EX-10.2
3
reeds_10qa-ex1002.htm
BREWING AGREEMENT
Exhibit 10.2
BREWING
AGREEMENT
THIS AGREEMENT, is dated and
effective as of November 1, 2008 (the “Effective Date”), by and between XXXX’X,
INC. (hereinafter referred to as “Xxxx’x”), a Delaware
corporation having offices at 00000 Xxxxx Xxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000, and THE LION BREWERY,
INC. (hereinafter referred to as “The Lion”), a
Pennsylvania corporation having offices at 000 X. Xxxxxxxxxxxx
Xxxxxx, Xxxxxx-Xxxxx, Xxxxxxxxxxxx 00000. Xxxx’x and The Lion shall
be hereinafter referred to as the “Parties”.
WITNESSETH:
WHEREAS, The Lion is engaged
in the brewing, production and bottling of alcoholic malt and non-alcoholic
beverages at its production facility located in Xxxxxx-Xxxxx,
Pennsylvania
(hereinafter referred to as “Plant”);
and
WHEREAS, Xxxx’x as a
manufacturer of a line of sodas has certain rights to the use of trademarks and
tradenames of products (hereinafter referred to as “Products”) as more
fully set forth on Exhibit “A”
hereto; and
WHEREAS, the Parties entered
into a
Brewing Agreement dated June 1, 2001 (including any amendments,
extensions or supplements thereof, the “Prior Agreement”)
under which The Lion is brewing or producing, bottling, and packaging the
Products for Xxxx’x; and
WHEREAS, the Parties have
decided to replace and supersede the Prior Agreement in its entirety with this
Agreement, as of the Effective Date; and
WHEREAS, under this Agreement
The Lion will continue to brew and produce, bottle, and package the Products on
Xxxx’x behalf (as well as other such products as may be added from time to time,
which, if and when so added, shall be included in the term “Products”), subject
to the terms and conditions of this Agreement, which will entirely supersede the
Prior Agreement.
NOW, THEREFORE, in
consideration of the terms, conditions, agreements and covenants contained
herein, the Parties hereto, intending to be legally bound, agree as
follows:
| | I. | PRODUCTION |
| | | | | |
| | | (a) | Territory
Requirements. Subject to the provisions of Article II
and the other terms and conditions of this Agreement, The Lion shall brew,
produce, bottle and package and Xxxx’x shall purchase from The Lion, all
of the “Territory
Requirements” (as hereinafter defined) during the Term (as defined
in Article VII hereof). The “Territory”
shall mean all of the United States east of the Mississippi River, and for
the avoidance of doubt shall include Puerto Rico and all of
Minnesota. The “Territory
Requirements” shall mean all Products that are to be directly sold,
shipped or delivered to Xxxx’x direct customers at delivery points located
in the Territory. Xxxx’x obligation to purchase the Territory
Requirements solely from The Lion during the Term is absolute and
unconditional, subject only to the provisions of Sections I(d)(3),
VIII(a), and XIII(c). |
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| | | (b) | Right of
Refusal. Should Xxxx’x intend to market other soda
products, or any soda Product in other packaging or configurations not
covered by this Agreement, in the Territory, Xxxx’x shall so notify The
Lion in writing before beginning production itself or entering into any
discussions with others to produce them. If The Lion at that time would be
capable of producing or packaging such soda product, at matching or better
prices and terms (considering prices and terms together as a whole) for a
period of thirty (30) days from the date of such notice, Xxxx’x and The
Lion shall use good faith efforts to reach an agreement under which The
Lion would have the exclusive right to produce the foregoing soda
products, either under this Agreement or under a separate
agreement. Xxxx’x shall afford The Lion the same exclusive
prior right to negotiate for additional services related to beverage
products not covered by this Agreement before contracting with other
parties therefor. |
| | | | |
| | | (c) | Trademark
Use. Xxxx’x grants to The Lion the limited right to use
the trademarks and trade names listed on Exhibit “A”
(collectively, the “Trademarks”)
solely for purposes of producing and bottling of the
Products. This right is limited in duration to the
Term. Xxxx’x agrees to furnish The Lion in writing with all
formulations, process descriptions, packaging specifications and related
technical information necessary for the fulfillment of this
Agreement. This information shall be treated in accordance with
Article IX hereof. |
| | | | |
| | | (d) | Product Quality
Covenants. In order to preserve the value and reputation
of the Trademarks and to assure that the Products will be of highest
quality and uniformity, The Lion agrees that it shall: |
| | | | | |
| | | | (1) | Comply with all
applicable laws, regulations and ordinances pertaining to the operation of
the Plant. It shall maintain the Plant in a clean and sanitary
condition consistent with “good manufacturing practices.” |
| | | | | |
| | | | (2) | Grant an authorized
person of Xxxx’x the right to be present during any production run of the
Products. An authorized person of Xxxx’x shall also have the
right, during regular business hours and upon reasonable notice, to
inspect the Plant. Such access shall be subject to Xxxx’x and
its agent’s compliance with all of The Lion’s reasonable rules and
policies regarding on-site visits, including execution of a Plant Visitor
Agreement in the form of Annex “I”
attached hereto. Xxxx’x shall be responsible for
assuring the compliance therewith by any employee or other representative
of Xxxx’x and shall be responsible to The Lion for any violation thereof
by such persons. |
| | | | | |
| | | | (3) | Discuss and review
in good faith with Xxxx’x any quality control standards required by Xxxx’x
customers, such as Cracker Barrel, Xxxxx & Xxxxx, Wal-Mart, or
Target. Xxxx’x shall provide The Lion with all such
requirements in writing (“Customer QC Standards”) at least three (3)
months in advance of the date when Xxxx’x needs them to take
effect. If meeting Customer QC Standards would require The Lion
to acquire or modify equipment, adjust processes, or incur additional
labor or other costs, The Lion shall so advise Xxxx’x of any changes in
the Co-packing Fee (as defined in Exhibit B) or
capital costs that would be necessary. If Xxxx’x and The Lion
agree on such costs, The Lion shall implement the changes necessary to
meet the Customer QC Standards as soon as is commercially reasonable, with
due regard to the customer’s needs. If Xxxx’x and The Lion do
not reach agreement regarding such increased costs, Xxxx’x may have the
relevant Products brewed, produced, bottled and packaged at another
production facility other than The Lion, to the extent necessary to serve
the particular customer(s) requiring such quality control
standards. |
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| | | (e) | Xxxx’x Instructions
and Standards. The Products shall be manufactured,
brewed and packaged in accordance with the written instructions of Xxxx’x,
including the maintenance of standards and quality control programs
furnished to The Lion in writing by Xxxx’x and, if applicable under the
preceding Section I(d)(3), the Customer QC Standards. |
| | | | |
| | | (f) | Changes in Formula,
etc. Xxxx’x shall have the right to change ingredients
and/or brewing formulae and procedures upon reasonable prior written
notice to The Lion, provided that (1) the cost of any such change shall be
borne by Xxxx’x and (2) the specified ingredients are readily available in
the necessary time frame. Xxxx’x shall have ultimate
responsibility and authority over every detail of the production process
for the Products, with such responsibility and authority as to those
parameters affecting taste and quality to be the same as if Xxxx’x were
the owner of The Lion's brewing facility at the Plant. To the
extent lawful and practicable, The Lion and Xxxx’x will, in any and all
public statements or comments, recognize that Xxxx’x controls the
ingredients, recipe, brewing processes and procedures and quality
parameters for all Products produced for Xxxx’x by The
Lion. Neither Party will make any public statements
inconsistent with the foregoing. Xxxx’x agrees and acknowledges
that The Lion’s historical practices and production quality under the
Prior Agreement have been proper and sufficient, and absent changes in
applicable laws or mutually agreeable changes therein (including Customer
QC Standards accepted by The Lion), shall be deemed to comply with this
Agreement in all respects. If a decision made by Xxxx’x in the
exercise of its authority under this Section 1(f) results in a change by
The Lion in any process or quality control, The Lion shall have the right
to adjust the Copacking Fee accordingly. |
| | | | |
| | | (g) | Identification
Codes. In order to assure quality control, The Lion
shall apply an identification code on each case and bottle indicating
whatever data Xxxx’x reasonably requires and an “L” in front of the
bottling time on line 2. |
| | | | |
| | | (h) | The Lion’ s
Insurance. The Lion shall maintain at all times, in full
force and effect for the benefit of Xxxx’x as an additional insured and
itself, general liability insurance coverage, applicable to the Products,
including broad form vendor’s coverage and product liability insurance in
an amount not less than Two Million ($2,000,000.00)
Dollars. The Lion shall furnish Xxxx’x with a certificate of
insurance evidencing that it has such insurance coverage upon the
execution of this Agreement and furnish Xxxx’x with evidence of such
insurance coverage on an annual basis thereafter. Such policy
shall provide that it cannot be changed or cancelled without at least
thirty (30) days’ prior written notice to Xxxx’x and The Lion agrees to
provide such notice to Xxxx’x before seeking to change or cancel such
insurance policy. |
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| | | (i) | Xxxx’x
Insurance. Xxxx’x shall maintain at all times, in full
force and effect for the benefit of The Lion as an additional insured and
itself, general liability insurance coverage, applicable to the Products,
including broad form vendor’s coverage and product liability insurance in
an amount not less than Two Million ($2,000,000.00)
Dollars. Xxxx’x shall furnish The Lion with a certificate of
insurance evidencing that it has such insurance coverage upon the
execution of this Agreement and furnish The Lion with evidence of such
insurance coverage on an annual basis thereafter. Such policy
shall provide that it cannot be changed or cancelled without at least
thirty (30) days’ prior written notice to The Lion and Xxxx’x agrees to
provide such notice to The Lion before seeking to change or cancel such
insurance policy. |
| | | | | |
| | II. | PRODUCTION
SCHEDULING |
| | | | | |
| | | (a) | Lead
Times. Xxxx’x shall submit written orders for Products
at least four (4) weeks prior to required packaging date. The
Lion will package the Products within four (4) weeks of the receipt of
such order, assuming all materials are on hand to produce one (1) week
before production, and The Lion shall use reasonable and good faith
efforts to ensure that all materials necessary to brew, produce, bottle
and package the Products are on hand. This includes the
materials that are the responsibility of Xxxx’x to have the same delivered
to The Lion. |
| | | | |
| | | (b) | Delivery of Products
to Warehouse. All Products shall be loaded and delivered
to a public warehouse (in Xxxxxx-Xxxxx, Pennsylvania if available) at the
completion of production, with the cost of shipping the Products to such
warehouse in Xxxxxx-Xxxxx to be borne exclusively by The
Lion. Xxxx’x shall bear all warehousing and storage costs for
completed Products, and should appropriate public warehousing in
Xxxxxx-Xxxxx be unavailable, Xxxx’x shall bear the additional cost of
shipping to such other warehouses as are available. |
| | | | |
| | | (c) | The Lion’s Production
of Other Products. Xxxx’x acknowledges that The Lion is
currently in the business of producing various products that are similar
to and may compete with the Products. Nothing in this Agreement
shall prevent The Lion from continuing or expanding its own business and
producing or selling any product for or to any person, provided that The
Lion shall not copy the brewing formula for the Products or use any
ingredients supplied to The Lion by Xxxx’x to produce products for itself
or third parties without Xxxx’x prior written consent, which consent may
be withheld in Xxxx’x sole discretion. The Lion shall not
produce any beverage brewed directly from fresh or raw ginger for itself
or any other person at any time during the Term or for a period of
ninety-nine (99) years after its expiration or termination without Xxxx’x
prior written consent, which consent may be withheld in Xxxx’x sole
discretion, even if such brewing would not involve use of Xxxx’x
Confidential Information (as defined in Article IX). All of the
Products produced by The Lion, including all work in process, shall be
produced solely for the benefit of Xxxx’x and used for no other
purpose. In the exercise of its authority under Articles I and
II, Xxxx’x shall not interfere with The Lion's production process for its
own proprietary brands and products or the production of products for
others. |
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| | III. | BREWING
AND PACKAGING MATERIALS |
| | | | | |
| | | (a) | Xxxx’x
Responsibility. Xxxx’x shall supply all flavorings and
other similar ingredients, and shall supply (or reimburse The Lion in
accordance with Section IV(b) for) all barrels, kegs, half-kegs,
sixth-kegs, and other similar larger-than-bottle-size containers, and all
proprietary and other packaging, including crowns, basket carriers,
labels, corrugated stock, partitions, multipacks and other shipping and
handling materials. |
| | | | |
| | | (b) | The Lion’s
Responsibility. The Lion shall supply and maintain on
hand a sufficient supply of brewing and packaging materials required that
are not supplied by Xxxx’x to manufacture the Products and fill orders,
including bottles. The Lion shall use commercially reasonable
efforts to supply recycled bottles to the extent practicable. The Lion
will include reasonable data in its monthly invoices so that Xxxx’x may
see what volume of recycled and new bottles was used. The Lion
will give Xxxx’x priority with regard to recycled xxxxx xxxxx and recycled
green bottles in the following manner: if The Lion has recycled
xxxxx xxxxx and green bottles on hand when Xxxx’x places orders, The Lion
will use such recycled bottles first to process Xxxx’x order before using
them to process other orders for other customers. |
| | | | |
| | | (c) | Shortage of Recycled
Bottles. Should The Lion at any time become unable to
supply at least 70% of Xxxx’x requirements of xxxxx xxxxx using recycled
bottles (calculated each month by reference to the past 12 months rolling
monthly average), and such shortage in and of itself has a material
adverse effect on Xxxx’x, The Lion shall notify Xxxx’x and Xxxx’x shall
have the right by written notice to require The Lion to renegotiate the
Base Co-packing Fee (as defined in Exhibit
“B”). Should the Parties, after negotiating over a
period of ninety (90) days in good faith, be unable to agree as to the
revised Base Co-packing Fee, Xxxx’x may terminate this Agreement upon a
further ninety (90) days’ written notice to The Lion, without further
liability to each party other than obligations theretofore
accrued. |
| | | | |
| | | (d) | Packaging
Forms. The Lion shall package the Products in the
particular forms and packaging styles described in Exhibit
“B”. |
| | | | |
| | | (e) | Shrinkage. The
Lion recognizes its responsibility to use packaging and ingredients
supplied by Xxxx’x wisely and efficiently. Further, both
Parties recognize that the supply chain for ingredients includes multiple
parties, such as Xxxx’x and its suppliers, and their respective ordering
and fulfillment systems, and that, at the present time, the Parties may
not have sufficient information and systems to determine actual and
optimal shrinkage levels with sufficient
precision. Accordingly, within ninety (90) days of execution of
this Agreement, The Parties shall cause their representatives to meet and
use commercially reasonable efforts to institute (i) a yield tracking
system which will allow them to identify the actual causes and
rates of shrinkage, and (ii) processes that will assure that average
shrinkage rates are 3% or less for packaging and 8% or less for
ingredients. Each Party shall provide all necessary information in its
possession in furtherance of this goal. |
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| | | (f) | Product
Recalls. In case of any Product recall, the Parties
shall promptly confer regarding the proposed response and any costs and
keep each other informed as to all material developments and actions
requested and required. The Lion shall have the right to manage
the process and control all material decisions whenever it is subjected to
a claim or demand that The Lion bear responsibility for the recall and any
costs thereof. Any liability with respect to recalls shall be
governed by the provisions of Article XI and Article XII. |
| | | | |
| | IV. | PRICE/PAYMENT |
| | | | | |
| | | (a) | Co-packing
Fee. Xxxx’x hereby agrees to pay The Lion a
brewing/co-packing fee (the “Co-packing
Fee”) for all Products ordered by Xxxx’x and processed by The Lion
as set forth in Exhibit “B.”
The Co-packing Fee shall be subject to the adjustments set forth in Exhibit “B” and
except as expressly provided in this Agreement shall be in addition to all
other payments required hereunder and thereunder. All
Co-packing Fees shall be paid within thirty (30) days of
production. |
| | | | | |
| | | (b) | Pass-Through. In
addition to the Co-packing Fees, Xxxx’x will be invoiced for ingredients,
packaging and shipping materials supplied by The Lion, at The Lion’s
invoice cost, and for all recycled glass bottles at the price set forth in
Exhibit
“B”, for all Products ordered by Xxxx’x and processed by The Lion
as set forth in Exhibit
“B.” All such pass-through payments shall be paid within
thirty (30) days of production. |
| | | | |
| | | (c) | Shortfall
Payment. If for any period, Xxxx’x fails to meet its
obligation to purchase the entirety of the Territory Requirements from The
Lion, for any reason other than (i) The Lion’s inability or refusal to
supply Products conforming to this Agreement (including on account of
Force Majeure, as referred to in Section XIII(c)), or (ii) Xxxx’x exercise
of its right to have Products brewed, produced, bottled and packaged at
another production facility other than The Lion as set forth in Section
I(d)(3) then, without prejudice to The Lion’s other rights, Xxxx’x shall
pay The Lion an amount equal to the applicable Co-packing Fee for the
Products that Xxxx’x was obligated to (but did not) purchase from The Lion
during the applicable period (the “Shortfall
Payment”). |
| | | | |
| | | (d) | Taxes,
etc. The Co-packing Fee and all other amounts due
hereunder shall be exclusive of any and all federal, state, or local sales
use and other taxes, excises, duties, and similar government impositions
now or hereafter in effect with respect to the production, sale,
transportation, use or consumption of the Products or any packaging
materials or other goods used or provided hereunder, all of which shall be
born by Xxxx’x, excepting only taxes with respect to The Lion’s income,
profits, assets, or franchises. |
| | | | | |
| | X. | XXXX’X
REPRESENTATION AND WARRANTIES. |
| | | | | |
| | Xxxx’x makes the
following representations and warranties to The Lion: |
| | | | | |
| | | (a) | Infringement,
etc. No Trademark, tradename or design used on the
Products and specified by Xxxx’x, and no recipe, formulation, technology
or process provided, specified by Xxxx’x for use in producing the
Products, shall infringe upon or misappropriate any trademark, patent,
copyright, trade secret or other proprietary right of any third
party. |
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| | | (b) | No
Conflicts. The execution, delivery and performance of
this Agreement will not violate, conflict with, constitute, or result in
any default or event of default under any contract, loan document,
commitment, arrangement, understanding, judgement, decree or law to which
Xxxx’x is a party or by which Xxxx’x or any of its business or assets are
bound. |
| | | | | |
| | VI. | RECORDS
AND AUDIT RIGHTS |
| | | | | |
| | | (a) | Records and
Audits. Each Party shall maintain accurate and complete
books and records with respect to its transactions hereunder, and shall
keep them available for inspection, auditing and copying (collectively, an
“Audit”)
by the other Party or its representatives at all times during normal
business hours upon reasonable advance notice for at least two (2) years
after the expiration or termination of the Term. Audits shall
be no more frequent than twice annually (unless a Party has reasonable
cause for concern as to whether the other is in compliance with its
obligations hereunder) and shall be limited to those books and records
required to confirm compliance with the subject Party’s obligations
hereunder. |
| | | | | |
| | | (b) | Audit
Expenses. All Audits shall be at the expense of the
requesting Party, unless the Audit reveals that the subject Party was
overpaid (or had underpaid the requesting Party, as applicable) by more
than 3.5% of the correct amount, or when the subject Party is Xxxx’x, it
had purchased less than 96.5% of what it was obligated to purchase under
this Agreement, in which case the subject Party shall bear all reasonable
costs of the Audit, in addition to whatever adjustments, reimbursements or
credits are necessary to correct the inaccuracy or instance of
noncompliance, and in addition to any Shortfall Payment. |
| | | | | |
| | VII. | TERM | | |
| | | | | |
| | | This
Agreement shall be for an initial term of three (3) years beginning as of
the Effective Date and ending three (3) years from that
date. Xxxx’x shall have the option to extend the Term by one
additional year by providing written notice at least thirty (30) days
before the end of the initial three (3) year term. The Parties
may mutually agree in writing to extend the Term (in addition to Xxxx’x
one-year option), in their sole discretion. “Term” as used
herein, shall mean the original three-year term and any such
extensions. |
| | | | | |
| | VIII. | TERMINATION |
| | | | | |
| | | (a) |
Termination by
Xxxx'x.
In the event The
Lion shall fail to perform any of its obligations under this Agreement
(other than on account of force majeure or a breach hereof by Xxxx’x) and
such failure is not corrected within thirty (30) days after date of
written notice to The Lion specifying the nature of such failure, Xxxx’x
may give further notice to The Lion terminating this Agreement effective
as of the date of such further notice. Xxxx’x shall also have
the right to terminate this Agreement in accordance with Section
III(c).
|
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| | | (b) |
Termination by The
Lion.
In the event Xxxx’x shall fail to perform any of its obligations
under this Agreement (other than on account of Force Majeure or a breach
hereof by The Lion), The Lion may notify Xxxx’x in writing of such
determination. If Xxxx’x failure relates to moneys owed, Xxxx’x
shall have ten (10) days in which to remedy the failure, but otherwise
Xxxx’x shall have thirty (30) days within which to remedy the
failure. If Xxxx’x refuses to or fails to remedy the failure
within the time allowed, The Lion may give further notice to Xxxx’x
terminating this Agreement effective as of the date of such further
notice.
|
| | | | | |
| | | (c) |
Following
Termination
Upon termination:
|
| | | | | |
| | | | (1) | The Lion will
immediately cease all production of Products, but may in its discretion
complete any batches then in process. |
| | | | | |
| | | | (2) | All obligations of
either Party shall be adjusted up to and including the date of termination
provided, however, that upon termination, Xxxx’x shall purchase at the
applicable purchase price, all Products and all packaging which comply
with the agreed-upon specifications and which are in storage or in process
at the Plant or any warehouse. |
| | | | | |
| | | | (3) | The Lion will return
all unused packaging materials that Xxxx’x had purchased for production
use. Xxxx’x shall purchase at cost any unused packaging
materials The Lion had purchased specifically for production of the
Products, which The Lion cannot use in or for its other products (not
under this Agreement). The Lion shall return all equipment
owned by Xxxx’x and each Party shall return all Confidential Information
(as defined in the following Article) and materials that are the property
of the other Party. |
| | | | | |
| | IX. | CONFIDENTIALITY
AND PROPRIETARY RIGHTS |
| | | | | |
| | | (a) | Definitions. As
used herein, the term “Confidential
Information” shall be defined as marketing and other information
such as customer lists, price lists, pricing policies, marketing and
business plans, information regarding customers’ needs or requirements,
and arrangements with customers, consultants, licensees, and suppliers,
and shall be deemed to include any confidential, proprietary, trade
secret, technical or business information disclosed by one Party (the
“Disclosing
Party”) to the other Party (the “Receiving
Party”), and includes formulations, processes, long-range and
current strategic plans, operating results, earnings, costs of operation,
accounts, products, product design, engineering and technical information,
test data, product and material costs, policies, practices,
correspondence, procedures, methods, manuals, records, information
regarding projects and current and prospective employees, contractors,
suppliers, customers, contracts and business arrangements, and trade
secrets that the Receiving Party may obtain by participation, observation,
examination or otherwise. The Trademarks, and all of Xxxx’x
formulations, process descriptions, packaging specifications and related
technical information provided by Xxxx’x shall be Xxxx’x Confidential
Information. |
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| | | (b) | Obligations. |
| | | | | |
| | | | (1) | All Confidential
Information disclosed, provided or delivered or made available in
connection with the performance of this Agreement is confidential and the
property of the Disclosing Party, shall be held in strict confidence by
the Receiving Party, and shall not be disclosed or disseminated to, or
discussed with, any person other than the Receiving Party or used in any
manner other than to perform this Agreement. Each Party
receiving the other’s Confidential Information shall take all commercially
reasonable steps necessary to prevent any such disclosure or improper use
by its employees, officers, directors, representatives or
agents. Each Receiving Party agrees to promptly return (upon
request at any time during the Term and forthwith upon the termination or
expiration of this Agreement) all the Disclosing Party’s Confidential
Information and shall not retain any copies, extracts or memoranda
therefrom. The Lion shall use commercially reasonable efforts
to procure written agreements from its brew masters in customary form in
which they agree to honor Xxxx’x rights with regard to Confidential
Information and agree that Xxxx’x may enforce such agreements directly
against them. If The Lion cannot obtain such contractual
agreements from its brew masters, The Lion and Xxxx’x shall cooperate to
enforce such rights as may exist under applicable law or otherwise against
the brew masters. |
| | | | | |
| | | | (2) | Notwithstanding that
recipes and formulations may be provided by Xxxx’x and may be Xxxx’x
Confidential Information, all brewing processes in use by The Lion at any
time that were not provided by Xxxx’x shall be the Confidential
Information of The Lion and/or its brew masters, and shall not be subject
to disclosure to Xxxx’x or its customers except as required by applicable
law, and Xxxx’x shall have no right thereto. Any processes that
are or could be utilized by The Lion for production of any product other
than the Products made using Xxxx’x recipes or formulations, or that are
at any time conceived or developed by The Lion independently, shall be the
intellectual property and Confidential Information of The
Lion. Each Party shall be free to use, disclose, transfer,
license and otherwise deal with all such publicly available information
and all of its own intellectual property without restriction except as
expressly provided in this Agreement. |
| | | | | |
| | | | (3) | Because of the
unique nature of the Confidential Information and the rights of the
Disclosing Party hereunder, the Receiving Party understands and agrees
that the Disclosing Party will suffer irreparable harm in the event the
Receiving Party fails to comply with its obligations under this Agreement
regarding Confidential Information, and that monetary damages will be
inadequate to compensate the Disclosing Party for such breach. In
the event of a breach or threatened breach by the Receiving Party of the
provisions of this Agreement relating to Confidential Information, the
Disclosing Party shall be entitled to an injunction restraining the
Receiving Party from violating the terms hereof, or from using or
disclosing any Confidential Information of the Disclosing Party.
Nothing herein shall be construed as prohibiting the Disclosing Party from
pursuing any other remedies available to it for such breach or threatened
breach of this Agreement including recovery of damages from The
Lion. |
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| | | (c) | Exceptions. “Confidential
Information” does not include information which: |
| | | | | |
| | | | (1) | was already in the
Receiving Party’s possession at the time of disclosure hereunder, provided
that such information has not been obtained from the Disclosing Party and
that such possession can be demonstrated by the Receiving Party’s written
records; |
| | | | | |
| | | | (2) | is, or becomes,
generally available to the public, through, for example, such sources as
patents or other generally circulated publications, and such availability
to the public does not result from any fault of the Receiving
Party; |
| | | | | |
| | | | (3) | is received by the
Receiving Party in written form from a third party having no obligation to
the Disclosing Party to keep it confidential; or |
| | | | | |
| | | | (4) | is independently
developed by the Receiving Party provided that such development can be
demonstrated by the Receiving Party’s written records. |
| | | | | |
| | Specific technical
and business information shall not be deemed to be within the exceptions
of the preceding sentence merely because it is embraced by more general
technical or business information within such exceptions, nor shall a
combination of features be deemed to be within such exceptions merely
because the individual features are within such exceptions. |
| | | | | |
| | | (d) | Mandatory
Disclosures. A Receiving Party shall be free to disclose
any information required pursuant to applicable laws, regulations, court
orders, or subpoenas, so long as it advises the Disclosing Party as soon
as reasonably practicable, to allow the Disclosing party to contest such
requirement by appropriate means or take other appropriate measures to
protect its legitimate rights. |
| | | | | |
| | X. | NO
AGENCY |
| | | | | |
| | The
Lion and Xxxx’x understand and agree that neither Party is, by virtue of
this Agreement or anything contained herein, including The Lion affixing
any label to any Product, constituted or appointed the agent of the other
Party for any purpose whatsoever, nor shall anything herein contained be
deemed or construed as granting Xxxx’x or The Lion any right or authority
to assume or to create any obligation or responsibility, express or
implied, for or on behalf of or in the name of the other, or to bind the
other in any manner or way whatsoever. The relationship between
the Parties is solely of independent contractors, as set forth in this
Agreement, and no representation or warranty shall be made by either Party
to any third person or Party to the contrary. There are no
third party beneficiaries of any rights hereunder. |
| | | | | |
| | XI. | INDEMNIFICATION |
| | | | | |
| | | (a) | By The
Lion. The Lion shall defend, indemnify and hold harmless
Xxxx’x and all of its principals, directors, officers, employees, and
subsidiaries from and against any and all claims, demands, losses,
liabilities, costs and expenses of any nature whatsoever, including
reasonable attorney's fees (collectively, "Claims and
Damages"), to the extent arising out of (i) the improper storage,
handling or alteration of the Products before delivery to Xxxx’x or Xxxx’x
designee, (ii) any defect arising out of or related to The Lion’s
manufacturing, packaging, or handling of the Products before delivery to
Xxxx’x or Xxxx’x designee (including without limitation any failure to
follow Xxxx’x specifications, recipes and instructions, and good
manufacturing practices and other requirements of this Agreement), or
(iii) The Lion’s negligence or willful
misconduct. |
10
| | | (b) | By
Xxxx’x. Xxxx’x shall defend, indemnify and hold harmless The
Lion and all of its principals, directors, officers, employees, and
subsidiaries from and against any and all Claims and Damages to the extent
arising out of (i) the improper storage, handling or alteration of the
Products after delivery to Xxxx’x or Xxxx’x designee, (ii) any defect
arising out of or related to the design, formula, recipe, warnings or any
other type of defect (except for defects arising out of or related to The
Lion’s manufacturing, packaging, or handling of the Products before
delivery to Xxxx’x or Xxxx’x designee), (iii) any recipe, formulation,
process, brewing ingredient, packaging material (other than bottles) or
other materials supplied by Xxxx’x, (iv) any allegation that The Lion’s
use of the Trademarks or any recipe, formulation, process, brewing
ingredient, packaging material, know-how, technology or other intellectual
property provided by Xxxx’x infringes or misappropriates the intellectual
property rights or trade secrets of any person; or (v) Xxxx’x negligence
or willful misconduct. |
| | | | | |
| | XII. | LIMITATIONS
OF LIABILITY |
| | | | | |
| | | Notwithstanding the
provisions hereof regarding indemnification, each Party’s aggregate
liability for damages of any sort under or in connection with any and all
claims arising under this Agreement, whether incidental, consequential,
special, punitive or indirect or for loss of profits or business, of any
nature or arising on account of any cause, and regardless whether such
losses or damages were within the contemplation of the parties at any
time, together with attorneys’ fees and other expenses in connection with
such claims, shall not exceed the sum of Four Million Dollars
($4,000,000). The foregoing limitations shall not apply to damages arising
from a Party’s fraud, knowing and intentional violation of applicable
laws, willful misconduct, or violation of its obligations under Article IX
relating to the other party’s Confidential Information. |
| | | |
| | XIII. | MISCELLANEOUS |
| | | |
| | | (a) | Successors and
Assigns. Notwithstanding anything else set forth herein,
this Agreement shall be binding on and inure to the benefit of the Parties
and their respective successors and assigns. Any such
assignment or delegation by either Party shall not release the assigning
or delegating Party of any of its obligations under this Agreement, and
the assignee shall expressly assume all obligations hereunder as a
condition of its enjoyment of any rights relating hereto. Any
assignment by a Party to a person who is not as creditworthy as the
assignor shall require the other Party’s prior written consent, which
shall not be unreasonably withheld. |
| | | | |
| | | (b) | Reorganization or
Divestiture. Xxxx’x recognizes that The Lion is entering into this
Agreement under the express expectation that for the entire Term, and
subject to the terms hereof, The Lion will supply all of the Territory
Requirements of all business units now or hereafter operated by Xxxx’x,
and their successors and assigns, regardless of any change of control,
merger, sale or offering of stock, consolidation, spin off, split up, sale
or exchange of assets, liquidation, reorganization or other transaction
that may alter the identity, ownership or structure or such business
units. Accordingly, before entering into any such transaction,
Xxxx’x shall cause all entities which may succeed to those operations of
Xxxx’x in which Products are used, distributed or resold, to agree
expressly in writing to honor and assume this Agreement, in whole, on its
then existing terms. No such assignment, assumption or related
transaction shall release Xxxx’x of any obligation hereunder, and without
limiting any other rights of The Lion hereunder, Xxxx’x hereby expressly
agrees to be liable to The Lion for any failure of any such successor to
purchase the successor’s Territory Requirements of the relevant Products
which it is using on the terms set forth herein, as if the successor were
jointly and severally liable under this
Agreement. |
11
| | | (c) | Force
Majeure. The Lion shall not be responsible for delays in
production or delivery of Products due to riots, sabotage, fire, floods,
differences with workmen (other than Xxxx’x own labor force),
insurrections, acts of God, wars, governmental acts, difficulties with
contractors, shortages of utilities, supplies, ingredients or materials,
or breakdown or unavailability of equipment or processes (for reasons
other than The Lion’s failure to maintain the same properly), or other
events beyond The Lion’s reasonable control (“Force
Majeure”). During such periods, Xxxx’x has the right to
have its Products brewed/produced at another facility. If The
Lion cannot (or cannot reasonably be expected to) resume normal production
within one-hundred twenty (120) days after the onset of an event of Force
Majeure, and no other brewery will fill Xxxx’x needs for the same
applicable Products except on the condition that Xxxx’x enter into a
long-term agreement that would be inconsistent with Xxxx’x obligations
under Section I(a) hereof, Xxxx’x shall be permitted to enter into such
other agreement, and Section I(a) of this Agreement shall be deemed
amended to the extent necessary to accommodate such other
agreement. Xxxx’x shall take and pay for such portions of its
Territory Requirements as The Lion is able to supply, and acknowledges
that the right to obtain alternate supplies from other vendors is a full
and sufficient remedy for The Lion’s failure to fill Xxxx’x
orders. Xxxx’x shall have no right to compensation from The
Lion for any difference in price or other remedy for such
failure. If an event of Force Majeure impairs The Lion’s
production capacity, or Xxxx’x places orders for Products in quantities
substantially disproportionate to historic levels, The Lion shall have the
right to allocate its production capacity in any reasonably equitable
manner, taking into account its own needs, Xxxx’x needs, and the needs of
The Lion’s other customers, who, for this purpose, include parties who
have binding contracts with The Lion in force at the actual time the event
of Force Majeure occurs or arises and others who are regular customers of
The Lion, even if they do not have such contracts in force at that
time. |
| | | | |
| | | (d) | Waivers,
etc. No waiver by either Party of a breach of the other
Party’s obligations, agreements or covenants herein set forth shall be a
waiver of any subsequent breach or any other obligation, agreement or
covenant, nor shall any forbearance by any Party to seek a remedy for any
breach by the other be a waiver by such Party of its rights and remedies
with respect to that or any other breach. |
12
| | | (e) | Governing
Laws. This Agreement shall be interpreted and any
dispute hereunder adjudicated according to the substantive laws of the
Commonwealth of Pennsylvania, excluding its principles of conflict of
laws. |
| | | | | |
| | | (f) | Dispute
Resolution. The State and Federal courts sitting in
Luzerne County, Pennsylvania shall have exclusive jurisdiction of all
disputes arising from or related to this Agreement, and the Parties hereby
consent to jurisdiction and venue in such courts. The
prevailing Party in any action relating hereto shall be entitled to
reimbursement of all of its reasonable legal and other fees, costs and
expenses incurred in connection therewith. For the purposes of
this Article, the “prevailing Party” shall be the Party awarded the
preponderance of whatever relief is awarded, whether financial or
equitable, as determined by the court. |
| | | | | |
| | | (g) | Amendments.
This Agreement may not be amended except by an instrument in writing
signed by both Parties. |
| | | | | |
| | | (h) | Entire
Agreement. This Agreement constitutes a single integrated, written
contract expressing the entire agreement of the Parties hereto relative to
the subject matter hereof. No other covenants, agreements,
representations, or warranties of any kind whatsoever have been made by
any Party hereto, except as specifically set forth in this
Agreement. All prior discussions and negotiations have been and
are merged and integrated into, and are superseded by, this
Agreement. |
| | | | | |
| | | (i) | Prior Agreement
Superseded. This Agreement supersedes the Prior
Agreement in all respects, and the Prior Agreement shall have no further
force or effect, except that any amounts earned by The Lion under the
Prior Agreement shall be due and payable according to its
terms. In the event that any provision of this Agreement should
be held to be void, voidable, or unenforceable, the remaining portions
hereof shall remain in full force and effect. |
| | | | |
| | | (j) | Notices. All
notices required herein shall be given by registered mail, return receipt
requested, or by overnight courier service, in both cases with a copy also
sent by telecopier or email, to the addresses given below the Parties’
respective signatures below unless change thereof has previously been
given to the Party giving the notice and shall be deemed effective when
received. |
| | | | |
| | | (k) | Counterparts,
etc. This Agreement may be executed by the Parties
hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Such counterpart may
consist of a number of copies hereof each signed by less than all, but
together signed by all of the Parties hereto. Signatures hereon
may be exchanged by facsimile or other electronic
means. |
[signature page follows]
13
IN
WITNESS WHEREOF, the Parties, intending to be legally bound, have signed this
Agreement the date and year set forth above by their duly authorized
officers.
| |
XXXX’X
INC.
By:
/s/ Xxxxxxxxxxx X.
Xxxx
Xxxxxxxxxxx
X. Xxxx, President and Chief Executive Officer
Address
for Notices:
00000
Xxxxx Xxxxxx Xxxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax:
000-000-0000
Email:
xxxxx@xxxxxxxx.xxx
Attention:
Xxxxxxxxxxx X. Xxxx, President and Chief Executive
Officer
|
| | |
| | |
| |
THE
LION BREWERY, INC.
By:
/s/ Xxxxxx
Xxxxxxx
Xxxxxx
Xxxxxxx, Chief Executive Officer
Address
for Notices:
000 X. Xxxxxxxxxxxx
Xxxxxx
Xxxxxx-Xxxxx,
Xxxxxxxxxxxx 00000
Fax:
000-000-0000
Email:
xxxxxxx@xxxxxxxxxxx.xxx
Attention: Xxxxxxxx
Xxxxxx, President and COO
|
14
EXHIBIT
“A”
PRODUCTS;
TRADEMARKS
|
Brewed Products and Related
Trademarks:
|
|
Xxxx'x
Original Xxxxxx Xxxx
|
|
Xxxx'x
Extra Xxxxxx Xxxx
|
|
Xxxx'x
Premium Xxxxxx Xxxx
|
|
Xxxx’x
Raspberry Xxxxxx Xxxx
|
|
Xxxx'x
Spiced Apple Brew
|
|
Xxxx'x
Xxxxxx Xxxxxx Xxxx
|
|
Pasteurized Soft Drinks and Related
Trademarks:
|
|
Virgil’s
Root Beer
|
|
Virgil’s
Diet Root Beer
|
|
Virgil’s
Cream Soda
|
|
Virgil’s
Diet Cream Soda
|
|
Virgil’s
Black Cherry
|
|
Virgil’s
Real Cola
|
|
China
Cola
|
|
Cherry
China Cola
|
|
Diet
Real Cola
|
|
Diet
Black Cherry Cream Soda
|
1
EXHIBIT
“B”
PACKAGING
AND PRICING
|
Product
|
Base
Copacking Fee
|
|
Brewed
Products
Xxxx'x
Original Xxxxxx Xxxx
Xxxx'x
Extra Xxxxxx Xxxx
Xxxx'x
Premium Xxxxxx Xxxx
Xxxx’x
Raspberry Xxxxxx Xxxx
Xxxx'x
Spiced Apple Brew
Xxxx'x
Xxxxxx Xxxxxx Xxxx
|
$X.XX
per case of 6-4 pks/12oz., 4-8 pks/7oz, 12pks/22oz, 2-12pk/12oz for
bottled product
$X.XX
per unit, for product in half or sixth barrels, kegs, half kegs, or other
non-bottle containers
|
|
Pasteurized
Soft Drinks
Virgil’s
Root Beer
Virgil’s
Cream Soda
Virgil’s
Black Cherry
Virgil’s
Real Cola
China
Cola
Diet
Real Cola
Diet
Black Cherry Cream Soda
|
$X.XX
per case of 6-4 pks/12oz., 4-8 pks/7oz, 12pks/22oz,
2-12pk/12oz for bottled product
$X.XX
per unit, for product in half or sixth barrels, kegs, half kegs, or other
non-bottle containers
|
1. Copacking
Fee. The Copacking Fee shall consist of the “Base Copacking Fee”
stated in the table above, plus the Energy Surcharge and Labor Surcharge
referred to in Sections 2 and 3 below.
2. Energy
Surcharge. An energy surcharge (the “Energy Surcharge”)
will be added to the Base Copacking Fee for bottled Products if the cost of
compressed natural gas (“CNG”) exceeds $8.00
per million BTU (“mmBTU”) during the
Term. The Energy Surcharge will equal $0.01875 per case for every
dollar by which the price of CNG exceeds $8.00 per mmBTU, prorated for partial
dollar increases. The price of natural gas as quoted at xxxx://xxx.xxxxx.xxx/xx_xxx_xxx.xxxx as of the close of
trading on the 288th day
(or last preceding business day) of each month (the “CNG Closing Price”)
shall be used to determine the Energy Surcharge to be applied to Products
produced during the ensuing calendar month. The maximum Energy
Surcharge shall be $0.15 cents per case. For example, if on November
28, 2008 the CNG Closing Price was $10.50 per mmBTU, an Energy Surcharge of
$0.0469 (or 2.5 times
$0.01875) per case would be added to the applicable Copacking Fee for each case
produced in December 2008. The Lion shall provide reasonable back-up
information supporting the prices and calculations used on each invoice
reflecting an Energy Surcharge.
2
3. Labor
Surcharge.
(a) The Parties
acknowledge and agree that the total cost of labor under The Lion’s collective
bargaining agreement with Operating Engineers Local 367 (the “CBA”) is currently
$0.77 per case for Brewed Products and $0.64 per case for Pasteurized Soft
Drinks. A labor surcharge (the “Labor Surcharge”)
will be added to the Base Copacking Fee for bottled Products on each June 1
during the Term (the “Labor Adjustment
Date”), in the amount by which Lion’s total cost of labor under the CBA
exceeds $0.77 case for Brewed Products and $0.64 per case for Pasteurized Soft
Drinks. The Lion shall provide Xxxx’x with reasonable supporting
documentation to indicate how total labor cost was calculated. Upon
any disagreement as to such calculation, the Parties shall refer the matter to a
mutually agreeable independent certified public accounting firm, whose
determination shall be final. The costs of such determination shall
be borne equally by the Parties, the determination shall be retroactive to the
applicable Labor Adjustment Date, and the Parties shall make such payments or
credits as are necessary to reflect the determination.
(b) If
year-over-year Xxxx’x volume growth produced at The Lion as of each Labor
Adjustment Date is 15% or greater, the Labor Surcharge will not be
added. If volume growth in any year is less than 15% over the prior
year, The Lion will calculate the current cost per case for labor under the CBA
(or successor agreement) and the impact of the labor cost increase for that year
and adjust the Base Co-packing Fee accordingly. The initial base year
for calculating volume (the “Base Volume Year”)
shall be June 1, 2007 to May 31, 2008, and “volume” shall mean the number of
cases of Product delivered. For example, if The Lion delivered
700,000 cases of Product in the Base Volume Year and 806,000 cases during the
year ended May 31, 2009, the increase over the previous year exceeds 15%, and
there will be no Labor Surcharge for Products produced during the year beginning
June 1, 2009. If for the year ended May 31, 2010, volume is 900,000
cases, the increase over the previous year (ending May 31, 2009) is less than
15%, and the Labor Surcharge will be added for the year beginning June 1, 2010,
using the cost of labor per case as of May 31, 2010 as the base figure and the
cost of labor per case as of June 1, 2010 as the new figure.
4. Bottle Cost
Reimbursement.
(a) New
Bottles. Xxxx’x shall reimburse The Lion for all new bottles
used at the applicable invoice price plus the allocable portion of
any freight, fuel and energy surcharges born by The Lion. The Lion
shall supply back-up invoices from suppliers, but Xxxx’x recognizes that such
information is confidential to The Lion’s suppliers, and therefor it shall be
disclosed only to Xxxx’x auditors (and not to Xxxx’x) and only if such auditors
enter into a reasonable confidentiality agreement to protect such
information.
(b) Recycled
Bottles. Xxxx’x shall reimburse The Lion for all recycled
bottles used at the then-applicable current invoice price for new bottles (net
of any freight, fuel or energy surcharges) of the same color (whether purchased
on the spot market or under the current contract), less thirty cents ($0.30) per
24 bottle case. The Audits referred to in Section V of the Agreement shall at
Xxxx’x direction address The Lion’s purchases and usage of recycled and new
bottles.
5. Flavorings,
etc. The prices stated in this Agreement are premised upon
Xxxx’x purchasing and providing The Lion with all flavorings. Xxxx’x
shall be responsible for all die and plate charges relating to Product
packaging. Xxxx’x shall be responsible for all licensing and label
approval charges incurred by The Lion on behalf of Xxxx’x.
6. General. All
Prices are platform FOB at the Plant, Xxxxxx-Xxxxx,
Pennsylvania. Xxxx’x shall be responsible for the cost of partitions
in the event multipacks are not used.
3
ANNEX
“I”
Plant
Visitors Agreement
Xxxx’x Inc. (“Xxxx’x”) has reserved
certain rights to inspect facilities (the “Plant”), and/or to
receive and have access to certain information, of The Lion Brewery, Inc. (the
“Lion”) which
is confidential and/or proprietary to The Lion (“Confidential
Information”). This Agreement represents the understanding
concerning the disclosure, use and handling of Confidential Information and any
such Plant visit. In return for the disclosure by The Lion to Xxxx’x
of the Confidential Information and/or permission to visit The Lion’s Plant(s),
as applicable, the undersigned agree to abide by the terms and conditions set
forth in this Agreement.
“Confidential
Information” shall have the meaning given in the
Brewing Agreement
between Xxxx’x and The Lion, and shall include information a person may see or
hear during any visit to a Plant that relates to any of the
foregoing.
The
undersigned shall not disclose Confidential Information to any third parties and
shall maintain all Confidential Information in strict confidence for the benefit
of The Lion.
All
persons to whom Confidential Information is disclosed shall be informed of the
restrictions contained in this Agreement regarding disclosure, use and
reproduction of Confidential Information. The undersigned shall not
reproduce Confidential Information without the express written consent of The
Lion.
The
undersigned shall not retain (and shall destroy or return to The Lion) any
tangible Confidential Information including but not limited to drawings,
blueprints, descriptions, documents, software, models, or plans, and all copies
or summaries thereof.
The
undersigned shall not at any time make any photographs, videotapes, sound
recordings, or other reproductions of Confidential Information or of anything
Xxxx’x may see or hear during a visit to The Lion Plant. Visitors to
The Lion Plants must check all cell phones, cameras, PDAs, wireless devices,
sound recorders and similar equipment with The Lion Security during their
visit. If the Confidential Information should become stored on the
undersigned’s electronic data processing systems, Xxxx’x shall see that it can
readily be fully and permanently destroyed or deleted in compliance with the
undersigned’s obligations to The Lion.
The
undersigned hereby releases The Lion and its officers, directors, shareholders,
employees, and agents from any and all damages, liabilities, claims, demands,
actions, and causes of action (collectively, “Claims”) for property damage,
economic injury and personal injury, including death, which may arise as a
result of entry into production areas except for Claims resulting from The
Lion’s gross negligence or willful misconduct. The undersigned also
agree to defend, indemnify and hold harmless The Lion, its officers, directors,
shareholders, employees, and agents, from and against any and all Claims for
property damage, economic injury and personal injury, including death, which may
arise as a result of your negligence or willful misconduct.
Intending
to be legally bound, the undersigned agrees to the foregoing , effective as of
the date set forth below.
| |
_________________________________
(SEAL)
Name:
Title:
Date:
|
4
