<PAGE>
Exhibit 10.3
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.
NATIONAL DISTRIBUTION AGREEMENT
AGREEMENT made as of the 3rd day of September, 2004 by and
between
Castle Brands (USA) Corp., a Delaware
corporation and wholly owned subsidiary of
Castle Brands Inc., which has its principal
place of business at 570 Lexington
Avenue, 29th Floor, New York, NY 10022 USA
("Importer") and Gosling's Export
(Bermuda) Limited, which has its principal
place of business at 17 Dundonald
Street, Hamilton, HM 10 Bermuda
("Supplier"). This agreement is being entered
into in counterparts and shall be effective
as of January 1, 2005, or such
earlier date that the Producer has
completed the termination of its pre-existing
Import Agreement (the "Effective
Date").
1. Definitions.
(a) "Products" shall mean all products listed in Schedule A
(b) "Territory" shall mean the domestic market of the 50 states
of the United States of America, and such
other markets as may be added by
mutual consent.
(c) Trademarks shall mean the trademarks Gosling's Black Seal
Rum, Gosling's Gold Bermuda Rum, Gosling's
Family Reserve Old Rum, Dark 'n
Stormy and all other trademarks, brand
names and logo designs used on or in
connection with the Products.
(d) "Initial Term" shall mean the period commencing January 1,
2005 (or such earlier date that the
Producer has completed the termination of
its pre-existing Import Agreement) and
continuing until January 1, 2010.
(e) "Renewal Term" shall mean the period commencing the first
day
following the end of the Initial Term or
any prior Renewal Term and continuing
for five (5) years thereafter.
(f) "Contract Year" shall mean the twelve (12) month period
commencing January 1 and ending December 31
of that calendar year.
(g) "Case" shall mean 12 bottles of 750 ml. each, or a nine
liter
equivalent.
2. Appointment.
(a) Supplier hereby appoints Importer as the sole and exclusive
importer and distributor of the Products
for the Territory.
(b) Importer hereby accepts appointment as the sole and
exclusive
importer of the Products for the Territory
and shall, during the term of this
Agreement, use all reasonable efforts to
distribute the Products throughout the
Territory.
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3. Duration.
(a) The term of this Agreement shall be the Initial Term,
unless
sooner terminated in accordance with
Section 11, and shall include any Renewal
Term provided renewal occurs in accordance
with Section 3(b).
(b) Provided this Agreement is otherwise still in effect at the
end of the Initial Term or any Renewal Term
and subject to the provisions of
Section 11, the parties agree to negotiate
in good faith for an additional
Renewal Term of five (5) years.
4. Terms of Sale and Payment.
(a) All sales of the Products by Supplier to Importer shall be
on
an FOB Heaven Hill basis at the prices set
in accordance with Schedule A, and as
amended hereafter from time to time
pursuant to Section 4(b) below. Payment
shall be made in Bermuda to a bank
designated by Supplier and shall be due sixty
(60) days from the date of the bill of
lading. Because Supplier will be funding
marketing programs in the Territory with
the aforementioned receivables, time
shall be of the essence for receipt of
payments sixty (60) days from the date of
bills of lading.
(b) All carriers engaged to ship the Products within the
Territory for Importer (or any distributor
designated by Importer in the
Territory) shall be the agents of Importer.
The risk of loss thereon shall pass
immediately to Importer upon delivery of
the Products from Heaven Hill (the
"Bottler") to such carrier for shipment
within the Territory. Importer shall
have the right to determine the point of
destination in the Territory and the
method of shipment of the Products.
(c) It is the intention of this agreement that Importer will
receive a net margin amount as set forth in
the following table (the "Net
Margin"). Importer will also be entitled to
reimbursement for Control State (18
states plus Montgomery County) brokers'
commissions as approved by Supplier, any
mutually agreed salaries, warehousing,
insurance and other costs of
distribution, such that Importer is able to
net the agreed Net Margin, but not
amounts above or below the agreed Net
Margin. The reimbursements shall not
include the normal salaries, travel and
entertainment and other overhead costs
of the Importer, except with respect to
certain mutually agreed personnel that
will be hired and directed by Importer but
will follow the strategic marketing
plan prepared by the Supplier's U.S.
marketing affiliate ("Supplier Sales
Personnel"). The costs of Supplier Sales
Personnel, including normal health or
other benefits, will be reimbursed by
Supplier.
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<TABLE>
<CAPTION>
NET MARGIN
YEAR
VOLUME RANGE
TO IMPORTER
-------------------- -------------------
---------------
<S>
<C>
<C>
2004 (if applicable)
All sales
* per case
2005
Up to * cases
* per case
Over * cases
* per case
2006 and later Up to *
cases
* per case
Over * cases
* per case
</TABLE>
(d) Importer will pay to the Supplier's U.S. Marketing
Affiliate
(the "Affiliate") an agreed amount per
month, to help defray the normal overhead
costs of the Affiliate. Importer will also
pay to the Affiliate a marketing fee
of $1.50 per case. All of such overhead and
fee payments by Importer will be
reimbursable by Supplier, but in no event
will reduce the Net Margin.
(e) Importer may bill Supplier monthly for reimbursements, and
should be reimbursed by Supplier within 15
days by wire transfer to Importer's
designated account. Importer and Supplier
will work together to coordinate
mutual payments and reimbursements, to
minimize the levels of net funding
required by either party.
(f) Any excess funds received by Importer, net of agreed Net
Margins, reimbursements or payments to the
Affiliate, shall be promptly
forwarded to Supplier. It is the intention
of this payments section to assure
Importer that it receive its agreed Net
Margin, but not amounts above or below
the agreed Net Margin, except as relates to
agreed reimbursements.
5. Marketing and Advertising.
(a) Supplier and/or its U.S. marketing affiliate shall be
responsible for the creation, development
and implementation of all marketing,
advertising and promotional efforts of the
products. At least four times per
Contract Year, Supplier shall review with
Importer the Supplier's plans for the
current and following Contract Year.
Importer will be responsible for sales
efforts in the field, and will coordinate
with the Supplier with respect to
field-based marketing programs, including
local promotions, product tastings,
discounts, etc., with the cost of such
programs borne entirely by the Supplier.
(b) The costs of marketing and advertising will be borne by
Supplier. To the extent that the Importer
pays for any billings relative to
marketing or advertising, Supplier agrees
to reimburse Importer within 15 days
of receipt of a detailed invoice, unless
there is a legitimate dispute relative
to any such invoice.
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6. Representations and Warranties of Importer. Importer
represents,
warrants and covenants to Supplier as
follows:
(a) Importer and its agent MHW Ltd. hold in full force and
effect
the federal, state and local licenses or
permits that are necessary to conduct
its business as an importer of the Products
and to engage in the transactions
intended by this Agreement.
(b) Importer shall maintain a distributor network of adequate
size to represent and promote the sales of
the Products throughout the
Territory. Such sales force shall be kept
properly informed as to all
advertising, marketing and promotional
programs and policies regarding the
Products.
(c) Importer shall conduct its activities under this Agreement
in
accordance with local, state and federal
laws and regulations regarding the sale
of the Products.
(d) Importer shall monitor its customers' inventories of the
Products to ensure that quantities are
adequate to service the requirements of
the markets in the Territory. Importer
shall promptly deliver, or arrange for
direct import shipments of the Products, to
its customers in the Territory in
accordance with good business practice and
local custom.
(e) Importer shall timely file all price schedules and reports
as
may be required by applicable laws and
regulations.
(f) Importer shall not terminate any existing wholesaler, or
appoint any new wholesaler, in the
Territory without the prior written consent
of Supplier; which consent shall not be
unreasonably withheld.
7. Representations and Warranties of Supplier. Supplier
represents,
warrants and covenants to Importer as
follows:
(a) Supplier has the authority to enter into and carry out its
obligations under this Agreement.
(b) The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement
will not act as a breach of any
agreement or understanding to which
Supplier is a party.
(c) Subject to expiration or earlier termination of Supplier's
current import agreement, Supplier has the
right to designate and appoint the
Importer as the exclusive distributor of
the Products in the Territory.
(d) The Products sold to Importer under this Agreement shall be
merchantable and fit for human consumption.
The Products shall be manufactured,
packaged and labeled in conformity with
applicable U.S. federal, state and local
laws, rules and regulations
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and, specifically, the rules and
regulations of the Federal Alcohol Tax and
Trade Bureau [new name] and the Food and
Drug Administration. Samples of the
Product have been provided to Importer. All
shipments of the Products shall
conform to any samples provided.
(e) The Products sold to Importer shall be free and clear of
any
liens or encumbrances. Neither the
execution of this Agreement, nor compliance
with its terms, will result in the creation
or imposition of any lien, charge,
encumbrance or restriction of any nature by
any third party upon the Products
sold to Importer.
(f) Supplier shall maintain an adequate inventory of the
Products
with which to supply Importer. Supplier
shall accept all orders reasonably
submitted by Importer, with shipment to
follow not later than thirty (30) days
from receipt of an order, unless excused by
Section 15 below, or as otherwise
agreed upon by the parties.
(g) Supplier shall use its best efforts to prevent the sale of
unauthorized shipments of the Products in
the Territory by entities or persons
other than Importer. In this regard,
Supplier shall not sell or otherwise
transfer any of the Products to any
distributor located outside the Territory
whom Supplier knows, or has reason to
believe, will, either directly or
indirectly, sell or otherwise transfer the
Products into the Territory.
(h) Subject to the provisions of Sections 8 and 10 below and in
all events, with the full right to select
counsel and supervise the legal and
any settlement processes, Supplier shall
defend, indemnify and hold harmless
Importer from and against any and all
damages and liability, costs or expenses,
including at
