EXHIBIT 10.17
PRODUCTION AGREEMENT
Agreement dated this ___12th__ day of ___July___________, 2002 between Frederick
Brewing Company, a Maryland xxxxxx ("Xxxxxx"), and Penn Brewery, Pittsburgh,
Pennsylvania ("Customer").
1. TERM
The term of this Agreement shall continue for two years unless
terminated by either party upon sixty days prior written notice.
2. PRODUCTION AND PACKAGING
Xxxxxx shall produce and package for Customer the malt beverage
products set forth on Exhibit A attached hereto ("the Products"), as
Customer, in its discretion, may order from time to time. Unless
otherwise specified on Exhibit A, the Products shall be produced in
accordance with Customer's standard formula for malt beverage products
as provided in writing to Xxxxxx prior to execution of this Agreement.
Xxxxxx requires a minimum order of 200 bbl per month and Xxxxxx and
Customer anticipate an annual production of approximately 4800 barrels
for Year One.
3. ORDERING AND DELIVERY
Customer shall order the Products not less than seven weeks in advance
of the desired date of delivery of lagers, and not less than five
weeks for ales. Customer shall order Products in case equivalents not
less than 650 (approximately 50 barrels per style). Customer shall
take delivery of the Products FOB Frederick, Maryland brewery on the
date specified for delivery. Products not picked up by Customer within
15 business days of the date of production shall be assessed a
warehousing charge of $4.00 per pallet per month.
4. PACKAGING MATERIALS
Customer shall be responsible for the cost of all labels and packaging
materials except as defined further in Exhibit A. All packaging
materials must be compatible with Xxxxxx'x packaging machinery. The
cost of any required change parts shall be negotiated between the
parties. Xxxxxx agrees that liquid loss will not exceed 5% and
packaging loss shall not exceed 5% per barrel. In the event actual
loss should exceed percentages set forth above, appropriate credits
will be provided by Xxxxxx to Customer. The amount of such credits
will be based on how much the actual percentage of loss exceeds the
target percentages set forth in the immediately preceding sentence.
The Xxxxxx represents that all Customer products will be of
merchantable quality.
5. PRICING
Customer will pay Xxxxxx the prices set forth on Exhibit A for each
case of the Products ordered by Customer and produced by Xxxxxx under
this Agreement pursuant to Customer's order. Invoices shall be due and
payable net 3 days from production. Prices may be changed by Xxxxxx
upon thirty days prior written notice to Customer for any increase or
decrease in the cost of raw materials and packaging materials
purchased by Xxxxxx, which are non-controllable by the Xxxxxx. The
respective co-packing fees include the cost of loading Products and
shrink wrapping pallets.
6. SALES AND MARKETING
Customer is exclusively responsible for all sales and marketing for
the Products.
7. WARRANTIES
Xxxxxx warrants that the Products shall be free from adulterations as
defined in the US Food, Drug and Cosmetics Act. Customer warrants that
the trademarks and artwork applied to the Products shall not infringe
upon the trademark rights of any other person. In no event does Xxxxxx
have any ownership rights in, or any right to the use of Customer's
trademarks or copyrights related to the Products provided. Xxxxxx
acknowledges that the Products are confidential information of the
Customer and include, without limitation, trademarks, copyrights and
trade secrets that have been developed by Customer at great expense.
All confidential information of Customer disclosed under this
Agreement will remain the exclusive property of Customer. Xxxxxx
agrees to take all reasonable measures necessary to safeguard the
confidential nature of Customer's confidential information disclosed
to Xxxxxx, including notifying its employees, agents, contractors,
distributors and customers or anyone else with whom the Xxxxxx works
to complete the purposes of this Agreement of the confidential nature
of Customer's confidential information.
8. ALTERNATING PROPRIETORSHIP
If applicable, upon the request of Customer, Xxxxxx agrees to
cooperate in arranging for alternation of proprietorship of the
brewery. Customer shall pay Xxxxxx a fee of 4 (cents) per case for
administration of the alternating proprietorship. Appropriate
production and brewing information needed for proper completion of all
federal and state reporting to be timely provided by Xxxxxx.
9. INDEMNIFICATION
Xxxxxx and Customer shall indemnify and hold the other party harmless
from all liability arising out of breach of their respective
warranties.
10. DISPUTE RESOLUTION
All disputes arising under the Agreement shall be resolved by
arbitration. The parties shall attempt to resolve any dispute before
demanding arbitration.
11. PRODUCTION DEPOSIT
Simultaneously upon execution of this Agreement, Customer will deposit
with Xxxxxx $6,000 (US), which is refundable 9 months from signing of
this production agreement.
12. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between the parties
with respect to the subject matter stated therein and there are no
other understandings or agreements. The Agreement may not be modified
except in writing signed by both parties.
13. NOTICE
Notice under this Agreement shall be deemed delivered if deposited in
first class US mail to addressee as follows:
Xxxxxx: Xxxx Xxxxxxxx
Xxxxxxxxx Brewing Company
0000 Xxxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
Customer: Pennsylvania Brewing Company
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
14. DELIVERY
Customer shall pay a refundable deposit on all related pallets used in
shipment of Products (current deposit is $8 for case and keg pallets).
Xxxxxx shall use reasonable commercial efforts to meet Customer's
requested shipping dates. Xxxxxx, at Customer's request, may ship to
Customer by common carrier. Xxxxxx, at its discretion, may load
appropriate POS materials onto specific destinations.
15. TEST BREWS
Customer will reimburse Xxxxxx for reasonable liquid cost and expenses
incurred by Xxxxxx for such test brewing of the Products.
16. INSURANCE
Xxxxxx will maintain all respective insurance and standard coverage
limits standard for the industry. Xxxxxx will, if requested, add
Customer as an additional insured party for all policies whereby it is
deemed appropriate by both Customer and Xxxxxx.
17. QUALITY ASSURANCE AND REPORTING
Xxxxxx will conduct at least four quality checks, which consist of
air, fill, CO2 and package appearance per each run. Xxxxxx is also
responsible for providing Daily Production Reports.
IN WITNESS THEREOF, the parties have caused this Agreement to be duly executed
on the date first above written.
XXXXXX INTERNATIONAL PENNSYLVANIA BREWING CO
BREWING GROUP
By /s/ Xxxx Xxxxxxxx By /s/ Xxxxxx X. Xxxxxxxxx
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Xxxx Xxxxxxxx Xxxxxx X. Xxxxxxxxx
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Print Name Print Name
Plant Manager President
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