Exhibit 10.3
EXECUTION COPY
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TRANSITION AGREEMENT
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THIS TRANSITION AGREEMENT (this "Agreement"), is entered into as of
this 24th day of August, 1999 (the "Effective Date"), by and between XXXXX X.
XXXXXXX, an individual (the "Consultant"), and Frederick Brewing Co., a Maryland
corporation (the "Company").
WHEREAS, the Company engages in the business of operating a brewery,
which manufactures, packages and sells malt and non-malt based beverages (the
"Company's Business").
WHEREAS, the Company wishes to retain Consultant to perform certain
consulting and transition services for the Company and to advise the Company
with respect to the Company's Business under the terms and conditions set forth
in this Agreement.
WHEREAS, the Consultant is currently employed by the Company pursuant
to an Employment Agreement, dated December 9, 1995 ("1995 Agreement"), and it is
the desire of the Consultant and the Company that this Agreement supersede in
its entirety and replace the 1995 Agreement, as of the date first written above.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth below, and upon the terms and subject to the conditions contained in
this Agreement, the Consultant and the Company agree as follows:
Section 1. Definitions.
1.1 Affiliates. "Affiliate" means any Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the Person specified or, directly or indirectly, is
related to or otherwise associated with any such Person.
1.2 Company. "Company" includes the Company's subsidiaries, divisions
and Affiliates, including, without limitation, Crooked River Brewing Company,
LLC ("Crooked River"), Royal Brewing, L.L.C. ("Royal"), and Xxxxxx International
Brewing Group, LLC, as they may exist from time to time.
1.3 Confidential Information. "Confidential Information" means
information that constitutes a trade secret under the Uniform Trade Secrets Act
or that otherwise is not generally known to the public and that is developed,
owned or obtained by the Company, including, without limitation, information
developed by Consultant in the course of performing service to the Company, the
Company's technical information, marketing and financial information, customer
and prospective customer information, sales information and product and
production information.
1.4 Person. "Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including, without limitation,
a government or political subdivision or an agency or instrumentality of a
government or political subdivision.
1.5 Restricted Territory. "Restricted Territory" means:
(a) the geographic area within a 100 mile radius of the Company's
brewery in Frederick, Maryland;
(b) the geographic area within a 100 mile radius of Crooked River's
brewery in Cleveland, Ohio; and
(c) the geographic area within a 100 mile radius of Royal's
operations in Cincinnati, Ohio.
1.6 Work Product. "Work Product" means any and all promotional and
advertising materials, catalogs, brochures, plans, customer lists, supplier
lists, manuals, handbooks, equipment and parts lists, dealer and distributor
lists, inventions, discoveries, improvements, trade secrets, secret processes
and any technology, know-how or intellectual property made or developed or
conceived of by Consultant, in whole or in part, alone or with others, which
results from any work he may do for, or at the request of, the Company or which
relates to the business, operations, activities, research, investigations or
obligations of the Company.
Section 2. Retention, Services and Compensation.
2.1 Term. The Consultant shall provide the Consulting Services (as
defined in Section 2.2) to the Company for a term of six months beginning on the
Effective Date of this Agreement, unless sooner terminated pursuant to the
provisions of this Agreement (the "Term").
2.2. Consulting Services
(a) Consulting Services. The Company retains Consultant to furnish
the Company with consulting services ("Consulting Services") as designated by
(i) the Chief Executive Officer of the Company or (ii) any other Person
designated by the board of directors of the Company. Consultant shall perform
all Consulting Services on behalf of the Company in a timely, diligent and
professional manner in accordance with the highest commercial industry
standards.
(b) Schedule and Location. Consultant will perform the Consulting
Services on a full-time basis. The Consultant shall render the Consulting
Services during the Term in accordance with such policies as the Company may
establish. The Consultant shall provide the Consulting Services in Frederick,
Maryland and may travel to such other places in the United States and elsewhere
as the Chief Executive Officer or the Board of Directors of the Company so
directs from time to time as needed.
(c) Exclusivity. Without limiting the generality of the foregoing,
during the Term, the Consultant shall not, without the prior written approval of
the Board of
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Directors of the Company, render services of a business, professional or
commercial nature for compensation or otherwise to any Person if the rendering
of such services would interfere with the Consultant performing the Consulting
Services hereunder.
(d) Documentation. In connection with the provision of Consulting
Services, Consultant shall provide to the Company, upon the Company's request:
(i) any and all information, documents and other materials relating to the
Consulting Services; and (ii) oral or written reports regarding the progress of
the Consulting Services rendered.
(e) No Use of Others' Rights. Consultant represents and warrants
that Consultant can perform the Consulting Services, independent of any
confidential and proprietary information owned by a third party, including,
without limitation, patents, copyrights, trademarks, trade secrets, service
marks, trade names, slogans, logos, copyrights, designs, sketches, ideas,
persona, images (e.g., photographs, computerized graphics, etc.) and/or
publicity rights.
2.3 Consulting Fee: Expense Reimbursement. During the Term, the Company
shall pay Consultant an aggregate amount of $63,000, in regular installments in
accordance with the Company's employee payroll policies in effect from time to
time. The Company shall reimburse Consultant for his reasonable direct
out-of-pocket expenses incurred in performing the Consulting Services; provided
that, the Company has approved such expenses in writing in advance. Except as
provided in this Section 2.3, the Consultant shall not be entitled to receive
any benefits, or other amounts provided to employees of the Company
2.4 Independent Contractor.
(a) Consultant is and will at all times be and remain an
independent contractor. Consultant is free to exercise Consultant's own judgment
as to the manner and method of providing the Consulting Services to the Company,
subject to applicable law and requirements reasonably imposed by the Company.
(b) Consultant acknowledges and agrees that Consultant will not be
treated as an employee for purposes of federal, state and/or local income tax
withholding, and unless otherwise specifically provided by law, for purposes of
the Federal Insurance Contributions Act, the Social Security Act, the Federal
Unemployment Tax Act, or any Workers Compensation law of any state, and for
purposes of benefits provided to employees of the Company under any employee
benefit plan.
(c) Consultant acknowledges and agrees that as an independent
contractor, Consultant is required to pay any applicable taxes on the fees paid
to Consultant. Consultant shall indemnify, hold harmless and defend the Company
for all tax and other liabilities (including, without limitation, reasonable
attorneys' fees) arising out of or relating to Consultant's failure to report
and pay all employment income taxes or other taxes due on taxable amounts paid
to or on behalf of Consultant by the Company.
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Section 3. Non-Competition.
3.1 Trade Secrets and Confidential Information. Consultant acknowledges
and agrees that any Confidential Information gained by Consultant while
providing Consulting Services hereunder or during his prior employment with the
Company has been developed by the Company through substantial expenditures of
time and money and constitutes valuable and unique property of the Company.
Consultant further understands and agrees that the foregoing makes it necessary
for the protection of the Company's Business that Consultant not compete with
the Company during the Term and not compete with the Company for a reasonable
period after the Term, as further provided in the following sections.
3.2 Non-Competition During Employment. During the Term, Consultant
shall not and shall cause each of his Affiliates not to, in any of the United
States of America, Puerto Rico, the Virgin Islands, Canada or any other country
in the world:
(a) enter into or engage in any business that competes with
the Company's Business;
(b) solicit, divert, entice or otherwise take away any
wholesale customers, former wholesale customers, active prospects, business,
patronage or orders of the Company or attempt to do so; or
(c) promote or assist, financially or otherwise, any Person,
engaged in any business that competes with the Company's Business.
3.3 Non-Competition After Employment. For a period of two years
following the termination of this Agreement or expiration of the Term of this
Agreement, Consultant shall not and shall cause each of his Affiliates not to:
(a) enter into or engage in any business that competes with
the Company's Business within the Restricted Territory;
(b) solicit, divert, entice or otherwise take away any
wholesale customers, former wholesale customers, active prospects, business,
patronage or orders of the Company within the Restricted Territory or attempt to
do so; or
(c) promote or assist, financially or otherwise, any Person
engaged in any business that competes with the Company's Business within the
Restricted Territory.
3.4 Tolling of Covenants. If it is judicially determined that
Consultant has violated any of his obligations under Section 3.3, then the
period applicable to each obligation that Consultant has been determined to have
violated automatically will be extended by a period of time equal in length to
the period during which such violation(s) occurred.
3.5 Non-solicitation. Consultant shall not, and shall cause each of his
Affiliates not to, directly or indirectly, at any time solicit, induce or
attempt to solicit or induce any employee, representative or agent of the
Company to terminate his or its employment, representation or other association
with the Company.
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3.6 Non-Competition - Direct or Indirect. Consultant will be in
violation of Sections 3.2, 3.3 and 3.5 if he engages in any or all of the
activities set forth in those sections directly as an individual on his own
account, or indirectly for any other Person and whether as partner, joint
venturer, employee, agent, salesperson, consultant, officer or director of any
Person or as an equity holder of any Person in which Consultant or Consultant's
spouse, child or parent owns, directly or indirectly, any of the outstanding
equity interests.
Section 4. Development of Inventions, Improvements or Know-How.
(a) Disclosure Obligation. Consultant and his heirs, assigns
and representatives shall disclose fully and promptly to the Company any and all
Work Product, including, without limitation, any and all facts known to him or
them reflecting such Work Product, such as any and all test data, findings,
designs, formulas and processes.
(b) Assignment. All Work Product is deemed a "work for hire"
in accordance with the U.S. Copyright Act and is owned exclusively by the
Company. If, and to the extent, any of the Work Product is not considered a
"work for hire," Consultant shall, without further compensation, assign to the
Company and does hereby assign to the Company, Consultant's entire right, title
and interest in and to all Work Product. At the Company's expense and at the
Company's request, Consultant shall provide reasonable assistance and
cooperation, including, without limitation, the execution of documents in order
to obtain, enforce and/or maintain the Company's proprietary rights in the Work
Product throughout the world. Consultant appoints the Company as its agent and
grants the Company a power of attorney for the limited purpose of executing all
such documents.
(c) Publication. Consultant shall not publish or submit for
publication, or otherwise disclose to any Person other than the Company, any
data or results from the Consulting Services on behalf of the Company without
the prior written consent of the Company.
Section 5. Non-Disclosure. The Consultant shall keep in strict
confidence, and shall not, directly or indirectly, at any time, during or after
the Term, disclose, furnish, disseminate, make available or, except in the
course of performing the Consulting Services under this Agreement, use any
Confidential Information, without limitation as to when or how the Consultant
may have acquired such information. The Consultant specifically acknowledges
that: (a) the Confidential Information, whether reduced to writing, maintained
on any form of electronic media, or maintained in the mind or memory of the
Consultant and whether compiled by the Company or the Consultant derives
independent economic value from not being readily known to or ascertainable by
proper means by others who can obtain economic value from its disclosure or use;
(b) reasonable efforts have been put forth by the Company to maintain the
secrecy of such information; (c) such information is and will remain the sole
property of the Company; and (d) any retention and use of the Confidential
Information during or after the Term will constitute a misappropriation of the
Company's trade secrets.
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Section 6. Termination.
6.1 Right to Terminate.
(a) Death or Disability. This Agreement will terminate upon
the Consultant's death or Disability. "Disability" means an illness or
incapacity (mental or physical) of a character, nature, degree or effect that
renders the Consultant incapable of performing substantially all of his duties
to the Company under this Agreement for 60 consecutive days.
(b) Cause. The Company has the right to terminate this
Agreement for cause effective immediately upon written notice to the Consultant.
The term "cause" means Consultant's conviction of, or Consultant's entering of a
guilty plea with respect to, a felony. Termination pursuant to this Section
6.1(b) shall not be in limitation of any other right or remedy the Company may
have against the Consultant, and following termination pursuant to this Section
6.1(b), the Consultant shall remain liable to the Company for any damages caused
by the foregoing.
(c) By Consultant. The Consultant has the right to terminate
this Agreement at any time for any reason not specified in this Section 6.1 upon
45 days prior written notice to the Company.
6.2 Rights and Obligations of Consultant Upon Termination or
Expiration.
(a) Payment Obligation. Upon the termination by the Company of
this Agreement pursuant to Section 6.1(b), the Company will have no further
obligation to the Consultant under this Agreement except to distribute to the
Consultant compensation due pursuant to Section 2.3 up to the date of
termination.
(b) Post-Term Benefits. Upon termination by the Company of
this Agreement pursuant to Section 6.1(a) or termination by the Consultant of
this Agreement pursuant to Section 6.1(c) or the expiration of the Term, the
Company shall, subject to the terms of the Escrow Agreement (as defined below),
pay to the Consultant or, in the case of termination pursuant to Section 6.1(a),
to the Consultant's executors, legal representatives or heirs (i) on the
effective termination date or the effective expiration date, as the case may be,
unless such date is prior to January 1, 2000, in which case, on January 4, 2000,
a payment of $100,000 in cash and (ii) six months after the effective
termination date or the effective expiration date, unless such date is prior to
January 1, 2001, in which case, on January 4, 2001, as the case may be, a
payment of $50,000 in cash. As a condition to receipt of each such payment, the
Consultant (or a duly authorized representative of Consultant in the case of
death or Disability) must execute a release in substantially the form of the
release set forth in Section 6.2(d) below. On the date hereof, the Company shall
deposit $150,000 in cash in escrow pursuant to the terms of the Escrow Agreement
attached hereto as Exhibit A (the "Escrow Agreement").
(c) Return or Destruction. Upon termination of this Agreement
or expiration of the Term, Consultant shall not remove from the premises any
property of the Company including, without limitation, any Confidential
Information, and shall return promptly, in good condition, all property of the
Company, including, without limitation, all tangible embodiments of the
Confidential Information in the Consultant's possession, custody or control.
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If such items are not so returned, the Company will have the right to charge the
Consultant for all reasonable damages, costs, attorneys' fees and other expenses
incurred in searching for, taking and/or recovering such property.
(d) Release of Company by Consultant. Upon execution of this
Agreement, Consultant, for himself and his dependents, successors, assigns,
heirs, executors, administrators, legal representatives and affiliates (the
"Consultant Group"), hereby releases and discharges forever, irrevocably and
unconditionally, the Company, as well as its successors, assigns, subsidiaries
and affiliates and their respective officers, directors, agents, employees,
consultants, counsel and shareholders and any of its employee benefit plans (as
defined in Section 3(3) of the Employment Retirement Income Security Act of
1974, as amended) (collectively, the "Company's Released Parties") from, against
and with respect to any and all claims, actions, causes of action, suits,
proceedings, losses, damages, rights or demands of every kind and nature
whatsoever, whether at law or in equity, whether known or unknown, foreseen or
unforseen, matured or unmatured, absolute or contingent, determined or
determinable (collectively, "Claims"), which the Consultant Group has, ever has
had, or may hereafter have, against the Company's Released Parties, or any of
them individually, at any time on or prior to the date of this Agreement. This
release includes, without limitation, (i) any and all tort claims, including,
without limitation, claims of harassment and intentional or negligent infliction
of emotional distress; (ii) any and all claims of discrimination on any basis,
including, without limitation, race, color, national origin, religion, sex, age
or disability arising under any federal, state, local, or foreign statute,
ordinance, order or law, including the Age Discrimination in Employment Act;
(iii) any and all claims that the Company's Released Parties, jointly or
severally, breached any contract, including, without limitation, any consulting
agreement or employment agreement, or promise, express or implied, or any term
or condition of this Agreement or the Consultant's prior employment with the
Company, including, without limitation, any claim of the Consultant for any
equity interest in the Company; and (iv) any other claims directly or indirectly
related to the Consultant's employment with the Company or retention as a
Consultant by the Company.
Section 7. Indemnification. Set forth on Exhibit B is a list of all the
personal guaranties, indemnification agreements and other obligations made by
the Consultant in connection with (a) loans, surety bonds, licenses and permits
issued to the Company and (b) other obligations of the Company (the "Indemnified
Matters"). The Company shall indemnify, defend and hold the Consultant harmless
from and against any and all damages, losses, judgments, fines, liabilities,
claims, obligations, penalties, costs and expenses (including reasonable
attorneys' fees) ("Damages") incurred by Consultant in connection with the
Indemnified Matters; provided that, such Damages arise from or relate to events
occurring after the Effective Date. Consultant acknowledges and agrees that any
Damages incurred by Consultant in connection with the Indemnified Matters that
arise from or relate to events occurring before the Effective Date are not
subject to any indemnification by the Company and will remain the personal
obligations of Consultant.
Section 8. Miscellaneous.
8.1 Amendment. This Agreement may be amended only by a writing executed
by the parties to this Agreement.
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8.2 Entire Agreement. This Agreement and the other agreements referred
to in this Agreement set forth the entire understanding of the parties regarding
this subject matter and supersede all prior contracts, agreements, arrangements,
communications, discussions, representations and warranties, whether oral or
written, between the parties regarding this subject matter, including, without
limitation, the 1995 Agreement.
8.3 Termination of 1995 Agreement. By execution of this Agreement, the
1995 Agreement is hereby terminated and is of no further force and effect. The
parties acknowledge and agree that they have no further rights, interests,
claims or obligations whatsoever arising out of, or relating to, the 1995
Agreement.
8.4 Notices. All notices and other communications required or permitted
under this Agreement will be in writing and will be deemed to have been duly
given when delivered in person or when dispatched by electronic facsimile
transfer (confirmed in writing by mail simultaneously dispatched) or one
business day after having been dispatched by a nationally recognized overnight
courier service to the appropriate party at the address specified below:
If to the Company:
Xxxxxxxxx Brewing Co.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telecopy No: (000) 000-0000
Attn: C. Xxxxx Xxxxxx
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
North Point
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy No: (000) 000-0000
If to the Consultant:
Xxxxx X. Xxxxxxx
000 X. 0xx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
8.5 Assignment. This Agreement is binding upon and inures to the
benefit of the heirs, successors, representatives and assigns of each party, but
no rights, obligations or liabilities of the Consultant under this Agreement
will be assignable without the prior written consent of the Company.
8.6 Governing Law. This Agreement will in all respects be governed by,
and construed in accordance with, the laws of the State of Maryland.
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8.7 Severability. Each section and subsection of this Agreement
constitutes a separate and distinct provision of this Agreement. It is the
intent of the parties that the provisions of this Agreement be enforced to the
fullest extent permissible under the laws and public policies applicable in each
jurisdiction in which enforcement is sought. Accordingly, if any provision of
this Agreement is adjudicated to be invalid, ineffective or unenforceable, the
remaining provisions will not be affected by such adjudication. The invalid,
ineffective or unenforceable provision will, without further action by the
parties, be automatically amended to effect the original purpose and intent of
the invalid, ineffective or unenforceable provision; provided, however, that
such amendment will apply only with respect to the operation of such provision
in the particular jurisdiction with respect to which such adjudication is made.
8.8 Waivers. None of the terms of this Agreement will be deemed to be
waived or amended by either party unless such a waiver or amendment specifically
references this Agreement and is in writing signed by an authorized
representative of the party to be bound. Any such signed waiver will be
effective only in the specific instance and for the specific purpose for which
it was made or given.
8.9 Headings. The headings in this Agreement are solely for convenience
of reference and are not to be given any effect in the construction or
interpretation of this Agreement.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original and all of which
together will constitute one and the same instrument.
8.11 Third Parties. Nothing expressed or implied in this Agreement is
intended, or may be construed, to confer upon or give any Person other than the
Company and the Consultant any rights or remedies under, or by reason of, this
Agreement.
8.12 Disclosure; Non-Diaparagement. During the Term and for two years
after such Term, the Consultant shall communicate the contents of this Agreement
to any Person that he intends to be employed by, associated with, or a
representative of, if such Person is engaged in a business that is competitive
with the Company's Business. During and after the Term, neither Consultant nor
any Affiliate controlled by Consultant shall publicly or privately disparage
the Company, any employee, director or shareholder of the Company or the
Company's Business or products.
8.13 Remedies. Consultant acknowledges that his failure to comply with
Sections 2, 3, 4 and 5 of this Agreement will irreparably harm the Company's
Business and that the Company will not have an adequate remedy at law in the
event of such non-compliance. Therefore, Consultant acknowledges that the
Company will be entitled to injunctive relief and/or specific performance
without the posting of bond or other security, in addition to whatever other
remedies it may have, at law or in equity, in any court of competent
jurisdiction against any acts of non-compliance by Consultant under this
Agreement.
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8.14 Survival of Certain Obligations. The obligations of the Company
and the Consultant set forth in this Agreement that by their terms extend beyond
or survive the termination or the expiration of the Term will not be affected or
diminished in any way by the termination or the expiration of the Term.
8.15 Officer Status. Notwithstanding anything in this Agreement to the
contrary, the Consultant shall, effective as of the Effective Date, become a
Vice President of the Company and shall retain such position and shall continue
to be one of the holders of the Company's Maryland liquor license (the "State
License") until notified by the Company. The Consultant acknowledges and agrees
that he shall have no authority to act for or on behalf of the Company in such
position except as expressly provided by the Board of Directors of the Company
in writing. The Company agrees to indemnify the Consultant for any Damages
suffered or incurred by the Consultant as a result of being one of the holders
of the State License.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and delivered by its duly authorized officer, and the Consultant has
duly executed and delivered this Agreement, as of the Effective Date.
CONSULTANT
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
XXXXXXXXX BREWING CO.
By: /s/ C, Xxxxx Xxxxxx
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Name: C. Xxxxx Xxxxxx
Title: Chairman and CEO
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Exhibit A
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Escrow Agreement
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Exhibit B
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Indemnified Matters
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See attached.
[LOGO Frederick Underwriters, Inc.]
July 27, 1999
Frederick Brewing Company
Attn: Xxxxx Xxxxxxx
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Dear Xx. Xxxxxxx:
Per your conversation with Xxxx Xxxxxxx, enclosed find copies of the following
bonds issued for Frederick Brewing Company in which the personal indemnification
were required of both you and Xxxxxxx McGinnnis:
Bond No Description Amount Issued Date Term
LPM0002659 USA Brewers Bond $30,000 12/01/96 12/01/98 - 12/01/99
LPM8001822 Maryland Beer Bond $ 3,000 03/12/97 03/12/99 - 03/12/2000
LPM8001835 Washington Beer Bond $ 3,000 05/02/97 05/02/99 - 05/02/2000
LPM8003642 New Jersey Beverage Tax Bond $20,000 07/01/97 06/30/99 - 06/20/2000
LPM8003555 Missouri Beer Tax Bond $ 1,000 08/29/97 06/30/99 - 06/30/2000
30460035 West Virginia Bond of Xxxxxx $25,000 02/22/93 07/01/99 - 07/01/2000
LPM8003554 Michigan Beer Bond $ 1,000 08/28/97 08/28/98 - 08/28/99
On March 17, 1998 a General Indemnity Agreement was signed by Xxxxxxxxx Brewing
Company with the personal indemnification of both you and Xxxxxxxx XxXxxxxx. A
copy is enclosed herewith. If any new bonds are issued they will be covered
under this signed GIA.
Please call if you have any questions.
Very truly yours,
/s/ Xxxxxxxx Xxxxxx
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Xxxxxxxx Xxxxxx
Xxxx Department
Extension 20
Enclosures
Personal Guarantees for Xxxxx Xxxxxxx and Xxxxxxxx XxXxxxxx
Item Guaranteed Amount Outstanding
World Capital Funding Bridge Loan $50,000
Baltimore Funds S.A. Bridge Loan $25,000
Austost Anstalt Xxxxxx Bridge Loan $25,000
Chesapeake Industrial Leasing Stretch Wrapper $6,531.11
Finova Misc. Equip./Office Furniture $145,929
Small Business Admin. Section 504 Loan $500,000 - each
