1 Exhibit 10.19 LICENSE AGREEMENT This License Agreement, made this day of ____________, 1996, between C. A. WITTWER & ASSOCIATES (hereinafter "LICENSOR"), having its principal office at 2772 Loker Avenue West, Suite F, Carlsbad, California, 92008, and HERITAGE BREWING COMPANY, INC., a California corporation (hereinafter "LICENSEE"), having its principal office at 571-C Crane Street, Lake Elsinore, California 92530. RECITALS A. LICENSOR is the holder of the exclusive worldwide license for the use of the tradename, trademark and logos of HUSSONG'S BEER (hereinafter referred to collectively as "TRADENAME"). LICENSOR desires to have LICENSEE manufacture, distribute and market beer under the TRADENAME. B. LICENSEE is in the business of brewing beer and desires to obtain the rights to manufacture, distribute and market beer under the TRADENAME. Wherefore, the parties hereto agree as follows: 1. OWNERSHIP RIGHTS a. LICENSOR warrants that it is the holder of the exclusive worldwide license for the use of the TRADENAME pursuant to an agreement with Ricardo Hussong on behalf of the Hussong Family Mexico. A true and correct copy of the agreement between LICENSOR and the Hussong Family Mexico is attached hereto, identified as Exhibit "A," and incorporated herein by reference. b. During the term of this License Agreement and subject to Paragraph 3(a), LICENSEE may from time to time develop new logos and artwork for use with the name Hussong's Beer. All such logos and artwork shall be part of the TRADENAME. LICENSEE shall have the exclusive right to the use of such logos and artwork it develops for the term of this License Agreement. Upon termination of this License Agreement, all rights and interest in such logos and artwork developed by LICENSEE shall pass to LICENSOR. c. The formulas for the beer to be brewed, distributed and marketed under the TRADENAME has been developed by LICENSEE and is the property of LICENSEE. All proprietary interest in the formula shall remain with LICENSEE at all times during the term of this License Agreement, but shall pass to LICENSOR upon termination of this License Agreement. 1 2 LICENSE AGREEMENT Page 2 2. APPOINTMENT AND TERRITORY a. LICENSOR and LICENSEE agree that LICENSEE will be the exclusive licensee with the exclusive right to use of the TRADENAME for the manufacture, distribution and marketing of beer in California, Oregon, Washington, Arizona, Nevada, Montana, Utah, New Mexico, Hawaii, Idaho, and Mexico (hereinafter referred to collectively as the "TERRITORY"). In addition, subject to Paragraph 3(b), LICENSEE shall have the limited right, for promotional purposes related to the sale of beer only, to manufacture, distribute and market clothing and merchandise using or bearing the TRADENAME. b. LICENSEE shall also have the right to expand the exclusive license and other rights granted hereunder to geographical areas outside of the TERRITORY. LICENSEE shall have the exclusive right to expand the manufacturing, distribution and marketing of beer under the TRADENAME into other geographical areas west of the Mississippi River for three (3) years from the date of this License Agreement. LICENSEE shall have the exclusive right to expand the manufacturing, distribution and marketing of beer under the TRADENAME into all other geographical areas worldwide for five (5) years from the date of this License Agreement. LICENSOR shall not grant a license for use of the TRADENAME within these geographical areas to any third party during the time periods stated herein without the written consent of LICENSEE. c. LICENSEE may exercise its right to expand into other geographical areas by providing LICENSOR with written notice sent by certified mail indicating the specific area into which LICENSEE intends to expand. When LICENSEE elects to expand its rights to include additional geographical areas, such areas shall become part of the TERRITORY. 3. APPROVAL BY LICENSOR a. Use of any new logo or artwork developed by LICENSEE for use with the name Hussong's Beer is subject to the prior approval of LICENSOR, such approval not to be unreasonably withheld. All new logos and artwork proposed for use by LICENSEE shall be submitted to LICENSOR for approval by delivering representative copies to LICENSOR by certified mail. LICENSOR shall communicate in writing, by certified mail, its approval or rejection of the submitted materials within five (5) business days of receipt thereof. If no response from LICENSOR has been delivered to LICENSEE by the end of the fifth business day after receipt of the proposed materials by LICENSOR, it shall be deemed that the proposed logos or artwork are approved. b. The right of LICENSEE to manufacture, distribute or market clothing or merchandise using or bearing the TRADENAME is subject to the prior approval of 2 3 LICENSE AGREEMENT Page 3 LICENSOR, such approval not to be unreasonably withheld. All designs for such clothing or merchandise proposed for use by LICENSEE shall be submitted to LICENSOR for approval by delivering copies of the designs to LICENSOR by certified mail. LICENSOR shall communicate in writing, by certified mail, its approval or rejection of the submitted designs within five (5) business days of receipt thereof. If no response from LICENSOR has been delivered to LICENSEE by the end of the fifth business day after receipt of the proposed designs by LICENSOR, it shall be deemed that the proposed designs are approved. 4. TERM OF AGREEMENT The term of this License Agreement shall be as follows: a. The initial term of this License Agreement shall be for one (1) year, renewable annually at the option of LICENSEE so long as LICENSEE is not in material breach of the terms of this License Agreement and has met the annual minimum sales quotas set forth in subsection 4(b). The option must be exercised by LICENSEE, if at all, no later than forty-five (45) days prior to the commencement of the year for which the option is being exercised by the giving of written notice sent by certified mail to LICENSOR. In the event of termination of this License Agreement for any reason, LICENSEE shall have the right to sell all then existing inventory of beer manufactured under the TRADENAME. LICENSOR has the right of first refusal to purchase the inventory at cost. b. Annual minimum sales quotas for beer sold under the TRADENAME which will entitle LICENSEE to renew the license are as follows: Year Sales in Gallons ---- ---------------- 1 63,000 2 135,000 3 225,000 4 337,500 5 500,000 c. In the event LICENSEE sells 600,000 gallons or more in years five (5), and on, this License Agreement and all rights granted hereunder shall be extended at the option of LICENSEE so long as LICENSEE is not in material breach. Such extension shall be for the same term as the existing license agreement between the Hussong Family Mexico and LICENSOR (Exhibit "A" hereto) and any superseding license agreement between such parties or their respective agents, employees, heirs, successors, and assigns. If LICENSEE exercises its option to extend this License Agreement pursuant to this provision, LICENSEE shall pay LICENSOR, at the commencement of year six (6), $100,000. d. The exclusive rights granted by this License Agreement shall vest as of 3 4 LICENSE AGREEMENT Page 4 the date this License Agreement is signed by both parties. However, for purposes of calculating the time from which the first year of the license begins to run, the license shall be deemed to commence as of June 1, 1996. Each subsequent year under this License Agreement shall also commence on June 1. LICENSOR shall begin production of beer to be marketed under the TRADENAME no later than June 1, 1996. e. In the event that LICENSEE elects to expand into geographical areas within the United States not initially included in the TERRITORY as defined in paragraph 2(a), the quotas set forth in paragraph 4(b) shall be modified as follows: i. The quota will not increase during the first year of operation within the geographical area newly added to the TERRITORY. ii. The quota for the second year of operation within the geographical area newly added to the TERRITORY and for each year thereafter will be based on the following formula: Population of Newly Added Area x .5 = % Increase in Applicable Quota Combined Population of Existing TERRITORY in the United States and Newly Added Area iii. The increased quota will be calculated under subsection ii above using the most recent official United States Census Bureau figures. iv. LICENSEE shall also pay to LICENSOR, upon commencement, a territorial fee for the newly added area calculated using the following formula: Population of Newly Added Area x base quota as set forth x $.20 = Territorial Fee Combined Population of Existing in Paragraph 4(b) for Territory in the United States the applicable year and Newly Added Area f. In the event that LICENSEE elects to expand into geographical areas outside of the United States, the quotas applicable to such areas shall be negotiated by the parties. 5. COMPENSATION AND PAYMENT a. LICENSEE shall pay LICENSOR, upon execution of this License Agreement, a non-refundable territorial licensing fee of $25,000 for the first year of the license. 4 5 LICENSE AGREEMENT Page 5 b. LICENSEE shall pay LICENSOR, upon commencement of the second year of the license, a non-refundable territorial licensing fee of $25,000. c. LICENSEE shall pay LICENSOR, upon the commencement of the each year, an advance royalty of $10,000. LICENSEE shall receive a credit of that amount against the royalty payments due under Paragraph 5(f). d. LICENSEE shall issue to LICENSOR 6,500 shares of stock in BEVERAGE WORKS, INC. LICENSEE shall request that the investment banking firm grant registration rights pursuant to the BEVERAGE WORKS, INC. lockup agreement (also known as the "Brewco 13 Month Lockup"). In the event that LICENSOR invokes its call option agreement with BEVERAGE WORKS, INC., then LICENSEE will issue LICENSOR an equivalent number of shares of stock in HERITAGE BREWING COMPANY, INC. in exchange for LICENSOR'S surrender of the shares of stock in BEVERAGE WORKS, INC. originally issued to LICENSOR pursuant to this provision. e. LICENSEE shall pay to LICENSOR, upon execution of this License Agreement, the sum of $5,000 as reimbursement of expenses incurred by LICENSOR in connection with obtaining licensing rights from the Hussong Family Mexico. f. LICENSEE shall pay to LICENSOR a royalty of $.20 per gallon on all beer sold under the TRADENAME during the first five (5) years of this license agreement. Thereafter, the royalty to be paid by LICENSOR shall be at double the rate to be paid by LICENSOR to the Hussong Family Mexico pursuant to the terms and conditions of Exhibit "A." g. LICENSEE shall pay to LICENSOR a royalty of 10% of the gross profit from the sale of any clothing or merchandise bearing the TRADENAME. 6. RELATIONSHIP OF THE PARTIES The LICENSEE is an independent contractor under this License Agreement and no agency, joint venture or partnership is created between the parties. Neither party has the right to incur any liabilities on behalf of or binding upon the other party. 7. BOOKS AND RECORDS The LICENSEE will provide to LICENSOR monthly activity reports detailing the sales of beer under the TRADENAME. "Sales" is used herein and for purposes of calculating royalties under this License Agreement shall mean shipments made (based on gallons sold)less returns. The monthly activity reports are to be delivered to LICENSOR by regular mail on or before the 15th day of the month following the month covered by the 5 6 LICENSE AGREEMENT Page 6 report. 8. PAYMENTS Payments required under Paragraphs 5(f) and 5(g) of this License Agreement shall be made by LICENSEE on the 15th day of the month following the end of each calendar quarter. LICENSOR shall pay the royalty payments due the Hussong Family Mexico under Exhibit "A" hereto, or under any superseding License Agreement between said parties, on a timely basis and shall provide LICENSEE with proof of payment within seven (7) days of the date each such payment is made. In the event LICENSOR fails to make timely royalty payments to the Hussong Family Mexico or fails to provide to LICENSEE proof of such payments, LICENSEE at its sole option shall have the right to make the royalty payments due the Hussong Family Mexico from LICENSOR. If LICENSEE elects to make payments directly to the Hussong Family Mexico pursuant to the provisions of this paragraph, the payments due LICENSOR from LICENSEE shall be reduced by the amounts paid by LICENSEE directly to Hussong Family Mexico. 9. ASSIGNMENT The rights and obligations hereunder may be assigned by LICENSEE provided LICENSOR has given its written consent in advance of such assignment. Consent shall not be unreasonably withheld by LICENSOR. Effective January 1, 1997, and notwithstanding the foregoing, LICENSEE shall have the right, at its sole discretion and without approval by LICENSOR, to assign all rights and obligations hereunder to BEVERAGE WORKS, INC., a California corporation, having its principal office at 9800 S. Sepulveda Boulevard, Suite 720, Los Angeles, CA 90045. 10. INDEMNIFICATION a. LICENSOR agrees to indemnify and hold LICENSEE free from any loss, damage or cost, including legal fees and expenses for which LICENSEE becomes liable by reason of acts of the LICENSOR in promoting, marketing and selling the products which are the subject of this License Agreement including, but not limited to misstatements or misrepresentations by LICENSOR'S employees or agents concerning any aspect of the content, make-up or characteristics of the products or availability, delivery dates or any other term or condition relating to the sale of the products. b. LICENSEE agrees to indemnify and hold LICENSOR free from any loss, damage or cost, including legal fees and expenses, for which LICENSOR becomes liable by reason of acts of the LICENSEE in promoting, marketing and selling the products which are the subject of this License Agreement, including, but not limited to misstatements or misrepresentations by LICENSEE'S employees or agents concerning any aspect of the 6 7 LICENSE AGREEMENT Page 7 content, make-up or characteristics of the products, or availability, delivery dates or any other term or condition relating to the sale of the products. LICENSEE further agrees to indemnify and hold LICENSOR free from any loss, damage or cost, including legal fees and expenses, based in tort or for personal injury or property damage, for which LICENSOR becomes liable by reason of the acts of LICENSEE in manufacturing, distributing, promoting, marketing and selling the products. 11. INSURANCE LICENSEE shall obtain and maintain at all times during the term of this License Agreement a product liability insurance policy providing for coverage of at least $1,000,000 for each occurrence. LICENSOR shall be included as an additional insured under such policy of insurance. 12. FORCE MAJEURE If LICENSEE fails to perform its obligations because of strikes, lockouts, labor disputes, embargos, acts of God, inability to obtain labor or materials or reasonable substitutes for labor or materials, governmental restrictions, governmental regulations, governmental action, judicial orders, enemy or hostile governmental action, civil commotion, fire or other casualty, or other causes, except financial, beyond the reasonable control of LICENSEE, then LICENSEE'S performance shall be excused for a period equal to the period of such cause for failure to perform as long as LICENSEE gives LICENSOR notice, in writing by certified mail, within three (3) business days after the event causing the failure. 13. ARBITRATION Any controversy, claim or dispute arising out of this License Agreement or the breach of any provision hereof shall be settled by arbitration in accordance with the rules of the American Arbitration Association. The arbitrator may allocate all costs of dispute resolution, including attorneys' fees, between the parties at his sole discretion. The award rendered by the arbitrator shall be final and binding. The location of the arbitration proceedings will be in Orange County, California. 14. NOTICES All notices required or permitted under this License Agreement shall be sent registered or certified mail, return receipt requested, to the addresses set forth hereinabove, or at such address as the party to whom the notice is to be sent directs in a writing sent in compliance with this notice provision. 15. SEVERABILITY; HEADINGS; WAIVER; GOVERNING LAW; COMPLIANCE 7 8 LICENSE AGREEMENT Page 8 In the event that one or more of the provisions contained herein are found to be illegal or unenforceable in any respect, the legality and enforceability of the remaining provisions of this License Agreement shall not be affected. The headings of this License Agreement are provided for reference only. The failure of either party to enforce at any time any provision of this License Agreement shall in no way be construed as a waiver of such provision and shall in no way affect the ability of such party to thereafter enforce each and every provision. This License Agreement shall be governed by and construed in accordance with the laws of the State of California. Both parties mutually agree to do all things reasonably necessary in order to comply with all laws and regulations. IN WITNESS WHEREOF, the parties have caused this License Agreement to be signed by their duly authorized and empowered officers or representatives as of the date first above written. C. A. WITTWER & ASSOCIATES ("LICENSOR") ________________________________________ ___________________________ Date ________________________________________ Title of Signator HERITAGE BREWING COMPANY, INC., a California corporation ("LICENSEE") ________________________________________ ___________________________ Date ________________________________________ Title of Signator 8