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.

EXECUTION COPY

AGREEMENT

This agreement (this “Agreement”) has been executed by and between Autentica
Tequilera S.A. de C.V. (“Producer”) located at Morelos 285, Tequila Jalisco,
Mexico C.P. 46400, and Castle Brands (USA) Corp., located at 570 Lexington
Avenue, 29th Floor, New York, New York 10022 (“Importer”) in counterparts on the
dates specified adjacent to the signatures of the respective parties and shall
be effective as of February 4, 2008 (the “Effective Date”).

 

I.

WHEREAS, Producer is the owner of a premium brand of tequila called “Tierras
Autenticas de Jalisco” or “Tierras” (together with all other products which may
be added to Exhibit I hereto from time to time pursuant to the terms of this
Agreement, the “Products”); and

 

II.

WHEREAS, Importer is a Delaware corporation engaged in the import and marketing
of premium spirits; and

 

III.

WHEREAS Producer wishes to appoint Importer, and Importer wishes to accept such
appointment, as sole importer of the Products in the Territory (as defined in
Exhibit I) upon the terms and condition set out in this agreement.

NOW, THEREFORE, in consideration of the premises and the mutual promises herein
set forth, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:

1. DEFINITIONS

For the effects of this Agreement, Importer and Producer agree on the following
definitions:

(a) “Affiliate”: A Person which, directly or indirectly, is Controlled by or
Controls another Person, or a Person which is under common Control with another
company.

(b) “AMP”: Strategy, plans and spending levels for advertising marketing and
promotions, including creative copy, media, merchandising, POS materials and all
other marketing related activities.

(c) “Case”: A case of six (6) 750 ml bottle cases of Product or the equivalent
thereof as measured by volume, in the aggregate.

(d) “Control”:

(i) a direct or indirect holding, or aggregate holdings, of securities
possessing more than 50% of the voting rights attributable to the issued and
outstanding capital stock of a Person which are currently exercisable at a

 

 

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general meeting, irrespective of whether the holding or holdings gives de facto
control; or

(ii) the right to elect or remove directly or indirectly at least one half of
the board of directors or equivalent managing body of a Person; or

(iii) the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person or entity, whether
through the ownership of equity securities, by contract, or otherwise.

(e) “Domain Name”: An address in conveniently readable form for use on the
worldwide web, the Internet, any other computer network or communication system.

(f) “Gross Margin”: For any fiscal period, the gross revenues recognized by the
Importer for the sale of the Products within the Territory, less the aggregate
Purchase Price of such Products paid by the Importer to the Seller.

(g) “Initial Term”: From the date of execution of this Agreement until the fifth
anniversary of the date hereof.

(h) “Laid-in-Cost”: The Purchase Price paid by Importer for the Products plus
all Importer Expenses with respect to such Products.

(i) “Operational Year”: Any fiscal year (years ending March 31) during the Term
starting from the fiscal year 2009 (ending March 31, 2009).

(j) “Person”: An individual, corporation, company, partnership, joint venture,
trust, unincorporated organization, government or agency or political
subdivision thereof or any other entity that may be treated as a person under
applicable law.

(k) “Proprietary Information”: All information used or developed pursuant to
this Agreement.

(l) “Renewal Term”: Any extended term following the Initial Term.

(m) “Shipments”: Shipments of the Products from Importer to Importer’s
wholesalers or to state purchasing agencies pursuant to this Agreement.

(n) “Term”: The Initial Term and any Renewal Term.

(o) “Trade Dress”: Overall appearance and presentation of the Products’
labeling, packaging (inluding, without limitation, outer shippers), and
containers, as well as associated advertising and copyrights in all materials
which are connected with it.

 

 

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2. GRANT OF RIGHTS; RESERVATION OF RIGHTS; RIGHTS OF FIRST REFUSAL

(a) Producer hereby appoints Importer as Producer’s exclusive importer and/or
distributor in the Territory of the the Products for the duration of the Term,
subject to the terms and conditions hereafter set forth. Importer agrees to
accept such appointment.

(b) Except for the deletion of the Trademark (as defined in Exhibit III hereto),
Producer may reasonably modify, delete, or add to, labeling or packaging used on
or in connection with the promotion or sale of the the Products, including, but
not limited to, adding to or deleting, diminishing or expanding size, or
relocating on the labeling or packaging any Trade Dress elements, label design
or logotypes on one hundred eighty (180) days written notice to Importer. If
Importer does not agree with any such modification, Importer shall promptly
advise Producer in writing, expressing the reasons for such disagreement.
Producer agrees to discuss such proposed modification with Importer prior to the
implementation of such modification, which implementation shall in any event be
at Producer’s discretion, provided however that Producer shall at all times
comply with any modification mandated by a regulatory body in the Territory. All
costs and expenses incurred by Importer to implement such modifications shall be
at Producer’s expense. In the event of any such modification, Importer shall
have the right, with the prior written approval of Producer, which shall not be
unreasonably conditioned, delayed or withheld, to use up any materials, labels,
packaging or signage bearing the affected labels, Trademark, packaging or Trade
Dress. If Producer does not promptly consent to such use-up right, or wishes to
accelerate such use-up rights, then Producer shall reimburse Importer for all
costs and expenses incurred by Importer due to destruction and non-use of such
materials, labels, packaging or signage or shall repurchase any affected
inventory from Importer at the Importer’s Laid-in-Cost. Both parties will use
all reasonable efforts to sell off old inventory as expeditiously as possible.

(c) During the term of this Agreement, Importer shall have the right of first
refusal regarding any other current or future products (including, without
limitation, any new flavor or aging extension of the Products and any other
product utilizing the Trademark or the Tierras brand name; provided, however,
that Producer will discuss any flavor or aging extensions or deletions with
Importer prior to Producer making final decisions regarding same) that Producer
or any of its Affiliates maintains or adds to its product line for sale in the
Territory on the following terms and conditions:

(i) If Producer desires to add any new product to its product line for sale in
the Territory, then Producer shall deliver a written notice (the “Offer Notice”)
describing such new product, its proposed formulation, marketing strategy and
any and all other available information with respect to such product prior to
the introduction of any such new product to any market within the Territory and
offering Importer the exclusive right to import and distribute the product in
the Territory. Such offer shall remain irrevocable for sixty (60) days from the
date on which Importer first receives the Offer Notice.

(ii) Importer shall have sixty (60) days from the date on which it first
receives the Offer Notice to exercise its right of first refusal to import
and/or distribute the product described in the Offer Notice by delivering to
Producter a written acceptance of the offer contained in the Offer Notice or
other

 

 

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writing stating that Importer is exercising its right of first refusal with
respect to the product described in the Offer Notice. Failure to exercise the
right of first refusal within sixty (60) days of the date on which Importer
first receives the Offer Notice shall be deemed to be a waiver by Importer of
such right.

(iii) If Importer exercises its option pursuant to Section (2)(c)(ii) above,
Exhibit I shall be automatically amended and the term “Products” as used in this
Agreement shall be deemed to include such additional products. In the event that
Importer declines to exercise such option, Producer shall have the right to
offer such additional products to other importers and/or distributors on the
terms and conditions therein within ninety (90) days of the date on which the
Importer declines or waives the right of first refusal as described in Section
2(c)(ii); provided, however, that Producer shall not enter into any importation
agreement with any other importer upon terms more favorable in any respect than
those originally offered to Importer without first offering those more favorable
terms to Importer in the manner described in this Section 2(c).

(d) During the term of this Agreement, Importer shall have the right of first
refusal to import and/or distribute Products to any market not then in the
Territory (except Mexico) on the following terms and conditions:

(i) If Producer desires to engage any Person as an importer or distributor of
Products in any market not then in the Territory, then Producer shall deliver a
written notice (the “Market Notice”) describing such new market and the Products
it proposes to have imported or distributed including the material terms and
conditions under which it proposes to engage such importer or distrubutor prior
to the engagement of any Person to act as an importer and/or distributor in such
market and offering Importer the exclusive right to import and distribute the
Products in such market. Such offer shall remain irrevocable for sixty (60) days
from the date on which Importer first receives the Market Notice.

(ii) Importer shall have sixty (60) days from the date on which it first
receives the Market Notice to exercise its right of first refusal to import
and/or distribute the product described in the Market Notice by delivering to
Producer a written acceptance of the offer contained in the Offer Notice or
other writing stating that Importer is exercising its right of first refusal
with respect to the market described in the Offer Notice. Failure to exercise
the right of first refusal within sixty (60) days of the date on which Importer
first receives the Market Notice shall be deemed to be a waiver by Importer of
such right.

(iii) If Importer exercises its option pursuant to Section 2(d)(ii) above, then
either (x) if the terms and conditions described in the Market Notice are
substantially similar to the material terms and conditions hereof, Exhibit I
shall be automatically amended and the term “Territory” as used in this
Agreement shall be deemed to include such additional markets or (y) if the terms
and conditions described in the Market Notice are not substantially similar to
the material terms and conditions hereof, Producer and Importer shall execute
and

 

 

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deliver an additional agreement with respect only to the new market based on the
form of this Agrement, but implementing the terms and conditions refleted in the
Market Notice (for clarification, the execution and delivery of the additional
contract shall not affect the terms and conditions of this Agreement, which
shall continue in full force and effect). Following the exercise by Importer of
such option, Importer shall have one hundred twenty (120) days in which to
commence its operations in such market. In the event that Importer declines to
exercise such option or fails to commence operations in such market within one
hundred twenty (120) days of the exercise of such right, Producer shall have the
right to engage a third party as an importer and/or distributor in the market
described in the Market Notice on the terms and conditions therein within ninety
(90) days of the date on which the Importer declines or waives the right of
first refusal as described in Section 2(d)(ii) (or the expiration of the period
in which it was required to commence operations, as applicable); provided,
however, that Producer shall not enter into any importation or distribution
agreement with any other importer or distributor upon terms more favorable in
any respect than those originally offered to Importer without first offering
those more favorable terms to Importer in the manner described in this Section
2(d).

3. SUPPLY AND PRODUCT QUALITY

(a) At least sixty (60) days prior to the beginning of each Operational Year,
Importer shall propose to Producer in writing a commercially reasonable rolling
forecast of the quantities and types of the Products to be supplied to Importer
by Producer during each quarter of the following Operational Year. Such proposed
forecast shall be subject to discussion between the parties and shall be subject
to revision to reflect market conditions.

(b) In the event of any request by Importer for Shipments greater than the
forecast amount for any given Operational Year, Producer will use its best
efforts to supply such additional Shipments.

4. PURCHASES AND TERMS

(a) Producer shall deliver to Importer the Products set forth in Exhibit I, in
such quantities as Importer may request from time to time. Prices for each
Product shall be the Purchase Price for each such Product as as set forth in
Exhibit III hereto.

(b) Importer shall pay the Purchase Price for delivered products by check at the
address listed for the Producer in Exhibit I hereto or, if requested in writing
by the Producer, by wire transfer to an account for the benefit of the Producer,
within a term of sixty (60) days from date of shipment; provided, however, that
Importer shall so pay Producer within a term of thrity (30) days for the first
two (2) orders of Products which Importer places with Producer under this
Agreement.

(c) Importer shall pay all import duties and all expenses of importation into
the Territory as well as freight, taxes, insurance and expenses for movement
from the

 

 

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Producer’s plant to the Territory destination and storage expenses, if any,
following arrival to the Territory (collectively, the “Importer Expenses”).

5. EQUITY PAYMENT AND RIGHT OF FIRST REFUSAL

(a) Producer shall retain and maintain title to the Trademarks and related
intellectual property rights for all of the Producrs. Producer shall not sell or
otherwise transfer, directly or indirectly through the sale of stock of Producer
or its parent company or otherwise, any of the Trademarks or its related
intellectual property rights except in compliance with the terms of this Section
5.

(b) In the event Producer should decide to sell any or all of the Products or
Trademark(s), whether sold directly or indirectly through the sale of equity of
Producer or otherwise to a third party (a “Sale Transaction”), then, (i)
Producer shall promptly pay to Importer, in cash, an amount equal to the product
obtained by multiplying (x) the gross proceeds of any such sale, including,
without limitation, the fair market value of any non-cash consideration received
in any such transaction (the “Sale Proceeds”) by (y) the “Earned Percentage” as
calculated pursuant to the following:

(i) If aggregate number of Cases of Product ordered by Importer from Producer
during the Term of this Agreement, as of the date of the consummation of the
Sale Transaction, is less than *, the Earned Percentage shall equal zero;

(ii) If aggregate number of Cases of Product ordered by Importer from Producer
during the Term of this Agreement, as of the date of the consummation of the
Sale Transaction, is equal to or greater than *, the Earned Percentage shall
equal ten percent (10%);

(iii) If aggregate number of Cases of Product ordered by Importer from Producer
during the Term of this Agreement, as of the date of the consummation of the
Sale Transaction, is equal to or greater than *, the Earned Percentage shall
equal twenty percent (20%);

(iv) If aggregate number of Cases of Product ordered by Importer from Producer
during the Term of this Agreement, as of the date of the consummation of the
Sale Transaction, is equal *, the Earned Percentage shall equal thirty-five
percent (35%);.

In the event that one or more of the Products are sold, the parties hereto will
use commercially reasonable efforts to agree on a reasonable reduction to the
Case amounts referenced in Section 5(a). The terms of this Section 5(a) shall
survive any termination or expiration of this agreement.

(c) If (i) total Cases of Product ordered by Importer from Producer on or before
the end of the Operational Year ending on * are equal to or greater than

 

 

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* Cases, and (ii) Producer decides to sell or transfer, whether directly or
indirectly through the sale of stock of Producer or its parent company or any
affiliate thereof or otherwise, to a third party, any or all of its Trademarks
or any related intellectual property rights, either directly or indirectly,
during any term of this Agreement, the Importer shall each have a right of first
refusal to purchase said Trademark(s) or related intellectual property rights on
the terms and conditions set forth in this Section 5(c).

(i) Upon the receipt by Producer of any bona fide offer to purchase any
Trademark or related intellectual property right which Producer desires to
accept, Producer shall promptly deliver to the Producer a written notice (the
“Notice”) stating (i) Producer’s bona fide intention to sell or otherwise
transfer certain Trademark(s) or related intellectual property rights or other
assets which would result in an indirect transfer of such Trademark(s) or
related intellectual property rights, along with a precise description of the
Trademarks or related intellectual property rights or other assets which are
proposed for sale or transfer (the “Offered IP”), (ii) a brief description of
the proposed transaction, (iii) the name of each proposed purchaser or other
transferee (the “Proposed Transferee”), (iv) the Offered IP proposed to be
transferred to each Proposed Transferee, (v) the bona fide cash price or other
consideration for which Producer proposes to sell or transfer the Offered IP
(the “Offered Price”) and (vi) the estimated closing date of such sale or
transfer, and the Notice shall contain an offer to sell the Offered IP to the
Company at the Offered Price, payable as specified in this Section. At any time
within sixty (60) days of after receipt of the Notice, the Producer may, by
giving written notice (an “Exercise Notice”) to Producer, elect to purchase the
Offered IP at the Offered Price, payable as specified in this Section, by
accepting the offer contained in the Notice.

(ii) If Importer exercises its right of first refusal, Producer and Importer
shall both use their best efforts to consummate the purchase of the Offered IP
by the Importer within ninety (90) days of the date of the delivery of the
Exercise Notice, or, if later, the time set forth in the Notice.

(iii) The purchase price for the Offered IP purchased by Importer shall be the
Offered Price. If the Offered Price includes consideration other than cash, the
cash equivalent value of the non-cash consideration shall be determined by the
Importer and Producer negotiating in good faith, or, in the absence of an
agreement after commercially reasonable efforts by Importer and Producer, by a
third party appraiser mutually agreed upon by the Importer and Producer;
provided that the fees and expenses of such appraisal shall be equally divided
between the Importer and Producer. Payment of the Offered Price shall be made
within ninety (90) days after delivery of the Exercise Notice or, if later, the
time set forth in the Notice. Such payment shall be made in cash or, if the
Offered Price is specified in the Notice to be payable, in whole or in part, in
a medium other than cash then, at the election of Importer, in the manner
specified in the Notice. At the time of payment, the Selling Holder shall
deliver title to the Offered IP to Importer free and clear of all liens and
encumbrances.

 

 

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(iv) If the Offered IP is not purchased by Importer, as provided herein,
Producer may sell or transfer all, but not less than all, of the Offered IP to
the Proposed Transferee at the Offered Price (and only at the Offered Price),
provided that such sale or transfer is (i) consummated within niney (90) days
after the date of the Notice; and (ii) in accordance with the terms of this
Agreement and all other applicable agreements between the parties hereto. If the
Offered IP is not transferred within such period at the Offered Price, a new
Notice shall be given by Producer to Importer, and Importer shall again be
offered a right of first refusal in accordance with this Section before the
Offered IP, or any portion thereof, may be sold or otherwise transferred by
Producer.

(d) In additon to, and not in substitution for the other provisions of this
Section 5, if Producer (i) sells the Product brands listed on Exhibit I hereto
or sells or licenses the Trademark for the purpose of effecting a de facto sale
of the brand, (ii) sells all or substantially all of its assets, (iii) issues,
sells or transfers all or substantially all of its equity securities to an
unrelated third party, or (iv) undergoes any recapitalization or reorganization
which results in or has the effect of any of the foregoing or otherwise
transfers control of Producer or the Products to a third party, then Producer
shall have the right to terminate this Agreement upon the delivery of (i) a
written notice of termination to Importer and (ii) the payment to Importer in
cash of an amount equal to the aggregate Gross Margin from all sales of the
Products within the Territory with the twelve full calendar months immediately
preceding such sale or license.

6. QUALITY STANDARDS

(a) Producer, or Producer’s designee, shall manufacture and bottle the Products
in accordance with: (1) all applicable laws and regulations in the place of
production (including those of any self-regulatory bodies), (2) all laws and
regulations applicable to the production and sale of spirits to be imported in
the Territory; and (3) industry best manufacturing practices. Importer shall
have access during all reasonable business hours to the premises where the
Products are manufactured.

(b) The Products that Producer sells to Importer must be “merchantable” which
shall mean that the Products are of good quality, free from defects (whether
patent or latent) in material and workmanship, merchantable and fit for human
consumption, and shall be substantially of the same quality as the Products
already distributed in the Territory.

(c) Importer shall use all reasonable efforts to maintain high standards of
quality on all the Products sold and distributed by Importer, and to this end
Importer shall ship and warehouse the Products in accordance with reasonable
warehousing standards and Producer or its duly authorized representatives shall
have access during all reasonable business hours to the places where the
Products are stored by Importer.

(d) In consultation with Importer, Producer may reasonably modify the Products
upon not less than one hundred twenty (120) days written notice to Importer (or
less if mandated by a regulatory body in the Territory). If Importer does not
agree with such modification, it shall so advise Producer. Except in the case of
a mandate by a regulatory body,

 

 

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Producer agrees to discuss such proposed modification with Importer. If the
parties cannot agree on the proposed modification, Producer’s decision shall be
controlling, except that it shall have the obligation to comply with any change
mandated by a regulatory body in the Territory.

(e) In the event of such modification, Importer shall have the right, with
Producer’s prior written approval, which cannot be unreasonably withheld, to use
up all the Products previously supplied to it. If Producer fails to permit a
use-up requested by Importer, Producer shall be required to repurchase from
Importer all pre-modification inventory at Importer’s Laid-in-Cost.

(f) During the Term, each party shall provide, at no cost to the other party,
all information related to this Agreement and the operations related thereto.

7. REPORTS

Importer shall submit to Producer:

(a) Quarterly statements showing shipments by market; and

(b) Such other figures and marketing information as Producer may reasonably
request in writing;

provided, however, that Importer shall not be required to provide such
statements, reports or information to Producer if such provision of such
statements, reports or information would violate any federal, state or local law
or if it would be unreasonably burdensome.

8. MARKETING AND AMP

(a) Promptly following the execution and delivery of this Agreement, and
thereafter, by end of each Operational Year, commencing with the 2009 fiscal
year of the Importer (ending on March 31, 2009), Importer and Producer shall
meet to discuss and construct a preliminary annual long term strategic plan for
the Operational Years remaining in Term and a full annual marketing plan for the
Products for the next Operational Year. The strategic plans will contain (i) a
vision of future market growth potential for the Territory and the Products,
(ii) a consideration of alternative strategies for achieving long term
objectives, (iii) the forecasts provided by Importer.

(b) Importer, upon Producer’s reasonable request, shall periodically review with
Producer the results and trends of the strategic and marketing plan elements
referred to in Section 8(a) hereof, the administration of this Agreement and any
other factors relating to the Products.

(c) Any change that Importer shall desire to make to any product, labels,
packaging, and/or designs of the Products, shall require the written consent of
Producer prior to distribution or sale of such product except that Importer
shall have the right to make any change mandated by a regulatory body in the
Territory.

 

 

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(d) Importer and Producer shall consult with each other and shall have the
opportunity to participate in discussions regarding the selection of, and
changes in, the AMP of the Products. The final decision with respect to any AMP
activities shall be made by the Importer, who shall pay the costs of all such
AMP activities.

(e) Producer acknowledges that the Products may be sold in combination
promotions with other Importer products.

9. TRADEMARK

(a) The appointment as per paragraph 2(a) shall include the permission granted
by Producer to Importer to use the Trademark free from any additional payment in
the Territory. Importer shall ensure that each reference to and use of the
Trademark by Importer is in a manner befitting the trademark.

(b) The permission to use the Trademark in the Territory hereby granted shall
not be assignable by Importer and upon termination of this Agreement all rights
granted to Importer to use the Trademark shall cease forthwith.

(c) Importer acknowledges Producer’s right, title and interest in the Trademark
in the Territory and elsewhere and agrees not to tamper with it or do any act
which might invalidate such title or the registration of the Trademark, nor do
any act which might support any application to remove the Trademark from the
register nor assist any other person directly or indirectly in any such act.
Importer hereby covenants not to challenge, directly or indirectly, in any
country of the world, Producer’s sole and exclusive ownership of the Trademark
and any variations or modifications thereof, as well as the goodwill symbolized
by such Trademark.

(d) The goodwill arising from the permitted use of the Trademark by Importer
shall accrue to Producer.

(e) Importer undertakes not to use in its business any other Trademark which is
similar to, or substantially similar to, or so nearly resembles the Trademark as
to cause deception or confusion.

(f) In the event that Importer learns of any infringement or threatened Trade
Dress infringement of the Trademark, or any common law passing-off by reason of
imitations or otherwise, or that any third party alleges claim that the
Trademark is liable to cause deception or confusion to the public, Importer
shall forthwith notify Producer giving particulars thereof and Importer will, at
Producer’s expense, provide all reasonable information and assistance to
Producer in any proceeding which is commenced or engaged in by the Producer.

(g) The copyright in all brochures, pamphlets and material supplied by Producer
to Importer and relating to the Products shall be and shall remain the property
of Producer and Importer shall, upon termination of this Agreement, return to
Producer or dispose of as Producer shall direct at the cost of Producer, all
samples supplied by Producer together with all such brochures and materials as
aforesaid.

 

 

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10. REASONABLE EFFORTS

(a) Importer undertakes to use its reasonable efforts to comply with the
obligations assumed hereunder. For purposes hereof, “reasonable efforts” shall
mean that Importer will use the same effort, diligence and attention to the
distribution, sale and marketing of each of the Products and the goodwill and
image thereof, as Importer uses in the distribution, sales, marketing and
protection of its own brands in the Territory, taking into account the different
AMP levels applicable to each of the Products as provided in the strategic and
annual marketing plans described herein.

(b) If Producer believes Importer has failed to use reasonable efforts as
required under Paragraph 10 (a) with respect to any of the Products, Producer
shall deliver written notice to Importer detailing the alleged failures. Upon
the recipt of such notice by Importer, the parties hereto shall discuss this
matter in good faith and seek a mutually acceptable solution within sixty (60)
days.

11. CONFIDENTIALITY

(a) Importer, and Producer agree to keep confidential, and not to disclose the
contents of this Agreement, and all Proprietary Information related to it
(including but not limited to information contained in the strategic or
marketing plans), received or used under this Agreement unless the disclosure of
such information is required by any federal, state or local government or laws,
but always in accordance with written agreements containing the appropriate
provisions to protect the confidentiality of the disclosure.

(b) Each party agrees to only disclose Proprietary Information to any Person
within the respective organizations who have a need to know such Proprietary
Information to perform their duties and responsibilities under this Agreement.

(c) This confidentiality obligation shall continue for a minimum period of two
(2) years after termination of this Agreement.

12. ASSIGNABILITY

Neither party hereto shall transfer, allocate, or assign to any other Person any
of the rights or obligations under this Agreement without the prior written
consent of the other party hereto, which consent shall not be unreasonably
conditioned, delayed or withheld; provided, however, that either party shall be
permitted to assign this Agreement to any Affiliate of such party.

13. TERMINATION, RENEWAL AND DURATION

(a) This Agreement shall come into effect upon the date of execution of this
Agreement by both parties and shall remain in full force for the duration of the
Initial Term, subject to the provisions of this Agreement and the renewal and
termination provisions specified herein. The contract will be renewed or may be
terminated as follows:

 

 

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(i) Subsequent Renewal Terms of five (5) years shall be automatically added to
the Term of this Agreement if Importer purchases the required aggregate minimum
quantity of Product listed on Exhibit IV by the end of the applicable
Operational Year; For each Renewal Term which begins after April 1, 2018,
Producer and Importer shall meet at least six months prior to the first day of
such renewal term and negotiate, in good faith, to eastablish an agreed minimum
aggregate quantity of Product that must be purchased by the Importer from the
Producer to provide for an additional five (5) year Renewal Term following such
Renewal Term. Upon such agreement, the agreed aggregate minimum quantity shall
automatically, wihtout further action being required by either party hereto, be
added to Exhibit IV opposite the last year of the appliacable Renewal Period; or

(ii) If Importer’s purchases of the Products do not equal at least required
aggregate quantity of Product in an applicable contract period for a renewal
determination pursuant to Section 13(a)(i), renewal shall be subject to the
mutual agreement of Producer and Importer, following negotiation in good faith
and mutual consideration of, among other things, the performance of the category
in the Territory;

provided, however, in each case, that if any portion of a shortfall in purchase
of Product by the Importer or the failure of such Purchases to increase as
required for any metric under this Agreement is due to the inability of Producer
to supply agreed upon quantities of the Products to Importer as provided in the
marketing plan (including, without limitation, a failure attributable to a force
majeure, as described in Section 17 hereof), the amount of such shortfall or
failure to so increase that is attributable to Producer’s inability to supply
agreed amounts of the Products shall be deducted from minimum requirements set
forth above in determining whether the performance standards are met.

(b) Except as provided in paragraph (a) herein, if either party does not provide
the other party at least six months written notice of its intention to not renew
this Agreement upon the expiration of the Term, this Agreement shall be
automatically renewed for a further term of five years and shall continue to be
renewed for further terms of five years unless and until one party gives to the
other party such six months’ prior written notice of its intention not to renew
this Agreement at the end of the current Term.

(c) Notwithstanding the foregoing, it remains understood that Producer shall not
have the right to terminate this Agreement upon expiration of the Initial Term,
or any subsequent Renewal Term, if purchases by Importer during the year ending
March 31, 2013 or any subsequent Renewal Term, in the aggregate, equal or exceed
the requirements for such Operational Years as set forth above.

(d) In the event of default under this Agreement, Producer and Importer shall
have the right to terminate this Agreement only through a notice of termination
of the Contract to the defaulting party specifying the default. Before
termination takes place, the defaulting party shall have thirty (30) days after
receipt of the notice of termination to convince the non-defaulting party that a
default has not occurred. If the non-defaulting party maintains after such
thirty (30) day period that a default has occurred by means of a second notice
of termination, then the defaulting party shall, from the receipt of the second
notice of termination, have a right of correction, consisting of a period of
sixty (60) days to remedy the stated default. If the

 

 

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non-defaulting party is convinced that the default has been cured, notices of
termination shall be without effect. If the default is not cured within the
sixty (60) day period, the notice of termination of this Agreement shall become
effective as of the end of the sixty (60) day period pursuant to a notice from
the non-defaulting party to defaulting party (hereinafter “Effective Date of
Termination”). Neither party shall have the right to exercise such right of
correction more than twice during the Initial Term, or any Renewal Term.

(e) Producer and Importer are not by this Paragraph 13 waiving any right to
damages arising from any breach of this Agreement which rights are expressly
reserved.

14. EFFECT OF TERMINATION

(a) Following the effective date of any termination hereof, Importer shall cease
marketing and selling the Products and cease the use of advertising, packaging,
containers or labels bearing the Trademark or Domain Names used in connection
therewith. Notwithstanding the foregoing, Importer shall have the right to use
the Trademark or Domain Names to sell any remaining inventory of the Products
unless purchased by Producer pursuant to Paragraph 14(b) below.

(b) Upon termination of this Agreement, Producer shall deliver a written notice
to importer stating that either (i) Producer shall purchase from Importer, at
Importer’s Laid-in-Cost, any stocks of the Products and marketing and
promotional materials relating thereto which remain in Importer’s possession
from the termination of this Agreement (in which case Producer shall make prompt
payment to Importer upon the delivery of such Products and materials) or (ii)
Producer is granting a use-up right for the remaining Products and marketing and
promotional materials relating thereto which remain in Importer’s possession
from the termination of this Agreement (which right shall include the right to
use up any materials, labels, packaging or signage bearing the affected labels,
Trademark, packaging or Trade Dress).

(c) A waiver by either party of any breach of any provision of this Agreement
will not be deemed to be a waiver of a subsequent breach thereof.

(d) It is understood that in the event of termination of this Agreement for any
reason, the parties hereto will continue to be responsible for all obligations
which may have occurred up to, including and following the date of termination.

(e) Importer acknowledges that, as of the date of termination of this Agreement,
Importer’s failure to cease all use of the Trademark may result in immediate and
irreparable harm to Producer and/or to the rights of any licensee or distributor
appointed by Producer. Importer acknowledges and admits that damages may not
constitute adequate relief for such failure to cease all use of the Trademark
and Importer agrees in the event of such failure Producer shall be entitled to
seek relief by way of temporary and permanent injunctions.

(f) In the event of termination or expiration of this Agreement, Importer agrees
that Producer, or its designee, may “use-up” any labels or bottles that contain
Importer’s name as the importer of the Products and Importer agrees that it will
sign a written document agreeing to such “use-up” if required by any
governmental authority, provided Importer has been fully reimbursed for all
outstanding payables due from Producer.

 

 

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15. REPRESENTATIONS, WARRANTIES AND CONVENANTS BY THE PARTIES

(a) Importer represents, warrants and covenants that it or its agents have and
will maintain and update all material licenses necessary to distribute the
Products, and will continue to be in compliance in all material respects with
and in lawful possession of all material licenses, permits, approvals, consents
and registrations required in order for Importer to comply with its obligations
under this Agreement.

(b) Without prejudice to any other representation and warranty made by Producer
in this Agreement, Producer represents and warrants that the Products shall be
of good and merchantable quality and fit for the purpose intended when delivered
to Importer, including but not limited to, produced and labeled in compliance
with all laws and regulations from time to time in force in the Territory,
packed in sealed, clean and undamaged cases, with undamaged packaging and Trade
Dress.

(c) 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 Producer is a Party.

(d) Producer has the right to designate and appoint the Importer as the
exclusive distributor of the Products in the Territory. Producer further
warrants that no distribution rights to any of the Products are currently
designated or granted to anyone else in the Territory.

(e) Producer shall maintain an adequate inventory of the Products with which to
supply Importer. Producer 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 paragraph 17 below, or as otherwise agreed upon by
the parties.

(f) Producer shall use all reasonable efforts to prevent the sale of
unauthorized shipments of the Products in the Territory by entities or persons
other than Importer. In this regard, Producer shall not sell or otherwise
transfer any of the Products to any distributor located outside the Territory
whom Producer knows, or has reason to believe, will, either directly or
indirectly, sell or otherwise transfer the Products into the Territory.

(g) Producer represents, warranties and covenants that the shelf life of all the
Products sold to Importer shall not be less than thirty-six (36) months provided
the Products are properly handled, stored and shelved by Importer and its
customers.

(h) Producer and Importer shall comply with all relevant changes to all
applicable rules relating to the Products being sold in the Territory.

16. INDEMNITY

Producer will indemnify, defend and otherwise hold Importer harmless in the
Territory against any claims, losses, damages, liability or expenses (including
reasonable attorneys’ fees) incurred by Importer arising out of third party
claims concerning (i) compliance

 

 

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with United States laws and regulations applicable to the actions of Producer,
(ii) the quality or fitness for use of the Products produced, bottled and
shipped directly to Importer by Producer or (iii) marketing or promotion, sale
or distribution activities of the Products directed or supervised by the
Producer. Producer shall acquire and maintain at its sole cost and expense
throughout the term of this Term and any sell-off period standard product
liability insurance from a reputable insurance company. This insurance coverage
shall provide protection of not less than five million dollars U.S. ($5,000,000)
for each occurrence and Importer shall be named as an additional named insured
against any and all claims, demands, causes of action or damages, including
reasonable attorney’s fees, arising out of any alleged defects in the Products.
Such insurance policies shall provide that they may not be cancelled or amended
in a manner which restricts the existing coverage without at least thirty (30)
days written notice to both parties.

17. FORCE MAJEURE

Neither party shall be liable to the other for failure or delay in the
performance of any of its obligations under this Agreement for the time and to
the extent such failure or delay is caused by riots, civil commotion, wars,
hostilities between nations, governmental laws, orders or regulations,
embargoes, actions by the government or any agency thereof, acts of God, storms,
fires, earthquakes, floods, accidents, strikes, sabotages, explosions, terrorist
acts or other similar or different contingencies beyond the reasonable control
of the affected party or parties.

18. APPLICABLE LAW

The rights and obligations of the parties under this agreement shall be governed
by the laws of the State of New York without giving effect to principles of
conflict of laws.

19. FURTHER ACTIONS

The parties agree to grant and formalize any document as may be necessary, from
time to time, to comply with the intentions expressed in this Agreement.

20. VERSIONS

As this Agreement has been fully negotiated by the parties and they have been
represented by counsel during such negotiations, this Agreement shall be deemed
to have been drafted by both parties and no provision shall be interpreted as
against either party merely as a result of the party responsible for the
drafting of this Agreement.

21. SEVERABILITY

If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the legal substance of the transactions contemplated
hereby is not affected in any substantially adverse manner to either party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as

 

 

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to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.

22. NOTICES

Notifications pursuant to this Agreement shall be valid only if signed by or
sent to and received at the addresses set forth on the attached Exhibit I by
certified mail (return receipt requested), by facsimile, with confirmation, or
by Federal Express or other similar courier. If any of these notification
addresses is changed, then notice of such change must be sent to the other
party. Otherwise, all notices sent to the above addresses shall be valid.

23. BINDING PROVISIONS

During the term of this Agreement and thereafter as provided for in this
Agreement, all obligations shall apply to and be binding on the parties hereto,
their successors, assigns, transferees, as well as their agents, officers,
directors and employees, providing that such succession, assignment or transfer
is not in contradiction to the provisions of Paragraphs 5 and 12 of this
Agreement.

24. JOINT VENTURE

Nothing contained herein shall be construed to place the parties in the
relationship of partners, joint venturers, agents or employees of the other.
Producer and Importer shall have no power to obligate or bind each other in any
manner whatsoever, except as otherwise expressly provided herein.

25. EXHIBITS

Exhibits I through IV attached hereto shall, for all purposes, be deemed to be
and by this reference are made part of this Agreement.

26. ENTIRE AGREEMENT

This agreement represents the entire agreement between the parties, supersedes
all prior oral or written agreements or understandings, and shall not be changed
except by a further written agreeement or a written amendment to this Agreement
executed by both parties.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
Executed:

 

 

 

 

AUTENTICA TEQUILERA S.A. DE C.V.

 

 

By

/s/ Francisco Javier Orendain Lopez

 

 

 

Name: 

Francisco Javier Orendain Lopez

 

 

 

Title: 

Director General

 

 

 

 

CASTLE BRANDS (USA) CORP.

 

 

By

/s/ Donald L. Marsh, Jr.

 

 

 

Name: 

Donald L. Marsh, Jr.

 

 

 

Title: 

President and Chief Operating Officer

 

 

 

 

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EXHIBIT I

TERRITORY, DISTRIBUTED PRODUCTS, NOTICES

(1)

Territory:

The fifty (50) states of the United States of America and the District of
Columbia, which shall include military bases and the territories and possessions
of the United States of America or the overseas Commonwealths of the United
States of America or the Commonwealth of Puerto Rico, including duty free and
ships chandlers sales.

(2)

the Products:

Tequila or other spirits marketed under the name:

TIERRAS

TIERRAS TEQUILA

TIERRAS AUTENTICAS DE JALISCO

or any similarly named or identified products.

At least three expressions, including those referred to as Blanco, Reposado and
Añejo, and any new flavor or aging extension of the Products listed above shall
automatically be added to the definition of the Products in this Exhibit I
without further action being required by any Person.

(3)

Notices:

Notices are to be sent to the following addresses:

 

 

To Producer:

Autentica Tequilera S.A. de C.V.
Morelos 285
Tequila, Jalisco, Mexico
C.P. 46400

 

 

 

 

To Importer:

President
Castle Brands (USA) Corp.
570 Lexington Avenue, 29th Floor
New York, NY 10022

 

 

 

 

with copy to:

General Counsel
Castle Brands Inc.
570 Lexington Avenue, 29th Floor
New York, NY 10022

 

 

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EXHIBIT II

[Tierras Tequila] (the “Trademark”)

Producer represents and warrants that it has all rights, title and interest in
the following regions within the Territory to the above Trademark, and other
trademarks used in connection with its domestic and international activity,
copyrights, labels, designs, recipes, slogans (excluding the bottle shape and
the production process), together with the goodwill associated therewith:

[List to be provided by Producer]

Producer hereby agrees to use its best efforts to (i) obtain all reasonably
available intellectual property rights and protections with respect to the
Trademark and all other intellecutal property involving or with respect to the
Products anbd Trade Dress and (ii) enforce its Trademark and all other
intellectual property rights, in each case, in all markets within the Territory
in which the Products are or are intended to be imported and/or distributed.

 

 

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EXHIBIT III

 

Product

 

Purchase Price

6 x 750 ML TEQUILA TIERRAS BLANCO 100% AGAVE 40% ALC/ VOL

 

$* USD

6 x 750 ML TEQUILA REPOSADO 100% AGAVE 40% ALC/VOL

 

$* USD

6 x 750 ML TEQUILA TRES TIERRAS AÑEJO 100% AGAVE 40% ALC/VOL (1 year)

 

$* USD

 

 

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EXHIBIT IV

 

Operation Year Ending March 31,

 

Aggregate Minimum Purchase Quanities (Cases)

2013

 

*

2018

 

*

 

 

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