, THE
TERM OF THIS AGREEMENT SHALL COMMENCE ON THE DATE HEREOF AND EXPIRE ON JUNE 30,
2000; PROVIDED, HOWEVER, THAT THE PARTIES MAY AGREE TO EXTEND THE TERM FOR
SUCCESSIVE THREE-YEAR PERIODS (THE TERM OF THIS AGREEMENT, AS EXTENDED, IS
REFERRED TO HEREIN AS THE "TERM").
3. TERMS OF DISTRIBUTORSHIP.
(a) During the Term, Saratoga shall be entitled to take orders
for the Products from distributors for delivery of Products for resale by such
distributors within the Territory at such prices as may be mutually agreed upon
by the Hype Entities, Saratoga and such distributors. Saratoga shall provide to
the Hype Entities copies of its latest price lists for the Products, which shall
include details of any trade discounts or rebates. Upon receipt of an order for
Products, Saratoga shall acquire the right to purchase from the bottler or
co-packer the number of cases of Products specified in the order for delivery to
distributors. Saratoga shall acquire the ordered cases at such prices as may be
mutually agreed upon by the bottler or co-packer and Saratoga and Hype Entities.
Payment to the bottler or co-packer for the ordered Products shall be subject to
no less than thirty (30) day payment terms. Subject to Section 3(c) below,
within thirty (30) days after payment from the distributor for the ordered cases
is received by Saratoga, Saratoga shall forward to the Hype Entities an amount
equal to (i) the amount received from the distributor, less (ii) one dollar
(US$1.00) per case; provided, however, that for the first fifty thousand
(50,000) cases of Products ordered during the Term, Saratoga shall forward to
the Hype Entities an amount equal to (i) the amount received from the
distributor, less (ii) two dollars (US$2.00) per case. In the event that
Saratoga receives less than the total amount required to be paid by a
distributor under the purchase order, Saratoga shall receive its payment first,
and then the Hype Entities shall be entitled to the remainder of the amounts
received from the distributor. In the event that a distributor pays its invoice
for an order in two or more tranches, Saratoga shall not be entitled to more
than the one dollar (US$1.00) or two dollar (US$2.00) per case payment specified
above.
(b) Upon execution of this Agreement, Hype shall notify all of
its distributors within the Territory in writing that all orders of Products are
to be made through Saratoga and all payments for orders of the Products are to
made to Saratoga. To the extent that orders for delivery in the Territory are
received by any of the Hype Entities, the Hype Entities shall promptly forward
such orders to Saratoga. Without the prior written consent of Saratoga, the Hype
Entities shall not fill any orders for delivery in the Territory except through
or on behalf of Saratoga. To the extent that payments for orders of Products are
received by any of the Hype Entities, the Hype Entities shall promptly forward
such payments to Saratoga. During the Term, Saratoga shall be responsible for
the billing for orders and collections from distributors. The Hype Entities
shall use their best efforts to fulfill all orders taken by Saratoga in
accordance with the standard terms and conditions of sale of the Hype Entities,
subject to the terms and conditions of this Agreement. The Hype Entities shall
cause the Products to comply with all laws in the Territory regarding
labeling and health and safety laws and to obtain and consents or licenses and
pay all expenses of delivery of the Products required to fulfill the orders.
Exhibit 10
<PAGE> 4
Saratoga shall not be required to take delivery of any Products nor shall
Saratoga be responsible for the labeling, bottling, shipping, advertising or
promotion of the Products under this Agreement.
(c.) Saratoga has the right, in its sole discretion and for
any or no reason, to reject any order from distributors for Products. Saratoga
shall notify the Hype Entities of any order for Products in the Territory which
is rejected by Saratoga. In the event that an order for Products is rejected by
Saratoga, the Hype Entities may fill the order directly, and such order shall
not be subject to the payment provisions of this Section 3(c). Notwithstanding
the foregoing, if, without the prior written consent of Saratoga, any of the
Hype Entities shall fill any orders for delivery of Products in the Territory
during the Term, the Hype Entities shall pay Saratoga the sum of one dollar
(US$1.00) for each case of Products delivered in the Territory for which
Saratoga did not act as master distributor under Section 3(a) above.
(d) Notwithstanding anything in this Section 3 to the
contrary, Saratoga may, but shall not be required to, pay or extend credit to
(and shall not be in default under this Agreement for the failure to pay) the
Hype Entities or co-packer, bottler, supplier, distributor, or affiliate of Hype
Entities any amounts payable under Section 3(a) to the extent that, at the time
when payments would otherwise be payable, Saratoga is owed more than one million
dollars (US$1,000,000) from any Hype co-packer, bottler, supplier, distributor,
or affiliate pursuant to this Agreement.
(e) To the extent that distributors do not pay all amounts due
from such distributors to Saratoga within thirty (30) days after an order is
made, or if Products are returned to the Hype Entities or their bottlers or
co-packers for any reason, Saratoga shall offset such deficiency amount against
payments owed to the Hype Entities under Sections 3(a) or 3(e) above. If any
amounts are offset by withholding payment to the Hype Entities, as allowed by
the immediately preceding sentence, at such time as such deficiency amounts are
received by Saratoga, Saratoga shall promptly forward such amounts to the Hype
Entities. If the distributors do not pay deficient amounts, Hype will reimburse
Saratoga for such amount. If Hype does not reimburse Saratoga within thirty (30)
days upon notice from Saratoga, then Saratoga may, at its option, take physical
possession of the Products subject to the order or other assets of any of the
Hype Entities, including the use of intellectual property rights in order to
continue to sell any of the Hype Products, and may retain or resell such assets,
including without limitation the resale of such Products to other distributors
or other third parties, until such deficient amount is recovered by Saratoga.
3.1 HYPE COMMISSIONS. During the Term, if the Hype Entities order,
or if any distributor of any of the Hype Entities which is not
a current distributor of Saratoga orders as a result of the
direct efforts of the Hype Entities, any "Saratoga" branded
products from Saratoga, within thirty (30) days after payment
from the Hype Entities or such distributor for the ordered
"Saratoga" branded cases is received by Saratoga, Saratoga
shall forward to the Hype Entities an amount equal to five
percent (5%) of the net invoice for the "Saratoga" branded
cases. Net invoice is defined as selling price less freight,
promotions, discounts, and free goods.
Exhibit 11
<PAGE> 5
4. Representations and Warranties of the Hype Entities;
Covenants.
(a) Each of the Hype Entities, jointly and severally with the
other Hype Entities, represents and warrants to Saratoga that:
(i) Each of the Hype Entities has full corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. Each of the Hype Entities, by all requisite
action (whether corporate or otherwise), has duly authorized the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, and no other proceedings, corporate or otherwise, on the part of any of
the Hype Entities are necessary to authorize this Agreement, which, when
executed, will constitute the valid and binding agreement of the Hype Entities,
enforceable in accordance with its terms. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
constitute a violation or breach of (A) the organizational documents of any of
the Hype Entities, (B) any provisions of any contract or other instrument to
which any of the Hype Entities is a party or by which it, its businesses, assets
or properties may be affected or secured, (C) any order, writ, injunction or
decree applicable to any of the Hype Entities or (D) to the knowledge of the
Hype Entities, any statute, rule or regulation;
(ii) No consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental or other third
party, domestic or foreign, is required by or with respect to the Hype Entities
in connection with its execution and delivery of this Agreement, or the
consummation of the transactions contemplated hereby;
(iii) The Hype Entities have the sole and exclusive
rights to, and are the sole and exclusive owners of all , the Products,
including the names "HYPE," "HYPE ENERGY," "PASSION ATTACK," "MORNING RUSH,"
"NIGHT BOOST," "MFP," "SPIKED HYPE" and "HYPERHOLICS," in the Territory, free
and clear of all liens, encumbrances or restrictions of any kind, and the
Products constitute all of the beverage products currently offered for sale by
any of the Hype Entities;
(iv) The Hype Entities have the sole and exclusive
rights to grant the License to Saratoga pursuant to this Agreement, free and
clear of all liens, encumbrances or restrictions of any kind; and
(v) The Marketing Agreement dated January 8, 1997
between WWBI and Shurfine International, Inc. has been canceled and is null and
void, and Shurfine International, Inc. has no rights to produce, market or
distribute any of the Products in the Territory.
(b) each of the Hype Entities, jointly and severally with the
other Hype Entities, covenants and agrees:
(i) that none of the Hype Entities shall grant a
License to any other person or entity which would infringe upon Saratoga's
rights under this Agreement;
(ii) to maintain liability insurance of such types,
in such amounts and for such risks, casualties and contingencies as are
customarily insured against by enterprises in operations similar to the business
of Saratoga, as such operations are currently conducted and proposed to be
conducted. Saratoga shall be a named co-insured of such insurance. Copies of
such insurance policies shall be delivered to Saratoga at such time as the
insurance is in place; and
Exhibit 12
<PAGE> 6
(iii) that the Hype Entities shall be solely
responsible for the accuracy of all claims made on the labels of the Products
and all advertising of the Products, and that all such labels and advertising
shall comply with all state and federal statutes, rules and regulations
applicable to the Products.
5. Representations and Warranties of Saratoga.
(a) Saratoga represents and warrants to Hype that:
(i) Saratoga has full power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby.
Saratoga, by all requisite action (whether corporate or otherwise), has duly
authorized the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and no other proceedings, corporate or
otherwise, on the part of Saratoga are necessary to authorize this Agreement,
which, when executed, will constitute the valid and binding agreement of
Saratoga, enforceable in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will constitute a violation or breach of (A) the Certificate of
Incorporation, By-Laws or other organizational documents of Saratoga, (B) any
provision of any contract or other instrument to which Saratoga is a party or by
which it, its businesses, assets or properties may be affected or secured, (C)
any order, writ, injunction or decree applicable to Saratoga or (D) to the
knowledge of Saratoga, any statute, rule or regulation; and
(ii) No consent, approval, order or authorization of,
or registration, declaration or filing with any governmental or other third
party, domestic or foreign, is required by or with respect to Saratoga in
connection with its execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
6. Termination.
(a) The Hype Entities and Saratoga may terminate this
Agreement by written notice given to the other party hereto, effective upon
receipt of (or, on such later date as may be specified therein), in the event of
any one of the following:
(i) any of the representations and warranties made by
the other party herein is materially false, and continue to be false for a
period of thirty (30) days following notice from the non-breaching party of such
breach;
(ii) the other party fails to fulfill or perform any
one or more of its material obligations hereunder, and such non-fulfillment
continues for a period of thirty (30) days following written notice from the
non-breaching party of such breach;
(iii) dissolution of the other party;
(iv) insolvency of the other party, filing by the
other party of a voluntary petition in bankruptcy, filing of an involuntary
petition in bankruptcy against the other party, which petition remains unlifted
or unstayed for sixty (60) days, appointment by court of a temporary or
permanent receiver, trustee or custodian for the other party or its business or
a general assignment by the other party for benefit of its creditors; and
(v) attachment of or levy against a substantial
amount of the other party's property by an judicial officer which is not
discharged or bonded within ten (10) days thereafter.
Exhibit 13
<PAGE> 7
For purposes of Sections 6(a)(i) and 6(a)(ii) hereunder, the Hype Entities in
the aggregate and Saratoga shall each constitute one party; for purposes of
Sections 6(a)(iii), 6(a)(iv) and 6(a)(v) hereunder, each of the Hype Entities
individually and Saratoga shall each constitute one party
(b) Except as set forth in Sections 6(c), 8 or 9 below, in the
event of a termination of this Agreement, Saratoga shall immediately cease all
activities as the master distributor for the Products and all obligations of the
parties shall cease and be null and void.
(c.) In the event of a termination of this Agreement by
Saratoga pursuant to Section 6(a), Saratoga shall have the right to (i) retain,
acquire from distributors and/or sell any of the finished Products as a setoff
against the amounts owed to Saratoga and (ii) to collect from the Hype Entities
or other third parties all amounts due and payable to Saratoga under this
Agreement.
7. Violation of License. Each of the parties to this Agreement shall
promptly notify the other in writing of any actual, alleged or threatened
violation of the License granted hereunder (each a "Violation"). The Hype
Entities shall have the right to institute proceedings against any third party,
at its own expense, in its own name and in the name of Saratoga, with the prior
approval of Saratoga (which approval shall not be unreasonably withheld) to
obtain relief, including, but not limited to, injunctive relief, with respect to
any Violation. Saratoga shall also have the right to institute proceedings
against any third party, at the expense of the Hype Entities, in its own name
and in the name of the Hype Entities, with the prior approval of the Hype
Entities (which approval shall not be unreasonably withheld), to obtain relief,
including, but not limited to, injunctive relief, with respect to any Violation.
In the event Saratoga desires to exercise the right granted pursuant to this
Section 7, Saratoga shall notify the Hype Entities in writing. In the event that
the Hype Entities desire to control such proceedings, the Hype Entities shall
notify Saratoga within five (5) days after receipt of such notice from Saratoga.
Saratoga acknowledges and agrees that the Hype Entities shall have the right to
control such proceedings and shall have the right to settle any such proceeding,
provided, however, that the Hype Entities shall not settle any such proceeding
which would in any way affect Saratoga's rights under this Agreement without the
prior consent of Saratoga. If and to the extent any monetary judgment is awarded
in any such proceeding, such monetary judgment shall be for the benefit of the
party injured. Nothing contained in this Agreement shall impose any obligations
upon Saratoga to institute proceedings with respect to any Violation.
8. Indemnification. The Hype Entities shall indemnify, defend and hold
harmless Saratoga and its officers, directors, advisors and affiliates (other
than any of the Hype Entities or their affiliates) from and against all loss,
damage, liability, cost and expense, including, but not limited to, reasonable
attorneys' fees, arising from (i) any claim or cause of action by any third
party arising out of or in connection with the grant of the License to Saratoga
pursuant to this Agreement, (ii) any claim or cause of action by any third party
arising out of or in connection with the use or delivery of any Products,
including by any customer, (iii) any material breach by any of the Hype Entities
of any representation or warranty made by the Hype Entities herein or (iv) any
material breach by any of the Hype Entities of any of its obligations or
agreements contained herein or hereunder.
9. Confidential Information.
(a) The Hype Entities shall not, at any time during the term
of this Agreement and thereafter, directly or indirectly, disclose or furnish to
any other person, firm, partnership, corporation or any other entity, except in
the course of the proper performance of his duties hereunder, any Confidential
Information (as defined below) pertaining to Saratoga, unless required to do so
by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Hype Entities, or by any
administrative body or legislative body (including a committee thereof) with
jurisdiction
Exhibit 14
<PAGE> 8
to order the Hype Entities to divulge, disclose or make accessible such
information; provided, however, that the Hype Entities shall provide Saratoga
with notice of the requirement of such disclosure promptly after any of the Hype
Entities are notified thereof and prior to their disclosure thereof so as to
enable Saratoga to challenge the order compelling such disclosure.
(b) Saratoga shall not, at any time during the term of this
Agreement and thereafter, directly or indirectly, disclose or furnish to any
other person, firm, partnership, corporation or any other entity, except in the
course of the proper performance of his duties hereunder, any Confidential
Information (as defined below) pertaining to the Products or the Hype Entities,
unless required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of Saratoga,
or by any administrative body or legislative body (including a committee
thereof) with jurisdiction to order Saratoga to divulge, disclose or make
accessible such information; provided, however, that Saratoga shall provide the
Hype Entities with notice of the requirement of such disclosure promptly after
Saratoga is notified thereof and prior to its disclosure thereof so as to enable
the Hype Entities to challenge the order compelling such disclosure.
(c.) For purposes of this Agreement, "Confidential
Information" shall mean non-public information concerning any financial data,
statistical data, strategic business plans, product development (or other
proprietary product data), customer and supplier lists, customer and supplier
information, information relating to practices, processes, techniques,
procedures, methods, trade secrets, marketing plans and other non-public,
proprietary and confidential information that, in any case, (i) is not otherwise
generally available to the public and (ii) has not been disclosed to others not
subject to confidentiality agreements.
10. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served, (ii) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid or (iii) on the date sent if sent by
facsimile, to the parties at the following addresses or facsimile numbers (or at
such other address or facsimile number for a party as shall be specified by like
notice):
If to Saratoga, to: Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, New York 12866
Attention: Robin Prever
Fax No.: (518) 584-0380
Exhibit 15
<PAGE> 9
If to any of
the Hype Entities, to: Hype Beverage Corporation
33 University Avenue, Suite 1109
Toronto, Ontario M5J 2S7
Attention: R.J. Barry Cox
Fax No.:
11. Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties with respect to the subject matter
hereof and supersedes any and all prior understandings, negotiations or
agreements between the parties hereto, both written and oral, with respect to
such subject matter. The parties hereby acknowledge that this Agreement is
separate and distinct from any other agreement, including any agreement
regarding a merger or business combination, which may in the future be entered
into by any of the Hype Entities and Saratoga, and the failure to enter into any
other such agreement shall have no effect on the validity of this Agreement.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of Saratoga and the Hype Entities and
their respective successors and assigns. Except as expressly contemplated by
this Agreement, none of the parties hereto shall assign any rights or delegate
any duties hereunder without the prior written consent of the other parties
hereto, and any assignment made without such consent shall be void and
constitute a default hereunder.
13. Amendment or Modification; Waiver. This Agreement may be amended or
modified only by written agreement executed by all parties hereto. The parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (iii) waive compliance with any of the covenants, agreements
or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed by the party granting such waiver. Such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or future failure.
14. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
15. Governing Law; Consent to Jurisdiction. This Agreement shall be
construed in accordance with, and governed by, the internal laws of the State of
New York, without giving effect to the principles of conflict of laws thereof.
The parties agree that any dispute arising out of or relating to this Agreement
shall be resolved by binding arbitration in the City of Albany, State of New
York, under the Commercial Arbitration Rules of the American Arbitration
Association. Each of the parties hereto consents, for itself and in respect of
its property, to the jurisdiction and venue of the City of Albany, State of New
York for purposes of this Section 15 and hereby irrevocably waives any
objection, including any objection to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have to the
bringing of any dispute in the City of Albany, State of New York, under the
Commercial Arbitration Rules of the American Arbitration Association, in respect
of this Agreement or any documents related thereto. Each of the parties hereto
waives personal service of any summons, complaint or other process, which may be
made by any other means permitted under New York law.
16
<PAGE> 10
16. Publicity. The parties shall agree with each other as to the timing
and content prior to issuing any announcement, press release, public statement
or other information to the press or any third party with respect to this
Agreement or the transactions contemplated hereby; provided, however, that
nothing herein shall prohibit any party to this Agreement from making any public
disclosure regarding this Agreement and the transactions contemplated hereby if,
in the opinion of counsel to such party, such disclosure is required by law or
by valid judicial process.
17. Headings. Section headings contained in this Agreement are included
for convenience only and shall not affect the interpretation of any provisions
of this Agreement.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall constitute one and the same agreement.
19. No Prejudice. This Agreement has been jointly prepared and
negotiated by the parties hereto and the terms hereof shall not be construed in
favor of or against any party on account of its participation in such
preparation.
Exhibit 17
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first set forth above.
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Robin Prever
------------------------------
Name: Robin Prever
Title: Chief Executive Officer
HYPE CORPORATION HYPE BEVERAGE CORPORATION
By: /s/ R.J. Barry Cox By: /s/ R.J. Barry Cox
------------------- ------------------------------
Name: R.J. Barry Cox Name: R.J. Barry Cox
Title: Chairman Title: Director
GLOBAL BRANDS AG WORLD WIDE BEVERAGE INC.
By: /s/ R.J. Barry Cox By: /s/ R. J. Barry Cox
------------------- ------------------------------
Name: R.J. Barry Cox Name: R.J. Barry Cox
Title: Director Title: Director
HYPE WATER COMPANY INC. HYPERHOLICS INC.
By: /s/ R.J. Barry Cox By: /s/ R.J. Barry Cox
------------------- ------------------------------
Name: R.J. Barry Cox Name: R.J. Barry Cox
Title: Director Title: Director
Exhibit 18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,474,270
<SECURITIES> 0
<RECEIVABLES> 1,458,286
<ALLOWANCES> 133,500
<INVENTORY> 196,166
<CURRENT-ASSETS> 3,070,837
<PP&E> 3,004,614
<DEPRECIATION> 1,532,247
<TOTAL-ASSETS> 4,661,754
<CURRENT-LIABILITIES> 808,438
<BONDS> 1,504,966
0
0
<COMMON> 29,458
<OTHER-SE> 2,304,480
<TOTAL-LIABILITY-AND-EQUITY> 4,661,754
<SALES> 3,189,828
<TOTAL-REVENUES> 3,215,502
<CGS> 2,113,016
<TOTAL-COSTS> 2,282,126
<OTHER-EXPENSES> 678,129
<LOSS-PROVISION> 38,500
<INTEREST-EXPENSE> 8,103
<INCOME-PRETAX> 255,793
<INCOME-TAX> 0
<INCOME-CONTINUING> 255,793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255,793
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
