EXHIBIT 10.42
*DENOTES EXPURGATED INFORMATION
BREWING SERVICES AGREEMENT
BETWEEN
CITY BREWING COMPANY, LLC
AND
BOSTON BEER CORPORATION
AGREEMENT entered into effective as of the 1st day of July, 2002 (the
"Effective Date"), by and between CITY BREWING COMPANY, LLC, a Wisconsin limited
liability company ("City Brewing"), and BOSTON BEER CORPORATION, a Massachusetts
corporation ("Boston Beer"). Boston Beer and City Brewing are sometimes referred
to herein individually as a "Party" and collectively as the "Parties."
City Brewing and Boston Beer desire to enter into an agreement pursuant to
which Boston Beer's proprietary malt beverages shall be brewed and packaged at
City Brewing's facility located in La Crosse, Wisconsin (the "Brewery").
ACCORDINGLY, in consideration of the mutual agreements contained in this
Agreement, the Parties, intending to be legally bound, hereby agree, as follows:
1. SCOPE OF AGREEMENT.
(a) During the Term of this Agreement, as defined in Section 5 below, and
in accordance with the terms and conditions set forth herein, City Brewing
agrees to brew, package and sell to Boston Beer, or, in the event an alternating
proprietorship be established (as set forth in Section 10 below), City Brewing
shall give Boston Beer access to the Brewery and make available to Boston Beer
City Brewing's production personnel to allow Boston Beer to produce Boston
Beer's proprietary Beer Products, as defined in Section 1(b) below.
(b) For purposes of this Agreement, Boston Beer's "Beer Products" shall
include those products set forth in Exhibit A attached hereto, together with
certain specially ordered and seasonal malt beverage products identified as such
by Boston Beer ("Special Orders") and such other beer products as Boston Beer
may introduce from time to time. Special Orders and other beer products not
listed on Exhibit A, as amended from time to time, must be approved by City
Brewing prior to the submission by Boston Beer of orders for such products,
provided, however, that City Brewing shall not unreasonably withhold or delay
such approval. Boston Beer shall periodically provide to City Brewing an updated
schedule of all Boston Beer products which Boston Beer deems to be Beer
Products, subject to this Agreement.
2. CONTROL OF PRODUCTION OF BEER PRODUCTS; PUBLIC STATEMENTS.
(a) All Beer Products shall be brewed and packaged according to Boston
Beer's specifications, including the maintenance of standards and quality
control programs. Boston Beer shall have ultimate responsibility and authority
over every detail of the production process
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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for Beer Products at the Brewery, with such responsibility and authority as to
those parameters affecting beer taste and quality to be the same as if Boston
Beer were the owner of the Brewery. Boston Beer shall have the right, at any
time, to monitor and review the practices and procedures of City Brewing in the
production and packaging of Beer Products and to inspect the Brewery. If a
decision made by Boston Beer in the exercise of its authority under this Section
2(a) results in additional costs over and above the costs of the then current
operations, City Brewing shall be entitled to be reimbursed by Boston Beer for
such costs. In addition, in the exercise of its authority under this Section
2(a), Boston Beer shall not interfere with City Brewing's production processes
for its own proprietary brands or for other brands that it produces under
contract with third parties.
(b) Consistent with the provisions of Section 2(a) above, City Brewing and
Boston Beer will, in any and all public statements or comments, recognize that
Boston Beer controls the ingredients, recipe, brewing processes and procedures
and quality and taste parameters for all Beer Products produced at the Brewery
and that Boston Beer is the xxxxxx of all such Beer Products. Neither party will
make any public statements inconsistent with the foregoing.
(c) Each Party agrees to take all commercially reasonable steps to prevent
any of its personnel from making disparaging or otherwise adverse remarks about
the products of the other Party.
3. COMMITTED CAPACITY; COMMITMENT FEE.
(a) During the Term, City Brewing shall make available to Boston Beer for
brewing of Beer Products up to [*] barrels per month, and up to [*] barrels per
contract year, of production at the Brewery (the "Committed Capacity"). The
Committed Capacity is based on anticipated tank usage and availability and shall
be increased or decreased in inverse proportion to the extent that actual
average tank usage varies from five weeks per storage cycle. Boston Beer will,
however, endeavor, to the extent reasonably possible, to provide City Brewing
with [*] ([*]) days advance written notice of any expected increase or decrease
in its expected production requirements which varies more than [*]% from any
previously submitted monthly forecasts for the period in question, in order to
allow City Brewing to plan its capacity utilization at any Brewery. Beer
Products shall primarily be produced in packaged units described in Section 7
below.
(b) Boston Beer shall pay a commitment fee to City Brewing in the amount
of [*] Dollars ($[*]) for any year in which Boston Beer does not purchase at
least [*] barrels of Beer Products from City Brewing under this Agreement, such
fee to be due and payable within [*] ([*]) days after the end of the applicable
contract year.
4. PRICE AND MANNER OF PAYMENT.
(a) Boston Beer shall pay City Brewing for Beer Products produced at the
Brewery an amount (the " Price") equal to the sum of (i) a processing charge or
brewing fee (the "Fixed Charge") as set forth in the Pricing Schedule attached
hereto as Exhibit B plus (ii) the net cost
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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(taking into account purchase discounts but not discounts resulting from credit
terms) to City Brewing of all Hops (as defined in Section 8 below), malt,
flavorings and Packaging Materials (also as defined in Section 8 below)
including actual loss factors, purchased by City Brewing and used directly in
the production of Beer Products, plus (iii) deposits for case pallets and kegs
at City Brewing's standard rate or as otherwise agreed between the Parties. The
Fixed Charge for other packaging units not listed in Exhibit B shall be set by
the Parties based on proportionate volume and packaging efficiencies relative to
the units described in said Exhibit. City Brewing shall be entitled to increase
each Fixed Charge, effective as of January 1 in each year while the Agreement
remains in effect (the "inflation adjustment"), with the first such increase
pursuant to this Agreement to be effective as of January 1, [*], at a rate equal
to [*] percent ([*]%) of the increase in the consumer price index in the
preceding twelve (12) months. On the first January 1st after new or extended
agreements with the bargaining units at the Brewery covering at least [*]% of
the Brewery workers are completed, and on each subsequent January 1st, if so
decided by City Brewing, in lieu of the "inflation adjustment", the Fixed Charge
will be increased by [*]% of the average percentage increase in the wages of
those bargaining units for the preceding 12 months.
(b) The Price is F.O.B. the carrier's trucks at City Brewing's dock (i.e.,
the Price includes the cost and risk of loading trucks at City Brewing's dock)
and includes labor, overhead, profit, and other costs incurred in the production
of packaged Beer Products suitable for shipment by truck.
(c) The Price excludes any federal and state excise taxes, which City
Brewing may pass along to Boston Beer, if City Brewing pays such taxes in
compliance with Federal and state laws. If an alternating proprietorship between
Boston Beer and City Brewing with Boston Beer being the xxxxxx of record has
been established, Boston Beer is required to submit certain reports to the
Federal Alcohol, Tobacco and Firearms Department ("ATF") and to pay the required
excise tax, which such tax is based upon the number of barrels, or fraction
thereof, that leave the Brewery premises. So that Boston Beer may complete and
file the required reports and to pay the excise taxes on such production on a
timely basis, City Brewing agrees to provide Boston Beer with the required
information within the time periods set forth on Exhibit C attached hereto.
(d) Assuming Boston Beer uses pallets interchangeable with City Brewing,
the Price plus deposit also includes any charge for Boston Beer's use of pallets
owned by City Brewing.
(e) City Brewing shall provide electronic reports to Boston Beer, in form
and content mutually acceptable to the parties, showing the quantity of Beer
Products actually produced and shipped on the previous day. City Brewing will
invoice Boston Beer electronically on a weekly basis for the Price of Beer
Products produced in the previous week and Boston Beer shall pay such invoices
within [ * ] ([ * ]) business days after receipt of the invoice from City
Brewing by wire or other mutually agreed upon method. All other amounts
otherwise chargeable to Boston Beer hereunder shall be invoiced by City Brewing
reasonably promptly in accordance with normal business practices following the
month in which incurred by City Brewing. Such timely invoices shall similarly be
paid by Boston Beer within [ * ] ([*]) days of receipt. Neither party
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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shall be liable for any liability if such notification and invoice is issued
more than [*] ([*]) days following the date on which such expense is incurred.
(f) City Brewing shall have the right to increase the Price to reflect
City Brewing's actual incremental cost for any Special Orders which use a more
expensive brewing process or longer time frames or which have more expensive
packaging processes than used to produce [*]. Other pricing and payment terms
for Special Orders shall be in accordance with the foregoing provisions of this
Section 4, including the timely invoicing requirements of paragraph (e) above.
(g) Boston Beer shall also be entitled to a proportional reduction in the
Fixed Charge to the extent that City Brewing is able to achieve variable cost
savings through changes in production procedures initiated by Boston Beer or
arising out of any investment made by Boston Beer in City Brewing facilities,
including any investments made prior, and subsequent to, the date of this
Agreement.
(h) Volume Rebate: The Fixed Charge will be adjusted for each package
based on the following volume reduction schedule, if in any calendar year the
volume of Products produced reaches the following volume levels:
[*] Barrels $[*] per barrel reduction on volume over [*] Barrels
[*] Barrels additional $[*] per barrel reduction on volume over [*] Barrels
[*] Barrels additional $[*] per barrel reduction on volume over [*] Barrels
(i.e., the Fixed Charge would be reduced by $[*] per barrel from the Fixed
Charge in Exhibit B for each barrel produced after the first [*] barrels in any
calendar year)
5. TERM.
The term of this Agreement (the "Term") shall commence as of the Effective
Date and shall continue until terminated pursuant to Section 6 hereof. The
Parties acknowledge that either Party's obligations pursuant to this Agreement
to make payments to the other Party and the Parties' respective obligations
under Sections 4 and 13, and City Brewing's obligations under Sections 14 and 15
shall survive the termination of this Agreement.
6. TERMINATION.
(a) Either Party may terminate this Agreement for any reason whatsoever on
not less than [*] ([*]) months' prior written notice to the other Party,
effective at any time on or after [*].
(b) Boston Beer may also terminate this Agreement effectively immediately
upon written notice in the event that City Brewing is in default of any of its
obligations to brew, package and ship any Beer Products, which default continues
for a period of [*] ([*]) business days following receipt by City Brewing of
written notice from Boston Beer regarding such default
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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(each such event is hereinafter referred to as a "City Brewing Production
Default".) City Brewing shall not be deemed to be in default of its obligations
for purposes of this Section 6(b), if it is in good faith both seeking to
correct the circumstances giving rise to its failure to brew, package and ship
Beer Products and honoring its obligations under Section 14 hereof, to the
extent applicable.
(c) Boston Beer may also terminate this Agreement effective [*] if (i) all
or substantially all of City Brewing's business or assets have been acquired by
a third party or (ii) a transaction or series of transactions results in the
majority of voting control of City Brewing being acquired by a person or persons
not currently holding an equity interest in City Brewery.
(d) City Brewing may terminate this Agreement on [*] ([*]) days' prior
written notice to Boston Beer in the event that Boston Beer is in arrears in
payment of undisputed amounts (i) for the production of Beer Products in excess
of [*] ([*]) weeks or (ii) for other charges in excess of [*] ([*]) days, and
such arrearage has remained outstanding for in excess of [*] ([*]) weeks after
written demand for payment was made by City Brewing.
(e) In the event of bankruptcy by either Party, the non-bankruptcy Party
shall have the right to terminate this Agreement.
(f) Upon termination of this Agreement, Boston Beer shall promptly pay to
City Brewing all unpaid invoices in full and all unpaid costs incurred by City
Brewing pursuant to this Agreement in the brewing, packaging, shipping and
storage of Beer Products, and purchase from City Brewing at City Brewing's cost
all City Brewing's inventory of (i) work in process of Beer Products, (ii)
ingredients and raw materials unique to the Beer Products, and (iii) Packaging
Materials. City Brewing will use all reasonable efforts to minimize such costs
upon termination, and Boston Beer will have the right to review documentation
evidencing such costs.
7. PACKAGING, DEPOSITS AND MINIMUM ORDERS.
(a) Packaging of Beer Products shall consist of (i) twenty-four 12-ounce
bottles, whether packaged as a 24 bottle loose case, a four 6-pack case or a two
12-pack case (each a "12-oz. Case Unit"), (ii) twelve 24-ounce bottles (a "24
oz. Case Unit"), (iii) 5.2 U.S. gallons (a "One-Sixth Barrel"), (iv) 7.75 U.S.
gallons (a "Quarter Barrel"), and (v) 15.50 U.S. gallons (a "Half Barrel"), and
any other package types or configurations that the parties mutually agree to use
for packaging such Products. All kegs used will be Xxxxxx-style kegs. Except for
one-way pallets paid for by Boston Beer, a deposit per pallet and per keg as set
forth in Section 4(a) hereof shall be charged to Boston Beer with corresponding
credit applied upon the safe return in good working order of the pallets or kegs
to City Brewing. Boston Beer has the right, subject to the approval of City
Brewing, which approval will not be unreasonably withheld, to make changes in
the packaging used to produce the Beer Products, including but not limited to,
the packaging of the Beer Products in can units. The price for packaging in cans
will be adjusted by the difference in City Brewing's costs between packaging in
bottles and cans.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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(b) City Brewing shall package Beer Products at least [*] ([*]) times a
month, if requested by Boston Beer, each packaging spread evenly through the
month ([*]). Boston Beer shall order at any given time not less than one
production run (at present equivalent to one brew in the brew house, [*] Kegs on
the racking line and [*] 12-oz. Case Units and [*] 24-oz. Case Units in the
bottling line). Boston Beer acknowledges and agrees that the minimum order
applies to each beer style, individually, rather than in combination; provided,
however, that orders for the bottling line may consist of one shift (currently
averaging [*] Case Units) of the Beer Products in combination and any bottling
line order shall not be less than [*] Case Units of each beer style, except that
for twenty-four ounce (24 oz.) bottles, an order may be comprised of as many as
[*] styles of at least [*] cases each.
8. PACKAGING MATERIALS AND HOPS.
Crowns, bottles, labels, six-packs, cases, partitions and other packing
materials for Beer products (collectively, "Packaging Materials"), or any
applicable federal or state taxes (but specifically excluding any taxes in the
nature of a tax on income or profits) are not included in the Fixed Charge and
shall be borne directly by Boston Beer. All Packaging Materials and all hops to
be used in the brewing of Beer Products ("Hops") shall be (i) purchased directly
by Boston Beer at its cost for delivery to City Brewing, (ii) the property
solely and exclusively of Boston Beer, and (iii) segregated and identified as
such. Boston Beer shall be responsible for the storage of Hops and shall release
Hops to City Brewing for production on a bi-weekly basis. City Brewing
acknowledges that Boston Beer shall be afforded unrestricted 24-hour access to
all Packaging Materials and Hops when under City Brewing control for purposes of
removal or otherwise. Delivery of Packaging Materials and Hops (on such
bi-weekly basis) to City Brewing shall be coordinated between City Brewing and
Boston Beer, provided that City Brewing shall be ultimately responsible for
coordinating the timely delivery of Packaging Materials and Hops to the
appropriate Breweries and other Breweries. Boston Beer shall invoice City
Brewing for all Hops delivered to City Brewing hereunder upon delivery and all
such invoices shall be payable within [*] ([*]) days of invoicing or at such
time may be offset against amounts owing by Boston Beer to City Brewing. All
vendors shall be selected by Boston Beer, in its discretion, subject only to
meeting City Brewing's customary quality and performance requirements.
9. RISK OF LOSS.
City Brewing and Boston Beer acknowledge and agree that, consistent with
the F.O.B. pricing terms, the risk of loss in loading the carrier's trucks shall
be borne by City Brewing. However, the carrier's driver shall have the right to
inspect each shipment for damage prior to leaving the loading dock and,
accordingly, Boston Beer shall bear the risk of loss on any shipment of Beer
Products, once the carrier's truck leaves City Brewing's loading dock.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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10. BREWERY OF RECORD.
(a) City Brewing shall provide all Beer Products brewed hereunder under
the name of "The Boston Beer Company" or such other trade name as Boston Beer
shall require as the Xxxxxx of Record. City Brewing shall secure any permits,
licenses, approvals and the like required by any federal, state or local
governmental agency on behalf of Boston Beer. Boston Beer agrees to reimburse
City Brewing promptly for any reasonable out-of-pocket costs, including, without
limitation, legal expenses, incurred in connection therewith.
(b) To the extent requested by Boston Beer, City Brewing shall, to the
extent possible, establish and maintain an alternating proprietorship or
multiple alternating proprietorships, if necessary, and, subject to and in
compliance with all applicable federal, state or local laws, rules and
regulations, identify Boston, Massachusetts (or such other location as may be
reasonably requested by Boston Beer), as the sole label source for Beer
Products. [*].
11. STORAGE.
The Price shall include storage of reasonable quantities of packaged Beer
Products for up to [*] ([*]) days. City Brewing shall be entitled to charge
Boston Beer a reasonable fee for the handling and storage of Beer Products
beyond [*] ([*]) days.
12. FORCE MAJEURE.
(a) If City Brewing is unable, by reason of a labor dispute, governmental
action, act of God or the like, to produce Beer Products at the Brewery to the
extent contemplated by this Agreement, it shall, in any event, to the extent it
is still able to maintain production at such Brewery, continue to produce Beer
Products at such Brewery in proportion to the capacity at such Brewery dedicated
to Beer Products prior to the occurrence of the event in question.
(b) If Boston Beer is unable, by reason of a labor dispute, governmental
action, act of God or the like, to produce Beer Products at any brewery not
owned by City Brewing but at which from time to time Boston Beer produces Beer
Products, and at that time City Brewing has available production capacity at the
Brewery, City Brewing shall make such production capacity available to Boston
Beer at a price equal to the then current pricing for comparable products being
produced by City Brewing for Boston Beer under this Agreement.
13. CHANGE PARTS AND BREWERY MODIFICATIONS.
Boston Beer will pay for all change parts and Brewery modifications that
are unique to running Boston Beer's packaged Beer Products, provided that (i)
City Brewing does not have such parts existing at the Brewery in question, and
(ii) City Brewing notifies Boston Beer in advance of making any such
expenditures. Boston Beer shall be entitled to be reasonably
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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compensated for any such investment, whether made prior to or after the date
hereof, to the extent that any change parts and/or modifications are used in the
production of products other than Beer Products, such compensation to be as
agreed from time to time to time by City Brewing and Boston Beer.
14. AGENCY AND INDEMNIFICATION.
City Brewing and Boston Beer understand and agree that neither Party is,
by virtue of this Agreement or anything contained herein, including City Brewing
affixing to any Product and/or registering the name of "The Boston Beer
Company," "Boston Beer Company," or "Twisted Tea Brewing Company" constituted or
appointed the agent of the other Party for any purpose whatsoever, nor shall
anything herein contained be deemed or construed as granting Boston Beer or City
Brewing any right or authority to assume or to create any obligation or
responsibility, express or implied, for or on behalf of or in the name of the
other, or to bind the other in any manner or way whatsoever. Boston Beer shall
indemnify and hold harmless City Brewing from and against any and all claims,
expenses, causes of action or liabilities of any nature whatsoever
(collectively, "Damages"), to the extent that Damages arise solely from the
independent conduct of Boston Beer; provided that Damages shall not include any
loss, liability, cost or expense incurred by City Brewing as a consequence of
the exercise by Boston Beer of any of its rights under this Agreement.
15. PRODUCT LIABILITY.
(a) City Brewing and Boston Beer shall each maintain product liability
insurance of not less than $[*] and in the amount of $[*] combined single limit
in the aggregate relating to the Beer Products produced by City Brewing for
Boston Beer.
(b) City Brewing shall indemnify and hold harmless Boston Beer and all of
its affiliates from and against any and all loss, liability, cost or expense of
any nature whatsoever, including reasonable attorneys' fees (collectively,
"Product Liability Damages"), arising out of or associated with all claims made
against Boston Beer by any party or parties for personal injury or property
damage caused by impurities, defects, or adulteration of any kind in the Beer
Products manufactured and/or packaged by City Brewing, regardless of when
manufactured or packaged; except to the extent that (i) Product Liability
Damages when caused solely by (i) Boston Beer's improper storage, handling, or
alteration of the Beer Products in question; (ii) Packaging Materials or
ingredients purchased, specified or otherwise approved by Boston Beer subsequent
to written notice from City Brewing reasonably advising that such Packaging
Materials or ingredients should not be used in the Beer Products for health and
safety reasons: or (iii) Product Liability Damages resulting from inherent
properties and/or characteristics of the Beer Products, including, by way of
example and not of limitation, health and intoxicating effects of the Beer
Products.
(c) Boston Beer shall indemnify and hold harmless City Brewing and all of
its affiliates from and against any and all Product Liability Damages to the
extent arising out of [*].
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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(d) Notwithstanding the provisions of Sections 15(b) and (c) above, in no
event shall either Party be liable to indemnify the other Party for
consequential damages suffered by the other Party in an amount greater than [*]
([*]) times the aggregate Fixed Charge paid by Boston Beer for all Beer Products
produced hereunder during the [*] ([*]) months preceding the month in which
occurred the event giving rise to the claim for indemnification, unless such
consequential damages are caused by the negligence or willful misconduct of the
other Party.
16. TRADEMARKS.
(a) City Brewing acknowledges that no trademark or trade name rights in
any of the trademarks, trade names, service marks, domain names or logos owned
by Boston Beer, including specifically but without limitation those identified
on the Trademark Schedule attached hereto as Exhibit D (collectively, the
"Trademarks") are granted by this Agreement.
(b) Boston Beer hereby represents, warrants and covenants that it has and
will maintain the right to use the Trademarks and will indemnify and hold
harmless City Brewing from any claim of alleged infringement brought by any
party against City Brewing, including, but not limited to, City Brewing's
reasonable costs of legal expenses.
17. SUCCESSORS AND ASSIGNS: FUTURE POTENTIAL ACQUISITIONS.
(a) The Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and assigns, but shall not be assigned
by either Party without the prior written consent of the other Party, which
consent will not be unreasonably withheld. No failure of a Party to consent to a
proposed assignment of this Agreement by the other Party shall be deemed
unreasonable if such Party believes in good faith that the proposed assignee is
not capable of performing the financial or production obligations of the Party
proposing to assign this Agreement. Transfer of ownership to a parent,
subsidiary or affiliate of a Party shall not be deemed an assignment under this
Section 17.
(b) Assignment of this Agreement shall not relieve the assigning Party of
its financial obligations hereunder, including its indemnification obligations,
if an assignee defaults in the performance of its assigned obligations.
(c) In the event that Boston Beer shall acquire substantially all of the
business and assets of another company which produces and/or distributes beer,
or, shall acquire all right, title and interest in and to the brands and
trademarks of another company (hereinafter the "Acquired"), then, in such event,
if the Acquired has products already being produced by City Brewing, then City
Brewing agrees to make available to Boston Beer, for the same period of time
that City Brewing has pre-existing commitments for the Acquired, such additional
capacity which is equivalent to that with the Acquired; provided, however, that
the terms and conditions governing production, including pricing, shall be
governed by the terms of this Agreement.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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(d) If City Brewing acquires substantially all of the business and assets
of another company which produces beer or acquires an additional brewery
facility (hereinafter a "City Brewing Acquired Brewery"), then, in such event,
if the City Brewing Acquired Brewery has a pre-existing agreement with Boston
Beer for the production of Beer Products, City Brewing agrees to continue to
make available to Boston Beer, for the same period of time which existed under
the pre-existing agreement between Boston Beer and the City Brewing Acquired
Brewery, the same capacity as had been committed to Boston Beer by the City
Brewing Acquired Brewery; provided, however, that the terms and conditions
governing production, including pricing, shall be governed by the terms of this
Agreement.
18. GOVERNING LAW.
This Agreement shall be interpreted and construed in accordance with the
laws of the Commonwealth of Massachusetts.
19. ARBITRATION.
Any disagreement, dispute, controversy or claim with respect to the
validity of this Agreement or arising out of or in relation to the Agreement, or
breach hereof, shall be finally settled by arbitration in a mutually agreeable
location other than New York, New York, Boston, Massachusetts or Chicago,
Illinois, in accordance with the articles of the American Arbitration
Association for Commercial Arbitration. The arbitrators shall have the right to
assess costs, including legal expenses, in favor of the prevailing Party,
including, if applicable, travel costs. Notwithstanding the foregoing, the
Parties may have recourse to the courts of the United States of America for the
purpose of obtaining preliminary injunctive relief.
20. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same document.
21. AMENDMENTS.
No amendment, change, or modification of any of the terms, provisions or
conditions of this Agreement shall be effective unless made in writing and
signed or initialed on behalf of the parties hereto by their duly authorized
representatives.
22. NO THIRD PARTY BENEFICIARIES.
City Brewing and Boston Beer agree that this Agreement is solely for their
benefit and does not nor is it intended to create any rights in favor of, or
obligations owing to, any person not a party to this Agreement.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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23. MERGER: SEPARABILITY.
This Agreement terminates and supersedes all prior formal or informal
understandings among the Parties with respect to the subject matter contained
herein. Should any provision or provisions of this Agreement be deemed
ineffective or void for any reason whatsoever, such provision or provisions
shall be deemed separable and shall not affect the validity of any other
provision.
24. NON-EXCLUSIVE NATURE OF AGREEMENT.
(a) Nothing contained in this Agreement shall require Boston Beer to avail
itself of the Committed Capacity or preclude Boston Beer from engaging any other
xxxxxx for the purpose of producing and distributing Beer Products.
(b) Boston Beer acknowledges that City Brewing's business includes brewing
specialty malt beverage products, including products that may compete directly
with, use the same brewing ingredients and formulae as, and/or are of the same
style as one or more of the Beer Products. Boston Beer agrees that nothing
contained in this Section 24 shall in any manner prevent, limit, restrict or
otherwise affect City Brewing's right to continue and expand such aspect of its
business, including by introducing new products that compete directly with
existing Beer Products, so long as City Brewing does not intentionally (i) copy
the identical brewing formulae and ingredients of any Beer Product, (ii) use any
proprietary yeast specifically supplied to City Brewing by Boston Beer solely
for use in producing Beer Products; or (iii) use labeling or other packaging
which infringes any of Boston Beer's Trademarks or copies Boston Beer's
marketing position and strategy.
25. YEAST STRAINS.
City Brewing will keep all yeast strains supplied by Boston Beer free of
any contamination and will not use such yeast strains to brew any beers other
than the Beer Products. The obligations of City Brewing under this Section 25
shall survive any termination of this Agreement. City Brewing shall, upon the
request of Boston Beer, return any proprietary yeast strains it may have in its
possession or under its control.
26. LABORATORY ANALYSIS; QUALITY ASSURANCE
City Brewing will perform the laboratory analysis and monitor production
and packaging of the Beer Products in accordance with standards set forth on
Exhibit E attached hereto. Under such procedures, City Brewing will examine
samples of each Product prior to and after packaging.
27. CONFIDENTIALITY.
The Parties agree that, except as they shall otherwise mutually determine
from time to time, the terms of this Agreement and any notices given hereunder
or other communications
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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with respect to the substance of the relationship between them shall be
maintained in confidence; provided that each Party shall be permitted to make
such disclosures of confidential information to such courts and other public or
governmental agencies as their counsel shall deem necessary to maintain
compliance with and to prevent violation of applicable federal or state laws.
28. NOTICES.
All notices required herein shall be given by certified mail, return
receipt requested, or by overnight courier service, to the following addresses
(unless change thereof - has previously been given to the party giving notice)
and shall be deemed effective when received:
If to Boston Beer:
Xxxxxx X. Xxxxx, President and CEO
Xxxxxxx X. Xxxxx, Chief Operating Officer
Boston Beer Corporation
00 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
with a copy to:
Legal Department
Boston Beer Corporation
00 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
If to City Brewing:
Xxxxx Xxxx, Director of Business Development
City Brewing Company, LLC
000 Xxxxx Xxxxx Xxxxxx
Xx Xxxxxx, XX 00000
29. RIGHTS OF OFFSET.
City Brewing and Boston Beer agree that, to the extent that either of them
is at any time owed money by the other Party, including on regular invoices sent
as provided herein, such Party may set off such amount against any undisputed
monies owed by it to such Party from time to time, any such set-off to be
accomplished by written notice to the owing Party, effective upon being sent.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-12-
30. DELIVERIES TO JOINT WHOLESALERS.
To the extent permitted by applicable law and at the request of Boston
Beer, City Brewing will combine Beer Products and City Brewing products in
single truckloads for delivery to "Joint Wholesalers," in which case freight
costs shall be pro-rated. For this purpose, a "Joint Wholesaler" is a licensed
beer wholesaler that has been duly authorized by both Boston Beer and City
Brewing to distribute their respective products. City Brewing and Boston Beer
will cooperate with each other in the coordination of order entry so as to
facilitate such single truckload deliveries.
31. LIMITATION ON PERIOD OF CLAIMS.
Except as otherwise provided in this Agreement with respect to specific
issues, all claims hereunder must be brought no later than [*] after such claim
arose or the Party having such claim shall be deemed to have waived or forever
released it; provided that, for purposes of this Section 31, a claim based on a
claim by a third party shall be deemed to have arisen at the time that the Party
asserting a claim first became aware of it.
IN WITNESS WHEREOF, City Brewing and Boston Beer have executed this
Agreement as of the date first above written.
CITY BREWING COMPANY, LLC
By: s/ XXXXX X. XXXX
-----------------------------------
[Title] President
BOSTON BEER CORPORATION
By: s/ XXXXXX X. XXXXX
----------------------------------
Xxxxxx X. Xxxxx, President and CEO
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-13-
Exhibit A
Beer Products
[*]
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-14-
Exhibit B
Pricing Schedule
[*]
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-15-
Exhibit C
Reports under Alternating Proprietorship
City Brewing shall provide to Boston Beer the number of barrels of Beer
Products produced by City Brewing and which have left the Brewery
("Production/Tax Data"), on or before the following dates:
(i) With respect to Production/Tax Data during each calendar month, except
for September, City Brewing shall provide such information within no more than
five calendar days following the fifteenth and last day of each month in order
that Boston Beer may submit and pay the applicable excise taxes which are due
within fourteen days following the 15th and last day of each month (or which is
due on the preceding business day if the fourteenth day, as aforesaid, should
fall on a Saturday, Sunday or legal holiday);
(ii) With respect to Production/Tax Data for the month of September in
each year, City Brewing agrees to provide Boston Beer with Production/Tax Data
for the following periods within the time frames hereinafter set forth: For the
period from September 1 through September 15, such Production/Tax Data must be
received by Boston Beer no later than September 20; for the period from
September 16 through September 26, Production/Tax Data must be received by
Boston Beer no later than September 28; and for the period from September 27
through September 30, City Brewing agrees to provide the Production/Tax Data no
later than October 5.
(iii) In the event that the provisions of 27 CFR, Subpart K are amended,
Boston Beer shall supply City Brewing with written notice of any changes
required in the reporting schedule set forth above.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-16-
Exhibit D
Schedule of Trademarks
TRADEMARK REGISTRATION NO., IF APPLICABLE DATE OF ISSUANCE
--------- ------------------------------- ----------------
Xxx Xxxxx(R) 1,987,061 July 16, 1996
Xxx Xxxxx(R) (Stylized) 2,054,509 April 22, 1997
Xxxxxx Xxxxx(R) 1,987,062 July 16, 1996
Xxxxxx Xxxxx Portrait Logo(R) 2,402,492 November 7, 0000
Xxxxxx Xxxxx Xxxxxx Xxxxx(X) 1,522,026 January 24, 1989
Xxx Xxxxx Light(TM) 76/254,442
Twisted Tea(R) 2,574,263 May 28, 2002
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-17-
QUALITY ASSURANCE EXHIBIT E
STANDARD ANALYTICAL TESTING SCHEDULE - BREWING - WORT
TYPE OF TEST MINIMUM TEST FREQUENCY
------------ ----------------------
pH Each Brew
Starch Conversion (Brewing Dept.) Each Brew
Color As Requested
Dissolved Oxygen 1 Brew Weekly
STANDARD ANALYTICAL TESTING SCHEDULE - BREWING - BEER
TYPE OF TEST MINIMUM TEST FREQUENCY
------------ ----------------------
END OF FERMENTATION
-------------------
Original Gravity Each Tank
Real Extract Each Tank
Alcohol Each Tank
Real Degree of Attenuation Each Tank
VDK Each Tank
pH Each Tank
IBU As Requested
Color As Requested
RUH BEER
--------
Original Gravity Each Tank
Real Extract Each Tank
Alcohol Each Tank
Real Degree of Attenuation Each Tank
Dissolved Oxygen (Brewing Dept.) Each Tank
pH Each Tank
IBU Each Tank
Color Each Tank
Sensory Evaluation Each Tank
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-18-
QUALITY ASSURANCE EXHIBIT cont.
STANDARD ANALYTICAL TESTING SCHEDULE - BREWING - BEER
TYPE OF TEST MINIMUM TEST FREQUENCY
------------ ----------------------
PACKAGE RELEASE BEER
--------------------
Original Gravity Each Tank
Real Extract Each Tank
Alcohol Each Tank
Color Each Tank
pH Each Tank
Turbidity Each Tank
Dissolved Oxygen (Brewing Dept.) Each Tank
CO2 (Brewing Dept.) Each Tank
Temperature (Brewing Dept.) Each Tank
Sensory Evaluation Each Tank
STANDARD ANALYTICAL TESTING SCHEDULE - BREWING - WATER
TYPE OF TEST MINIMUM TEST FREQUENCY
------------ ----------------------
RAW WATER
---------
pH Weekly
Alkalinity Weekly
Turbidity Weekly
Sensory Evaluation Weekly
CARBON TREATED WATER
--------------------
Carbon Weekly
BREWING WATER AND R.O. WATER
----------------------------
pH Daily
Alkalinity Daily
Conductance Daily
Turbidity Daily
Sensory Evaluation Daily
DILUENT
-------
Dissolved Oxygen (Brewing Dept.) Each Tank
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-19-
QUALITY ASSURANCE EXHIBIT cont.
STANDARD ANALYTICAL TESTING SCHEDULE - PACKAGING - ALL PRODUCTS
TYPE OF TEST - PRODUCT MINIMUM TEST FREQUENCY
--------------------------- -----------------------
Package Air (bottles and cans) 3 units/2 hours and Each Tank Change
CO2 (bottles and cans) 3 units/2 hours and Each Tank Change
Fill Volume (bottles and cans) 5 units/2 hours and Each Tank Change
Product Analysis (alcohol, RE, OG) Start-up and Each Tank Change
NA Beer Analysis (alcohol, RE, OG) Start and End of Each Run
TYPE OF TEST -PACKAGE
---------------------
Crown Crimp Check (Packaging Dept.) 2 sets/shift/xxxxxxx
Removal Torque 1 set/shift/xxxxxxx or capper
Filled Carton Package Evaluation (Packaging Dept.) 48 units/2 times/shift/line
Metal Exposure (cans) 12 units/2 times/shift/line
1st Operation Seam Check 1/week and after seamer maintenance
2nd Operation Seam Check l/shift/seamer
Can Lubricant Contamination l/shift/seamer
Seamer Lubricant Check (Packaging Dept.) 2/shift
Can Filtec Rejects Visual (Packaging Dept.) Every hour/line
Sensory Evaluation Each Tank Change
PACKAGING LINE EQUIPMENT
------------------------
Glass Inclusion Monitoring (QA/Packaging) 24 bottles/2 hrs. and 100 bottles@Start-up
Pasteurizer Temperature Monitoring
(Packaging Dept.) Every 2 hours/line
Pasteurizer PU Check 1/week/line and at changeovers Pasteurizer Pressure Switch
Check (Packaging Dept.) 1/shift/line
Package Filtec Check (Packaging Dept.) Every 2 hours/line
Full Case Filtec Check (Packaging Dept.) 2/shift/line
Date Coding-cans, bottles, carriers, cartons
(Packaging) Every 2 hours and line and changeovers
Carton Set-up and Gluing (Packaging Dept.) Every 30 minutes/line
STANDARD ANALYTICAL TESTING SCHEDULE -BREWING -BLENDED PRODUCTS
PRODUCT RELEASE TANKS
TYPE OF TEST MINIMUM TEST FREQUENCY
------------ ----------------------
Original Gravity Each Tank
Specific Gravity Each Tank
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-20-
QUALITY ASSURANCE EXHIBIT cont.
STANDARD ANALYTICAL TESTING SCHEDULE -BREWING -BLENDED PRODUCTS
PRODUCT RELEASE TANKS
TYPE OF TEST MINIMUM TEST FREQUENCY
------------ ----------------------
Refractive Index Each Tank
Real Extract Each Tank
Alcohol Each Tank
Color Each Tank
pH Each Tank
Turbidity Each Tank
Degrees Brix Each Tank
Total Acidity Each Tank
Dissolved Oxygen (Brewing Dept.) Each Tank
CO2 (Brewing Dept.) Each Tank
Temperature (Brewing Dept.) Each Tank
Sensory Evaluation Each Tank
STANDARD ANALYTICAL TESTING SCHEDULE -MICROBIOLOGY
TYPE OF TEST MINIMUM TEST FREQUENCY
------------ ----------------------
Cooler Wort (aerobes and anaerobes) 1/week
Pitched Wort (aerobes and anaerobes) Each Fermenter
Pitched Wort Cell Count 1/week
Yeast % Solids (Brewing) Each Brink
Dead Cell Count 1/day
IN-PROCESS PRODUCT
------------------
Ruh Storage Tanks (aerobes and anaerobes) Each Tank
Package Release Tanks (aerobes and anaerobes) Each/l week
Filter Series (aerobes and anaerobes) 1/week
Extended Age Product >28 days 1/week/tank
PACKAGED PRODUCT
----------------
Bottles and Cans (aerobes and anaerobes) 1/line/week at start-up
Rinse Water 1/line/week
Xxxxxx Water 1/line/week
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-21-
QUALITY ASSURANCE EXHIBIT CONT.
STANDARD ANALYTICAL TESTING SCHEDULE - MICROBIOLOGY
TYPE OF TEST MINIMUM TEST FREQUENCY
------------ ----------------------
WATER
-----
Well Water (coliforms) 1/month
Raw Water (aerobes) 1/week
Diluent Water (aerobes) Each/1 week
Brewing Water (aerobes) Each/1 week
PITCHING YEAST
--------------
Morphology 1/day
Dead Cells 1/day
Aerobes and Anaerobes 1/day
Wild Yeast 1/day
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-22-
