<PAGE> 1
U.S. 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 March 31, 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 Identification No.)
of incorporation or organization)
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 - 2,228,447 shares of Class A Common Stock,
$.01 par value, and 817,313 shares of Class B Common
Stock, $.01 par value,
were outstanding as of May 8, 1997
Traditional small business disclosure format (check one):
Yes No X
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This document contains 12 pages
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SARATOGA BEVERAGE GROUP, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 1997 (Unaudited) and
as of December 31, 1996 1
Consolidated Statements of Operations and Accumulated Deficit for
the three months ended March 31, 1997 and 1996 (Unaudited) 2
Consolidated Statements of Cash Flow for the three months ended
March 31, 1997 and 1996 (Unaudited) 3
Notes to Consolidated Financial Statements (Unaudited) 4-5
Item 2 - Management's Discussions and Analysis of Financial Condition and
Results of Operations 6-8
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 9-11
Signatures 12
</TABLE>
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<TABLE>
<CAPTION>
SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
--------------------- --------------------
(UNAUDITED) (a)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $92,824 $387,938
Accounts receivable, net of allowance for doubtful
accounts of $103,500 in 1997 and $95,000 in 1996 739,013 398,195
Inventories 188,197 183,072
Prepaid expenses and other current assets 27,415 25,427
--------------------- --------------------
Total current assets 1,047,449 994,632
Property, plant and equipment, net 1,529,135 1,618,397
Other assets 17,860 16,859
--------------------- --------------------
Total assets $2,594,444 $2,629,888
===================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $501,328 $301,667
Current portion of obligation under capital lease 5,978 6,295
Revolving credit facility 300,000
--------------------- --------------------
Total current liabilities 507,306 607,962
Long-term debt:
Obligation under capital lease 6,401 7,455
--------------------- --------------------
Total liabilities 513,707 615,417
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; 2,017,724 and 1,691,224 shares issued in 1997
and 1996, respectively 20,177 16,913
Class B common stock, $.01 par value; 2,000,000 shares
authorized; 1,021,036 and 1,036,036 shares issued and
outstanding in 1997 and 1996, respectively 10,210 10,360
Paid-in capital 9,280,005 9,258,405
Treasury stock at cost, 2,700 shares of Class A (3,990)
Accumulated deficit (7,229,655) (7,267,217)
--------------------- --------------------
Total stockholders' equity 2,080,737 2,014,471
--------------------- --------------------
Total liabilities and stockholders' equity $2,594,444 $2,629,888
===================== ====================
(a) Condensed from audited financial statements
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
--------------------- --------------------
<S> <C> <C>
Revenue:
Product sales $686,745 $510,189
Co-pack revenue 391,078 208,416
--------------------- --------------------
Total revenue 1,077,823 718,605
Cost of goods sold, exclusive of depreciation
and amortization shown separately below 662,747 435,401
--------------------- --------------------
Gross Profit 415,076 283,204
--------------------- --------------------
Operating Expenses:
Marketing and sales 78,926 71,197
General and administrative 217,350 195,473
Depreciation and amortization 93,153 89,843
--------------------- --------------------
389,429 356,513
--------------------- --------------------
Operating income (loss) 25,647 (73,309)
--------------------- --------------------
Other Income (Expense):
Commission income 13,796 21,967
Interest income 1,316 3,182
Interest expense (3,197) (2,684)
--------------------- --------------------
Other Income (Expense), net 11,915 22,465
--------------------- --------------------
Net income (loss) $37,562 $(50,844)
===================== ====================
Accumulated Deficit:
Beginning of period (7,267,217) (7,119,758)
--------------------- --------------------
End of period $(7,229,655) $(7,170,602)
===================== ====================
Per Share Information:
Primary earnings (loss) per share $0.01 $(0.02)
Fully-diluted earnings per share $0.01
Weighted average number of common and
equivalent shares outstanding:
Primary 2,868,579 2,627,260
Fully-diluted 2,988,197
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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SARATOGA BEVERAGE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
--------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $37,562 $(50,844)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 93,153 89,843
Issuance of treasury stock 3,990
Provision for doubtful accounts 8,500 (28,619)
Changes in operating assets and liabilities:
Accounts receivable (349,317) 86,768
Inventories (5,125) 61,928
Prepaid expenses and other current assets (1,988) 22,087
Accounts payable and accrued liabilities 199,661 (370,208)
--------------------- --------------------
Net cash used in operating activities (13,564) (189,045)
--------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (3,192) (15,000)
Increase in other assets (1,700) (31)
--------------------- --------------------
Net cash used in investing activities (4,892) (15,031)
--------------------- --------------------
Cash flows from financing activities
Proceeds from long-term borrowings 100,000
Principal payments on revolving credit facility (300,000)
Principal payments on long-term borrowings (63,650)
Principal payments on short-term borrowings (53,172)
Principal reductions on capital lease obligation (1,371)
Proceeds on the exercise of stock warrants 3,000
Proceeds from the exercise of stock options 28,750
Distribution to minority interest (7,037) (12,328)
--------------------- --------------------
Net cash used in financing activities (276,658) (29,150)
--------------------- --------------------
Decrease in cash and cash equivalents (295,114) (233,226)
Cash and cash equivalents at beginning of period 387,938 352,797
--------------------- --------------------
Cash and cash equivalents at end of period $92,824 $119,571
===================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period $3,180 $1,420
===================== ====================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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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 period ended March 31, 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.
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 exclude
outstanding options and warrants, in 1996 since the effect of these securities
on per share data is anti-dilutive, and include certain options and warrants in
1997 because of their dilutive effect on per share data.
3. RELATED PARTY TRANSACTIONS
Included in cash and cash equivalents at March 31, 1997 is
approximately $39,000 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
have supplied the Company with a line-of-credit for up to $250,000 with interest
at prime plus 1%. The line-of-credit is collateralized by the Company's accounts
receivable, inventory and property, plant and/or equipment. The line-of-credit
expires in April 1998 at which time all accrued interest and unpaid principal
will be due and payable. The line-of-credit will be payable at an earlier date
if the Company obtains a bank line-of-credit or similar financing in an amount
of at least $250,000 or if a change of control of the Company occurs.
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 computation to the numerator and
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denominator of the diluted EPS computation. Management has not yet made a
determination of the impact, if any, that the adoption of this standard would
have on the consolidated financial statements.
5. Income Tax
For the quarter ended March 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 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.
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.
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 of 1995.
In April 1997 the Company entered into a three-year bottling agreement
(the "Bottling Agreement") with Hype Corporation and certain affiliates of Hype
corporation (collectively, "Hype") whereas Hype granted the Company (i) the
exclusive right and license to manufacture and package alcoholic or alco-pop
beverages in glass or plastic bottles using the names "HYPERHOLICS" or
"ULTRAHOLICS" (collectively with any future alcohol or alco-pop beverages using
any other names, the "Holic Products") anywhere in the world, (ii) the
nonexclusive right and license to manufacture and package the water beverages
in glass or plastic bottles using the name "Hype 2-0" (collectively with any
future water beverages using any other name, the "Water Products") anywhere in
the world and (iii) the nonexclusive right and license to the names
"HYPERHOLICS", "ULTRAHOLICS", "HYPE 2-0" and any future names used by Hype in
connection with alcoholic or alco-pop or water beverages.
The Bottling Agreement contains, among other items, minimum annual
quantities to be purchased for the Holics Products. The minimum quantities are
as follows: (i) 500,000 24-count cases of Holic Products in 1.75 liter bottles
and (ii) 600,000 24-count cases of Holic Product in 330 ml or 375 ml bottles.
To the extent that minimum annual quantities are not met by Hype, Hype has
agreed to pay the Company liquidated damages in an amount equal to, in the case
of 1.75 liter bottles, $.50 per bottle, multiplied by the number of bottles by
which Hype fell short of the 500,000 24-count case annual minimum during each
applicable 12 month period, plus, in the case of 330 ml or 375 ml bottles,
$3.00 per case, multiplied by the number of cases by which Hype fell short of
the 600,000 case annual minimum during each applicable 12 month period. The
minimum order quantities do not take effect until the Holic Products receive
all required approvals necessary to begin production, which approvals are
currently anticipated to be received in the third quarter of 1997. There are no
minimum annual quantities for the Water Products.
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PRODUCTS
During the first quarter of 1997 the Company introduced two new
non-carbonated water products. Both products are bottled in .5 Liter
polyethylene terephthalate ("PET") bottles. One product is a water, fortified
with caffeine, and the other is a water, fortified with ginseng. Both products
are being marketed through the Company's existing distribution network.
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 months ended March 31, 1997 and 1996.
NET SALES
Net revenue for the three months ended March 31, 1997 increased
$359,218, or 50.0%, to $1,077,823 from $718,605 reported for the comparable
period ended March 31, 1996. The increase in net sales is attributable to: (i)
an increase in branded product sales of $176,556, a 34.6% increase from the
comparable period ended March 31, 1996 and (ii) an increase in co-pack revenue
of $182,662, an 87.6% increase from the comparable period ended March 31, 1996.
GROSS PROFIT
The gross profit margin, exclusive of depreciation and amortization,
was 38.5% and 39.4% for the three-month periods ended March 31, 1997 and 1996,
respectively. The gross profit margin percentage decrease is primarily
attributable to: (i) a reduction in the selling price of certain packages in
certain markets, due to the competition in those markets, and (ii) increased
co-pack revenue that carry smaller margins.
MARKETING AND SALES
Marketing and sales expenses were $78,926 and $71,197 for the three
months ended March 31, 1997 and 1996, respectively. As a percentage of net
sales, marketing and sales expenses decreased to 7.3% in 1997 from 9.9% in 1996.
The $7,729 increase in marketing and sales expenses for the three-month period
ending March 31, 1997 when compared with the three-month period ending March 31,
1996 is primarily due to (i) an increase in salaries and commissions paid to
independent representatives, (ii) an increase in promotional allowances as a
result of the increased sales volume, partially offset by the elimination of
sales consulting services fees, of $.50 per case paid to Royal Crown Company,
Inc. ("RCC") for their sales and marketing services as part of the Sales and
Marketing Services Agreement that was terminated on December 1, 1996.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $217,350 for the three months
ended March 31, 1997, an increase of $21,877 from the $195,473 reported for the
three months ended March 31, 1996. General and administrative expenses as a
percentage of net sales for the three months ended March 31, 1997 and 1996 were
20.1% and 27.2%, respectively. The $21,877 increase in general and
administrative
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expenses is primarily attributable to increases in utility costs, legal and
professional fees, property and other non-income related taxes and bad debt
expense.
OTHER INCOME (EXPENSE)
For the three months ended March 31, 1997, the Company reported net
other income of $11,915, as compared to net other income of $22,465 reported for
the three months ended March 31, 1996. The $10,550 decrease in net other income
for the three-month period ending March 31, 1997 is primarily due to (i) a
decrease of $8,171 in commission income derived from the sale of the Mistic
Distribution Agreement by Sample, due to a decrease of $.50 per case commission
beginning in March 1996 (ii) a decrease of $1,866 in interest income as a result
of the decline in capital available for investment. The $513 increase in the
Company's interest expense is primarily attributable to the $300,000 principal
balance outstanding on the credit facility with Triarc Companies, Inc.
("Triarc") for 29 days in the first quarter of 1997 as compared with $100,000
outstanding for 44 days in the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1997 and 1996, cash flows used in
operations were $13,564 and $189,045, respectively. At March 31, 1997, cash and
cash equivalents was $92,824, while working capital was $540,143. The current
ratio at March 31, 1997 was 2.1 : 1. The Company believes that its efforts to
reduce operating losses will generate positive cash flow; this supplemented with
the line-of-credit supplied by the Company's President and a principal
shareholder is sufficient to meet anticipated needs for the next twelve months
(see Note number 3, Notes to Consolidated Financial Statements). As of
March 31, 1997, zero has been borrowed on the line-of-credit.
Debt includes the outstanding principal balance of $12,379 on a capital
lease.
On January 31, 1997, the Company and Triarc entered into a Termination
Agreement whereby the Credit Agreement was terminated and as such, the credit
facility was terminated and the $300,000 outstanding principal balance was
repaid.
The Company anticipates upgrading their bottling lines in 1997 and the
construction of a facility addition. The estimated cost of the project is
$1,500,000. The project has been approved by Saratoga County Industrial
Development Agency which will enable the Company to obtain tax-exempt financing.
However, the borrowing has not yet been approved by a financial institution.
In addition to the $300,000 payment made on January 31, 1997, to repay
the outstanding balance on the credit facility, and the planned upgrade of the
facility and equipment, the Company has no other significant commitments or
known contingencies that are expected to require sizable cash outlays in 1997.
While the Company will continue to incur costs to develop and introduce new
products, it will strive to limit such costs.
There are no material commitments 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* (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 Stock Certificate
4.2*** (P) Non-Callable Warrant A dated December 13, 1995 by the Company to
Triarc Companies, Inc. ("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 as of 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.
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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
D.H. Blair & Co. (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 Agreement hereto dated
November 9, 1993
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, between the Company
and Triarc
10.18B# Termination Agreement dated as of January 31, 1997 between the
Company and Triarc
10.19*** (P) 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
22** (P) Subsidiaries
24*** (P) Power of attorney
27## Financial Data Schedule
(*) 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 10, 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
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(#) Incorporated herein by reference to the Company's Form 10-KSB
filed with the Commission on April 15, 1997
(##) Filed herewith
(+) Management Agreement
(b) Reports on Form 8-K: No reports on Form 8-K were filed in the quarter ended
March 31, 1997
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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 dully
authorized.
SARATOGA BEVERAGE GROUP, INC.
(REGISTRANT)
DATE: MAY 8, 1997 BY: /S/ ROBIN PREVER
------------ ---------------------------
ROBIN PREVER
CHIEF EXECUTIVE OFFICER
DATE: MAY 8, 1997 BY: /S/ ANTHONY PRINCIPE
----------- ----------------------------
ANTHONY PRINCIPE
CHIEF FINANCIAL OFFICER
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INDEX TO EXHIBITS
EXHIBIT NO.
------- ---
Bottling Agreement................................................10.23
Line of Credit Agreement..........................................10.24
Financial Data Schedule...........................................27
Exhibit 1
<PAGE> 1
EXHIBIT 10.23
BOTTLING AGREEMENT BY AND AMONG THE
COMPANY AND HYPE CORPORATION, HYPE
BEVERAGE CORPORATION, WORLD WIDE BEVERAGE INC.,
HYPE WATER COMPANY INC., HYPERHOLICS INC.,
R.J. BARRY COX AND NIGEL SPIRO
Exhibit 2
<PAGE> 2
BOTTLING AGREEMENT
THIS BOTTLING AGREEMENT (this "Agreement") is made and entered into as
of April 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"), Hype Water Company Inc., a corporation incorporated
under the laws of the British Virgin Islands and a majority-owned subsidiary of
WWBI ("HWC"), 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, HWC and Hyperholics are collectively referred to
herein as "Hype"), and, for purposes of Sections 9, 12 and 17, R.J. Barry Cox
and Nigel Spiro (Mr. Cox and Mr. Spiro are collectively referred to herein as
the "Guarantors").
WHEREAS, Hype owns the sole and exclusive right to manufacture,
package, sell and distribute alcoholic or alco-pop beverages in glass or plastic
bottles using the names "HYPERHOLICS" or "ULTRAHOLICS" (collectively with any
future alcohol or alco-pop beverages using any other names, the "Holic
Products") and water beverages in glass or plastic bottles using the name "HYPE
2-0" (collectively with any future water beverages using any other names, the
"Water Products"; the Holic Products and the Water Products are collectively
referred to herein as the "Products");
WHEREAS, Hype desires to grant to Saratoga, and Saratoga desires to
obtain from Hype, (i) the exclusive right and license to manufacture and package
the Holic Products anywhere in the world, (ii) the nonexclusive right and
license to manufacture and package the Water Products anywhere in the world and
(iii) the nonexclusive right and license to the names "HYPERHOLICS",
"ULTRAHOLICS", "HYPE 2-0" and any future names used by Hype in connection with
alcoholic or alco-pop or water beverages (collectively, the "Names"), 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. TERM. Subject to provisions contained in Section 7 hereof, the term
of this Agreement shall commence on the date hereof and expire on the later to
occur of (i) June 30, 2000 and (ii) the third anniversary of the first Holics
Approval Date (as hereinafter defined); 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").
2. GRANT OF RIGHTS TO SARATOGA; RESTRICTIONS. Subject to the terms and
conditions set forth in this Agreement, Hype hereby grants to Saratoga (i) the
exclusive right and license to manufacture and package the Holic Products
anywhere in the world, (ii) the nonexclusive right and license to manufacture
and package the Water Products anywhere in the world and (iii) the nonexclusive
right and license to the Names (collectively, the grant of the rights and
licenses set forth in clauses (i), (ii) and (iii) above is hereby referred to as
the "License"). Hype hereby agrees not to grant to any other person or entity
the right to manufacture and/or package the Holic Products.
3. PRODUCTION; MINIMUM ORDER QUANTITIES, LETTERS OF CREDIT.
Exhibit 3
<PAGE> 3
(a) In connection with this Agreement, Saratoga shall
manufacture and package, or cause to be manufactured and packaged, all of the
Products to be sold anywhere in the world by or on behalf of Hype.
(b) In connection with this Agreement, Hype shall purchase,
during each 12 month period beginning on the first day of the month in which the
first Holics Approval Date occurs during the Term (i.e., if the first Holics
Approval Date occurs on July 15, 1997, the 12 month period from July 1, 1997 to
June 30, 1998 and each 12 month period thereafter during the Term) the following
quantities of the Holic Products:
(i) 500,000 24-count cases of Holic Products in 1.75
liter bottles, and
(ii) 600,000 24-count cases of Holic Products in 330
ml or 375 ml bottles
To the extent that minimum annual quantities for the Holic Products is not
purchased by Hype, Hype hereby agrees to pay Saratoga liquidated damages in an
amount equal to (x) in the case of 1.75 liter bottles, (A) $.50 per bottle,
multiplied by (B) the number of bottles by which Hype fell short of the 500,000
24-count case annual minimum during each applicable 12 month period beginning
July 1 and ending June 30 (beginning July 1, 1997), plus (y) in the case of 330
ml or 375 ml bottles, (A) $3.00 per case, multiplied by (B) the number of cases
by which Hype fell short of the 600,000 case annual minimum during each
applicable 12 month period beginning July I and ending June 30 (beginning July
1, 1997).
(c) There shall be no minimum annual quantities for the Water
Products.
(d) The Products shall be manufactured and packaged in
accordance with the standards, formulae and procedures established and revised
by Hype from time to time; provided, however, that until each of the Products,
including packaging, shall have (i) received the approval from the United States
Bureau of Alcohol Tobacco and Firearms to manufacture, package and sell the
Products, (ii) received any other applicable United States federal and state
approvals required to manufacture, package and sell the Products in any, United
States jurisdiction (including United States Food & Drug Administration
approval), (iii) received any applicable foreign approvals required to
manufacture, package and sell the Products in any jurisdiction outside of the
United States in which the Products are intended to be sold, (iv) been approved
by Hype and Saratoga, after appropriate testing, on the final design of the
bottles and labels for the Products, (v) been approved by Hype and Saratoga,
after appropriate testing, on the recipe and ingredients (including suppliers
for the ingredients) for the Products (the time when all of the foregoing
conditions have been met for a Product, for a Holics Product and for a Water
Product is referred to herein as an "Approval Date", a "Holics Approval Date"
and a "Water Approval Date", respectively), Saratoga shall not be required to
expend any of its own monies or produce any of such Products, except as
otherwise expressly set forth in this Agreement. In addition, prior to an
Approval Date, Saratoga shall order glass bottles, develop labels and take other
reasonable steps necessary to assist Hype in reaching the Approval Date. To the
extent that the approval process would otherwise require Saratoga to submit
orders to vendors, Hype hereby agrees that it shall either (i) order such goods
directly from the vendors and supply them to Saratoga, in which case Hype shall
assume full responsibility for the quality of and payment for such goods, or
(ii) shall advance Saratoga an amount equal to the amount necessary to pay the
vendors, in which case Saratoga shall assume full responsibility for the quality
of and payment for such goods.
(e) On at least a monthly basis after an Approval Date, Hype
shall furnish or cause to be furnished written order projections to Saratoga
showing the number of cases to be ordered for each Product, the type of
containers to be used and the place of delivery of the Products. Saratoga shall
use its best efforts to manufacture and package the Products required to satisfy
such written order projections on the date requested by Hype; provided, however,
that such date shall be no less than 60 days after the date of the written order
projections; provided further, however, that, if any portion of an
Exhibit 4
<PAGE> 4
order is changed by Hype for any reason, Saratoga shall use its good faith
efforts to manufacture and package the Products required to satisfy such order
within 60 days after the date of the change. For purposes of this Agreement,
Hype agrees that Saratoga may rely on the written order projections to
manufacture and package the Products and receive payment therefor.
Simultaneously with each order by Hype for the Products after an Approval Date,
Hype shall deliver to Saratoga an irrevocable letter of credit (or other means
of financing, if mutually agreed by Hype and Saratoga) in an amount equal to (i)
with respect to Products to be manufactured and packaged by Saratoga in its own
facilities, one hundred thirty percent (130%) of Saratoga's Cost (as hereinafter
defined) and (ii) with respect to Products to be manufactured and packaged by
Saratoga outside its own facilities, one hundred twenty-five percent (125%) of
Saratoga's Cost. Each irrevocable letter of credit (or other means of financing,
if mutually agreed by Hype and Saratoga) shall be payable to Saratoga upon
demand, upon the earlier to occur of the termination of this Agreement or the
manufacture and package of the Products. Saratoga shall have no obligation to
manufacture and package any Products for which an irrevocable letter of credit
(or other means of financing, if mutually agreed by Hype and Saratoga) is not in
place.
4. PAYMENT OF COST; RIGHT TO AUDIT.
(a) In connection with this Agreement, Hype shall pay to
Saratoga the following:
(i) with respect to Products bottled by Saratoga in
its own facilities, one hundred thirty percent (130%) of Saratoga's Cost (as
hereinafter defined); and
(ii) with respect to Products bottled by Saratoga
outside its own facilities, one hundred twenty-five percent (125%) of Saratoga's
Cost.
(b) "Cost" is defined for purposes of this Agreement as all
costs necessary in order for Saratoga to produce the finished Products,
including, without limitation, the out-of pocket cost of all raw materials
(including bottles, caps and Product ingredients) and work-in-progress, the cost
of all labor and other expenses, including inventory costs, unamortized bottle
mold costs and unamortized change parts, and the cost of all co-pack fees paid
by Saratoga if it should decide, in its sole discretion, to use one or more
co-packers, either within or outside of the United States. Hype hereby
acknowledges that Saratoga may delegate some or all of Saratoga's obligations
under this Agreement to one or more co-packers or other persons, either within
or outside of the United States, in Saratoga's sole discretion. Hype hereby
further acknowledges that all shipping of the Products shall be FOB Plant
(either Saratoga's plant or the co-packer's plant, as the case may be).
(c) The payments due under the Agreement with respect to the
manufacture and packaging of any Products shall be paid by Hype within ten (10)
days after the delivery of such Products. In the event that payments are not
made within such ten (10) day period, Hype acknowledges that Saratoga may, in
its sole discretion, draw upon the letters of credit (or other means of
financing, if mutually agreed by Hype and Saratoga) securing such payments, can
setoff against finished goods inventory then held by Saratoga on its premises or
under its control or can take possession of the Collateral (as defined in the
Trademark Security Agreement annexed hereto as Exhibit A). All determinations
with respect to the number of Products bottled and the payments to be made
hereunder shall be made by Saratoga in accordance with its books and records.
Saratoga hereby agrees to maintain true and correct records of the number of
Products bottled and the payments to be made hereunder and the other material
records in connection with this Agreement for two (2) years after termination of
this Agreement. Within five (5) business days after a request is made by Hype,
Saratoga shall send copies of the records relating to this Agreement to Hype.
(d) Hype shall have the right, one (1) time in each calendar
year, during normal business hours and upon ten (10) days' prior written notice
to Saratoga and subject to the confidentiality requirements set forth in this
Agreement, at Hype's expense, to audit the books and records of Saratoga
regarding the amounts payable to Saratoga pursuant to Section 4(a); provided,
however, that any such audit period shall end with one of Saratoga's fiscal
quarters; provided further, however, that, without the
Exhibit 5
<PAGE> 5
prior written consent of Saratoga, no such audit shall take place during the
first ninety (90) days of Saratoga's fiscal year. Notwithstanding the foregoing,
the calculation and payment of amounts payable to Saratoga shall be deemed final
and not subject to further review one (1) year after the end of the fiscal year
of Saratoga in which such payment of amounts was made unless otherwise
challenged by Hype pursuant to this Section 4(d). Saratoga shall have the right
for a period of ten (10) business days after the completion of the audit to
present the auditors with any comments on the calculation of the amounts payable
to Saratoga for such period. The auditors shall consider Saratoga's comments and
shall make any necessary revisions. In the event Saratoga ultimately disagrees
with the auditor's calculation, such dispute 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. In the event an audit
reveals that Hype should have paid Saratoga an amount that is greater than that
which was paid to Saratoga, then Hype shall pay to Saratoga the difference
between the amount owed and the amount paid, plus interest.
5. REPRESENTATIONS AND WARRANTIES OF HYPE; COVENANTS.
(a) Hype jointly and severally represents and warrants to
Saratoga that:
(i) Hype has full corporate power and authority to
enter into this Agreement and the Trademark Security Agreement and to carry out
the transactions contemplated hereby. Hype, by all requisite action (whether
corporate or otherwise), has duly authorized the execution and delivery of this
Agreement and the Trademark Security Agreement and the consummation of the
transactions contemplated hereby, and no other proceedings, corporate or
otherwise, on the part of Hype are necessary to authorize this Agreement and the
Trademark Security Agreement, each of which, when executed, will constitute the
valid and binding agreement of Hype, enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement and the Trademark Security
Agreement nor the consummation of the transactions contemplated hereby will
constitute a violation or breach of (A) the organizational documents of Hype,
(B) any provisions of any contract or other instrument to which Hype 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 Hype or (D) to the
knowledge of Hype, 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 Hype in connection
with its execution and delivery of this Agreement, or the consummation of the
transactions contemplated hereby;
(iii) Hype has the sole and exclusive rights to, and
is the sole and exclusive owner of, the names "HYPERHOLICS", "ULTRAHOLICS" and
"HYPE 2-0" in the United States and in each country in which the Products will
be sold and has the sole and exclusive right to grant a license of the names
"HYPERHOLICS", "ULTRAHOLICS" and "HYPE 2-0" to Saratoga pursuant to this
Agreement, free and clear of all liens, encumbrances or restrictions of any
kind;
(iv) Hype has the sole and exclusive right to grant
the License to Saratoga pursuant to this Agreement, free and clear of all liens,
encumbrances or restrictions of any kind;
(b) Hype jointly and severally covenants and agrees:
(i) to provide Saratoga with all standards, formulae
and procedures necessary (and consistent with industry standards) for the
production of the Products, as such standards, formulae and procedures may be
revised by Hype from time to time;
(ii) to use its best efforts to satisfy the
conditions set forth in Section 3(d) hereof for the Approval Date for each of
the Products, including without limitation to (A) receive the approval from the
United States Bureau of Alcohol Tobacco and Firearms to manufacture, package and
sell the Products, (B) receive any other applicable United States federal and
state approvals required to manufacture, package and the sell the Products in
any United States jurisdiction (including United States
Exhibit 6
<PAGE> 6
Food & Drug Administration approval), (C) received any applicable foreign
approvals required to manufacture, package and sell the Products in any
jurisdiction outside of the United States in which the Products are intended to
be sold, (D) approve, after appropriate testing, the final design of the bottles
and labels for the Products, (E) approve, after appropriate testing, the recipe
and ingredients (including suppliers for the ingredients) for the Products; and
(iii) that Hype shall not grant a License to any
other person or entity which would infringe upon Saratoga's rights under this
Agreement.
6. REPRESENTATIONS AND WARRANTIES OF SARATOGA; COVENANTS.
(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 Trademark
Security 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 and the Trademark Security Agreement, each
of 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 and the Trademark Security 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.
(b) Saratoga covenants and agrees:
(i) to comply with all standards, formulae and
procedures promulgated by Hype for the production of the Products, as such
standards, formulae and procedures may be revised by Hype from time to time and
to assist Hype in meeting the conditions set forth in Section 3(d) hereof for
the applicable Approval Date; and
(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.
7. TERMINATION.
(a) Either party to this Agreement 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 obligations hereunder, and such non-fulfillment continues for
a period of thirty (30) days following written notice from
Exhibit 7
<PAGE> 7
the non-breaching party of such breach; provided, however, that no written
notice or thirty (30) day period shall apply to a breach of any obligation of
Hype pursuant to Sections 3(b), 3(d) (the last sentence only), 4(a), 4(c) or 10
hereto or for a breach of any obligation of Saratoga pursuant to Section 3(e)
(provided that Hype has fulfilled its obligations under Section 3(e);
(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.
(b) Upon termination of this Agreement, Saratoga shall
immediately cease to bottle the Products; provided, however, that, for a period
of six (6) months after termination of this Agreement, Saratoga shall continue
to have the right to sell Products in order to liquidate its inventory of
Products unsold on the date of termination of this Agreement.
(c) In the event of a termination of this Agreement by
Saratoga pursuant to Section 7(a), Saratoga shall have the right to (i) retain
and/or sell any of the finished Products as a setoff against the amounts owed to
Saratoga (including any amounts owed to the end of the Term with respect to the
fulfillment of the minimum quantities set forth in Section 3(b)), (ii) to
exercise its rights under the Trademark Security Agreement annexed hereto as
Exhibit A, (iii) draw upon any outstanding letters of credit (or other
financing) and (iv) to collect all amounts due and payable under Sections 3(b)
(i.e., amounts owed to the end of the Term with respect to the fulfillment of
the minimum quantities set forth herein), 3(d) (the last sentence only), 4(a)
and 4(c).
8. 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"). Hype 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
Hype's expense, in its own name and in the name of Hype, with the prior approval
of Hype (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 8, Saratoga shall notify Hype in writing. In the event Hype desires to
control such proceedings, Hype shall notify Saratoga within five (5) days after
receipt of such notice from Saratoga. Saratoga acknowledges and agrees that Hype
shall have the right to control such proceedings and shall have the right to
settle any such proceeding, provided, however, that Hype 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.
9. GUARANTY. Each of the Guarantors hereby, jointly and severally,
absolutely and unconditionally guarantees the prompt and punctual payment and
performance when due of all amounts due and payable under this Agreement. This
is a continuing guaranty applicable to any and all liabilities and obligations
of every kind and character of Hype to Saratoga, whether now existing or
hereafter arising, whether due and owing or to become due and owing, whether
joint or several or joint and several, whether absolute or contingent, in each
case as created by this Agreement, as this Agreement may be amended or modified.
Each of the Guarantors hereby represents and warrants that the
Exhibit 8
<PAGE> 8
Guarantor has all necessary power and authority to enter into the guaranty
contained in this Agreement and to carry out the transactions contemplated
hereby. The guaranty contained in this Agreement, when this Agreement is
executed by a Guarantor, will constitute the valid and binding agreement of the
Guarantor, 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) any provisions of any
contract or other instrument to which the Guarantor is a party or by which it,
its businesses, assets or properties may be affected or secured, (B) any order,
writ, injunction or decree applicable to such Guarantor or (C) to the knowledge
of the Guarantor, any statute, rule or regulation.
10. INDEMNIFICATION. Hype shall indemnify, defend and hold
harmless Saratoga and its officers, directors, advisors and affiliates (other
than Hype) 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
bottling, use or delivery of any Products, including by any customer of Hype,
(iii) any material breach by Hype of any representation or warranty made by Hype
herein or (iv) any material breach by Hype of any of its obligations or
agreements contained herein or hereunder.
11. CONFIDENTIAL INFORMATION.
(a) Hype 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 business of Saratoga, 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 Hype to divulge, disclose or make accessible such
information; provided, however, that Hype shall provide Saratoga with notice of
the requirement of such disclosure promptly after Hype is notified thereof and
prior to its 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 business of Hype, unless
required to do so by a court of competent jurisdiction, by any governmental
agency having supervisory authority over the business of Hype, 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 Hype with notice of
the requirement of such disclosure promptly after Saratoga is notified thereof
and prior to its disclosure thereof so as to enable Hype 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 of Saratoga or Hype, as the case may be, that, in any
case, (i) is not otherwise generally available to the public, (ii) is generally
known in any industry in which Saratoga or Hype, as the case may be, is or was
involved and (iii) has not been disclosed by Saratoga or Hype, as the case may
be, to others not subject to confidentiality agreements.
(d) Hype and Saratoga hereby agree that the covenants
contained in this Section 11 are reasonable and necessary covenants for the
protection of the parties hereto and their respective businesses under the
circumstances, and further agree that if, in the opinion of any court of
competent
Exhibit 9
<PAGE> 9
jurisdiction such covenants are not reasonable in any respect, such court shall
have the right, power and authority to excise or modify such provision or
provisions of these covenants as to the court shall appear not reasonable and to
enforce the remainder of these covenants as so amended. Hype and Saratoga each
hereby agrees that any breach or threatened breach by the other party hereto of
the covenants contained in this Section 11 would irreparably injure such party
and that there is no adequate remedy at law for any such breach or threatened
breach and, accordingly, that such party, in addition to pursuing any other
remedies it may have in law or in equity, may obtain injunctive relief in any
court, foreign or domestic, having the capacity to grant such relief, to
restrain any such breach or threatened breach by other party hereto and to
enforce the provisions of this Section 11.
12. 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
If to Hype or
the Guarantors, to: Hype Beverage Corporation
33 University Avenue, Suite 1109
Toronto, Ontario M5J 2S7
Attention: R.J. Barry Cox
Fax No. :
13. ENTIRE AGREEMENT. This Agreement and the Trademark Security
Agreement set 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 Hype and Saratoga, and the failure to
enter into any other such agreement shall have no effect on the validity of this
Agreement.
14. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of Saratoga and Hype and their respective
successors and assigns. Except as expressly contemplated by this Agreement,
neither of the parties hereto shall assign any rights or delegate any duties
hereunder without the prior written consent of the other party hereto, and any
assignment made without such consent shall be void and constitute a default
hereunder.
15. AMENDMENT OR MODIFICATION; WAIVER. This Agreement may be amended or
modified only by written agreement executed by all parties hereto. Either of the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party 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.
Exhibit 10
<PAGE> 10
16. 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.
17. 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 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 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.
18. 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.
19. HEADINGS. Section headings contained in this Agreement are included
for convenience only and shall not affect the interpretation of any provisions
of this Agreement.
20. 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.
21. 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 11
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
HYPE CORPORATION SARATOGA BEVERAGE GROUP, INC.
BY: /s/ R.J. Barry Cox BY: /s/ ROBIN PREVER
-------------------------- --------------------------
Name: R.J. Barry Cox Name: Robin Prever
Title: Chairman Title: Chief Executive
Officer
HYPE BEVERAGE CORPORATION 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: Chairman Title: Chairman
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: Chairman Title: Chairman
For purposes of Sections 9, 12 and For purposes of Sections 9,
17 only 12 and 17 only
/s/ NIGEL SPIRO /s/ R.J. BARRY COX
-------------------------- --------------------------
Nigel Spiro R.J. Barry Cox
Exhibit 12
<PAGE> 1
EXHIBIT 10.24
LINE OF CREDIT TO THE COMPANY FROM
ROBIN PREVER AND ANTHONY MALATINO
Exhibit 13
<PAGE> 2
April 10, 1997
Board of Directors
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, NY 12866
Ladies and Gentleman:
The undersigned hereby agree to loan to Saratoga Beverage
Group, Inc. (the "Company"), pursuant to a line of credit, an amount of up to
$250,000, which borrowing will be evidenced by a promissory note containing
standard terms and conditions, including the following: (a) the note will bear
interest at a rate equal to one percentage point per annum in excess of the
prime rate as in effect from time to time; (b) the term of the note will be one
year from the date thereof, at which time all accrued interest and unpaid
principal will be due and payable; provided, however, that the note will be
payable at such earlier time as either of the following events may occur: (I)
the Company secures a bank line of credit or similar financing in an amount of
at least $250,000; or (II) a change in control of the Company occurs; and (c)
the note will be secured by a pledge of receivables, inventory, property, plant
and/or equipment of the Company, as determined by the undersigned and the
officers of the Company in their discretion.
The line of credit will take effect upon the execution by the
undersigned and the Company of loan documentation prepared by counsel to the
undersigned.
Very truly yours,
/s/ Robin Prever
-------------------------
Robin Prever
/s/ Anthony Malatino
-------------------------
Anthony Malatino
Exhibit 14
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
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<CASH> 92,824
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<CURRENT-ASSETS> 1,047,449
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<DEPRECIATION> 1,439,685
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0
0
<COMMON> 30,387
<OTHER-SE> 2,050,035
<TOTAL-LIABILITY-AND-EQUITY> 2,594,444
<SALES> 1,077,823
<TOTAL-REVENUES> 1,092,935
<CGS> 662,747
<TOTAL-COSTS> 741,673
<OTHER-EXPENSES> 310,503
<LOSS-PROVISION> 8,500
<INTEREST-EXPENSE> 3,197
<INCOME-PRETAX> 37,562
<INCOME-TAX> 0
<INCOME-CONTINUING> 37,562
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