Exhibit 10.11
NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION. SUCH
PORTIONS HAVE BEEN REDACTED AND ARE MARKED WITH A "[*]" IN PLACE OF THE
REDACTED LANGUAGE.
TERRA LIMITED
AND
THE ROARING WATER BAY SPIRITS COMPANY
LIMITED
BOTTLING AND SERVICES AGREEMENT
Terra Limited
Institute Road
Bailieboro
Co Cavan
THIS AGREEMENT is made the 1st day of September 2002
BETWEEN:
(1) The Roaring Water Bay Spirits Company Limited, having its registered office
at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇ ("the Company"); and
(2) Terra Limited, having its registered office at Institute Road,
Bailieborough, County Cavan ("Terra")
WHEREAS:
(A) The Company is involved in the business of manufacturing, producing,
marketing, distributing, and selling branded whiskey, vodka, and other
spirit based products.
(B) Terra, pursuant to a Bottling and Services Agreement dated 19th day of
January 1998 ("the Original Agreement") has been providing certain bottling
and other services to the Company as provided in the Original Agreement.
(C) Terra and the Company have agreed to enter into this Agreement in
substitution for the Original Agreement.
NOW THEREFORE IN CONSIDERATION OF THE PAYMENTS AND COVENANTS HEREINAFTER
CONTAINED IT IS HEREBY AGREED AS FOLLOWS:
1. DURATION
This Agreement will commence with effect from September 1st 2002 and,
subject as hereinafter appearing, will continue for a period of three and a
half (3.5) years until 28th February 2005 and thereafter as may be agreed
between the parties.
2. SERVICES
Terra shall, utilizing the equipment in Appendix 1, provide the bottling
and other services described in Appendix 1 and elsewhere in this Agreement
("the Services") to the Company. The Company shall exclusively retain Terra
to provide bottling and other requirements of the Company for all Vodka,
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Whiskey and Gin permutations in conjunction with, but limited to Appendix
2.
3. PRICING/INVOICING
The pricing shall be as outlined in Appendix 2. Prices will be adjusted in
line with the Irish Consumer Price Index (CPI) every March 1st up to a
maximum of 3.5%. Both parties will use their best endeavors to agree
pricing on future new product configurations on a product by product basis.
Terra will invoice the Company monthly and payment will be made by the
Company within 60 days from the date of invoice.
4. DISCOUNT
With effect from March 1st, 2003, under this agreement an annual 3.5%
discount will apply in respect of the increase in bottling fees billed by
Terra over those billed in the immediately preceding year. The credit note
relating to this discount will be submitted to the Company by April in each
year, commencing in April 2004. This discount excludes bottling fees billed
in respect of new product configurations.
5. COMPANY ORDERS
All orders from the Company to Terra, to be valid, must be received by
Terra in writing, duly signed by the Company or a duly authorized
representative of the Company.
6. ORDER ACKNOWLEDGEMENT
Each order received by Terra from the Company will be acknowledged to the
Company by fax, post or e-mail by Terra within one working day of receipt
by Terra of the order.
7. CHANGE PARTS/NON-STANDARD EQUIPMENT
The Company will be responsible for the purchasing of the required change
parts, which are necessary and exclusive to the Company in order for Terra
to carry out the services. Where parts are deemed not exclusive to the
Company a cost sharing arrangement will be agreed. It is agreed that Terra
will obtain a purchase order form from the Company before proceeding with
any Purchase of change parts on its behalf.
8. PRODUCT SPECIFICATION
All bottling specifications will be supplied in writing to Terra by the
Company and are subject to agreement between Terra and the Company. No
changes will be made to the agreed bottling specifications without the
prior written consent of the Company and Terra.
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9. MATERIALS PROCUREMENT
Terra will be responsible for materials call off necessary for the
provision of the Services. Procurement shall be effected in the name and at
the cost of the Company. To permit Terra to call off such materials in a
timely and efficient manner, orders for product by the Company will be
required on a three (3) month rolling basis to allow for supplier lead
tines in the delivery of materials. Terra will endeavor to call off raw
materials subject to a pre-agreed call off plan.
Supplies of materials for the Company's products will only be purchased
from approved suppliers of the Company.
Minimum and maximum stock holding levels will be agreed between the Company
and Terra. Stocks will be continually monitored by the Company and Terra
against sales to avoid obsolescence. Terra will not be accountable for
obsolete stocks.
Minimum and maximum order quantities will also be agreed between Terra and
the Company to achieve economies of scale in purchasing.
The limited warehousing capacity of Terra is acknowledged. Where additional
storage space to warehouse the stock of the Company is necessary, the
Company will reimburse Terra on a pre-agreed basis.
10. INWARDS QUALITY INSPECTION
Terra will be responsible for maintaining quality standards to be agreed
between Terra and the Company. Materials supplied to Terra will be
inspected in accordance with such standards. A certificate of conformance
will be supplied by the company for all raw material items confirming that
the raw materials conform to the agreed quality standards. The Company will
be required to sign off on all proposed new packaging and ensure that a new
certificate of conformance is supplied. Notwithstanding the foregoing, any
changes in the specification of raw materials must be agreed with Terra
before being proceeded with. Terra must notify the Company on a timely
basis of all quality issues. All raw material received must be signed in as
"unchecked for quality and quantity".
11. QUALITY
Terra will be responsible for bottling the Company's products and providing
the other Services in accordance with the specifications agreed between
Terra and the Company. Testing of the Company's products shall be carried
out in accordance with the principles set out in Appendix 3.
Where specialized tests or testing equipment are required for materials or
products, the Company will provide Terra with written instructions on these
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test procedures. Any costs incurred in testing, in accordance with Appendix
3, and any additional costs incurred in specialized testing will be charged
separately to the Company.
12. STEWARDSHIP OF MATERIALS ON SITE
Packaging and finished products will be stored by Terra at ambient
temperatures in pallet stacks, in the store area at the Terra premises at
Bailieborough, Co. Cavan ("Premises"). All storage areas will be kept neat
and tidy and will be reviewed during hygiene audits.
For materials requiring specialized storage, the Company will provide Terra
with written instructions on the correct handling and storage of such
materials. Where additional costs are incurred in specialized storage,
these costs will be charged separately to the Company.
All of the Company's products on the Premises from time to time will be
under Terra's Customs and Excise bond.
It is anticipated that stocks of the Company's products on Terra's premises
will be kept to a minimum.
13. MATERIALS USAGE TOLERANCES
The levels of losses of materials during bottling should not exceed 1% of
the standard usage of materials in each year. This factor will be reviewed
by the Company on a batch basis and Terra must ensure that wastage reports
are prepared on a batch basis. Terra will also endeavor to explain any
wastage over this level and the company will give special consideration to
the wastage of alcohol and small run sizes.
14. CUSTOMS AND EXCISE
Management of the day-to-day relationship with Customs and Excise
representatives on the Premises will be the responsibility of Terra, and
Terra shall have the responsibility of notifying the Company in good time,
of any duty or tax payable by the Company to Customs and Excise in respect
of the Company's products on the Premises. The Company acknowledges that
duty is payable by the Company to Terra within a week of being invoiced at
the end of the month if the products which are removed from the Terra
bonded warehouse are not traveling under bond.
15. STOCK CONTROL
Terra with maintain detailed stock records of the Company's stock in a
format reasonably required by the Company, and will make these records
available to the Company in a timely and efficient manner.
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16. STOCK OBSOLESCENCE
Terra will use all reasonable endeavors to minimize stock obsolescence.
Materials called off against the Company's sales projections that are
subsequently not used due to revisions in the sales projections are the
responsibility of the Company.
Finished goods produced against the Company's sales projections which
subsequently become obsolete, are the responsibility of the Company.
17. SHIPPING/TRANSPORT
Shipping administration will be carried out by Terra for and on behalf of
the Company.
All shipping and transport costs will be the responsibility of the Company.
18. INSURANCE
Alcohol on the Terra site will come under the Terra customs bond. All other
insurance including, without limitation, product, packaging,
public/products liability and marine will be the responsibility of the
Company. The interest of Terra must be noted on all the Company's insurance
policies as sole loss payee in claims involving or including Customs and
Excise duty payable.
19. CUSTOMER SERVICE
Those aspects of customer service being invoicing, shipping and customer
queries relating to invoicing and shipping of the Company's products will
be dealt with by Terra. Costs resulting from errors made by Terra in
shipping will be met by Terra.
20. RESEARCH AND DEVELOPMENT
Terra will assist in the development of products and use all its expertise
in the launch and marketing of new products.
The Terra facilities will be made available to the Company in areas of
research, and use of Terra's pilot plant facilities will also be made
available in each case at costs to be agreed.
21. PROJECT MANAGEMENT
Terra will provide assistance in connection with logistics and project
management to include:
- Sourcing Materials
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- Agreeing standards and specifications with suppliers
- Supplier contracts and pricing
- Assisting in label approval with legal authorities such as, without
limitation, BATF etc.
- In all areas of research and development and project management, final
approval and sign off will be by a director or other authorized
signatory of the Company.
22. ACCESS TO SITE
With reasonable notice, Terra will make available for inspection/review,
its facilities at the Premises to the Company and its customers.
23. CREAM LIQUEUR PRODUCTS AND NON-COMPLETE
(i) The Company acknowledges that Terra is prohibited from and shall not
be required to perform any services whatsoever, relating directly or
indirectly to the business of the manufacture, processing, production,
bottling, sale or distribution of any Cream Liqueur Products and,
accordingly, Terra will not, and will not be required by the Company
to, provide any such services hereunder. "Cream Liqueur Products"
means alcohol beverages that contain alcohol and dairy, or alternative
fats, which in combination with sweetening and sugars are intended to
compete with, or replicate existing cream or fat based alcoholic
beverages.
(ii) Without prejudice to the foregoing, Terra shall not during the period
of this Agreement, do any of the following, without the prior consent
of the Company
(a) Either solely or jointly, with or on behalf of any person,
directly or indirectly, carry on or be engaged or interested
(except as a holder for investment purposes of securities dealt
with on a recognized stock exchange) in any business in Ireland
which competes either directly or indirectly, with the business
of the Company, in so far as it relates to the development,
manufacture or supply of vodka or whiskey.
(b) Solicit the custom of any person in Ireland, who is, or has been
at any time during the period of this Agreement, a customer of
the Company for the purposes of offering to such customer, vodka
or whiskey which compete directly or indirectly with those
manufactured and/or supplied by the Company
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(c) Solicit or entice away, or endeavor to solicit or entice away any
director or employee of the Company.
PROVIDED HOWEVER that nothing herein will preclude or restrict Terra from
providing any production, bottling, labeling or ancillary services to any
person or continuing with its investment in, and services to Gaelic
Heritage Corporation Limited, so long as Gaelic Heritage Corporation
Limited is not involved in the manufacture of Irish branded vodka or
whiskey.
24. TERMINATION
24.1 Either party shall be entitled forthwith to terminate this agreement by
written notice to the other if:
24.1.1 that other party commits any continuing or material breach of any of the
provisions of this Agreement and, in the case of such a breach, which is
capable of remedy, fails to remedy the same within 30 days after receipt of
a written notice giving full particulars of the breach and requiring it to
be remedied
24.1.2 an encumbrancer takes possession or a receiver is appointed over any of
the property or assets of that other party
that other party makes any voluntary arrangement with its creditors or
becomes subject to an administration order
24.1.3 that other party goes into liquidation (except for the purposes of an
amalgamation, reconstruction or other reorganization, and in such manner
that the company resulting from the reorganization effectively agrees to be
bound by or assume the obligations imposed on that other party under this
agreement)
24.1.4 an examiner is appointed to that other party under Section 2 of the
Companies (Amendment) ▇▇▇ ▇▇▇▇; or
24.1.5 that other party ceases, or threatens to cease, to carry on business.
25. INFRINGEMENT
The Company shall indemnify and keep indemnified Terra against all damages,
penalties, costs and expenses to which Terra may become liable as a result
of work done or the supply of goods in accordance with the Company's
requirements, which involves the infringement of any letters patent,
registered design, copyright, trademark, or trade name, or other rights of
confidentiality or industrial, commercial, or intellectual property.
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26. NATURE OF AGREEMENT
26.1 This Agreement is personal to the parties, and neither of them may, without
the written consent of the other, assign, mortgage, charge (otherwise than
by floating charge) or dispose of any of its rights hereunder, or
sub-contract or otherwise delegate any of its obligations under this
Agreement.
26.2 Nothing in this Agreement shall create, or be deemed to create, a
partnership between the parties.
26.3 This Agreement contains the entire agreement between the parties with
respect to its subject matter, supersedes all previous agreements and
understandings between the parties, and may not be modified except by an
instrument in writing signed by the duly authorized representatives of the
parties.
26.4 If any provision of this Agreement is held by any court or other competent
authority to be void or unenforceable in whole or in part, the other
provisions of this Agreement and the remainder of the affected provisions
shall continue to be valid.
26.5 This Agreement shall be governed and construed in all respects in
accordance with the laws of Ireland.
27. FORCE MAJEURE
27.1 If either party is affected by Force Majeure, it shall promptly notify the
other party of the nature and extent of the circumstances in question.
27.2 Notwithstanding any provisions of this Agreement, neither party shall be
deemed to be in breach of this Agreement, or otherwise be liable to the
other, for any delay in performance, or the non-performance of any of its
obligations under this Agreement, to the extent that the delay or
non-performance is due to any Force Majeure of which it has notified the
other party, and the time for performance of that obligation shall be
extended accordingly.
27.3 If at any time Terra claims Force Majeure in respect of its obligations
under this Agreement with regard to the supply of Services, the Company
shall be entitled to obtain from any other person such quantity of the
Services as Terra is unable to supply
28. NOTICES
Any notices to be given under this Agreement shall be either delivered
personally or sent by fax. The address of personal service of each party is
its registered office. A notice is deemed to be served as follows:
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(a) if personally delivered, at the time of delivery;
(b) if sent by fax, at 12 noon on the first business day after
transmission, provided always that an acknowledgement of such
transmission has been received.
29. WARRANTIES AND LIABILITY
29.1 Terra warrants to the Company that the provision of the Services in
accordance with the terms of this Agreement:
(i) will be of satisfactory quality (within the meaning of the Sale of
Goods ▇▇▇ ▇▇▇▇, and the Sale of Goods and Supply of Services ▇▇▇ ▇▇▇▇,
as amended);
(ii) will be free from defects in design, material and workmanship;
(iii) will correspond with any specification agreed between the Company and
Terra; and
(iv) will comply with all statutory requirements and regulations relating
to the provision of the Services.
29.2 Without prejudice to any other remedy, if any of the Services are not
provided in accordance with this Agreement, then the Company shall be
entitled:
(i) to require Terra to make good the failure to supply the Services in
accordance with this Agreement within 14 days; or
(ii) at the Company's sole option, require the repayment of any part of the
price which has been paid in respect of such Services.
29.3 Terra shall indemnify and keep indemnified the Company in full against all
liability, loss, damages, costs and expenses (including legal expenses)
awarded against or incurred or paid by the Company, as a result of or in
connection with breach of any warranty given by Terra in this clause 29.
29.4 The procedures described in Appendix 3 shall be employed by the parties in
order to facilitate the ascertainment of responsibility for any defect in
the products or any failure to comply with the Services.
30. ARBITRATION
In the event that there shall be any dispute between the parties hereto in
relation to this Agreement, then either party may serve notice on the other
specifying the nature of the dispute and if such dispute is not settled
within 60 days from the date of the service of such notice, then either
party may serve
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on the other, a notice requiring the matter to be submitted to arbitration.
The arbitrator shall be agreed by the parties within 30 days of the date of
such notice and failing such agreement, the arbitrator shall be determined
by the President for the time being of the Institute of Chartered
Accountants. The decision of such arbitrator as to the dispute shall be
final and binding on the parties, and the provisions of the Arbitration
Acts 1954 and 1980 (as amended) shall apply to such arbitration.
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AS WITNESS the hands of the parties hereto (by authorized signatories)
/s/ ▇▇▇▇▇▇ ▇'▇▇▇▇
-------------------------------------
SIGNED by or on behalf of
TERRA in the presence of: - /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
2/9/2002
SIGNED by or on behalf of
the Company in the presence of: - /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
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APPENDIX 1
EQUIPMENT AND THE SERVICES
EQUIPMENT
The standard bottling equipment of Terra consists of air blowing, filling, ▇▇▇▇
capping, front and back labeling, bottom stapling outer case, taping outer case,
semi-automatic pallet shrink wrapping, bottle coding, case coding and case
weighing.
SERVICES
1. Intake and Storage (limited) of all raw materials required by the Company
2. Storage of final product at bottling strength
3. Sampling, testing, final approval of bulk and finished product as per this
Agreement. On-line QC checks.
4. Final filtering, filling, capping and labeling of bottles.
5. Packing into final cases, taping, weighing, coding, palletising of final
cases and pallet wrapping facilities (optional).
6. Storage in warehouse for a period, loading and shipping administration
7. Record keeping of packaging and finished products.
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Appendix 3
PROCESS PROCEDURE FOR CUSTOMERS
1. Bulk spirit, on ordering is produced to the Company's specifications from
the supplier, Carbery Milk Products.
2. On arrival from Carbery, the product is accompanied by a Certificate of
Conformance and weighed to ensure that the correct volume has been
received. Terra and the Company retain samples of 250ml, and a sample is
lifted for Carbery.
3. The spirit is then transferred to the Company's premises.
4. Manufacturing of Vodka commences by transferring the quantity of spirit
delivered to a product dilution tank.
5. This product is diluted with de-ionised water to 55% v/v.
6. The Product is then manufactured by pumping the 55% v/v spirit through a
final clarifying filter to the final bottling product tank.
7. The manufactured product in the bottling tank is then diluted with
de-ionised water to the desired bottling strength as per specification.
Five samples of final product are taken, two samples for Terra, one for
retaining and one for testing, two samples for Carbery, one for retaining
and one for testing.
8. All samples following manufacture, including the bulk spirit samples, are
sent to Carbery the day after production.
9. The manufactured product is jointly approved by both Terra and Carbery
within three days. If there are any issues regarding the samples, a joint
decision between all parties will be decided upon. The Company retains one
sample. The procedures in this paragraph shall be reviewed by all the
parties, on an annual basis. The cost of any additional testing will be
borne by the Company.
10. The approved product is transferred by Terra.
11. The product is filtered to bottling line and bottled to the required
specification. Two samples are retained from the bottling line, one for the
Company and one for Terra.
12. Once bottling is completed and approved by Terra, the product is then
released to meet the Company's order.
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APPENDIX 2
PRICES
PRODUCT BOTTLING PRICES 2002 NOW PRICES
ROARING WATER BAY LIR NOW
---------------------------- -------- ------
▇▇▇▇ - 700ml x 12 37.5% * *
Odessa/Value Vodka - 700ml x 12 37.5% *
▇▇▇▇ - 700ml x 12 37.5% Orange * *
▇▇▇▇ - 700ml x 6 Germany 37.5% * *
▇▇▇▇ - 700ml x 12 45% * *
▇▇▇▇ - 750ml x 12 40% * *
▇▇▇▇ - 750ml x 12 40% Citrus * *
▇▇▇▇ - 750ml x 12 40% Orange * *
▇▇▇▇ - 1000ml x 12 37.5% * *
Odessa/Value Vodka - 1000ml x 12 37.5% *
▇▇▇▇ - 1000ml x 12 40% ORANGE * *
▇▇▇▇ - 1000ml x 12 40% GE * *
▇▇▇▇ - 1000ml x 12 40% USA * *
▇▇▇▇ - 1000ml x 12 50% * *
▇▇▇▇ - 1000ml x 15 40% * *
▇▇▇▇ - 1000ml x 15 40% CITRUS * *
▇▇▇▇ - 1000ml x 15 40% ORANGE * *
▇▇▇▇ - 1500ml x 6 37.5% * *
▇▇▇▇ 3 Litre x 4 37.5% * *
▇▇▇▇ Miniture Trinity X 72 (40.0%) * *
▇▇▇▇ Naggin 200ml x 24 37.5% * *
Odessa/Value Vodka - Naggin 200ml x 24 37.5% *
▇▇▇▇ Naggin 350ml x 24 37.5% * *
Odessa/Value Vodka - Naggin 350ml x 24 37.5% *
▇▇▇▇ Tops x 24 40% * *
▇▇▇▇ Trinity Vodka 3 Pk - 200MLx3x6 40% * *
▇▇▇▇ Vodka 1.75 LitreX6 (40.0%) * *
▇▇▇▇ mins x 72 40% * *
▇▇▇▇ mins x 72 40% - Citrus * *
▇▇▇▇ mins x 72 40% - Orange * *
▇▇▇▇ Vodka 50ml x 120 (40%) Orange * *
BoruMiniature Pets x 120 40% * *
Clontarf - 700/750ml x 6 40/43% * *
Clontarf Trinity Whiskey - 600MLx6 40% * *
Clontarf Trinity Whiskey - 600MLx6 43% * *
Clontarf Whiskey - 1 LitreX6 * *
Clontarf Whiskey MINI Trinity X72 40% * *
Note 1: The above prices exclude consumables
Note 2: The Odessa/Value Vodka prices above include processing
Note 3: Prices will be increased in line with the Irish CPI every March 1st by
the % change in this index over the preceeding year.
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