EXHIBIT 10.5
MASTER DISTRIBUTOR AGREEMENT
BETWEEN
CRAFT BRANDS ALLIANCE LLC
AND
ANHEUSER-XXXXX, INCORPORATED
MASTER DISTRIBUTOR AGREEMENT
THIS MASTER DISTRIBUTOR AGREEMENT (the "Agreement") is made as of July
1, 2004 by and between CRAFT BRANDS ALLIANCE LLC having its principal place of
business at 000 Xxxxx Xxxxxxx, Xxxxxxxx, Xxxxxx 00000 ("CBA") and
ANHEUSER-XXXXX, INCORPORATED having its principal place of business at Xxx Xxxxx
Xxxxx, Xx. Xxxxx, XX 00000 (referred to herein interchangeably as "Master
Distributor" or "ABI").
WHEREAS, CBA acquires products from Redhook Ale Brewery, Incorporated
and Xxxxxx Brothers Brewing Company and markets the Products in certain states
west of the Mississippi River.
WHEREAS, ABI and CBA desire to have ABI serve as Master Distributor of
the Products and to coordinate the delivery of the Products to designated
wholesalers in the ABI wholesaler network; and
WHEREAS, ABI and CBA desire CBA to have responsibility for developing
and implementing programs that create demand for, market, promote and advertise
the Products in the Territory (as defined herein);
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, CBA and ABI agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, capitalized terms not otherwise defined
herein shall have the following meanings ascribed thereto:
"ABI COMPETITOR" shall mean any Person that, together with the
Affiliates of such Person, has annual alcohol beverage sales of $100,000,000 or
more in North America (such number to be adjusted annually in proportion to
changes in the Consumer Price Index from the date hereof).
"ABI DISTRIBUTION FACILITY" shall mean the ABI source brewery,
warehouse, WSC, third-party warehouse or other suitable location reasonably
designated by ABI from which ABI will ship Product to Alliance Wholesalers.
"ADDITIONAL PRICE COMPONENT" shall mean 90% of the difference between
the price actually charged to an Alliance Wholesaler by ABI for a Product, and
the Fully Loaded Cost for such Product.
"AFFILIATE" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 50% or more of the equity securities
having ordinary voting power in the election of directors of such Person, or
(ii) each Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise. Kona,
Redhook, Xxxxxx shall be considered to be Affiliates of CBA.
"AFFILIATED WHOLESALER" shall mean any wholesaler of the alcohol
beverage products of ABI that distributes the Products in any portion of the
Territory pursuant to a distribution agreement between CBA, Redhook or Xxxxxx
and such wholesaler.
"ALLIANCE WHOLESALERS" shall mean those malt beverage wholesalers of
ABI, including without limitation, ABI branches, which have agreed to purchase
the Products from ABI and to distribute the Products in the Territory.
"BARREL" shall be equal to 31 United States gallons.
"COMMENCEMENT DATE" shall mean July 1, 2004.
"CONFIDENTIAL INFORMATION" shall have the meaning assigned to it in
Section 18.01(a).
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"COOPERAGE HANDLING CHARGE" shall mean * per Pallet Lift for draft
Product during 2004; ATTACHMENT A attached hereto describes the methodology used
to modify Cooperage Handling Charge for 2005 and future years.
"FORCE MAJEURE" shall have the meaning assigned to it in Section 16.01.
"FULLY LOADED COST" shall mean for a Product, the sum of:
(a) the Scheduled Price for such Product; plus (b) the Margin.
"INCOMPATIBLE CONDUCT" shall mean any act or omission of CBA or its
Affiliates that, in the sole determination of ABI, damages either the reputation
or image of ABI or of the brewing industry. ATTACHMENT B attached hereto sets
forth examples of the nature and gravity of acts and omissions constituting
Incompatible Conduct and not constituting Incompatible Conduct; such examples
shall not limit the nature of acts that could be construed as Incompatible
Conduct.
"INCREMENTAL MARGIN" shall mean during 2004, * per case-equivalent (of
288 fluid ounces per case) for packaged or draft Product. For 2005 and future
years, the applicable amount described above in this definition shall increase
or decrease for each calendar year pursuant to the methodology set forth in
ATTACHMENT C attached hereto.
"INITIAL TERM" shall have the meaning assigned to it in Section 7.01
hereof.
"INTELLECTUAL PROPERTY" shall have the meaning assigned to it in
Section 6.01.
"INVENTORY MANAGER" shall have the meaning assigned to it in Section
11.10.
"INVENTORY MANAGER FEE" shall mean the Inventory Manager's annual cash
compensation.
"INVOICING COSTS" shall mean * per Pallet Lift for Product during 2004.
For 2005 and future years, the applicable amount described above in this
definition shall increase or decrease for each calendar year pursuant to the
methodology set forth in ATTACHMENT C attached hereto.
* CONFIDENTIAL TREATMENT REQUESTED
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"KONA" shall mean Kona Brewery LLC.
"MARGIN" shall mean during 2004 * per case-equivalent (of 288 fluid
ounces per case) for packaged or draft Product.
For 2005 and future years, the applicable amount described above in
this definition shall increase or decrease for each calendar year pursuant to
the methodology set forth in ATTACHMENT C attached hereto.
"MASTER DISTRIBUTOR" shall mean ABI in its capacity as a distributor
under this Distribution Agreement.
"MODIFIED PRODUCT" shall have the meaning set forth in Section 11.08 of
this Agreement.
"NEW PRODUCT" shall mean new malt beverage(s) that CBA wishes to add,
through development or acquisition, to its beverage product line existing as of
the Commencement Date.
"NON-ALLIANCE WHOLESALERS" shall mean those beer wholesalers to which
CBA, Redhook or Xxxxxx has granted distribution rights for any of the Product in
the Territory as of the date of this Agreement and which are listed as
"WHOLESALER" on ATTACHMENT D attached hereto, as the same may be modified from
time to time pursuant to the terms and conditions of this Agreement, but shall
not include Affiliated Wholesalers.
"OFFER EXPIRATION DATE" shall have the meaning assigned to it in
Section 11.04(a).
"OFFER NOTICE" shall have the meaning assigned to it in Section
11.04(a).
"PALLET LIFT" shall mean a pallet of draft or packaged Product or
cooperage that, in each case, is prepared in such a manner that ABI may deliver
or move such Pallet in accordance with its customary practices in one operation.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public
* CONFIDENTIAL TREATMENT REQUESTED
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benefit corporation, entity or government (whether federal, state, county,
city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"PRODUCTS" shall mean all malt beverage products marketed by CBA as of
the Commencement Date and any malt beverage products for which ABI agrees to act
as master distributor pursuant to Section 11.03 hereof but shall not include any
malt beverage products the marketing of which CBA discontinues or the
distribution of which is terminated pursuant to this Agreement.
"PURCHASE PRICE" shall have the meaning assigned to it in Section 4.01
hereof.
"RECORDS" shall have the meaning assigned in Article XVII (a).
"REDHOOK" shall mean Redhook Ale Brewery, Incorporated.
"SCHEDULED PRICE" shall mean the purchase price for Product.
"STAGING COSTS" shall mean * per Pallet Lift for packaged Product, and
* per Pallet Lift for draught Product, during 2004. ATTACHMENT A describes the
methodology used to modify Staging Costs for 2005 and future years and the
assumptions and activities involved in Staging Costs.
"STOCKHOLDERS AGREEMENT" shall mean the letter agreement dated July 1,
2004 between Xxxx and Xxxxxx Xxxxxx, Xxxxxx and ABI.
"TAXES" shall mean all applicable national, federal, state and local
excise and other brewing related taxes and any applicable duties and import
tariffs and fees (including without limitation liquor and consumption taxes)
paid or incurred by ABI in connection with this Agreement.
"TERM" shall have the meaning assigned to it in Section 7.01 hereof.
"TERRITORY" shall mean Alaska, Arizona, California, Colorado, Hawaii,
Idaho, Montana, New Mexico, Nevada, Oregon and Wyoming, and shall also include
any other jurisdiction included within the scope of this Agreement pursuant to
Section 11.11 hereof.
* CONFIDENTIAL TREATMENT REQUESTED
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"WHOLESALER SUPPORT CENTER COSTS" or "WSC COSTS" with respect to any
Product shipped by CBA to a WSC shall mean the fee paid by ABI to the operator
of the WSC for its services with respect to such Product.
"XXXXXX" shall mean Xxxxxx Brothers Brewing Company.
"WSC" shall mean the regional wholesaler support centers or
distribution centers established by ABI for the receipt of products designated
by ABI and the palletizing and preparation for pick up of such products by the
adjoining wholesalers.
ARTICLE II
GRANT OF DISTRIBUTION RIGHTS
CBA hereby grants to ABI and ABI hereby accepts from CBA the exclusive
right to serve as the master distributor to distribute the Products in the
Territory commencing on the Commencement Date, except as otherwise described in
this Section. ABI shall not, without the prior written consent of CBA, sell the
Product outside the Territory or to any party other than an Alliance Wholesaler.
CBA agrees to not sell any Product to any other Person in the Territory other
than ABI, Affiliated Wholesalers and Non-Alliance Wholesalers. At the option of
ABI and the respective Affiliated Wholesaler, any Affiliated Wholesaler may
become an Alliance Wholesaler, and CBA shall, and shall cause Redhook and Xxxxxx
to, execute any documents or instruments reasonably requested by ABI to
effectuate this.
ARTICLE III
PURCHASE AND SALE OF PRODUCTS
CBA agrees to sell to ABI, and ABI agrees to purchase from CBA and
re-sell to the Alliance Wholesalers, the quantities of Products ordered by ABI
from time to time hereunder. CBA acknowledges that ABI is not guaranteeing any
level of Product sales; and that ABI's obligations under this Agreement are
limited to making the Products available to the Alliance Wholesalers, it being
understood that CBA assumes full responsibility for creating demand for the
Products. Except for Product shipped directly by CBA as set forth in Section
11.07, (i) all purchases of Product by ABI from CBA shall be on an F.O.B. ABI
Distribution Facility, freight prepaid basis, and (ii) CBA shall ship Products
to be delivered to an Alliance Wholesaler to the ABI Distribution Facility
designated from time to time by ABI for such Alliance Wholesaler.
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ARTICLE IV
PRICING OF PRODUCTS
4.01 The price for all Product sold by CBA to ABI for Products shipped
to ABI breweries or distribution centers shall equal: (a) the Scheduled Price
minus as applicable, (b) (i) the Staging Costs, (ii) the Cooperage Handling
Charge, and/or (iii) Taxes. The price for all Product sold by CBA to ABI for
Products shipped to a WSC shall equal (a)(i) the Scheduled Price minus as
applicable, (b)(i) the Invoicing Costs, (ii) the Cooperage Handling Charge
and/or (iii) Taxes. The price for all Product sold by CBA to ABI for Product
shipped directly by CBA to Alliance Wholesalers shall equal (a) the Scheduled
Price minus as applicable, (b)(i) the Invoicing Costs, (ii) the Cooperage
Handling Charge and/or (iii) Taxes. With respect to any Product, howsoever
shipped, the difference between the respective (a) and (b) shall be referred to
as the "Purchase Price").
CBA shall establish the initial Scheduled Price for each Product sold
by CBA to ABI. CBA shall have the right at any time in its sole discretion to
modify such Scheduled Price, such new pricing to become effective for all
deliveries to ABI not less than 30 days after date of written notice to ABI of
such price modifications.
4.02 Within 30 days after the end of each calendar quarter during the
Term, ABI shall pay to CBA any Additional Price Component which is due CBA with
respect to sales of Product by ABI to Alliance Wholesalers during such calendar
quarter.
4.03 CBA may, from time to time, suggest Product resale prices to ABI,
and ABI will consider such suggestions. However, ABI shall have the right to
re-sell the Product to Alliance Wholesalers at such prices and on such terms and
conditions as ABI may, in its sole discretion, determine from time to time. Any
and all price promotions to be offered to Alliance Wholesalers by CBA shall be
implemented in strict accordance with the procedures set forth in ATTACHMENT E
attached hereto.
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4.04 ABI shall remit payment of the Purchase Price to CBA for all
Product purchased hereunder, contemporaneously with its receipt of funds from
the Alliance Wholesalers with respect to such purchases. ABI shall be entitled
to set off against such payments any amounts owed to ABI for defective Products
(including without limitation, any costs of disposing of such defective
Product), or which are due ABI pursuant to the terms of this Agreement or
otherwise or which are due ABI from Redhook or Xxxxxx and which amounts arose
out of the brewing or sale of Products in the Territory. In the event that any
Alliance Wholesaler does not pay to ABI the purchase price with respect to any
Products purchased by such Alliance Wholesaler within 60 days after delivery
thereof, at the option of CBA, ABI shall assign all of its rights to CBA against
such Alliance Wholesaler relating to the purchase price for such Products.
4.05 Notwithstanding the foregoing provisions of this Article IV, CBA
and ABI recognize that the laws of certain States and/or U.S. federal laws may
preclude the parties from implementing the pricing mechanisms described above.
Under such circumstances, it is the intention of the parties to comply with the
requirements of such laws, without such compliance being a breach of this
Agreement. Under such circumstances, CBA and ABI shall in good faith negotiate a
periodic adjustment to the Purchase Price, other affected provisions hereof and
the procedures set forth herein where it is permissible to do so, in an amount
necessary to restore the same economic benefits CBA and ABI would have received
had the above pricing mechanisms been in effect.
4.06 (a) Within 45 days after the end of each calendar quarter, CBA
shall deliver a report setting forth the aggregate volume, in case -
equivalents, of Product: (i) sold by CBA in the Territory and by Redhook and
Xxxxxx in the State of Washington in such calendar quarter and (ii) sold by
Kona, Redhook and Xxxxxx in the Territory and in the State of Washington during
the respective calendar quarter in 2003.
(b) Contemporaneously with the delivery of such report, CBA
shall pay to ABI the Margin for all Product sold by CBA to Non-Alliance
Wholesalers or Affiliated Wholesalers and the Margin for all Product sold by
Redhook or Xxxxxx in the State of Washington during such calendar quarter.
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(c) To the extent that during any calendar quarter, the
quantity of Products sold in the Territory by CBA and by Redhook and Xxxxxx in
the State of Washington exceeds the quantity of Products (in each case
determined on a case equivalent basis) sold by Kona, Redhook or Xxxxxx in the
respective calendar quarter in 2003 in the Territory and the State of
Washington, CBA shall pay to ABI the Incremental Margin for all such Product
sold during such calendar quarter. Such payment shall be made contemporaneously
with the payment set forth in Section 4.06(b).
(d) If during any calendar year, the product of the (i) the
Incremental Margin and (ii) the amount, if any, by which the aggregate volume,
in case-equivalents, of Product sold by CBA in the Territory and Redhook and
Xxxxxx in the State of Washington in such calendar year exceeds the aggregate
volume, in case-equivalents of Product sold by Kona, Redhook and Xxxxxx during
2003 in the Territory and in the State of Washington does not equal the amounts
paid by CBA for such calendar year pursuant to Section 4.06(c), then, within 45
days after the end of such calendar year ABI shall pay to CBA any amount by
which the payments previously made by CBA pursuant to Section 4.06(c) exceed
such product or CBA shall pay to ABI any amount by which the payments previously
made by CBA are less than such product.
(e) The sales used in computing the Incremental Margin for any
calendar quarter shall be the sales derived from the sales areas included in the
Territory and in the State of Washington for the calendar quarter for which the
Margin is calculated and those sales derived from those same sales areas and the
State of Washington for the respective calendar quarter in 2003. For purposes of
determining the Margin, the parties agree that Schedule 4.06 sets forth the
Product sold by Kona, Redhook and Xxxxxx in the Territory and the State of
Washington in each calendar quarter of 2003. The parties agree that for purposes
of determining Incremental Margin to be paid by CBA in 2004, the calculations
set forth in Section 4.06(c) and (d) shall be applied only to that period in
2004 (and the respective period in 2003) occurring after the Commencement Date.
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4.07 (a) Within 30 days after the end of each calendar month, ABI shall
notify CBA of the WSC Fees payable with respect to the Product delivered by CBA
for such month, together with the product delivered by CBA to each WSC and the
fees incurred with respect to each WSC. CBA shall pay such WSC Fees within 15
days after its receipt of notification.
(b) Within 30 days after the end of each calendar year, ABI
shall notify CBA of the fees charged by each WSC to which CBA may ship Product
during such calendar year.
(c) In the event ABI changes a WSC or renegotiates the fees to
be paid to a WSC, in either case to which CBA may be reasonably expected to ship
Product, ABI shall notify CBA of such change or renegotiated fees.
ARTICLE V
DELIVERY OF PRODUCTS AND RISK OF LOSS
5.01 Except as set forth in Section 11.07, title to the Product and its
risk of loss or destruction shall pass from CBA to ABI upon delivery of the
Product to the ABI Distribution Facility designated by ABI to be used for the
respective Alliance Wholesaler.
5.02 CBA shall insure that Product shall be packaged, palletized and
prepared for shipment in accordance with ABI's instructions in effect from time
to time for ABI's malt beverage products. CBA shall reimburse ABI for any costs
incurred by ABI in handling Products which are not properly palletized and/or
prepared for shipment, or which are palletized and/or prepared for shipment in a
manner which causes ABI to incur handling expenses not otherwise included in the
calculation of Staging Costs as set forth in ATTACHMENT A, and ABI's
determination of such costs, absent material error, shall be binding on each of
ABI and CBA, provided, however, that such determination shall be subject to the
audit provisions of Article XVII below.
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ARTICLE VI
CBA'S TRADEMARKS
6.01 ABI shall not acquire any right in any of the CBA, Kona, Redhook,
or Xxxxxx trademarks, trade dress, copyrights, promotional slogans, trade names,
designs, labels, get-ups, color combinations, product shapes, and other
distinctive features in the Products, or the promotional goods, advertisements
and promotional activities used during the term of this Agreement in conjunction
with the advertising, promotion, distribution, and sale of the Products
(collectively, "Intellectual Property'). ABI is hereby granted the right during
the Term to use the Intellectual Property in advertising, promotion,
distribution, and sale of the Products in the Territory, which right ABI may
sub-license to the Alliance Wholesalers; provided, however, that CBA shall have
the right to require ABI and the Alliance Wholesalers to submit representative
samples of any use of such Intellectual Property to CBA for approval, which
approval shall be deemed given if CBA does not provide ABI with written notice
of reasonable objection within 10 days of receipt of such samples. Any and all
rights that may be acquired in the Intellectual Property by the use of the
Intellectual Property by ABI or any Alliance Wholesaler will inure to the sole
benefit of the owner of the Intellectual Property, which will be either CBA,
Kona, Redhook, or Xxxxxx. The foregoing sentence does not affect ABI's rights in
other marks it may use or adopt. At the request of CBA, ABI will execute an
instrument, in a form agreeable to CBA and ABI, to effect further registration,
maintenance, and renewal of the Intellectual Property, and, where applicable, to
record CBA, Kona, Redhook, or Xxxxxx (as the case may be) as a registered user
of the Intellectual Property. CBA represents and warrants that it has the right
and authority to provide ABI and the Alliance Wholesalers with the rights
provided in this Section.
6.02 ABI shall promptly notify CBA of any and all infringements of the
Intellectual Property pertaining to the Products that may come to ABI's
attention and shall assist CBA in taking such action against said infringements
as CBA, in its sole discretion, may decide. All expenses and costs of such legal
action, including those of ABI, shall be paid by CBA.
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ARTICLE VII
TERM AND TERMINATION
7.01 The term of this Agreement (the "Term") shall become effective at
the Commencement Date and, unless sooner terminated pursuant to the provisions
of this Agreement, shall continue in effect until December 31, 2014 (the
"Initial Term"). Following the Initial Term, this Agreement shall renew
automatically for an additional 10 year period, unless ABI provides written
notice to CBA on or prior to June 30, 2014 that the Agreement shall not be
renewed.
7.02 Either party shall have the right at any time to terminate this
Agreement immediately, without prejudice to any other legal rights to which such
terminating party may be entitled, upon the occurrence and during the
continuance of any one or more of the following:
(a) material default by the other party in the performance of
any of the provisions of this Agreement or any other agreement between the
parties, which default is either:
(i) curable within 30 days, but is not cured
within 30 days following written notice of
default; or
(ii) not curable within 30 days and either:
(A) the defaulting party fails to take
reasonable steps to cure as soon as
reasonably possible following
written notice of such default; or
(B) such default is not cured within 90
days following written notice of
such default;
(b) default by the other party in the performance of any of
the provisions of this Agreement or any other agreement between the parties,
which default is not described in Section 7.02(a) and which is not cured within
180 days following written notice of such default;
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(c) the making by the other party of an assignment for the
benefit of creditors; or the commencement by the other party of a voluntary case
or proceeding or the other party's consent to or acquiescence in the entry of an
order for relief against such other party in an involuntary case or proceeding
under any bankruptcy, reorganization, insolvency or similar law;
(d) the appointment of a trustee or receiver or similar
officer of any court for the other party or for a substantial part of the
property of the other party, whether with or without the consent of the other
party, which is not terminated within 60 days from the date of appointment
thereof;
(e) the institution of bankruptcy, reorganization, insolvency
or liquidation proceedings by or against the other party without such
proceedings being dismissed within 90 days from the date of the institution
thereof; or
(f) Any representation or warranty made by the other party
hereunder or in the course of performance of this Agreement shall be false in
material respects.
7.03 (a) ABI shall have the right and option to terminate this
Agreement at any time upon six months' prior written notice to CBA, in the
event:
(i) CBA, Kona, Redhook or Xxxxxx engage in any
Incompatible Conduct which is not curable or is not cured to ABI's satisfaction
(in ABI's sole opinion) within 30 days following written notice from ABI to CBA;
(ii) (x) any Person (including any "group" as defined
by Section 13(d)(3) of the Securities and Exchange Act of 1934), other than
Redhook or Xxxxxx, acquires or enters into an agreement to acquire any equity
securities issued by CBA or CBA provides such Person the ability to acquire any
equity securities issued by CBA.
(y) any ABI Competitor or Affiliate thereof
acquires 10% or more of the outstanding equity securities in Kona, Redhook or
Xxxxxx, and one or more officers, designees or agents of such Person becomes a
member of the Board of Directors of Kona, Redhook or Xxxxxx, respectively;
(iii) Material default by Redhook or Xxxxxx in the
performance of any of the provisions of any agreement between such parties and
ABI or any material default by CBA, Redhook or Xxxxxx in any agreement between
or among such parties related to the establishment or operation of CBA, in
either case, which default is either:
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(x) curable within 30 days, but is not cured
within 30 days following written notice
of default; or
(y) not curable within 30 days and either:
(A) the defaulting party fails to take
reasonable steps to cure as soon as
reasonably possible following written
notice of such default; or
(B) such default is not cured within 90 days
following written notice of such
default.
(iv) Default by Redhook or Xxxxxx in the performance
of any of the provisions of any agreement between such parties and ABI or any
default by CBA, Redhook or Xxxxxx in any agreement between or among such parties
related to the establishment or operation of CBA, in either case, which default
is not described in Section 7.03(a)(iii) and is not cured within 180 days
following written notice of such default;
(v) The current chief executive officer of any of
CBA, Redhook or Xxxxxx ceases to function as chief executive officer and within
six months of such cessation a successor satisfactory in the sole, good faith
discretion of ABI is not appointed; or
(vi) Redhook, Xxxxxx or CBA shall merge or
consolidate into or with any other Person or any other Person shall merge or
consolidate into or with Redhook, Xxxxxx or CBA;
(vii) ABI or its corporate affiliates incur any
liability or expense as a result of any claim asserted against them by or in the
name of Redhook or Xxxxxx or any shareholder of Redhook or Xxxxxx as a result of
the equity ownership of ABI or its affiliates in Redhook or Xxxxxx or any equity
transaction or exchange between ABI or its affiliates and Redhook and Xxxxxx,
and Redhook or Xxxxxx, respectively, do not reimburse and indemnify ABI and its
corporate affiliates on demand for the entire amount of such liability and
expense; or
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(viii) Xxxx or Xxxxxx Xxxxxx are in default or breach
of their obligations under the Stockholders Agreement which default or breach is
not cured within 30 days after written notice thereof by ABI.
(b) Notwithstanding the foregoing, this Agreement shall not be
subject to termination as a consequence of Incompatible Conduct if: (i) the act
of Incompatible Conduct does not arise out of or relate to the operations or
condition of CBA; (ii) within 90 days after notice of termination by ABI, CBA
has terminated its sale and marketing of the products of each xxxxxx out of
whose operations or condition the act of Incompatible Conduct arose or to which
operations or condition the act of Incompatible Conduct related and such
products are no longer subject to distribution pursuant to the terms hereof; and
(iii) such termination has, in the good faith judgment of ABI, rectified the
damage to the reputation or image of ABI or the brewing industry caused by such
act.
(c) Notwithstanding the provisions set forth in Section
7.03(a)(ii)-(viii), this Agreement shall not be subject to termination as a
consequence of the circumstances described in such provisions if: (i) the
circumstances do not arise out of the operations, acts, omissions or condition
of CBA; and (ii) within 90 days after notice of termination by ABI, CBA has
terminated its sale and marketing of the products of each xxxxxx out of whose
operations, acts, omissions, condition or stockholders the circumstances arose
and such products are no longer subject to distribution pursuant to the terms
hereof. Notwithstanding the provisions set forth in Section 7.03(a)(viii), this
Agreement shall not be subject to termination as a consequence of the
circumstances described in such provisions if within 90 days after notice of
termination by ABI, CBA has terminated its sale and marketing of the Xxxxxx
products.
7.04 ABI shall have the right and option to terminate this Agreement at
any time upon written notice to CBA in the event:
(i) Either Redhook or Xxxxxx makes an assignment for
the benefit of creditors; or commences a voluntary case or proceeding or
consents to or acquiesces in the entry of an order for relief against it in an
involuntary case or proceeding under any bankruptcy, reorganization, insolvency
or similar law;
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(ii) A trustee or receiver or similar officer of any
court is appointed for Redhook or Xxxxxx or for a substantial part of the
property of Redhook or Xxxxxx, whether with or without the consent of Redhook or
Xxxxxx, which is not terminated within 60 days from the date of appointment
thereof;
(iii) The institution of bankruptcy, reorganization,
insolvency or liquidation proceedings by or against Redhook or Xxxxxx without
such proceedings being dismissed within 90 days from the date of the institution
thereof;
(iv) Any of Kona, Redhook or Xxxxxx terminate or
purport to terminate the right of CBA to market and sell the Products as
contemplated hereby or either of Redhook or Xxxxxx terminate or disavow, or
purport to terminate or disavow, the guaranty of the obligations of CBA
hereunder; or
(v) CBA dissolves or undertakes proceedings to
dissolve; or
(vi) the master distributor agreement between ABI and
Redhook or the master distributor agreement between ABI and Xxxxxx is
terminated.
(vii) Notwithstanding the provisions set forth in
Section 7.04(i)-(vi), this Agreement shall not be subject to termination as a
consequence of the circumstances described in such provisions (or, if the
Agreement has been terminated as a result of such provisions, shall be subject
to automatic reinstatement) if: (i) the circumstances do not arise out of or
relate to the operations, acts, omissions or condition of CBA; and (ii) within
90 days after notice of termination by ABI, CBA has terminated its sale and
marketing of the products of each xxxxxx out of whose operations, acts,
omissions or status the circumstances arose or to which operations, acts,
omissions, condition or stockholders the circumstances related and such products
are no longer subject to distribution pursuant to the terms hereof.
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ARTICLE VIII
REMEDIES
If either party commits a breach or a default of this Agreement, no
remedy herein conferred upon or reserved to either party is exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any breach or
default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.
ARTICLE IX
DUTIES OF ABI
9.01 Except as set forth in Section 11.07, ABI shall have
responsibility and authority for coordinating delivery of the Product to the
Alliance Wholesalers. ABI shall specify the brand, package and quantity of
Product ordered and shall designate the ABI Distribution Facility to which the
Product shall be shipped (and ABI may change such designation from time to
time). The costs charged to CBA shall vary depending on which ABI Distribution
Facility is designated.
9.02 ABI shall store all Product as it stores its own products, and
shall handle all Product with the same degree of care as it handles its own
products.
9.03 Except for deliveries made by CBA directly to Alliance Wholesalers
as set forth herein, ABI shall promptly and correctly fill each Alliance
Wholesaler's order, or shall instruct the WSC to promptly and correctly fill
each Alliance Wholesaler's order and to load all Products on the trucks or other
means of conveyance to the Alliance Wholesalers.
9.04 ABI may, in its sole discretion, add the Products to Exhibit 1 of
the existing Wholesaler Equity Agreement that ABI has with any Alliance
Wholesaler. At the option of ABI, in the event ABI acquires the distribution
rights to the Products in any sales area, ABI may direct CBA and an ABI
wholesaler servicing such sales area to enter into a transitional distribution
agreement in a form satisfactory to ABI in lieu of adding the Products to
Exhibit 1 of the Wholesaler Equity Agreement between ABI and such wholesaler.
17
9.05 ABI shall use its best efforts (to the extent commercially
reasonable) to maintain all licenses, permits and other authorizations that are
necessary for ABI to distribute the Products in the Territory where there are
Alliance Wholesalers.
ARTICLE X
DUTIES OF CBA
10.01 CBA shall have sole responsibility for developing a market
presence, creating demand for the Products in the Territory, generating
marketing activity in each sales area of the Territory and developing and
distributing promotional programs and promotional literature. As between ABI and
CBA, the parties understand that CBA has full responsibility and discretion with
respect to the marketing, advertising and promotion of the Products. Appropriate
procedures with regard to independent pricing of Product are set forth in
ATTACHMENT E attached hereto. Promptly upon depletion reports on CBA inventory
at Alliance Wholesalers becoming available to ABI, ABI shall provide such
information to CBA.
10.02 CBA shall bear risk of loss and transportation costs for the
Products until delivery of Products to the ABI Distribution Facility designated
by ABI for such Alliance Wholesaler as set forth in Article V hereof.
10.03 CBA shall, or shall cause its Affiliates to, secure and maintain
label registrations in all states in the Territory where Product is sold.
10.04 CBA shall use commercially reasonable efforts to market and
promote Product throughout the Territory in the markets where Products is sold,
with a view towards maximizing sales of Products in accordance with its
marketing and sales plan. In addition, CBA shall use commercially reasonable
efforts (to the extent permitted by law) to prohibit the Non-Alliance
Wholesalers from knowingly selling Products to retailers in the sales areas
serviced by the Alliance Wholesalers or the Affiliated Wholesalers.
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10.05 As between CBA and ABI, CBA shall be responsible for, and shall
indemnify ABI on an after-tax basis from, all Taxes levied on, against or in
connection with the sale, distribution, possession, marketing or promotion of
the Products in the Territory, except for Taxes levied on ABI's net income.
10.06 CBA shall use commercially reasonable efforts to obtain and
maintain all licenses, permits and other authorizations that are necessary for
CBA to sell and distribute the Products in the Territory.
ARTICLE XI
ADDITIONAL AGREEMENTS
11.01 CBA shall at all times maintain its corporate existence, and will
do or cause to be done all things necessary to preserve and keep in full force
and effect all rights (charter and statutory), licenses and franchises necessary
for it to perform its obligations hereunder.
11.02 During the Term of this Agreement, CBA shall not, without ABI's
prior written consent, sell, license, transfer, convey, encumber, or place any
restrictions upon, any of the Intellectual Property, except for licenses of the
Intellectual Property to Affiliated Wholesalers or Non-Alliance Wholesalers for
use solely in connection with sales of Product by such Affiliated Wholesalers or
Non-Alliance Wholesalers.
11.03 CBA represents, warrants and covenants that it has the exclusive
right to market and sell all products of Kona, Redhook and Xxxxxx in the
Territory, whether such products are currently existing or are created in the
future, other than sales by Kona, Redhook or Xxxxxx occurring at their breweries
to retail consumers, sales from the premises of brew-pub restaurants operated by
Kona, Redhook or Xxxxxx or Redhook or sales made by Kona, Redhook or Xxxxxx at
beer competitions, beer festivals and similar types of temporary sales events.
CBA covenants that it shall not amend, modify, terminate, waive or fail to
enforce any provision of any agreement or instrument between it, Kona, Redhook
and Xxxxxx without the prior written consent of AB. Except as set forth to the
contrary herein, during the Term of this Agreement, ABI will be the exclusive
distributor of Product in the Territory. Subject to the provisions of the
following subsections of this Section 11.03, during the Term of this Agreement,
CBA reserves the right to add New Products for distribution in the Territory. In
the event CBA elects to distribute such New Product in the Territory, CBA shall
first offer to ABI in the manner described below, the right to distribute such
New Product and to have such New Product be deemed a Product for all purposes of
this Agreement.
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(a) If CBA or any of its Affiliates desires to distribute a
New Product in the Territory, CBA shall notify (the "Offer Notice") ABI of such
intention and offer ABI the right to distribute such New Product. Within 10 days
of ABI's receipt of the Offer Notice, ABI shall advise CBA of the information
required by ABI to make an evaluation of such New Product (which shall include,
but may not be limited to, the factors described on ATTACHMENT F). Within 45
days of ABI's receipt of all such information (the "Offer Expiration Date"), ABI
shall advise CBA of ABI's decision to accept or not accept such New Product as a
Product under this Agreement. If ABI declines to accept such New Product or
fails to accept such New Product by the Offer Expiration Date, CBA shall be free
to otherwise distribute such New Product as it deems appropriate; provided that
CBA enters into a binding agreement with another Person for the distribution of
such New Product within 365 days of the earlier of (Y) ABI's notice not to
accept, or (Z) the Offer Expiration Date. If CBA does not enter into such
binding agreement within such time period, or if CBA then fails to commence
distribution under such binding agreement or interrupts such distribution
thereafter for 365 consecutive days or more or decides to terminate its binding
agreement with such Person, CBA shall be required to comply with the preceding
provisions in this section again before permitting any other Person to
distribute the New Product. If ABI exercises its option to distribute the New
Product, such New Product shall be distributed by ABI in accordance with the
terms and conditions set forth in this Agreement. Notwithstanding the above, CBA
may test market New Products without ABI's prior approval; provided that: (i)
the duration all such test marketing on any and all New Products in any single
calendar year shall not exceed six months; (ii) the aggregate volume of all such
test marketing on any single New Product in any single calendar year shall not
exceed one percent of the sales volume for all CBA Products for the preceding 12
months; and (iii) all such New Products otherwise comply with the quality
standards set forth in this Agreement.
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(b) For purposes of this Section 11.03, New Products that are
accepted by ABI are deemed Products and if CBA desires to then modify such
Product, such modifications shall be handled as set forth in Section 11.08.
(c) Before making a New Product available to any Non-Alliance
Wholesaler, CBA shall, to the extent allowed by law and permitted by the terms
of any contract between CBA and the Non-Alliance Wholesaler holding the relevant
distribution rights, first make such New Product available for distribution by
ABI. Within 90 days of ABI's receipt of CBA's notice that it wishes such New
Product distributed in the sales area of such Non-Alliance Wholesaler, ABI shall
advise CBA of ABI's decision to accept distribution rights for such New Product
in the sales area, in which event the ABI wholesaler distributing the product in
the sales area shall be deemed an Affiliated Wholesaler or an Alliance
Wholesaler for such New Product.
11.04 CBA shall comply with every commercially reasonable request made
by ABI to terminate the distribution rights of any Non-Alliance Wholesaler and
to cause the CBA Products to be distributed in the sales area of such
Non-Alliance Wholesaler pursuant to this Agreement. This section shall not
obligate CBA to undertake any action inconsistent with applicable law, except
that at the written direction of ABI, ABI may obligate CBA to undertake an
action that may give rise solely to civil liabilities to private parties and any
such written direction shall obligate ABI to undertake the indemnification
obligations with respect to such action as set forth in Section 14.02.
11.05 If CBA wishes to have Products distributed in a sales area where
ABI is unable to provide an Affiliated Wholesaler or an Alliance Wholesaler who
will agree to carry or fill orders for Products which have been procured by CBA
or the Affiliated Wholesaler or the Alliance Wholesaler provided by ABI has
refused repeatedly to reasonably cooperate with CBA and has failed to adhere to
the provisions of the Wholesaler Equity Agreement between ABI and such
Affiliated or Alliance Wholesaler with regard to the Products, CBA may, to the
extent permitted by applicable law, terminate the distribution rights of the
Affiliated Wholesaler or the Alliance Wholesaler, select another Person
reasonably acceptable to ABI and upon written terms and conditions consistent
with the intent of this Agreement to make ABI the exclusive distributor of
Product in the Territory, to distribute the Product in such sales area, and if
selected, such Person shall be deemed a Non-Alliance Wholesaler for purposes of
this Agreement and shall be added to ATTACHMENT D. In the event ABI is able to
identify a wholesaler for such sales area different from the wholesaler
previously distributing the Products in such sales area, CBA's obligations with
respect to the Non-Alliance Wholesaler shall be as set forth in Section 11.04.
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11.06 At CBA's request, ABI shall instruct Alliance Wholesalers to
return cooperage to the ABI Distribution Facility designated by ABI or, at the
option of CBA, any cooperage used by a designated xxxxxx, and ABI shall make
available for pick-up by CBA all such cooperage. CBA shall pay ABI the Cooperage
Handling Charge for all cooperage received by ABI. ABI shall not be liable for
the costs of any cooperage lost or damaged by such Alliance Wholesaler, and ABI
assigns to CBA all of ABI's rights, if any, to seek reimbursement from the
Alliance Wholesaler for lost or damaged cooperage. CBA shall reimburse ABI for
any costs incurred by ABI in handling cooperage that is not properly segregated
from other cooperage by the Alliance Wholesalers or is returned in any other
manner that causes ABI to incur costs not included in the calculation of
Cooperage Handling Charges and ABI assigns to CBA all of ABI's rights, if any,
to seek reimbursement from those Alliance Wholesalers that cause CBA to incur
such additional costs. ABI's determination of such costs, absent manifest error,
shall be binding, on each of ABI and CBA; provided, however, that such
determination shall be subject to the audit provisions of Section Article XVII.
ABI and CBA shall develop, from time to time, procedures for the collection and
redemption of cooperage and cooperage deposit fees satisfactory to each party in
its reasonable judgment. Such procedures shall provide for the prompt delivery
of cooperage among ABI, CBA and the Alliance Wholesalers and the payment and
return of cooperage deposit fees promptly upon acceptance and return of the
respective cooperage.
11.07 With the consent of ABI (which ABI may withdraw or modify at any
time upon 60 days' advance notice to CBA), CBA shall be permitted to deliver
Product directly to Alliance Wholesalers. With respect to any such delivery,
22
(a) such deliveries shall still be deemed: (i) sales by CBA
to ABI, and (ii) re-sales by ABI to such Alliance
Wholesaler for purposes of this Agreement;
(b) title to and risk of loss of such Products shall remain
with CBA until delivery to such Alliance Wholesaler; and
(c) Invoicing Costs shall be substituted for Staging Costs
for all purposes under this Agreement.
If ABI does not consent to any request by CBA to deliver Product directly to an
Alliance Wholesaler, at the request of CBA from time to time (but not more often
than annually) ABI shall review the costs and benefits incurred or realized by
CBA and the Alliance Wholesaler that would result from such direct delivery by
CBA and discuss such costs and benefits with CBA. Within 30 days after
completion of the review, ABI shall inform CBA whether and to what extent ABI
shall consent to CBA's requests to deliver directly to such Allliance
Wholesaler.
11.08 In order to modify an existing Product for the purposes of
replacing the Product (rather than for the purposes of creating a New Product),
CBA may change, alter, modify or adjust the formula, taste profile, alcohol
content, ingredients, brand name or trade dress of any Product (a "Modified
Product"), if and only if CBA has given ABI at least 30 days notice of such
change, alteration, modification or adjustment. ABI shall have the right and
option, in its sole discretion, during such 30 day period to terminate
distribution of such Modified Product under this Agreement, in which event such
Modified Product shall no longer be deemed a Product for purposes of this
Agreement. Prior to execution of this Agreement, CBA, Redhook or Xxxxxx have
delivered to ABI, in writing, descriptions setting forth for each Product the
exact ingredients (by types and origin) and product characteristics for such
Product, including applicable tolerances and a description of the primary and
secondary packaging for each Product. Other than minor changes in trade dress,
any changes or deviations in primary or secondary packaging, ingredients
(additions or deletions), hops or malt type or supplier of other key raw
material in any Product from that earlier specified by CBA, Redhook or Xxxxxx,
such changes shall cause such Product to be a Modified Product. In addition, if
ABI's examination of any Product indicates a deviation greater than the
tolerance previously indicated for such Product in three or more tests, such
Product shall be deemed to be a Modified Product.
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11.09 CBA shall ship to ABI at 220 Taste Room, Xxx Xxxxx Xxxxx, Xx.
Xxxxx, Xxxxxxxx 00000, Attention: Director - Brewing Education (or to such other
address or location as may be specified from time to time in writing by ABI):
(a) one (1) case of each packaged Product during each calendar quarter; and (b)
from time to time upon request by ABI, one (1) keg of the draught Product
specified by AB.
11.10 ABI shall maintain in its employ a corporate inventory management
employee (the "Inventory Manager"), a substantial portion of the
responsibilities of whom shall be to coordinate and administer logistics of
Product distribution to Alliance Wholesalers. Within fifteen (15) days of the
end of each calendar quarter during the Term, beginning with the second calendar
quarter of 2004, CBA shall pay to ABI 16.25% of the annual Inventory Manager
Fee. ABI shall pay the Inventory Manager cash compensation not exceeding that
generally paid to other ABI employees with similar experience, training, skill
level and performance. Annually, ABI and CBA will review the time spent by the
Inventory Manager with respect to the products sold by CBA as compared to the
time spent on other matters for the preceding year, and annually ABI and CBA
shall adjust the percentage specified in this paragraph so that CBA pays to ABI
an amount that reasonably compensates ABI for the time spent by the Inventory
Manager in the preceding year on matters relating to products sold by CBA..
11.11 Upon written agreement by the parties hereto, the Territory may
be expanded to include states or portions of the United States of America (or
other countries in the world) not included in the Territory as of the
Commencement Date.
11.12 CBA shall not acquire any alcohol or non-alcohol malt beverage
brand or the assets or equity securities of any producer of alcohol malt
beverages unless CBA delivers to ABI a written plan providing for the exclusive
distribution of such malt beverages by ABI that is satisfactory to ABI.
11.13 If Kona exercises any right available to it to have any Person
other than Xxxxxx, XXX or CBA to distribute its products in any portion of the
United States, CBA shall, upon learning thereof, promptly notify ABI. At the
option of ABI, upon 90 days notice to CBA, ABI may notify CBA that products
brewed by Kona or bearing Kona trade names or trademarks shall no longer be
distributed pursuant to this Agreement, such termination to occur without
liability by either party hereto.
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ARTICLE XII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CBA
CBA represents, warrants and covenants to ABI as follows:
12.01 CBA is a limited liability corporation duly organized, validly
existing and in good standing under the laws of the State of Oregon, has full
corporate or other power and authority to carry on its business as now conducted
and as currently proposed to be conducted, and to execute, deliver and carry out
the terms of this Agreement, has all permits and authorizations necessary to
carry on its business as presently conducted, and is, or shall be if required,
duly qualified to do business as a foreign corporation in good standing in each
jurisdiction wherein the nature of CBA's business and operations or the
character of the properties owned or held under lease by CBA makes such
qualification necessary and in which the failure to so qualify would have a
materially adverse effect on the business, prospects, profits, condition or
operations, financial or otherwise, of CBA.
12.02 This Agreement and all related documents have been duly
authorized, executed and delivered by CBA and constitute legal, valid and
binding agreements or obligations of CBA enforceable against it in accordance
with their terms, subject to applicable bankruptcy, insolvency, and similar laws
affecting the enforcement of creditors' rights generally. Neither the execution
and delivery nor the performance by CBA of this Agreement will contravene any
law or governmental rule or regulation, or any judgment or order, applicable to
or binding on CBA, or CBA's charter documents, or result in any breach of or
constitute any default under, or result in the creation of any lien upon any
property of CBA under, any indenture, mortgage or other agreement or instrument
to which CBA is a party or by which it, or any of its properties may be bound or
affected.
25
12.03 Neither the execution and delivery nor the performance by CBA of
this Agreement requires any consent or approval of, giving notice to,
registration with, or taking of any other action in respect of, any federal or
state governmental authority or agency which has not been obtained prior to the
date hereof.
12.04 ABI's purchase or resale of Products or other goods hereunder in
the form furnished to ABI by CBA and ABI's use of the Intellectual Property in
accordance with the terms of authorization by the CBA of ABI's use pursuant to
the this Agreement shall not infringe any valid United States or foreign patent
right, right of privacy or publicity, or any rights with respect to trademarks,
trade dress, copyrights, promotional slogans, trade names, designs, labels,
get-ups, color combinations, product shapes, or other trademarks rights.
12.05 Except as set forth in ATTACHMENT D, CBA, Kona, Redhook and
Xxxxxx have no contract, agreement or understanding, whether oral or written,
with any Person for the distribution of Product in the Territory.
12.06 As of the date hereof, the list of Non-Alliance Wholesalers set
forth in ATTACHMENT D is accurate, full and complete.
12.07 All Products:
(a) shall be merchantable and fit for their intended purpose;
(b) shall be produced exclusively in the breweries of Kona,
Redhook, Xxxxxx or in other breweries approved by ABI;
(c) shall be free from defects in materials and workmanship
and in compliance with applicable federal and state laws and regulations;
(d) shall be delivered free from any lawful security interest,
lien or other encumbrance;
(e) shall not be adulterated or misbranded within the meaning
of the Federal Food, Drug and Cosmetic Act, as amended, and shall comply with
the applicable provisions of the Code of Federal Regulations; and
26
(f) shall be produced in compliance with the requirements of
the Fair Labor Standards Act of 1938, as amended, and Executive Order No. 11246
and of the rules, regulations and relevant orders of the Secretary of Labor, if
applicable.
12.08 (a) In order to ensure the freshness quality of Product when
consumed by the public, all Products shall be delivered by CBA to the designated
ABI Distribution Facility, or to the Alliance Wholesalers, Affiliated
Wholesalers and Non-Alliance Wholesalers: (i) for packaged Product, at least 80
days; and (ii) for draft Product, at least 32 days, prior to the time when such
Product would no longer be salable to or consumable by the public, based on
criteria developed by CBA and reasonably acceptable to ABI, by which CBA judges
the freshness of its malt and non-malt beverage products.
(b) If ABI changes from time to time its standards with
respect to the remaining shelf life as applied generally to its products sold in
the United States, CBA agrees that within six months of the effective date of
such change, CBA shall conform its shipment practices to the current ABI
standard.
(c) To the extent any Product is shipped to a WSC, ABI may
change the standards described in Section 12.08(a) to provide assurances,
satisfactory in the reasonable judgment of ABI, that the Product will continue
to be delivered to retailers with an remaining shelf life consistent with the
standards generally used by ABI.
12.09 CBA shall comply in material respects with all applicable
governmental laws, regulations and orders covering the production, sale,
packaging, marketing and delivering of the Products.
ARTICLE XIII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ABI
ABI represents, warrants and covenants to CBA as follows:
13.01 ABI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Missouri, has full corporate power and
authority to carry on its business as now conducted and as currently proposed to
be conducted, and to execute, deliver and carry out the terms of this Agreement
and has all permits and authorizations necessary to carry on its business as
presently conducted.
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13.02 This Agreement and all related documents have been duly
authorized, executed and delivered by ABI and constitute legal, valid and
binding agreements or obligations of ABI enforceable against it in accordance
with their terms, subject to applicable bankruptcy, insolvency, and similar laws
affecting the enforcement of creditors' rights generally. Neither the execution
and delivery nor the performance by ABI of this Agreement will contravene any
law or governmental rule or regulation, or any judgment or order, applicable to
or binding on ABI, or ABI's charter documents, or result in any breach of or
constitute any default under, or result in the creation of any lien upon any
property of ABI under, any indenture, mortgage or other agreement or instrument
to which ABI is a party or by which it, or any of its properties may be bound or
affected.
13.03 Neither the execution and delivery nor the performance by ABI of
this Agreement requires any consent or approval of, giving notice to,
registration with, or taking of any other action in respect of, any federal or
state governmental authority or agency, which has not been obtained prior to the
date hereof.
13.04 ABI shall comply in material respects with all governmental laws,
regulations and orders covering the re-sale and distribution of the Products.
ARTICLE XIV
INDEMNIFICATION
14.01 In addition to any other indemnities set forth in this Agreement,
CBA will indemnify, protect, defend and hold harmless each of ABI, its
Affiliates, wholesalers and each of their respective directors, officers,
employees and agents, from and against all claims, liabilities, losses, damages,
injuries, demands, actions, causes of action, suits, proceedings, judgments and
expenses, including, without limitation, reasonable attorneys' fees, court costs
and other legal expenses arising from, connected with or attributable to: (a)
the Products; (b) the breach by CBA of any provision hereof; (c) ABI's use of
the Intellectual Property in conjunction with the distribution and sale of the
Products in accordance with the terms hereof; (d) the inaccuracy of any warranty
or
28
representation made by CBA herein or in connection herewith; or (e) the
termination of the distribution rights of any Affiliated Wholesaler or Alliance
Wholesaler pursuant to Section 11.05. None of the above indemnities shall
require CBA to indemnify, protect, defend or hold harmless any indemnitee with
respect to any claim to the extent such claim arises from, is connected with or
is attributable to the negligence or willful misconduct of such ABI Indemnitee.
Additionally, to the extent permitted by law, CBA shall indemnify, protect,
defend and hold harmless ABI and any employee or designee of ABI on the board of
directors of CBA from all claims, liabilities, losses, damages, injuries,
demands, actions, causes of action, suits, proceedings, judgments and expenses,
including without limitation, reasonable attorneys' fees, courts costs and other
legal expenses arising from, connected with or attributable to the status of any
employee or designee of ABI as a director of CBA. Expiration or termination of
this Agreement shall not affect the continuing obligations of CBA to indemnify
ABI under this Section 14.01.
14.02 In addition to other indemnities set forth in this Agreement, ABI
will indemnify, protect, defend and hold harmless each of CBA, its Affiliates
and each of their respective directors, officers, employees and agents, from and
against all claims, liabilities, losses, damages, injuries, demands, actions,
causes of action, suits, proceedings, judgments and expenses, including, without
limitation, reasonable attorneys' fees, court costs and other legal expenses
arising from, connected with or attributable to: (a) the breach by ABI of any
provision hereof; (b) the inaccuracy of any warranty or representation made by
ABI herein or in connection herewith; or (c) any action taken by CBA at the
written direction of ABI pursuant to Section 11.04. Expiration or termination of
this Agreement shall not affect the continuing obligations of ABI to indemnify
CBA under this Section 14.02. Nothing herein shall require ABI to indemnify,
protect, defend or hold harmless any indemnitee with respect to any claim to the
extent such claim arises from, is connected with or is attributable to the
negligence or willful misconduct of such indemnitee or the actions of any
Non-Alliance Wholesalers.
14.03 If a claim by a third party is made against a party indemnified
pursuant to this Article XIV, and if such indemnified party intends to seek
indemnity with respect thereto under this Article XIV, the indemnified party
shall promptly (and in any case
29
within 30 days of such claim being made) notify the indemnifying party of such
claim; provided, however, that any failure of the indemnified party to promptly
notify the indemnifying party of such claim shall not relieve the indemnifying
party of its obligations pursuant to this Section 14.03 except to the extent
that the indemnifying party would be responsible for the payment of any
additional amounts or be actually prejudiced in any other way as a result of
such failure. The indemnifying party shall have the right (but not the
obligation) to undertake, conduct and control, through counsel of its own
choosing and at the indemnifying party's expense, the settlement or defense
thereof, provided the indemnifying party proceeds in good faith, expeditiously
and diligently. If the indemnifying party does not notify the indemnified party
in writing that it will defend any matter within 20 business days after receipt
of notice from the indemnified party of the existence of such matter, or if the
indemnifying party disputes that it is liable to the indemnified party for any
sum pursuant to this Section 14.03, the indemnifying party shall have no right
to defend such matter, and the indemnified party shall have full right and power
to defend or otherwise deal with and dispose of the matter and shall be
indemnified for the fees and expenses of counsel retained for such purpose. The
indemnified party shall cooperate with the indemnifying party in connection with
any defense by the indemnifying party of a claim, but the indemnifying party
shall permit the indemnified party to participate in such settlement or defense
through counsel chosen by the indemnified party and the fees and expenses of
such counsel shall be borne by the indemnified party. Without the prior written
consent of the indemnified party, the indemnifying party will not enter into any
settlement of any such claim which would lead to liability or create any
financial or other obligation on the part of the indemnified party, and the
indemnifying party shall after such settlement or resolution of any claim
promptly reimburse the indemnified party for the full amount of any loss
resulting from such claim not theretofore paid by the indemnifying party. The
indemnified party will not enter into any settlement or pay (except pursuant to
a judgment) any such claim without the prior written consent of the indemnifying
party, which consent shall not unreasonably be withheld or delayed.
Notwithstanding the foregoing, the indemnified party shall have the right to pay
or settle any such claim, in the event the indemnified party has not assumed or
is not pursuing the defense of any claim or is in breach of its indemnification
obligations hereunder. The indemnification required by this Section 14.03 shall
be made by periodic payments of the amount thereof as losses are incurred and as
and when bills are received.
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ARTICLE XV
INSURANCE
CBA shall procure and maintain from qualified and licensed insurers
with Best's Ratings of at least A-: (i) a comprehensive or commercial general
liability insurance policy with at least $10,000,000 in coverage for each
occurrence, including liquor liability; (ii) a worker's compensation policy with
at least $2,000,000 in coverage for each occurrence; and (iii) a property
insurance policy covering damage to the Product owned by CBA. Coverage shall be
on an occurrence rather than a claims made basis. The policy shall name ABI as
an additional insured and shall include coverage for CBA's indemnification
obligations under this Agreement. The policy shall provide that ABI will be
notified of the cancellation or any restrictive amendment of the policy at least
15 days prior to the effective date of such cancellation or amendment. CBA shall
not violate, or permit to be violated, any conditions of such insurance
policies, and CBA shall at all times satisfy the requirements of the insurance
carrier writing said policy.
From time to time at the request of ABI, CBA shall provide ABI with a
certificate from such insurer certifying that the insurance policy described in
this section is in force and the evidence of coverage shall specifically state
that coverage as it pertains to ABI shall be primary regardless of any other
coverage that may be available to ABI. Failure to procure and maintain the
insurance coverage specified herein shall be deemed a material breach of this
Agreement
ARTICLE XVI
FORCE MAJEURE
16.01 If by reason of Force Majeure either party is unable in whole or
in part to carry out any of its agreements contained herein, such party shall
not be deemed in default during the continuance of such inability. The term
"Force Majeure" as used herein shall mean, without limitation, the following:
acts of God; strikes, lockouts or other industrial disturbances; acts of public
enemies; orders or restraints of any kind
31
from any government of the United States of America or from a state or from any
of their departments, agencies or officials (except when such governmental
action results from a party's failure or refusal to comply with any applicable
law, rule or regulation), or of any civil or military authority; insurrections;
riots; landslides; earthquakes; fires; storms; droughts, floods, explosions; and
any other cause or event not reasonably within the control of the respective
parties. Each party agrees, however, to remedy with all reasonable dispatch the
cause or causes preventing it from carrying out the Agreement, provided that the
settlement of strikes, lockouts and other course is in its judgment unfavorable
to it.
16.02 The response to an act of Force Majeure resulting from an
industrial disturbance shall be entirely within the discretion of the affected
party, and the affected party shall not be required to make settlement of
strikes, lockouts and other industrial disturbances by acceding to the demands
of the opposing party or parties.
ARTICLE XVII
AUDIT AND INSPECTION RIGHTS
(a) During the Term and for a period of at least two years
following the termination of this Agreement, each party shall maintain such
books and records (collectively, "Records") in accordance with generally
accepted accounting principles consistently applied as are necessary to
substantiate that:
(i) All invoices and other charges submitted to the
other for payment hereunder were valid and proper;
(ii) No payments have been made, directly or
indirectly, by or on behalf of either party to or for the
benefit of any employee or agent of the other party who may
reasonably be expected to influence such other party's
decision to enter into this Agreement, or the amount to be
paid by such other party pursuant hereto (as used herein,
"payment" shall include money, property, services, and all
other forms of consideration); and
(iii) Such party has conformed to the provisions of
this Agreement.
32
(b) Each party and/or its representative shall have the right
at any time during normal business hours, upon five business days' notice, to
have PricewaterhouseCoopers LLP, or such other internationally recognized
accounting firm as agreed to by the parties audit the Records of the other in a
manner which does not create unreasonable disruption to the audited party's
normal conduct of business.
ARTICLE XVIII
CONFIDENTIALITY
18.01 (a) During and subsequent to the Term of this Agreement, each
party shall treat and shall cause its respective employees, officers, directors,
advisors, representatives, subsidiaries, Affiliates, assigns, subcontractors and
any and all persons or business entities acting under one or any of them, to
treat, as confidential property and not disclose to any other Person or use in
any manner, except as is necessary to perform this Agreement (and then only on a
confidential basis satisfactory to both parties), any information regarding the
other party's prices, plans, programs, processes, products, costs, equipment,
operations or customers (including without limitation information received by
ABI with respect to Product formula and ingredient and information by CBA
received regarding the distribution and logistics programs used by ABI)
("Confidential Information") which may come within the knowledge of such party,
its officers, employees or advisors in the performance of this Agreement,
without in each instance securing the prior written consent of the other party;
nor shall ABI use such Confidential Information to produce a beer whose formula
duplicates any of the Product formulas.
(b) Nothing above, however, shall prevent either ABI or CBA
from disclosing to any other Person or using in any manner, information that
such party can show:
(i) has been published or has become part of the
public domain without any breach of this Agreement other than
by acts, omissions or fault of such party or its employees or
agents;
(ii) has been furnished or has been made known to
such party by third parties (other than those acting directly
or indirectly for or on behalf of the disclosing party) as a
matter of legal right without restrictions on its disclosure;
33
(iii) was in such party's lawful possession prior to
the disclosure thereof by the other party;
(iv) is later independently developed by the
receiving party; or
(v) has been required to be disclosed by law, court
order, or government order or regulation.
(c) If any party is required by law, court order or government order or
regulation to disclose Confidential Information, such party shall provide notice
thereof to the other party and undertake reasonable steps to provide the other
party with an opportunity to object to such disclosure.
(d) Except as required by law, neither party shall release, or cause or
allow the release of, information to the communications media or to any other
third party concerning the specific terms of this Agreement or any amendment or
modification thereto without the prior written consent of the other party;
provided, however, that if in the reasonable opinion of the disclosing party's
counsel, the failure to disclose any such information would create a reasonable
risk of non-compliance with applicable securities laws, then such disclosing
party may so disclose such information provided it gives the other party as much
advance notice as is reasonably possible.
18.02 Neither party shall make any Confidential Information available
to anyone other than those of its respective employees and advisors who need
such Confidential Information to enable them to perform this Agreement.
18.03 These secrecy obligations with respect to the Confidential
Information shall survive the termination or expiration of this Agreement.
34
ARTICLE XIX
ASSIGNMENT
19.01 This Agreement will be binding upon, and will inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
19.02 CBA may not assign this Agreement to any Person without the prior
written consent of ABI.
19.03 Provided that such assignment does not deny CBA the practical
benefits of this Agreement, ABI may assign this Agreement to any entity
controlled by Anheuser-Xxxxx Companies, Inc., or to any entity which succeeds
through any transaction to the business of ABI substantially as a whole, but no
such assignment shall release ABI from its obligations as primary obligor
hereunder without CBA's prior written consent, and ABI shall retain the sole
right to provide any consents or waivers under this Agreement.
ARTICLE XX
NOTICES
All notices required or permitted hereunder shall be in
writing and shall be deemed duly given if either personally delivered, sent by
electronic facsimile or sent by overnight courier service or certified mail,
return receipt requested, addressed to the parties as follows:
If to ABI: Anheuser-Xxxxx, Incorporated
Xxx Xxxxx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Vice President - Business and
Wholesaler System Development
Facsimile Number: (314)765 -9167
If to CBA: Craft Brands Alliance LLC
000 Xxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Chief Executive Officer
Facsimile Number: (000) 000-0000
35
with copies to:
Redhook Ale Brewery, Incorporated
00000 XX 000xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Telecopy Number: (000) 000-0000
Xxxxxx Brothers Brewing Company
000 Xxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Attention: President
Telecopy Number: (000) 000-0000
or to such other address, facsimile number or attention as either party shall
provide to the other in accordance herewith. Notices delivered in person, by
overnight courier or by facsimile shall be effective when received. Notices
given by certified mail shall be effective on the third business day after
mailing unless sooner received, in which case they shall be effective upon
receipt.
ARTICLE XXI
INDEPENDENT CONTRACTORS
The parties shall be and act as independent contractors and under no
circumstances shall this Agreement be construed to create any agency,
partnership, joint venture or employment relationship between the parties.
Neither party has any authority to bind the other in any way except as may be
otherwise expressly stated in this Agreement. The parties recognize that during
the period of this Agreement, there will be employees of one party upon the
premises of the other. It is understood and agreed that on such occasions the
employees of each party shall remain the employees of that party solely, and
that each party shall be solely responsible for the wages and benefits for its
employees, and that any injury which may be sustained by an employee shall be
covered under the worker's compensation insurance of the party by which he is
employed.
36
ARTICLE XXII
MISCELLANEOUS
22.01 In exercising their respective rights (including, without
limitation, the making of any determinations under this Agreement, discretionary
or otherwise) and performing their respective obligations hereunder, each of the
parties shall act in good faith and in a commercially reasonable manner; except
that with respect to (a) the determination of Incompatible Conduct or the cure
thereof by ABI, (b) ABI's decision to terminate distribution of a Modified
Product (as described in Section 11.08 above); (c) ABI's judgment made pursuant
to Section 7.03(a)(i) or (b); and (d) ABI's decision whether to provide approval
as contemplated pursuant to Section 7.03(a)(v) above; ABI shall only be required
to act in good faith and need not act in a commercially reasonable manner.
22.02 If any provision of this Agreement shall be determined to be
illegal and unenforceable by any court of law or any competent governmental or
other authority, the remaining provisions shall be severable and enforceable in
accordance with their terms so long as this Agreement without such terms or
provisions does not fail in its essential commercial purpose or purposes. The
parties will negotiate in good faith to replace any such illegal or
unenforceable provision or provisions with suitable substitute provisions that
will maintain the economic purposes and intentions of this Agreement.
22.03 Failure by either party to insist on strict performance by the
other of any term, condition or obligation set forth in this Agreement shall not
be deemed a waiver of the same or any similar breach, and no waiver of any
provision hereof shall be effective unless in writing, specifying the provision
to be waived.
22.04 This Agreement is entered into in the State of Missouri and will
be governed by and construed under the laws of Missouri, including the Uniform
Commercial Code as in effect in the State. The parties agree that any legal or
equitable action or proceeding with respect to this Agreement shall be brought
in the United States District Court for the Eastern District of Missouri (or if
such court does not have jurisdiction, in any court of general jurisdiction in
the County of St. Louis, Missouri) or in
37
the United States District Court in Multonomah County, Oregon (or if such court
does not have jurisdiction, in any court of general jurisdiction in Oregon).
22.05 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior or
contemporaneous agreements in regard thereto. This Agreement cannot be altered
or modified except by an agreement in writing signed by authorized
representatives of both parties and specifically referring to this Agreement.
The section headings are inserted for convenience only and are in no way
intended to define or limit the scope, extent or intent of any provision of this
Agreement.
22.06 Nothing in this Agreement, express or implied, is intended or
shall be construed to give any Person other than the parties to this Agreement,
and the indemnitees specified in Article XIV or their respective successors or
assigns any legal or equitable right, remedy or claim under or in respect of any
agreement or any provision contained herein.
22.07 This Agreement may be executed in one or more counterparts and
shall be the valid and binding agreement of the parties when the counterparts of
this Agreement have been duly executed and delivered by each party hereto.
22.08 CBA acknowledges that ABI is reviewing changes to the procedures
by which Affiliated Wholesalers and Alliance Wholesalers generate and transmit
orders for Products. ABI may request from CBA reimbursement of out of pocket
costs incurred to analyze or implement such change, and CBA shall reasonably
consider such requests. CBA and ABI acknowledge that implementing such changes
may require an amendment hereto and each party shall reasonably consider such
amendment.
38
IN WITNESS WHEREOF, this Agreement is executed on behalf of the parties
by their duly authorized representatives as of the day and year first above
written.
ANHEUSER-XXXXX, INCORPORATED CRAFT BRANDS ALLIANCE LLC
By:/s/ XXXXX X. XXXXXXXXXXX By: /s/ XXXXX XXXXXXXXXX
------------------------ ----------------------------
Xxxxx X. Xxxxxxxxxxx Xxxxx Xxxxxxxxxx
Vice President - Administration Chief Executive
Officer and President
Redhook and Xxxxxx hereby jointly and severally irrevocably guarantee
the performance by CBA of its obligations hereunder. Each of Redhook and Xxxxxx
agree that this is a guaranty of performance and not of payment and waive any
defense that may be available to it with respect to this guaranty other than
performance. In the event ABI is required to return any payment made to it by
CBA, this guaranty shall be reinstated with respect to such payment.
REDHOOK ALE BREWERY, INCORPORATED
By:/s/ XXXX XXXXXXX
--------------------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
XXXXXX BROTHERS BREWING COMPANY
By: /s/ XXXX XXXXXX
--------------------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
2
211010.6/TDL
211010.6/TDL
ATTACHMENT A
STAGING COSTS AND COOPERAGE HANDLING COST MODIFICATION
For each calendar year during the Term, the Staging Costs and the Cooperage
Handling Costs shall each be recalculated each January to be an amount equal to:
*
where:
* = the Staging Costs or the Cooperage Handling Costs, as
applicable, in effect for the prior calendar year
* = the percentage change (in decimal fraction form) in the Average
Budgeted Hourly Fully Loaded Labor Rate for beer packaging and
shipping laborers, budgeted for the calendar year for which the
calculation is made, as compared to the amount which had been
budgeted for the prior calendar year.
The Average Budgeted Hourly Fully Loaded Labor Rate for each calendar year shall
be determined by taking the arithmetic average of the Budgeted Hourly Fully
Loaded Labor Rates for the subject year (as set forth in the annual budget in
the CMS/SAP system) in effect on December 31 preceding the subject year for all
ABI breweries in the Territory.
EXAMPLE:
2004 Package Staging Cost *
Budgeted Avg. Fully Loaded Labor Rate
2004 *
2005 *
% change *
2005 Package Staging Cost * *
2004 Cooperage Handling Cost *
Budgeted Avg. Fully Loaded Labor Rate
2004 *
2005 *
% change *
2005 Cooperage Handling Cost * *
* CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT B
INCOMPATIBLE CONDUCT
A. Examples of activities that constitute Incompatible Conduct:
(1) Advertising by CBA, Kona, Redhook or Xxxxxx directed at underage
drinkers;
(2) Production by Kona, Redhook or Xxxxxx of a high alcohol beer; provided
that high alcohol beer shall not include production of a beer whose
alcohol content does not exceed the alcohol content of (a) a similar
Product currently distributed hereunder or (b) a product that is made or
distributed currently by ABI;
(3) Advertising by CBA, Kona, Redhook or Xxxxxx based upon the high alcohol
content of its beer;
(4) Statements by CBA, Kona, Redhook or Xxxxxx defaming ABI or its products;
(5) Criminal activities by Kona, Redhook or Xxxxxx or their senior
executives; and
(6) Quality and wholesomeness of Product is materially affected, taking into
account the permitted tolerances and Product specifications.
B. Examples of activities that do not constitute Incompatible Conduct:
(1) Poor operating results by CBA, Kona, Redhook or Xxxxxx;
(2) Poor performance of CBA, Kona, Redhook or Xxxxxx products or
unsuccessful product introduction by CBA, Kona, Redhook or Xxxxxx;
(3) Introduction by CBA, Kona, Redhook or Xxxxxx of products directly
competitive with ABI products;
(4) Any activity the sole effect of which on ABI is to decrease the value of
ABI's investment in Redhook or Xxxxxx or the value of ABI's distribution
rights of CBA products; and
(5) Isolated, non-repetitive, inadvertent minor regulatory infractions.
PAGE 1 0F 2
ATTACHMENT C
METHODOLOGY TO ANNUALLY MODIFY THE
INCREMENTAL MARGIN, MARGIN,
AND THE INVOICING COSTS
For each calendar year during the Term, the Incremental Margin, Margin and the
Invoicing Costs shall each be recalculated (rounding to the nearest one
one-hundredth of a cent) each January to be an amount equal to:
*
where:
* = the Incremental Margin, Margin or the Invoicing Costs, as
applicable, in effect for the prior calendar year
* = the forecasted annual rate of change (in per cent) in the "GDP
Deflator (Implicit)" for the subject calendar year, as published
by DRI/McGraw Hill division of Standard & Poor's Corporation in
the "Inflation Summary" table in the October issue in the
preceding year of REVIEW OF THE U.S. ECONOMY (or such other
index or publication as may be reasonably acceptable to CBA and
ABI if such index or publication is no longer published).
EXAMPLE:
Assume the October 2004 issue of REVIEW OF THE U.S. ECONOMY, shows the Inflation
Summary table as follows:
Years
-----------------------------
2001 2002 2003 2004
-----------------------------
GDP Deflator (Implicit) ................... 1.6 1.7 2.1 2.0
The 2005 Base Margin would be calculated by multiplying the 2004 Base Margin
*
*
*
The 2005 Incremental Margin would be calculated by multiplying the 2004
Incremental Margin
*
*
*
* CONFIDENTIAL TREATMENT REQUESTED
PAGE 2 OF 2
The 2005 Invoicing Costs would be calculated by multiplying the 2004 Invoicing
Costs (* per Pallet Lift) by 1.020
*
* CONFIDENTIAL TREATMENT REQUESTED
2
ATTACHMENT D
NON-ALLIANCE WHOLESALERS
Xxxxxx Distributing
000 X. Xxxxxx
Xxxxxx, Xxxxx 00000
(Redhook products only)
ATTACHMENT E
PROCEDURES RELATING TO PRICING MATTERS
1. *
2. *
3. *
4. *
5. *
* CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT F
FACTORS NEEDED TO EVALUATE NEW PRODUCTS
CBA must provide at least the following information to ABI in order for ABI to
make an evaluation of New Product:
1. Proposed Name of New Product
2. Proposed New Product Packages
3. Proposed New Product Label
4. Proposed Ingredients and Proposed Suppliers
5. Alcohol Content
6. Beginning Gravity
7. IBU
8. Comprehensive Marketing Plan
9. Consumer Research
