EXHIBIT 10.1
LICENSING AGREEMENT
BY AND BETWEEN
XXXXXX BROTHERS BREWING COMPANY
AND
REDHOOK ALE BREWERY INCORPORATED
February 1, 2003
LICENSING AGREEMENT
By: Xxxxxx Brothers Brewing Company, an Oregon corporation ("Xxxxxx")
000 X. Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
and: Redhook Ale Brewery Incorporated, a Washington corporation ("Redhook")
00000 XX 000xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Date: February 1, 2003
This license agreement ("Agreement") is entered into by and between
Xxxxxx and Redhook as of the date first set forth above.
BACKGROUND
X. Xxxxxx owns certain recipes, yeast formulas, know-how, brewing
processes, and other trade secrets (collectively, the "Trade Secrets") and
certain trademarks and related goodwill related to its Hefeweizen style
hand-crafted beer (the "Product"). Xxxxxx markets and distributes the Product
throughout the United States.
B. Redhook has a manufacturing and packaging facility in Portsmouth, New
Hampshire (the "Redhook Facility") and is in the business of manufacturing and
packaging beer products at the Facility.
X. Xxxxxx and Redhook desire for Redhook to manufacture, bottle, and
package the Product at the Facility and to advertise, market, and distribute the
Product for sale in certain portions of the Eastern United States through the
distribution system established by Anheuser-Xxxxx, Inc. on the terms and
conditions set forth herein.
AGREEMENT
Based on the mutual promises set forth below and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Xxxxxx and Redhook hereby agree as follows:
1. Grant of License.
1.1 Trade Secrets. Upon the terms and conditions hereinafter set
forth, Xxxxxx hereby grants to Redhook, and Redhook hereby accepts, a
non-exclusive, non-transferable license to use the Trade Secrets solely to brew
the Product at the Facility. Redhook may not use the Trade Secrets for any other
purpose. Without limiting the foregoing, Redhook may not use the Trade Secrets
to sell the Product outside the Territory and may not use the Trade Secrets to
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sell any products within the Territory following the expiration or earlier
termination of this Agreement.
1.2 Trademarks. Upon the terms and conditions hereinafter set forth,
Xxxxxx hereby grants to Redhook, and Redhook hereby accepts, a non-exclusive,
non-transferable sub-license to use the trademarks set forth on Exhibit A,
attached hereto (the "Trademarks"), solely in connection with the packaging,
promotion, sale, and distribution of the Product in those states set forth on
Exhibit B, attached hereto (the "Territory"). All packaging, advertising,
bottling, labeling, or other uses of the Trademarks shall be approved in writing
by Xxxxxx before any use of such Trademark, which approval shall not be
unreasonably withheld, conditioned, or delayed. Redhook may not use the
Trademarks for any other purpose including (without limitation) in connection
with the sale or promotion of any product other than the Product. Without
limiting the foregoing, Redhook may not sell the Product or use the Trademarks
outside the Territory and may not use the Trademarks within the Territory
following the expiration or earlier termination of this Agreement.
1.3 Good Will. Redhook recognizes the value of the good will
associated with the Trademarks. Redhook agrees that its use of the Trademarks
shall inure to the benefit of Xxxxxx.
1.4 Exclusive Appointment. Subject to the terms and conditions of this
Agreement, Xxxxxx hereby grants Redhook the exclusive right to manufacture,
bottle, package, and distribute the Product for sale in the Territory. Xxxxxx
will neither distribute nor grant any other person the right to distribute
Product in the Territory. If Redhook has not obtained all licenses and approvals
necessary and commenced selling Product in any state located within the
Territory by the third anniversary date of this Agreement, Xxxxxx may modify the
Territory to eliminate such state from the Territory if (a) Xxxxxx notifies
Redhook of Xxxxxx'x intent to modify the Territory to eliminate a state (the
"Elimination Notice") and (b) Redhook fails, within 45 days from the date of the
Elimination Notice, to obtain all necessary licenses to sell the Product in the
state or fails make any sales of Product in such state.
1.5 Expansion of Territory. The parties acknowledge that they may in
the future determine that is in their mutual benefit to expand the Territory to
include other regions or states. Such expansion may only occur if the parties
agree in writing, which agreement will be subject to each party's sole and
absolute discretion. The foregoing does not give Redhook any rights if Xxxxxx
elects to distribute the Product through other distributors.
2. Product Quality Control.
2.1 The objectives of this Section 2 are to assure that (i) the
physical and sensory characteristics of the Product brewed and packaged by
Redhook will be essentially the same as the Hefeweizen beer brewed and packaged
by Xxxxxx in its Portland, Oregon facility and (ii) the Product is free of any
microbiological contamination.
2.2 Information regarding the process conditions, quality control
procedures, equipment and materials that are required for the Product will be
provided by Xxxxxx (collectively, the "Formula") as part of the Trade Secrets.
Redhook understands and agrees that changes in the Formula may be required by
Xxxxxx from time to time in order to attain such physical and sensory
characteristics.
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2.3 Redhook shall use all necessary ability, know-how, methods, and
means to brew, handle, package, and store the Product strictly in accordance
with the Formula. No change in the Formula shall be made by Redhook without
Xxxxxx'x prior written consent.
2.4 Xxxxxx shall have the right to inspect and approve the Facility
and equipment used by Redhook to brew, handle, package, and store the Product,
as well as any ingredients, processing aids, and containers used in brewing or
packaging the Product; and to taste samples of the Product at the Facility.
Promptly following the date of this Agreement, Xxxxxx shall have the right to
send to the Facility a qualified technical person(s) employed by Xxxxxx for a
reasonable period of time as determined by Xxxxxx to (a) communicate the Formula
to Redhook, (b) train selected person(s) employed by Redhook to use the Formula,
and (c) test the Product prior to the initial distribution to determine whether
the Product complies with the objectives set forth in Section 2.1. If Xxxxxx
does not approve of the Product within 90 days of the Agreement, Xxxxxx may
terminate this Agreement upon written notice to Redhook. The technical
assistance shall be paid for by Xxxxxx for the initial assistance. For any
additional technical assistance requested by Redhook, Redhook shall pay all
travel and employee costs related to the assistance.
2.5 Commencing with the first packaging run of the Product at the
Facility, following the initial approval of the Product set forth in Section
2.4, and thereafter at Xxxxxx'x request, Redhook shall provide to Xxxxxx in
Portland, Oregon, at Redhook's cost, samples of (a) Product packaged by Redhook
and (b) brewing and packaging materials. Redhook shall bear the cost of shipment
for said samples. If Xxxxxx detects a problem which calls for a more complete
sampling, Redhook shall send samples from one or more of the various stages of
the Product brewing or packaging as Xxxxxx shall request from time to time.
Redhook shall also, at Xxxxxx'x request, provide Xxxxxx with the results of
tests and analyses, as requested by Xxxxxx from time to time, which shall
initially include those reports described on Exhibit D, attached hereto. As
appropriate, Xxxxxx will furnish its comments and recommendations to Redhook
with respect to the samples and test results submitted by Redhook, and Redhook
shall follow said comments and recommendations, which may include modifying its
storage, handling, and packaging procedures pursuant to Xxxxxx'x request;
provided, that Redhook shall not be required to incur unreasonable amounts of
additional costs (except as otherwise provided in this Agreement or as required
to maintain the Facility in the condition it is in at the time it is approved,
reasonable wear and tear excepted) and provided that if Redhook fails to follow
said comments or recommendations, Xxxxxx may terminate this Agreement upon
notice to Redhook.
2.6 If Xxxxxx disapproves of the taste of the Product being brewed
and/or packaged by Redhook, it shall so notify Redhook in writing and the
parties shall immediately cooperate with each other in attempting to resolve
such taste problem. The first step shall be a meeting to be held within
seventy-two (72) hours of notification, between a senior brewery official from
each of Xxxxxx and Redhook. Xxxxxx may require Redhook to and Redhook will
immediately suspend shipment of the Product prior to such meeting. Xxxxxx will
provide Redhook with full technical and analytical support to assist Redhook in
identifying the problem and determining the correct procedures for resolving the
same, including, if appropriate, blending with other batches of the Product. If
such efforts do not result in a prompt resolution of the taste problem, Xxxxxx
may require Redhook to recall or destroy such Product, or use such Product in
another mutually agreeable manner. Upon notice to Redhook, Xxxxxx may, at its
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expense, have a representative visit the Facility to suggest changes and to
perform testings of the Product. All costs related to such suspension, recall
and destruction shall be borne by Redhook. Until the problem is resolved,
Redhook shall undertake the complete sampling described in Subsection 2.5, and
only the Product which Xxxxxx has approved shall be packaged and shipped. Such
approval shall be on the basis of taste tests conducted by Widmer
representatives in which samples of the Product in question are compared to
samples previously approved by Xxxxxx. Xxxxxx'x determination in such matters
shall be final.
2.7 If the taste problem described in Subsection 2.6 is not corrected
within ninety (90) days following the date on which Xxxxxx required Redhook to
discontinue packaging and shipping of the Product, then Xxxxxx shall have the
option to terminate this Agreement by giving Redhook notice of such termination.
3. Brand Management. Redhook will comply with the brand management
guidelines set forth on Exhibit C, attached hereto. Redhook will employ a brand
manager (the "Brand Manager") who will be primarily responsible for ensuring
Redhook's compliance with the brand management guidelines. The initial Brand
Manager is Xxxx Xxxxxxxx and any replacement Brand Manager shall be a
knowledgeable and experienced beer brand manager with comparable qualifications
as Xx. Xxxxxxxxx. Redhook shall introduce any replacement brand manager in
advance of employment. Xxxxxx may develop an incentive program to compensate the
Brand Manager for sales of the Product. Redhook will cooperate with Xxxxxx with
respect to such program, including (without limitation) paying bonuses to the
Brand Manager to the extent funded by Xxxxxx.
4. Royalties.
4.1 Royalties. Redhook will pay Xxxxxx royalties (collectively
"Royalties") as follows:
(a) $1.00 per case for sales of up to 165,360 cases; and
(b) $1.25 per case for sales in excess of 165,360 cases.
4.2 The Royalty rates set forth above shall be adjusted as follows:
(i) for purposes of this Section 4.2, "Net Sales Price" equals
the weighted average gross wholesale price charged by
Redhook for the Product, minus the weighted-average excise
taxes, Margins, and discounts. "Margins" are those fees
identified as "Margins" payable by Redhook to
Anheuser-Xxxxx, Inc. ("ABI") under its Distribution
Agreement with ABI. The "Base Net Sales Price" shall be Net
Sales Price upon which increases or decreases are computed.
The initial Base Net Sales Price shall be the Net Sales
Price as of December 31, 2003. Whenever an adjustment is
made under this Section 4.2, the Net Sales Price which
triggered the increase or decrease shall be the Base Net
Sales Price for the next adjustment.
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(ii) for aggregate increases or decreases in the Net Sales Price
after December 31, 2003, which are greater than a 2%
increase or decrease over the Base Net Sales Price then in
effect, the Royalty Rates will increase or decrease by the
same percentage change; provided, however, that in no event
will the Royalty Rates decrease below the amounts set forth
in Section 4.1 above.
4.3 The Net Sales Price shall be calculated as of December 31 of each
calendar year and compared to the Net Sales Price as of December 31 of the
immediately preceding year. Any Royalty rate adjustment shall be applied to all
Product delivered in the calendar year immediately following the calendar year
the Net Sales Price increases or decreases by at least 2%.
Example: Assume the following: During the calendar year of 2004, (a) Redhook
sells 100,000 cases of Product in the Territory for a weighted average price of
$[*] per case; (b) the Margin payable to ABI is $[*] per case; and (c) the
weighted average excise tax is $0.30 per case. During the calendar year of 2005,
(x) Redhook sells 100,000 cases of Product in the Territory for a weighted
average price of $[*] per case; (y) the Margin payable to ABI is $[*] per case;
and (z) the weighted average excise tax is $0.50 per case.
(a) The Net Sales Price in 2004 is equal to the weighted average
price per case ($[*]) minus weighted average excise tax ($0.30), Margin [*], and
discounts ($[*]) = [*]
(b) The Net Sales Price in 2005 is equal to the weighted average
price per case ($[*]) minus weighted average excise tax ($0.50), Margin [*], and
discounts ($[*]) = [*]
(c) The Net Sales Price increased from 2004 to 2005 by 2% ([*]).
Because the increase is equal to or greater than 2%, the Royalties will increase
by 2% to (A) $1.02 per case for sales of up to 165,360 cases and (B) $1.28 per
case for sales of over 165, 360. These adjusted Royalty rates would apply to all
cases delivered starting January 1, 2006.
4.4 Notwithstanding any other provision in this Agreement, Redhook
will pay Xxxxxx no less than the following Royalties regardless of the number of
cases sold:
(a) In the first calendar year, the minimum Royalties will be an
amount equal to the Royalties that would have been payable by Redhook if it sold
in 2003 eighty percent of the number of cases sold by Xxxxxx in the Territory in
2002 (the "2002 Minimum Royalty").
* Confidential Treatment Requested
(b) In each subsequent calendar year, the minimum Royalties will
be the greater of (i) the 2002 Minimum Royalty and (ii) an amount equal to the
Royalties that would have been payable by Redhook if it sold in such calendar
year eighty percent of the number of cases of Product it sold in the Territory
in the immediately preceding calendar year.
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4.5 Reports. On or before the thirtieth (30th) day of the calendar
month following the end of each calendar quarter, Redhook shall pay to Xxxxxx
Royalties accrued in such calendar quarter. Such payment shall be accompanied by
a report setting forth (a) the aggregate actual sales volume of the Product by
Redhook for such period, (b) the Royalties payable hereunder, and (c) such other
detail as Xxxxxx may reasonably request.
4.6 Partial Periods. If a period for which Royalties are due is less
than a full calendar quarter or calendar year, then the obligation for such
period shall be adjusted based on the number of days in such period relative to
the number of days in such calendar quarter or calendar year.
4.7 Books and Records. Redhook shall maintain such books and records
as are necessary to establish the accuracy of the reports submitted under
Section 4.4 for a period of three years from the date of submission of such
reports. For purposes of verifying the accuracy of Royalties paid by Redhook
hereunder, such books and records shall be made available to Xxxxxx during
regular business hours, at the location where such books and records are
normally maintained, for audit by Xxxxxx or its designee. Such audits may be
made once during each six-month period. The costs incurred in connection with
the audit shall be paid by Xxxxxx; provided, however, that Redhook shall pay
such fees and expenses if the audit reveals an underpayment of royalties of more
than five percent in any calendar quarter.
5. Rights in Trade Secrets and Trademarks.
5.1 Trade Secrets and Trademarks. Redhook hereby acknowledges Xxxxxx'x
right in the Trade Secrets and Trademarks, and will not at any time during the
term of this Agreement or thereafter do or cause to be done any act or thing in
any way impairing or tending to impair such rights. Redhook acknowledges and
agrees that it will not, nor will it assist another party to, dispute Xxxxxx'x
rights in the Trade Secrets and Trademarks. Redhook acknowledges that its use of
the Trade Secrets and Trademarks licensed hereunder shall not create any right,
title, or interest in or to the Trade Secrets or Trademarks licensed hereunder
in Redhook. Redhook shall neither sublicense nor authorize nor represent that it
is empowered to sublicense or authorize any other party to use the Trade Secrets
or Trademarks nor in any manner represent that it has any ownership or
sublicensing rights in the Trade Secrets or Trademarks. Redhook agrees to assist
Xxxxxx and execute such documents as Xxxxxx may reasonably request to the extent
necessary to protect any of Xxxxxx'x rights in the Trade Secrets and Trademarks.
5.2 Trademark Registration. Redhook shall neither apply at any time
anywhere in the world for any trademark protection in its name for any of the
Trademarks, nor file any application or other document with any governmental
authority or take any other action which could affect or is inconsistent with
Xxxxxx'x rights in the Trademarks, nor aid nor abet any third party in doing so.
5.3 Notices. Redhook agrees that the Product or Materials shall bear
appropriate proprietary legends or notices as specified by Xxxxxx from time to
time.
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5.4 Improvements; Ownership. Improvements to the Trade Secrets or the
Trademarks created by either party during the term of this Agreement shall, from
the time of conception or development, be the property of Xxxxxx.
5.5 Representations and Warranties. Xxxxxx represents and warrants
that (a) it has the right to use the Trade Secrets and Trademarks and (b) it has
the right to license the Trade Secrets and the Trademarks to Redhook as provided
under this Agreement. Xxxxxx shall indemnify and hold Redhook and its
affiliates, successors, and assigns harmless from and against any and all
charges, actions, and proceedings (including investigations) resulting from
Xxxxxx'x breach of such representations and warranties.
6. Infringement.
6.1 Infringement By Third Parties. Redhook shall notify Xxxxxx
promptly in writing of any suspected infringement or unauthorized use of the
Trade Secrets or Trademarks by third parties that may come to its attention.
6.2 Infringement By Redhook. Redhook shall notify Xxxxxx promptly in
writing of any and all allegations or claims by others which may come to its
attention that the use of the Trade Secrets or Trademarks infringes or violates
a patent, copyright, trademark, or trade secret, or other proprietary right of
any third party, or violates or is contrary to any applicable law, regulation,
order, consent, or the like. Xxxxxx may, but is not obligated to, procure for
Redhook the right to continue to use the matter which is the subject of the
claim, or to modify the same so that it becomes non-infringing. If Xxxxxx shall
elect, in its sole discretion, to undertake and conduct the defense of any suit,
action, or proceeding arising out of the use by Redhook of the Trade Secrets or
Trademarks, Redhook shall cooperate in such defense provided Xxxxxx shall pay
any out-of-pocket expenses incurred by Redhook in connection therewith. No
settlement of any such claim or suit shall be made without the prior written
consent of Xxxxxx.
7. Compliance with Law.
7.1 Facility. Redhook represents and warrants that the Facility and
manufacturing practices comply with, and will continue to comply with all
applicable laws, ordinances, regulations, and health and safety standards of all
applicable regulatory bodies. Xxxxxx represents and warrants that any processing
instructions, product formula, and packaging instructions furnished by it will
comply with applicable federal, state, and local laws, ordinances, regulations,
and health and safety standards.
7.2 Operations. Both Xxxxxx and Redhook shall comply with all
applicable rules and regulations of the BATF, and any other regulatory agency
that has jurisdiction over the Product or the Facility.
7.3 Cooperation. The parties will cooperate with each other to provide
and retain any regulatory, taxation, or other reports or information required by
BATF, or any other regulatory agency.
8. Confidentiality.
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8.1 Access to Information. Each party acknowledges that during the
term of this Agreement it may have access to nonpublic information about the
existing or proposed business or products ("Confidential Information") of the
other party (the "Disclosing Party") . Confidential Information includes,
without limitation, (i) information marked or otherwise designated by the
Disclosing Party as confidential, (ii) information that the Disclosing Party
does not designate as public information, and (iii) information provided to the
Disclosing Party by third parties that it is obligated to keep confidential.
Confidential Information may be written, oral, embodied in products (including
the Product), or in other forms. Confidential Information does not include
information that is or becomes publicly known, other than as a result of each
party's actions or failure to prevent disclosure. The fact that portions of
Confidential Information may be publicly available shall not affect each party's
obligations with respect to the remaining portion or with respect to the
particular formulation or compilation disclosed by the Disclosing Party.
8.2 Non-Disclosure and Non-Use. Neither party shall disclose to others
or use any Confidential Information of the Disclosing Party, except as required
to perform its obligations under this Agreement. Either party may, however,
disclose Confidential Information to its employees and agents who need to know
the information in connection with this Agreement, who are made aware of its
confidential nature, and who are obligated to comply with the restrictions
imposed by this Section 8. A default by a Recipient's employee or independent
contractor of the provisions set forth under this Agreement will be a default of
the Recipient. Each such employee of Redhook given access to Xxxxxx'x
confidential information shall execute and deliver to Xxxxxx a form of the
confidentiality and non-disclosure agreement attached hereto as Exhibit E.
8.3 Return. Except as set forth below, upon the expiration or
termination of this Agreement, the parties shall promptly destroy or return to
the Disclosing Party, as the Disclosing Party may direct, all tangible materials
provided to it by the Disclosing Party that embody Confidential Information and
shall erase or delete all such Confidential Information embodied in any
magnetic, optical, or similar medium or stored or maintained on any information
storage and/or retrieval device. Each party may retain one copy of Confidential
Information for archival and regulatory purposes.
8.4 Remedies. In the event of a default under this Section, the
Disclosing Party shall be entitled to a temporary restraining order, preliminary
injunction, and other injunctive relief, in addition to other available
remedies, including damages.
8.5 Duration. The obligations set forth in this Section shall continue
in effect beyond the term of this Agreement and for so long as each party
possesses Confidential Information.
8.6 Reference to Xxxxxx. Redhook acknowledges and agrees that the
contents of this Agreement are Confidential Information of Xxxxxx and that
Redhook may not disclose the contents of this Agreement except as required by
applicable law. Without limitation, Redhook may not during the term of this
Agreement or at anytime thereafter use the Trademarks in its marketing of any
products other than the Product, such as referring to Redhook as the current or
previous manufacturer of the Product; provided, however, that the label on the
packaging of the
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Product may state that the Product is "Manufactured and Bottled by Redhook under
the Supervision of Xxxxxx," or such other statements as may be approved by the
parties in writing.
9. Indemnification. Each party (the "Indemnifying Party") shall indemnify
and hold the other party, its affiliates and its successors and assigns (as to
each, an "Indemnified Party") harmless from and against any and all charges,
actions, and proceedings (including investigations) arising out of a breach of
this Agreement by the Indemnifying Party, including (without limitation) product
liability claims against the Indemnified Party, including all reasonable
expenses (including attorney fees) incurred by such Indemnified Party as a
result thereof.
10. Insurance. Each party shall keep in force at all times while any
Product is being offered for sale, general liability insurance with both
"products" and "contractual" coverage for aggregated claim in the minimum amount
of $5,000,000, and to furnish the other a certificate from a financially
responsible insurance company evidencing that such insurance is in force, naming
the other party as an additional insured, and providing that such coverage may
not be cancelled or materially changed without thirty (30) days prior written
notice to the other party. Any such policy of insurance shall contain a waiver
of subrogation.
11. Warranties.
11.1 Warranty of Authority. Each of the parties hereto warrants and
represents to the other party that (a) it has the full right, power and
authority to enter into this Agreement and to carry out its obligations
hereunder and (b) that it has no obligations to any other party that is
inconsistent with its obligations under this Agreement.
11.2 DISCLAIMER OF WARRANTY. EXCEPT AS PROVIDED IN SECTIONS 5.5, 7.1,
AND 11.1 ABOVE: (A) NO PARTY MAKES ANY WARRANTIES OR REPRESENTATIONS WHATSOEVER,
WHETHER EXPRESS OR IMPLIED, HEREUNDER AND, WITHOUT LIMITATION, NO PARTY MAKES
ANY WARRANTY OF TITLE, FITNESS FOR A PARTICULAR PURPOSE, OR MERCHANTABILITY; AND
(B) NO PARTY MAKES ANY REPRESENTATION OR WARRANTY THAT THE MANUFACTURE OR SALE
OF THE PRODUCT HEREUNDER BY ANY PERSON OR ENTITY WILL NOT CONSTITUTE AN
INFRINGEMENT OF THE PATENT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHTS OF
OTHERS. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OR LOST REVENUES OR PROFITS.
12. Termination.
12.1 Term. The term of this Agreement shall commence on the date first
set forth above and continue until the expiration of the fifth anniversary date
thereof unless earlier terminated or extended as set forth herein. The term of
this Agreement will automatically renew for additional consecutive one-year
periods unless either party notifies the other of its desire to have the term
expire at the end of the then existing term at least 150 days prior to such
expiration.
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12.2 Termination Without Cause. Either party may terminate this
Agreement without cause upon notice to the other party upon no less than 150
days prior written notice.
12.3 Termination for Cause. Either party may terminate this Agreement
upon written notice given to the other party following the occurrence of any of
the following events:
12.3.1 The other party fails to timely make any payment required
under this Agreement for a period of 10 days following written notice thereof by
the nonbreaching party; provided that, without limiting any of Xxxxxx'x other
rights or remedies, if Redhook fails to timely make any payment required under
this Agreement for a period of 15 days following written notice thereof, Xxxxxx
may assess interest at 1.25% per month and a late charge of 5% of the amount
owed.
12.3.2 The other party fails to perform any other obligation
under this Agreement and such failure remains uncured for a period of 30 days
following written notice thereof by the nonbreaching party.
12.3.3 The other party is given notice of a breach more than two
times in any twelve month period (regardless of whether such breach is cured).
12.3.4 The other party becomes the subject of insolvency or
bankruptcy proceedings, ceases doing business, makes an assignment of assets for
the benefit of creditors, dissolves, or has a trustee appointed for all or a
substantial portion of such party's assets.
12.3.5 Any government authority invalidates any portion of this
Agreement.
12.3.6 Either party finds that complying with any law or
regulation relating to production of the Product would be commercially
unreasonable and failure to comply with the law or regulation would subject such
party or any of its personnel to a monetary or criminal penalty.
12.3.7 An event of termination occurs as expressly provided
elsewhere in this Agreement.
12.4 Failure to Purchase Products. Xxxxxx may terminate this Agreement
upon 30 days' prior written notice if Redhook fails in two consecutive calendar
quarters to sell in the Territory quantities of Product equal to at least 80% of
the quantity of the Product sold in the Territory for the comparable quarter of
the preceding calendar year.
12.5 Survival of Rights and Obligations. Termination of this Agreement
shall not prejudice any rights of either party hereto against the other which
may have accrued up to the date of termination. In addition, all covenants
respecting indemnification, confidentiality, warranties, termination, and
continuing liability for amounts payable hereunder shall survive the termination
of this Agreement as expressly set forth elsewhere herein.
12.6 Repurchase upon Termination. If Xxxxxx terminates this Agreement
without cause or Redhook terminates this Agreement for cause as defined in
Section 12.3, Xxxxxx shall (a) purchase from Redhook at Redhook's direct out of
pocket costs, the raw materials inventory
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that is intended to be used by Redhook to manufacture the Product and is
purchased by Redhook prior to the date the notice of termination was delivered
and (b) assume the executory portions of the obligations of Redhook for any
noncancellable contracts to purchase such raw materials; provided that the
quantity of raw materials must be reasonable and shall not exceed the amount
reasonably necessary to the quantity of the Product manufactured over the 120
days period immediately preceding such termination. If this Agreement expires or
is terminated for any other reason, no purchase obligation shall exist.
12.7 License Termination. Upon expiration or any termination, (a) all
rights granted to Redhook with respect to the Trade Secrets or Trademarks, as
appropriate, shall revert to Xxxxxx; thereafter, (b) Redhook shall (i) refrain
from all further use of the Trademarks and (ii) take any and all action that
Xxxxxx may request to confirm termination of its license to use the Trademarks;
and (c) Redhook shall (at Xxxxxx'x direction) either destroy or return to Xxxxxx
all copies of labels, packaging, or other materials on which a Trademark may be
affixed and all tangible copies of Trade Secrets including any yeast cultures
provided.
12.8 Rights Upon Termination. Upon the termination of this Agreement
in its entirety, the grant of the license to use the Trade Secrets and
Trademarks hereunder shall cease but the following provisions shall survive:
Section 4, Section 6, Section 7, Section 8, Section 9, Section 11.2, Section 13,
Section 14, Section 15, and Section 16. Termination or expiration of this
Agreement shall not relieve any party from performance of any obligation due nor
affect any rights accrued prior to the effective date of such termination or
expiration.
13. Notices. Any notice, request or demand to be given or made under
this Agreement shall be in writing and shall be deemed to have been duly given
or made (i) upon delivery, if delivered by hand and addressed to the party for
whom intended at the address listed below, (ii) ten (10) days after deposit in
the mails, if sent certified or registered air mail (if available) with return
receipt requested, or five (5) days after deposit if deposited for delivery with
a reputable courier service, and in each case addressed to the party for whom
intended at the address listed below or (iii) upon completion of transmission,
if sent by facsimile transmission to the party for whom intended at the fax
number listed below, provided that a copy of the facsimile transmission is
promptly deposited for delivery by one of the methods listed in (i) or (ii)
above:
If to Xxxxxx, to:
Xxxxxx Brothers Brewing Company
000 X. Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxx Xxxxxxxxxx
Fax: 000-000-0000
If to Redhook, to:
Redhook Ale Brewery Incorporated
00000 XX 000xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx
Fax: 000-000-0000
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Any party may change its address and/or fax number for the purposes of this
Section 13 by written notice hereunder given to the other parties at least ten
(10) days prior to the effective date of such change.
14. Noncompete.
14.1 During the term of this Agreement, Redhook shall not in the
Territory except as set forth in Section 14.2 manufacture, advertise, market, or
distribute, whether for itself or for others, (a) any Product that is labeled or
advertised as a "Hefeweizen" or any confusingly similar name or xxxx or (b) any
Hefeweizen product that is similar to the Product. A "Hefeweizen" product is a
product that is substantially similar to the following: beer brewed with 25 or
greater percentage of malted wheat in the grist, then kegged or packaged without
filtration, resulting in a finished product with yeast remaining in the final
package at levels of above 1 million cells per milliliter, and with turbitity
levels above 100 NTU. Following the expiration or earlier termination of this
Agreement, Redhook shall cease making the Product and shall not thereafter
manufacture, advertise, market, or distribute the Product or any other product
that uses any of the Trade Secrets.
14.2 The parties acknowledge that Redhook currently markets and sells
its own Hefeweizen brand beer (the "Redhook Hefeweizen Product") in all or
portions of the Territory. Xxxxxx and Redhook intend for Redhook to market and
sell the Product on a state-by-state basis following the commencement of this
Agreement and for Redhook to stop selling and marketing the Redhook Hefeweizen
Product as the Product is established in each state. Accordingly, during the
term of this Agreement, Redhook shall not advertise, market, or distribute,
whether for itself or for others, the Redhook Hefeweizen Product (a) in any
state within the Territory beginning sixty (60) days following the first sale of
the Product in such state and (b) in any portion of the Territory beginning one
year after the date of this Agreement even if the Product has not been sold in
every state within the Territory.
15. Cooperage. During the term of this Agreement, Redhook may use the
Xxxxxx cooperage containers currently located in the Territory for reuse. Xxxxxx
will cooperate with Redhook in causing the existing inventory of cooperage
located in the Territory to be returned to the Facility at Redhook's expense.
Within thirty days following the date of this Agreement, Xxxxxx will pay Redhook
any deposits paid to Xxxxxx by such wholesalers. During the term of this
Agreement, Redhook will refund to the wholesalers such deposits after the
cooperage has been returned in accordance with Xxxxxx'x past practices. At the
expiration or earlier termination of this Agreement, Redhook shall (a) at its
expense, deliver the cooperage in its possession to the location requested by
Xxxxxx and (b) pay Xxxxxx any deposits paid to Redhook by such wholesalers.
16. Miscellaneous.
16.1 Relationship. This Agreement does not make either party the
employee, agent, or legal representative of the other party for any purpose
whatsoever. Neither party is granted any right or authority to assume or to
create any obligation or responsibility, express or implied, on behalf of or in
the name of the other party. In fulfilling its obligations pursuant to this
Agreement each party shall be acting as an independent contractor.
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Assignment. Except as set forth herein, neither party shall have the right to
assign, sublicense, subcontract, or otherwise transfer its rights and
obligations under this Agreement except with the prior written consent of the
other party. Xxxxxx does consent to Redhook's distributing the Product through
ABI distributors within the Territory and the parties acknowledge that the
Product shall be distributed pursuant to the Master Distribution Agreement
between Redhook and ABI. Each of Redhook and Xxxxxx agree that the terms and
conditions of the Distribution Agreement, including the rights and obligations
of ABI, shall apply to the Product as if it were a product of Redhook. Any
prohibited assignment shall be null and void.
16.2 Entire Agreement. THIS AGREEMENT, INCLUDING ALL ATTACHMENTS
HERETO, CONSTITUTES THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO THE
SUBJECT MATTER HEREOF, AND SUPERSEDES ALL PREVIOUS AGREEMENTS BY AND BETWEEN THE
PARTIES AS WELL AS ALL PROPOSALS, ORAL OR WRITTEN, AND ALL NEGOTIATIONS,
CONVERSATIONS, OR DISCUSSIONS HERETOFORE HAD BETWEEN THE PARTIES RELATED TO THIS
AGREEMENT.
16.3 Amendment. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled, or waived, in whole or in part, except
by written amendment signed by the parties hereto.
16.4 Severability. In the event that any of the terms of this
Agreement are in conflict with any rule of law or statutory provision or are
otherwise unenforceable under the laws or regulations of any government or
subdivision thereof, such terms shall be deemed stricken from this Agreement,
but such invalidity or unenforceability shall not invalidate any of the other
terms of this Agreement and this Agreement shall continue in force, unless the
invalidity or unenforceability of any such provisions hereof does substantial
harm to, or where the invalid or unenforceable provisions comprise an integral
part of, or are otherwise inseparable from, the remainder of this Agreement.
16.5 Counterparts. This Agreement may be executed in two or more
counterparts, and each such counterpart shall be deemed an original hereof.
16.6 Headings. Headings and subheadings in this Agreement are not
intended to and do not have any substantive content whatsoever.
16.7 Mutual Negotiation in Drafting. The parties acknowledge each
party and its counsel have materially participated in the drafting of this
Agreement. Consequently, the rule of contract interpretation, that ambiguities,
if any, in a writing be construed against the drafter, shall not apply.
16.8 Waiver. No failure by either party to take any action or assert
any right hereunder shall be deemed to be a waiver of such right in the event of
the continuation or repetition of the circumstances giving rise to such right.
16.9 Attorney Fees. In the event of a default under this Agreement,
the defaulting party shall reimburse the non-defaulting party for all costs and
expenses reasonably incurred by the non-defaulting party in connection with the
default, including, without limitation, attorney
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fees and costs (however incurred, including at trial, on appeal, and on any
petition for review). An event of "default" is a breach by either party of this
Agreement that is not cured within an applicable cure period. Additionally, in
the event any suit or action is brought to enforce or interpret any of the terms
of this Agreement, the prevailing party shall be entitled to recover from the
other party all reasonable attorney fees and costs (however incurred, including
at trial, on appeal, and on any petition for review), together with such other
expenses, costs, and disbursements as may be allowed by law.
16.10 Force Majeure. Neither party shall be liable for any delay or
default in performing its obligations if such default or delay is caused by any
event beyond the reasonable control of such party, including, but not limited
to, acts of nature, terrorism, war, or insurrection, civil commotion, damage or
destruction of production facilities or materials by earthquake, fire, storm, or
flood, labor disturbances or strikes, epidemic, materials shortages, equipment
malfunction, unavailability of raw materials, or other similar event. The party
suffering such cause shall immediately notify the other party of the cause and
the expected duration of such cause. If either party's performance is delayed by
more than 60 days pursuant to this Section, the other party may immediately
terminate this Agreement by written notice given before the affected party
resumes performance.
16.11 Governing Law. This Agreement shall be governed by the laws of
the State of Oregon, without regards to the principles of conflicts of laws
thereof. Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in Portland, Oregon in
accordance with the rules of the Arbitration Service of Portland, Inc. and
judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.
The parties have executed this Agreement as of the date first set forth
above.
XXXXXX BROTHERS BREWING COMPANY REDHOOK ALE BREWERY INCORPORATED
By: /s/ Xxxxx X. Xxxxxxxxxx By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------------- ------------------------------------
Name: Xxxxx X. Xxxxxxxxxx Name: Xxxxx X. Xxxxxxxxx
Title: COO Title: EVP/CFO/COO
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EXHIBIT A
TRADEMARKS
TRADEMARK SERIAL NO. (S)/ REG. NO. (R)
--------- ----------------------------
AMERICA'S ORIGINAL HEFEWEIZEN 1,990,522 (R)
BEER GLASS WITH LEMON
Design Only 2,238,151 (R)
HAYFA 2,173,242 (R)
IT LOOKS DIFFERENT BECAUSE WE DON'T
FILTER OUT THE FLAVOR 2,067,035 (R)
SAY HAYFA 2,173,245 (R)
SOME THINGS ARE BETTER LEFT UNFILTERED 2,067,036 (R)
TAP HANDLE Design Only 2,121,011 (R)
XXXXXX W BROTHERS and Design Common Law Use
EXHIBIT B
TERRITORY
The states of Maine, Vermont, New Hampshire, Massachusetts, Rhode Island,
Connecticut, New York, Pennsylvania, Ohio, Maryland, New Jersey, Delaware, West
Virginia, Virginia, North Carolina, South Carolina, Kentucky, Tennessee,
Georgia, Alabama, Mississippi, Florida, Wisconsin, Michigan, Indiana, Illinois,
and Washington D.C.
EXHIBIT C
BRAND MANAGEMENT GUIDELINES
PACKAGING COMPONENTS AND DESIGNS
- Packaging components are defined as all elements of the packaging including
crowns, labels, carriers, and boxes.
- Redhook may utilize Xxxxxx'x "West Coast" packaging components and
suppliers. Redhook would be responsible for shipping charges of these
components to the East.
- Redhook may have packaging components produced in the East to save shipping
charges. If Redhook chooses to have components produced in the East,
Redhook must utilize the same packaging graphics as Xxxxxx uses in the
West. And, Xxxxxx must approve the quality of the components to ensure they
are comparable to Xxxxxx'x "West Coast" components.
- Final bottle design for the East Coast bottle must be approved by Xxxxxx.
ADVERTISING CREATIVE
- Advertising creative is defined as radio commercials, print ads,
billboards, television commercials, and internet ads.
- Redhook may utilize Xxxxxx'x "West Coast" advertising creative in the East
so long as Redhook pays any incremental costs associated with running the
advertising creative in new markets (talent and usage fees, etc.).
- Redhook may develop their own advertising creative. However, this creative
must be approved by Xxxxxx Brother Brewing prior to advertising running in
market.
POINT OF SALE MATERIALS
- Point of sale materials are defined as any permanent or temporary signage
(any size or quantity) that is used to promote the Xxxxxx brand.
- Redhook may utilize Xxxxxx'x "West Coast" point of sale materials in the
East. Redhook may choose to buy POS items from Xxxxxx'x inventory at
Xxxxxx'x cost. Redhook would be responsible for shipping charges of these
materials to the East.
- Redhook may choose to use Xxxxxx'x "West Coast" POS designs and have
the items produced in the East to save on shipping charges. However,
if Redhook chooses to produce the POS items in the East, these items
must be approved by Xxxxxx to ensure the quality of the item is
comparable to Xxxxxx'x "West Coast" standards
- Redhook may develop their own POS items and designs. However, these
items and designs must be approved by Xxxxxx Brothers Brewing prior to
production.
MERCHANDISE AND UTILITY ITEMS
- Merchandise and utility items are defined as any wearables, dealer loaders,
display enhancers, promotional items, or any items for utility resale
(cups, glassware, umbrellas, etc.) that are used to promote the Xxxxxx
brand.
- Redhook may utilize Xxxxxx'x "West Coast" merchandise and utility items in
the East. Redhook may choose to buy merchandise and utility items from
Xxxxxx'x inventory at Xxxxxx'x cost. Redhook would be responsible for
shipping charges of items to the East.
- Redhook may choose to use Xxxxxx'x "West Coast" merchandise and
utility items and have the items produced in the East to save on
shipping charges. However, if Redhook chooses to produce the
merchandise and utility items in the East, these items must be
approved by Xxxxxx to ensure the quality of the item is comparable to
Xxxxxx'x "West Coast" standards.
- Redhook may develop their own merchandise and utility items. However,
these items and designs must be approved by Xxxxxx Brothers Brewing
prior to production.
MARKET VISITS
- Xxxxxx has the right to make periodic market visits by appropriate
management personnel to evaluate and support Xxxxxx sales and marketing in
Eastern markets. Xxxxxx will provide reasonable notice to the Xxxxxx Brand
Manager prior to any visit.
BRAND VALUE
- Redhook will maintain a Xxxxxx pricing environment in line with its own
products and/or the primary/leading specialty craft beer competition within
each state market. Redhook will not take any action to diminish the value
of Xxxxxx. Redhook will maintain competitive pricing for the Xxxxxx
licensed brands within the craft specialty makers with a specific strategy
to improve pricing whenever and wherever possible.
BRAND SUPPORT
- Redhook to spend a minimum of $1.00 per case for marketing.
- Marketing categories for this expenditure include advertising, point
of sale, promotions, sponsorships, incentives, co-op spending with the
wholesalers, and travel expenses of key wholesaler and Redhook sales
representatives to the Xxxxxx Brewery for training/and or incentive
awards.
- Any Brand support provided by Xxxxxx in markets assigned to Redhook would
be presented to Redhook's Vice President of Sales for approval, the
approval of which would not be unreasonably withheld.
SALES AND MARKETING PLANS.
Within 30 days following the date of this Agreement and by the beginning of each
calendar year, Redhook will deliver to Xxxxxx a sales and marketing plan, which
will include at least the following information:
- Sales forecasts for each calendar quarter over the next two Calendar
Years.
- Pricing of the different packages of the Product.
- Marketing plans for new market within the Territory over the next
calendar year.
- New Market programs over the next calendar year.
- Any other information reasonably requested by Xxxxxx from time to
time.
EXHIBIT D
INITIAL REPORTS
[*]
* Confidential Treatment Requested
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EXHIBIT E
EMPLOYEE CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
between
XXXXXX:
Xxxxxx Brothers Brewing Company
Incorporated
000 X. Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
and
REDHOOK:
Redhook Ale Brewery
00000 XX 000xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
In connection with a License Agreement by and between Xxxxxx and Redhook dated
February 1, 2003, Xxxxxx provided to Redhook certain recipes, yeast formulas,
know-how, brewing processes, other trade secrets, and other non-public
information (collectively, the "Confidential Information") on the conditions
stated in the License Agreement for the purpose of permitting Redhook to perform
its obligation under the License Agreement. As a condition to Xxxxxx agreeing to
the License Agreement, Xxxxxx has required that Redhook and each employee or
agent of Redhook (each, a "Recipient") agree to the following
1. Unless otherwise specified in writing by Xxxxxx, Recipient shall keep all
Confidential Information confidential. Recipient shall not use the Confidential
Information except to fulfill its obligations under the License Agreement.
Recipient shall use its best efforts to avoid unauthorized disclosure of
Confidential Information, using the degree of care that Recipient uses to
protect Recipient's trade secrets or other highly sensitive information.
2. At Xxxxxx'x request, Recipient shall return the physical materials containing
or relating to Confidential Information, without retaining any copies.
3. This agreement shall remain in effect indefinitely but shall not apply to
Confidential Information Recipient can show is or becomes publicly available
through no fault of Recipient.
4. If Recipient is required by judicial or administrative process to disclose
the Confidential Information, Recipient shall promptly notify Xxxxxx and allow
Xxxxxx a reasonable time to oppose such process.
5. In the event of default under this agreement by Recipient, Xxxxxx shall be
entitled to injunctive relief in addition to any other remedies, including
(without limitation) damages. In any litigation concerning this agreement, the
prevailing party shall be entitled to recover all reasonable expenses of
litigation, including reasonable attorney fees at arbitration, trial, and on any
appeal.
6. All additions or modifications to this agreement must be in writing and
signed by both parties.
7. Each Recipient agrees that Xxxxxx'x rights and Recipient's obligations
hereunder will not be effected by Recipient's termination of employment or
agency for any reason.
Agreed:
------------------------------------- ----------------------------------------
(Signature) (Name)
(Date)
------------------------------
------------------------------------- ----------------------------------------
(Signature) (Name)
(Date)
------------------------------
------------------------------------- ----------------------------------------
(Signature) (Name)
(Date)
------------------------------
------------------------------------- ----------------------------------------
(Signature) (Name)
(Date)
------------------------------
