EXHIBIT 10.2
MASTER DISTRIBUTOR AGREEMENT
BETWEEN
REDHOOK ALE BREWERY, INCORPORATED
AND
ANHEUSER-▇▇▇▇▇, INCORPORATED
MASTER DISTRIBUTOR AGREEMENT
THIS MASTER DISTRIBUTOR AGREEMENT (the "Agreement") is made as of July
1, 2004 by and between REDHOOK ALE BREWERY, INCORPORATED having its principal
place of business at ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ ("Redhook") and ANHEUSER-▇▇▇▇▇, INCORPORATED having its principal
place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (referred to herein
interchangeably as "Master Distributor" or "ABI").
WHEREAS, Redhook brews and markets products in the United States, with
the exception of eleven states in which its products are marketed by an
affiliate, Craft Brands Alliance LLC.
WHEREAS, ABI and Redhook desire to have ABI serve as Master Distributor
of the Products and to coordinate the delivery of the Products to designated
wholesalers in the ABI wholesaler network; and
WHEREAS, ABI and Redhook desire Redhook to have responsibility for
developing and implementing programs that create demand for, market, promote and
advertise the Products in the Territory (as defined herein);
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Redhook and ABI agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, capitalized terms not otherwise defined
herein shall have the following meanings ascribed thereto:
"ABI COMPETITOR" shall mean any Person that, together with the
Affiliates of such Person, has annual alcohol beverage sales of $100,000,000 or
more in North America (such number to be adjusted annually in proportion to
changes in the Consumer Price Index from the date hereof).
"ABI DISTRIBUTION FACILITY" shall mean the ABI source brewery,
warehouse, WSC, third-party warehouse or other suitable location reasonably
designated by ABI from which ABI will ship Product to Alliance Wholesalers.
"ADDITIONAL PRICE COMPONENT" shall mean 90% of the difference between
the price actually charged to an Alliance Wholesaler by ABI for a Product, and
the Fully Loaded Cost for such Product.
"AFFILIATE" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 50% or more of the equity securities
having ordinary voting power in the election of directors of such Person, or
(ii) each Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person.
"AFFILIATED WHOLESALER" shall mean any wholesaler of the alcohol
beverage products of ABI that distributes the Products in any portion of the
Territory pursuant to a distribution agreement between Redhook and such
wholesaler.
"ALLIANCE WHOLESALERS" shall mean those malt beverage wholesalers of
ABI, including without limitation, ABI branches, which have agreed to purchase
the Products from ABI and to distribute the Products in the Territory.
"BARREL" shall be equal to 31 United States gallons.
"COMMENCEMENT DATE" shall mean July 1, 2004.
"CONFIDENTIAL INFORMATION" shall have the meaning assigned to it in
Section 18.01(a).
"COOPERAGE HANDLING CHARGE" shall mean * per Pallet Lift for draft
Product during 2004; ATTACHMENT A attached hereto describes the methodology used
to modify Cooperage Handling Charge for 2005 and future years.
"FORCE MAJEURE" shall have the meaning assigned to it in Section 16.01.
"FULLY LOADED COST" shall mean for a Product, the sum of:
* CONFIDENTIAL TREATMENT REQUESTED
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(a) the Scheduled Price for such Product; plus
(b) the Margin.
"INCOMPATIBLE CONDUCT" shall mean any act or omission of Redhook or its
Affiliates that, in the sole determination of ABI, damages either the reputation
or image of ABI or of the brewing industry. ATTACHMENT B attached hereto sets
forth examples of the nature and gravity of acts and omissions constituting
Incompatible Conduct and not constituting Incompatible Conduct; such examples
shall not limit the nature of acts that could be construed as Incompatible
Conduct.
"INCREMENTAL MARGIN" shall mean during 2004, * per case-equivalent (of
288 fluid ounces per case) for packaged or draft Product. For 2005 and future
years, the applicable amount described above in this definition shall increase
or decrease for each calendar year pursuant to the methodology set forth in
ATTACHMENT C attached hereto.
"INITIAL TERM" shall have the meaning assigned to it in Section 7.01
hereof.
"INTELLECTUAL PROPERTY" shall have the meaning assigned to it in
Section 6.01.
"INVENTORY MANAGER" shall have the meaning assigned to it in Section
11.10.
"INVENTORY MANAGER FEE" shall mean the Inventory Manager's annual cash
compensation.
"INVOICING COSTS" shall mean * per Pallet Lift for Product during 2004.
For 2005 and future years, the applicable amount described above in this
definition shall increase or decrease for each calendar year pursuant to the
methodology set forth in ATTACHMENT C attached hereto.
"MARGIN" shall mean during 2004 * per case-equivalent (of 288 fluid
ounces per case) for packaged or draft Product.
For 2005 and future years, the applicable amount described above in
this definition shall increase or decrease for each calendar year pursuant to
the methodology set forth in ATTACHMENT C attached hereto.
* CONFIDENTIAL TREATMENT REQUESTED
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"MASTER DISTRIBUTOR" shall mean ABI in its capacity as a distributor
under this Distribution Agreement.
"MODIFIED PRODUCT" shall have the meaning set forth in Section 11.08 of
this Agreement.
"NEW PRODUCT" shall mean new malt beverage(s) that Redhook wishes to
add, through development or acquisition, to its beverage product line existing
as of the Commencement Date.
"NON-ALLIANCE WHOLESALERS" shall mean those beer wholesalers to which
Redhook has granted distribution rights for any of the Product in the Territory
as of the date of this Agreement and which are listed as "WHOLESALER" on
ATTACHMENT D attached hereto, as the same may be modified from time to time
pursuant to the terms and conditions of this Agreement, but shall not include
Affiliated Wholesalers.
"OFFER EXPIRATION DATE" shall have the meaning assigned to it in
Section 11.04(a).
"OFFER NOTICE" shall have the meaning assigned to it in Section
11.04(a).
"PALLET LIFT" shall mean a pallet of draft or packaged Product or
cooperage that, in each case, is prepared in such a manner that ABI may deliver
or move such Pallet in accordance with its customary practices in one operation.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"PRODUCTS" shall mean all malt beverage products marketed by Redhook as
of the Commencement Date and any malt beverage products for which ABI agrees to
act as master distributor pursuant to Section 11.03 hereof but shall not include
any malt beverage products the marketing of which Redhook discontinues or the
distribution of which is terminated pursuant to this Agreement.
"PURCHASE PRICE" shall have the meaning assigned to it in Section 4.01
hereof.
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"RECORDS" shall have the meaning assigned in Article XVII (a).
"SCHEDULED PRICE" shall mean the purchase price for Product.
"STAGING COSTS" shall mean * per Pallet Lift for packaged Product, and
* per Pallet Lift for draught Product, during 2004. ATTACHMENT A describes the
methodology used to modify Staging Costs for 2005 and future years and the
assumptions and activities involved in Staging Costs.
"TAXES" shall mean all applicable national, federal, state and local
excise and other brewing related taxes and any applicable duties and import
tariffs and fees (including without limitation liquor and consumption taxes)
paid or incurred by ABI in connection with this Agreement.
"TERM" shall have the meaning assigned to it in Section 7.01 hereof.
"TERRITORY" shall mean all states and territories in the United States
of America other than Alaska, Arizona, California, Colorado, Hawaii, Idaho,
Montana, New Mexico, Nevada, Oregon and Wyoming, and shall exclude any
jurisdiction subsequently excluded from the scope of this Agreement pursuant to
Section 11.11 hereof.
"WHOLESALER SUPPORT CENTER COSTS" or "WSC COSTS" with respect to any
Product shipped by Redhook to a WSC shall mean the fee paid by ABI to the
operator of the WSC for its services with respect to such Product.
"▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇ Brothers Brewing Company.
"WSC" shall mean the regional wholesaler support centers or
distribution centers established by ABI for the receipt of products designated
by ABI and the palletizing and preparation for pick up of such products by the
adjoining wholesalers.
ARTICLE II
GRANT OF DISTRIBUTION RIGHTS
Redhook hereby grants to ABI and ABI hereby accepts from Redhook the
exclusive right to serve as the master distributor to distribute the Products in
the Territory commencing on the Commencement Date, except as otherwise described
in
* CONFIDENTIAL TREATMENT REQUESTED
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this Section. ABI shall not, without the prior written consent of Redhook, sell
any Product acquired hereunder outside the Territory or to any party other than
an Alliance Wholesaler. Redhook agrees to not sell any Product to any other
Person in the Territory other than ABI, Affiliated Wholesalers and Non-Alliance
Wholesalers except at any brew pub situated at a Redhook brewery. At the option
of ABI and the respective Affiliated Wholesaler, any Affiliated Wholesaler may
become an Alliance Wholesaler, and Redhook shall execute any documents or
instruments reasonably requested by ABI to effectuate this.
ARTICLE III
PURCHASE AND SALE OF PRODUCTS
Redhook agrees to sell to ABI, and ABI agrees to purchase from Redhook
and re-sell to the Alliance Wholesalers, the quantities of Products ordered by
ABI from time to time hereunder. Redhook acknowledges that ABI is not
guaranteeing any level of Product sales; and that ABI's obligations under this
Agreement are limited to making the Products available to the Alliance
Wholesalers, it being understood that Redhook assumes full responsibility for
creating demand for the Products. Except for Product shipped directly by Redhook
as set forth in Section 11.07, (i) all purchases of Product by ABI from Redhook
shall be on an F.O.B. ABI Distribution Facility, freight prepaid basis, and (ii)
Redhook shall ship Products to be delivered to an Alliance Wholesaler to the ABI
Distribution Facility designated from time to time by ABI for such Alliance
Wholesaler.
ARTICLE IV
PRICING OF PRODUCTS
4.01 The price for all Product sold by Redhook to ABI for Products
shipped to ABI breweries or distribution centers shall equal: (a) the Scheduled
Price minus, as applicable, (b) (i) the Staging Costs, (ii) the Cooperage
Handling Charge, and/or (iii) Taxes. The price for all Product sold by Redhook
to ABI for Products shipped to a WSC shall equal (a) the Scheduled Price minus,
as applicable, (b)(i) the Invoicing Costs, (ii) the Cooperage Handling Charge
and/or (iii) Taxes. The price for all Product sold by Redhook to ABI for Product
shipped directly by Redhook to Alliance Wholesalers shall equal (a)(i) the
Scheduled Price minus, as applicable, (b)(i) the Invoicing Costs, (ii) the
Cooperage Handling Charge and/or (iii) Taxes. With respect to any Product,
howsoever shipped, the difference between the respective (a) and (b) shall be
referred to as the "Purchase Price").
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Redhook shall establish the initial Scheduled Price for each Product
sold by Redhook to ABI. Redhook shall have the right at any time in its sole
discretion to modify such Scheduled Price, such new pricing to become effective
for all deliveries to ABI not less than 30 days after date of written notice to
ABI of such price modifications.
4.02 Within 30 days after the end of each calendar quarter during the
Term, ABI shall pay to Redhook any Additional Price Component which is due
Redhook with respect to sales of Product by ABI to Alliance Wholesalers during
such calendar quarter.
4.03 Redhook may, from time to time, suggest Product resale prices to
ABI, and ABI will consider such suggestions. However, ABI shall have the right
to re-sell the Product to Alliance Wholesalers at such prices and on such terms
and conditions as ABI may, in its sole discretion, determine from time to time.
Any and all price promotions to be offered to Alliance Wholesalers by Redhook
shall be implemented in strict accordance with the procedures set forth in
ATTACHMENT E attached hereto.
4.04 ABI shall remit payment of the Purchase Price to Redhook for all
Product purchased hereunder, contemporaneously with its receipt of funds from
the Alliance Wholesalers with respect to such purchases. ABI shall be entitled
to set off against such payments any amounts owed to ABI for defective Products
(including without limitation, any costs of disposing of such defective
Product), or which are due ABI from Redhook pursuant to the terms of this
Agreement or otherwise. In the event that any Alliance Wholesaler does not pay
to ABI the purchase price with respect to any Products purchased by such
Alliance Wholesaler within 60 days after delivery thereof, at the option of
Redhook, ABI shall assign all of its rights to Redhook against such Alliance
Wholesaler relating to the purchase price for such Products.
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4.05 Notwithstanding the foregoing provisions of this Article IV,
Redhook and ABI recognize that the laws of certain States and/or U.S. federal
laws may preclude the parties from implementing the pricing mechanisms described
above. Under such circumstances, it is the intention of the parties to comply
with the requirements of such laws, without such compliance being a breach of
this Agreement. Under such circumstances, Redhook and ABI shall in good faith
negotiate a periodic adjustment to the Purchase Price, other affected provisions
hereof and the procedures set forth herein where it is permissible to do so, in
an amount necessary to restore the same economic benefits Redhook and ABI would
have received had the above pricing mechanisms been in effect. In particular,
the parties agree that notwithstanding the other provisions in this Agreement,
in the State of Washington, AB shall acquire no title to any Product to be sold
and Redhook shall sell Product directly to wholesalers pursuant to agreements
between such wholesalers and Redhook at prices and on terms determined by
Redhook and such wholesalers.
4.06 (a) Within 45 days after the end of each calendar quarter, Redhook
shall deliver a report setting forth the aggregate volume, in case -
equivalents, of Product: (i) sold by Redhook in the Territory; and (ii) sold by
Redhook in the Territory during the respective calendar quarter in 2003.
(b) Contemporaneously with the delivery of such report,
Redhook shall pay to ABI the Margin for all Product sold by Redhook to
Non-Alliance Wholesalers or Affiliated Wholesalers during such calendar quarter.
(c) To the extent that during any calendar quarter, the
quantity of Products sold in the Territory by Redhook exceeds the quantity of
Products (in each case determined on a case equivalent basis) sold by Redhook in
the respective calendar quarter in 2003 in the Territory, Redhook shall pay to
ABI the Incremental Margin for all Product sold by Redhook during such calendar
quarter. Such payment shall be made contemporaneously with the payment set forth
in Section 4.06(b).
(d) If during any calendar year, the product of the (i) the
Incremental Margin and (ii) the amount, if any, by which the aggregate volume,
in case-equivalents, of Product sold by Redhook in the Territory in such
calendar year exceeds the
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aggregate volume, in case-equivalents of Product sold by Redhook in the
Territory during 2003 does not equal the amounts paid by Redhook for such
calendar year pursuant to Section 4.06(c), then, within 45 days after the end of
such calendar year ABI shall pay to Redhook any amount by which the payments
previously made by Redhook pursuant to Section 4.06(c) exceed such product or
Redhook shall pay to ABI any amount by which the payments previously made by
Redhook are less than such product.
(e) The sales used in computing the Incremental Margin for any
calendar quarter shall be the sales derived from the sales areas included in the
Territory for the calendar quarter for which the Margin is calculated and those
sales derived from those same sales areas for the respective calendar quarter in
2003. For purposes of determining the Margin, the parties agree that Schedule
4.06 sets forth the Product sold by Redhook in the Territory in each calendar
quarter of 2003 (excluding the State of Washington). The parties agree that for
purposes of determining Incremental Margin to be paid by Redhook in 2004, the
calculations set forth in Section 4.06(c) and (d) shall be applied only to that
period in 2004 (and the respective period in 2003) occurring after the
Commencement Date.
(f) For purposes of Section 4.06, sales by Redhook in the
State of Washington shall not affect the computation of Margin or Incremental
Margin, and Redhook is not required to deliver any reports reflecting sales in
the State of Washington.
4.07 (a) Within 30 days after the end of each calendar month, ABI shall
notify Redhook of the WSC Fees payable with respect to the Product delivered by
Redhook for such month, and also the product delivered by Redhook to each WSC
and the fees incurred with respect to each WSC. Redhook shall pay such WSC Fees
within15 days after its receipt of notification.
(b) Within 45 days after the end of each calendar year, ABI shall
notify Redhook of the fees charged by each WSC to which Redhook may ship Product
during such calendar year.
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(c) In the event ABI changes a WSC or renegotiates the fees to
be paid to a WSC, in either case to which Redhook may be reasonably expected to
ship Product, ABI shall notify Redhook of such change or renegotiated fees.
ARTICLE V
DELIVERY OF PRODUCTS AND RISK OF LOSS
5.01 Except as set forth in Section 11.07, title to the Product and its
risk of loss or destruction shall pass from Redhook to ABI upon delivery of the
Product to the ABI Distribution Facility designated by ABI to be used for the
respective Alliance Wholesaler.
5.02 Redhook shall insure that Product shall be packaged, palletized
and prepared for shipment in accordance with ABI's instructions in effect from
time to time for ABI's malt beverage products. Redhook shall reimburse ABI for
any costs incurred by ABI in handling Products which are not properly palletized
and/or prepared for shipment, or which are palletized and/or prepared for
shipment in a manner which causes ABI to incur handling expenses not otherwise
included in the calculation of Staging Costs as set forth in ATTACHMENT A, and
ABI's determination of such costs, absent material error, shall be binding on
each of ABI and Redhook, provided, however, that such determination shall be
subject to the audit provisions of Article XVII below.
ARTICLE VI
REDHOOK'S TRADEMARKS
6.01 ABI shall not acquire any right in any of the Redhook trademarks,
trade dress, copyrights, promotional slogans, trade names, designs, labels,
get-ups, color combinations, product shapes, and other distinctive features in
the Products, or the promotional goods, advertisements and promotional
activities used during the term of this Agreement in conjunction with the
advertising, promotion, distribution, and sale of
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the Products (collectively, "Intellectual Property'). ABI is hereby granted the
right during the Term to use the Intellectual Property in advertising,
promotion, distribution, and sale of the Products in the Territory, which right
ABI may sub-license to the Alliance Wholesalers; provided, however, that Redhook
shall have the right to require ABI and the Alliance Wholesalers to submit
representative samples of any use of such Intellectual Property to Redhook for
approval, which approval shall be deemed given if Redhook does not provide ABI
with written notice of reasonable objection within 10 days of receipt of such
samples. Any and all rights that may be acquired in the Intellectual Property by
the use of the Intellectual Property by ABI or any Alliance Wholesaler will
inure to the sole benefit of the owner of the Intellectual Property, which will
be Redhook. The foregoing sentence does not affect ABI's rights in other marks
it may use or adopt. At the request of Redhook, ABI will execute an instrument,
in a form agreeable to Redhook and ABI, to effect further registration,
maintenance, and renewal of the Intellectual Property, and, where applicable, to
record Redhook as a registered user of the Intellectual Property. Redhook
represents and warrants that it has the right and authority to provide ABI and
the Alliance Wholesalers with the rights provided in this Section.
6.02 ABI shall promptly notify Redhook of any and all infringements of
the Intellectual Property pertaining to the Products that may come to ABI's
attention and shall assist Redhook in taking such action against said
infringements as Redhook, in its sole discretion, may decide. All expenses and
costs of such legal action, including those of ABI, shall be paid by Redhook.
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ARTICLE VII
TERM AND TERMINATION
7.01 The term of this Agreement (the "Term") shall become effective at
the Commencement Date and, unless sooner terminated pursuant to the provisions
of this Agreement, shall continue in effect until December 31, 2014 (the
"Initial Term"). Following the Initial Term, this Agreement shall renew
automatically for an additional 10 year period, unless ABI provides written
notice to Redhook on or prior to June 30, 2014 that the Agreement shall not be
renewed.
7.02 Either party shall have the right at any time to terminate this
Agreement immediately, without prejudice to any other legal rights to which such
terminating party may be entitled, upon the occurrence and during the
continuance of any one or more of the following:
(a) material default by the other party in the performance of
any of the provisions of this Agreement or any other agreement between the
parties, which default is either:
(i) curable within 30 days, but is not cured
within 30 days following written notice of
default; or
(ii) not curable within 30 days and either:
(A) the defaulting party fails to take
reasonable steps to cure as soon as
reasonably possible following
written notice of such default; or
(B) such default is not cured within 90
days following written notice of
such default;
(b) default by the other party in the performance of any of
the provisions of this Agreement or any other agreement between the parties,
which default is not described in Section 7.02(a) and which is not cured within
180 days following written notice of such default;
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(c) the making by the other party of an assignment for the
benefit of creditors; or the commencement by the other party of a voluntary case
or proceeding or the other party's consent to or acquiescence in the entry of an
order for relief against such other party in an involuntary case or proceeding
under any bankruptcy, reorganization, insolvency or similar law;
(d) the appointment of a trustee or receiver or similar
officer of any court for the other party or for a substantial part of the
property of the other party, whether with or without the consent of the other
party, which is not terminated within 60 days from the date of appointment
thereof;
(e) the institution of bankruptcy, reorganization, insolvency
or liquidation proceedings by or against the other party without such
proceedings being dismissed within 90 days from the date of the institution
thereof; or
(f) Any representation or warranty made by the other party
hereunder or in the course of performance of this Agreement shall be false in
material respects.
(g) The Master Distributor Agreement between Craft Brands
Alliance LLC and ABI dated the date hereof is terminated or the distribution
thereunder of the products of Redhook is terminated pursuant to its terms.
7.03 ABI shall have the right and option to terminate this Agreement at
any time upon six months' prior written notice to Redhook, in the event:
(i) Redhook engages in any Incompatible Conduct which
is not curable or is not cured to ABI's satisfaction (in ABI's sole opinion)
within 30 days following written notice from ABI to Redhook;
(ii) any ABI Competitor or Affiliate thereof acquires
10% or more of the outstanding equity securities in Redhook, and one or more
officers, designees or agents of such Person becomes a member of the Board of
Directors of Redhook;
(iii) The current chief executive officer of Redhook
ceases to function as chief executive officer and within six months of such
cessation a successor satisfactory in the sole, good faith discretion of ABI is
not appointed; or
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(iv) Redhook shall merge or consolidate into or with
any other Person or any other Person shall merge or consolidate into or with
Redhook; or
(v) ABI or its corporate affiliates incur any
liability or expense as a result of any claim asserted against them by or in the
name of Redhook or any shareholder of Redhook as a result of the equity
ownership of ABI or its affiliates in Redhook or any equity transaction or
exchange between ABI or its affiliates and Redhook, and Redhook does not
reimburse and indemnify ABI and its corporate affiliates on demand for the
entire amount of such liability and expense.
ARTICLE VIII
REMEDIES
If either party commits a breach or a default of this Agreement, no
remedy herein conferred upon or reserved to either party is exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any breach or
default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.
ARTICLE IX
DUTIES OF ABI
9.01 Except as set forth in Section 11.07, ABI shall have
responsibility and authority for coordinating delivery of the Product to the
Alliance Wholesalers. ABI shall specify the brand, package and quantity of
Product ordered and shall designate the ABI Distribution Facility to which the
Product shall be shipped (and ABI may change such designation from time to
time). The costs charged to Redhook shall vary depending on which ABI
Distribution Facility is designated.
9.02 ABI shall store all Product as it stores its own products, and
shall handle all Product with the same degree of care as it handles its own
products.
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9.03 Except for deliveries made by Redhook directly to Alliance
Wholesalers as set forth herein, ABI shall promptly and correctly fill each
Alliance Wholesaler's order, or shall instruct the WSC to promptly and correctly
fill each Alliance Wholesaler's order and to load all Products on the trucks or
other means of conveyance to the Alliance Wholesalers.
9.04 ABI may, in its sole discretion, add the Products to Exhibit 1 of
the existing Wholesaler Equity Agreement that ABI has with any Alliance
Wholesaler. At the option of ABI, in the event ABI acquires the distribution
rights to the Products in any sales area, ABI may direct Redhook and an ABI
wholesaler servicing such sales area to enter into a transitional distribution
agreement in a form satisfactory to ABI in lieu of adding the Products to
Exhibit 1 of the Wholesaler Equity Agreement between ABI and such wholesaler.
9.05 ABI shall use its best efforts (to the extent commercially
reasonable) to maintain all licenses, permits and other authorizations that are
necessary for ABI to distribute the Products in the Territory where there are
Alliance Wholesalers.
ARTICLE X
DUTIES OF REDHOOK
10.01 Redhook shall have sole responsibility for developing a market
presence, creating demand for the Products in the Territory, generating
marketing activity in each sales area of the Territory and developing and
distributing promotional programs and promotional literature. As between ABI and
Redhook, the parties understand that Redhook has full responsibility and
discretion with respect to the marketing, advertising and promotion of the
Products. Appropriate procedures with regard to independent pricing of Product
are set forth in ATTACHMENT E attached hereto. Promptly upon depletion reports
on Redhook inventory at Alliance Wholesalers becoming available to ABI, ABI
shall provide such information to Redhook.
10.02 Redhook shall bear risk of loss and transportation costs for the
Products until delivery of Products to the ABI Distribution Facility designated
by ABI for such Alliance Wholesaler as set forth in Article V hereof.
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10.03 Redhook shall, or shall cause its Affiliates to, secure and
maintain label registrations in all states in the Territory where Product is
sold.
10.04 Redhook shall use commercially reasonable efforts to market and
promote Product throughout the Territory in the markets where Products is sold,
with a view towards maximizing sales of Products in accordance with its
marketing and sales plan. In addition, Redhook shall use commercially reasonable
efforts (to the extent permitted by law) to prohibit the Non-Alliance
Wholesalers from knowingly selling Products to retailers in the sales areas
serviced by the Alliance Wholesalers or the Affiliated Wholesalers.
10.05 As between Redhook and ABI, Redhook shall be responsible for, and
shall indemnify ABI on an after-tax basis from, all Taxes levied on, against or
in connection with the sale, distribution, possession, marketing or promotion of
the Products in the Territory, except for Taxes levied on ABI's net income.
10.06 Redhook shall use commercially reasonable efforts to obtain and
maintain all licenses, permits and other authorizations that are necessary for
Redhook to sell and distribute the Products in the Territory.
ARTICLE XI
ADDITIONAL AGREEMENTS
11.01 Redhook shall at all times maintain its corporate existence, and
will do or cause to be done all things necessary to preserve and keep in full
force and effect all rights (charter and statutory), licenses and franchises
necessary for it to perform its obligations hereunder.
11.02 During the Term of this Agreement, Redhook shall not, without
ABI's prior written consent, sell, license, transfer, convey, encumber, or place
any restrictions upon, any of the Intellectual Property, except for licenses of
the Intellectual Property to Affiliated Wholesalers or Non-Alliance Wholesalers
for use solely in connection with sales of Product by such Affiliated
Wholesalers or Non-Alliance Wholesalers.
11.03 Redhook represents, warrants and covenants that it has the
exclusive right to market and sell all products of Redhook in the Territory,
whether such products are currently existing or are created in the future.
Except as set forth to the contrary herein, during the Term of this Agreement,
ABI will be the exclusive distributor of Product in the Territory. Subject to
the provisions of the following subsections of this Section 11.03, during the
Term of this Agreement, Redhook reserves the right to add New Products for
distribution in the Territory. In the event Redhook elects to distribute such
New Product in the Territory, Redhook shall first offer to ABI in the manner
described below, the right to distribute such New Product and to have such New
Product be deemed a Product for all purposes of this Agreement.
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(a) If Redhook or any of its Affiliates desires to distribute
a New Product in the Territory, Redhook shall notify (the "Offer Notice") ABI of
such intention and offer ABI the right to distribute such New Product. Within 10
days of ABI's receipt of the Offer Notice, ABI shall advise Redhook of the
information required by ABI to make an evaluation of such New Product (which
shall include, but may not be limited to, the factors described on ATTACHMENT
F). Within 45 days of ABI's receipt of all such information (the "Offer
Expiration Date"), ABI shall advise Redhook of ABI's decision to accept or not
accept such New Product as a Product under this Agreement. If ABI declines to
accept such New Product or fails to accept such New Product by the Offer
Expiration Date, Redhook shall be free to otherwise distribute such New Product
as it deems appropriate; provided that Redhook enters into a binding agreement
with another Person for the distribution of such New Product within 365 days of
the earlier of (Y) ABI's notice not to accept, or (Z) the Offer Expiration Date.
If Redhook does not enter into such binding agreement within such time period,
or if Redhook then fails to commence distribution under such binding agreement
or interrupts such distribution thereafter for 365 consecutive days or more or
decides to terminate its binding agreement with such Person, Redhook shall be
required to comply with the preceding provisions in this section again before
permitting any other Person to distribute the New Product. If ABI exercises its
option to distribute the New Product, such New Product shall be distributed by
ABI in accordance with the terms and conditions set forth in this Agreement.
Notwithstanding the above, Redhook may test market New Products without ABI's
prior approval; provided that: (i) the duration all such test marketing on any
and all New Products in any single calendar year shall not exceed six months;
(ii) the aggregate volume of all such test marketing on any single New Product
in any single calendar year shall not exceed one percent of the sales volume for
all Redhook Products for the preceding 12 months; and (iii) all such New
Products otherwise comply with the quality standards set forth in this
Agreement.
17
(b) For purposes of this Section 11.03, New Products that are
accepted by ABI are deemed Products and if Redhook desires to then modify such
Product, such modifications shall be handled as set forth in Section 11.08.
(c) Before making a New Product available to any Non-Alliance
Wholesaler, Redhook shall, to the extent allowed by law and permitted by the
terms of any contract between Redhook and the Non-Alliance Wholesaler holding
the relevant distribution rights, first make such New Product available for
distribution by ABI. Within 90 days of ABI's receipt of Redhook's notice that it
wishes such New Product distributed in the sales area of such Non-Alliance
Wholesaler, ABI shall advise Redhook of ABI's decision to accept distribution
rights for such New Product in the sales area, in which event the ABI wholesaler
distributing the product in the sales area shall be deemed an Affiliated
Wholesaler or an Alliance Wholesaler for such New Product.
11.04 Redhook shall comply with every commercially reasonable request
made by ABI to terminate the distribution rights of any Non-Alliance Wholesaler
and to cause the Redhook Products to be distributed in the sales area of such
Non-Alliance Wholesaler pursuant to this Agreement. This section shall not
obligate Redhook to undertake any action inconsistent with applicable law,
except that at the written direction of ABI, ABI may obligate Redhook to
undertake an action that may give rise solely to civil liabilities to private
parties and any such written direction shall obligate ABI to undertake the
indemnification obligations with respect to such action as set forth in Section
14.02.
11.05 If Redhook wishes to have Products distributed in a sales area
where ABI is unable to provide an Affiliated Wholesaler or an Alliance
Wholesaler who will agree to carry or fill orders for Products which have been
procured by Redhook or the Affiliated Wholesaler or the Alliance Wholesaler
provided by ABI has refused repeatedly to reasonably cooperate with Redhook and
has failed to adhere to the provisions of the
18
Wholesaler Equity Agreement between ABI and such Affiliated or Alliance
Wholesaler with regard to the Products, Redhook may, to the extent permitted by
applicable law, terminate the distribution rights of the Affiliated Wholesaler
or the Alliance Wholesaler, select another Person reasonably acceptable to ABI
and upon written terms and conditions consistent with the intent of this
Agreement to make ABI the exclusive distributor of Product in the Territory, to
distribute the Product in such sales area, and if selected, such Person shall be
deemed a Non-Alliance Wholesaler for purposes of this Agreement and shall be
added to ATTACHMENT D. In the event ABI is able to identify a wholesaler for
such sales area different from the wholesaler previously distributing the
Products in such sales area, Redhook's obligations with respect to the
Non-Alliance Wholesaler shall be as set forth in Section 11.04.
11.06 At Redhook's request, ABI shall instruct Alliance Wholesalers to
return cooperage to the ABI Distribution Facility designated by ABI, and ABI
shall make available for pick-up by Redhook all such cooperage. Redhook shall
pay ABI the Cooperage Handling Charge for all cooperage received by ABI. ABI
shall not be liable for the costs of any cooperage lost or damaged by such
Alliance Wholesaler, and ABI assigns to Redhook all of ABI's rights, if any, to
seek reimbursement from the Alliance Wholesaler for lost or damaged cooperage.
Redhook shall reimburse ABI for any costs incurred by ABI in handling cooperage
that is not properly segregated from other cooperage by the Alliance Wholesalers
or is returned in any other manner that causes ABI to incur costs not included
in the calculation of Cooperage Handling Charges and ABI assigns to Redhook all
of ABI's rights, if any, to seek reimbursement from those Alliance Wholesalers
that cause Redhook to incur such additional costs. ABI's determination of such
costs, absent manifest error, shall be binding, on each of ABI and Redhook;
provided, however, that such determination shall be subject to the audit
provisions of Section Article XVII. ABI and Redhook shall develop, from time to
time, procedures for the collection and redemption of cooperage and cooperage
deposit fees satisfactory to each party in its reasonable judgment. Such
procedures shall provide for the prompt delivery of cooperage among ABI, Redhook
and the Alliance Wholesalers and the payment and return of cooperage deposit
fees promptly upon acceptance and return of the respective cooperage.
19
11.07 With the consent of ABI (which ABI may withdraw or modify at any
time at the option of ABI upon 60 days' advance written notice), Redhook shall
be permitted to deliver Product directly to Alliance Wholesalers. With respect
to any such delivery,
(a) such deliveries shall still be deemed: (i) sales by Redhook
to ABI, and (ii) re-sales by ABI to such Alliance Wholesaler
for purposes of this Agreement;
(b) title to and risk of loss of such Products shall remain with
Redhook until delivery to such Alliance Wholesaler; and
(c) Invoicing Costs shall be substituted for Staging Costs for
all purposes under this Agreement.
If ABI does not consent to any request by Redhook to deliver Product directly to
an Alliance Wholesaler, at the request of Redhook from time to time (but not
more often than annually) ABI shall review the costs and benefits incurred or
realized by Redhook and the Alliance Wholesaler that would result from such
direct delivery by Redhook and discuss such costs and benefits with Redhook.
Within 30 days after completion of the review, ABI shall inform Redhook whether
and to what extent ABI shall consent to Redhook's requests to deliver directly
to such Alliance Wholesaler.
11.08 In order to modify an existing Product for the purposes of
replacing the Product (rather than for the purposes of creating a New Product),
Redhook may change, alter, modify or adjust the formula, taste profile, alcohol
content, ingredients, brand name or trade dress of any Product (a "Modified
Product"), if and only if Redhook has given ABI at least 30 days' notice of such
change, alteration, modification or adjustment. ABI shall have the right and
option, in its sole discretion, during such 30 day period to terminate
distribution of such Modified Product under this Agreement, in which event such
Modified Product shall no longer be deemed a Product for purposes of this
Agreement. Prior to execution of this Agreement, Redhook has delivered to ABI,
in writing, descriptions setting forth for each Product the exact ingredients
(by types and origin) and product characteristics for such Product, including
applicable tolerances and a description of the primary and secondary packaging
for each Product. Other than minor changes in trade dress, any changes or
deviations in primary or secondary
20
packaging, ingredients (additions or deletions), hops or malt type or supplier
of other key raw material in any Product from that earlier specified by Redhook,
such changes shall cause such Product to be a Modified Product. In addition, if
ABI's examination of any Product indicates a deviation greater than the
tolerance previously indicated for such Product in three or more tests, such
Product shall be deemed to be a Modified Product.
11.09 Redhook shall ship to ABI at 220 Taste Room, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Director - Brewing Education (or to such other
address or location as may be specified from time to time in writing by ABI):
(a) one (1) case of each packaged Product during each calendar quarter; and (b)
from time to time upon request by ABI, one (1) keg of the draught Product
specified by AB.
11.10 ABI shall maintain in its employ a corporate inventory management
employee (the "Inventory Manager"), a substantial portion of the
responsibilities of whom shall be to coordinate and administer logistics of
Product distribution to Alliance Wholesalers. Within fifteen (15) days of the
end of each calendar quarter during the Term, beginning with the second calendar
quarter of 2004, Redhook shall pay to ABI 8.75% of the annual Inventory Manager
Fee. ABI shall pay the Inventory Manager cash compensation not exceeding that
generally paid to other ABI employees with similar experience, training, skill
level and performance. Annually, ABI and Redhook will review the time spent by
the Inventory Manager with respect to the products sold by Redhook as compared
to the time spent on other matters for the preceding year, and annually ABI and
Redhook shall adjust the percentage specified in this paragraph so that Redhook
pays to ABI an amount that reasonably compensates ABI for the time spent by the
Inventory Manager in the preceding year on matters relating to products sold by
Redhook.
11.11 Upon written agreement by the parties hereto, the Territory may
be reduced to exclude states or portions of the United States of America.
11.12 Redhook shall not acquire any alcohol or non-alcohol malt
beverage brand or the assets or equity securities of any producer of alcohol
malt beverages unless Redhook delivers to ABI a written plan providing for the
exclusive distribution of such malt beverages by ABI that is satisfactory to
ABI.
21
ARTICLE XII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF REDHOOK
Redhook represents, warrants and covenants to ABI as follows:
12.01 Redhook is a corporation duly organized, validly existing and in
good standing under the laws of the State of Washington, has full corporate or
other power and authority to carry on its business as now conducted and as
currently proposed to be conducted, and to execute, deliver and carry out the
terms of this Agreement, has all permits and authorizations necessary to carry
on its business as presently conducted, and is, or shall be if required, duly
qualified to do business as a foreign corporation in good standing in each
jurisdiction wherein the nature of Redhook's business and operations or the
character of the properties owned or held under lease by Redhook makes such
qualification necessary and in which the failure to so qualify would have a
materially adverse effect on the business, prospects, profits, condition or
operations, financial or otherwise, of Redhook.
12.02 This Agreement and all related documents have been duly
authorized, executed and delivered by Redhook and constitute legal, valid and
binding agreements or obligations of Redhook enforceable against it in
accordance with their terms, subject to applicable bankruptcy, insolvency, and
similar laws affecting the enforcement of creditors' rights generally. Neither
the execution and delivery nor the performance by Redhook of this Agreement will
contravene any law or governmental rule or regulation, or any judgment or order,
applicable to or binding on Redhook, or Redhook's charter documents, or result
in any breach of or constitute any default under, or result in the creation of
any lien upon any property of Redhook under, any indenture, mortgage or other
agreement or instrument to which Redhook is a party or by which it, or any of
its properties may be bound or affected.
12.03 Neither the execution and delivery nor the performance by Redhook
of this Agreement requires any consent or approval of, giving notice to,
registration with, or taking of any other action in respect of, any federal or
state governmental authority or agency which has not been obtained prior to the
date hereof.
22
12.04 ABI's purchase or resale of Products or other goods hereunder in
the form furnished to ABI by Redhook and ABI's use of the Intellectual Property
in accordance with the terms of authorization by the Redhook of ABI's use
pursuant to the this Agreement shall not infringe any valid United States or
foreign patent right, right of privacy or publicity, or any rights with respect
to trademarks, trade dress, copyrights, promotional slogans, trade names,
designs, labels, get-ups, color combinations, product shapes, or other
trademarks rights.
12.05 Except as set forth in ATTACHMENT D, Redhook, has no contract,
agreement or understanding, whether oral or written, with any Person for the
distribution of Product in the Territory.
12.06 As of the date hereof, the list of Non-Alliance Wholesalers set
forth in ATTACHMENT D is accurate, full and complete.
12.07 All Products:
(a) shall be merchantable and fit for their intended purpose;
(b) shall be produced exclusively in the breweries of Redhook,
▇▇▇▇▇▇ or in other breweries approved by ABI;
(c) shall be free from defects in materials and workmanship
and in compliance with applicable federal and state laws and regulations;
(d) shall be delivered free from any lawful security interest,
lien or other encumbrance;
(e) shall not be adulterated or misbranded within the meaning
of the Federal Food, Drug and Cosmetic Act, as amended, and shall comply with
the applicable provisions of the Code of Federal Regulations; and
(f) shall be produced in compliance with the requirements of
the Fair Labor Standards Act of 1938, as amended, and Executive Order No. 11246
and of the rules, regulations and relevant orders of the Secretary of Labor, if
applicable.
23
12.08 (a) In order to ensure the freshness quality of Product when
consumed by the public, all Products shall be delivered by Redhook to the
designated ABI Distribution Facility, or to the Alliance Wholesalers, Affiliated
Wholesalers and Non-Alliance Wholesalers: (i) for packaged Product, at least 80
days; and (ii) for draft Product, at least 32 days, prior to the time when such
Product would no longer be salable to or consumable by the public, based on
criteria developed by Redhook and reasonably acceptable to ABI, by which Redhook
judges the freshness of its malt and non-malt beverage products.
(b) If ABI changes from time to time its standards with
respect to the remaining shelf life as applied generally to its products sold in
the United States, Redhook agrees that within six months of the effective date
of such change, Redhook shall conform its shipment practices to the current ABI
standard.
(c) To the extent any Product is shipped to a WSC, ABI may
change the standards described in Section 12.08(a) to provide assurances,
satisfactory in the reasonable judgment of ABI, that the Product will continue
to be delivered to retailers with an remaining shelf life consistent with the
standards generally used by ABI
12.09 Redhook shall comply in material respects with all applicable
governmental laws, regulations and orders covering the production, sale,
packaging, marketing and delivering of the Products.
ARTICLE XIII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ABI
ABI represents, warrants and covenants to Redhook as follows:
13.01 ABI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Missouri, has full corporate power and
authority to carry on its business as now conducted and as currently proposed to
be conducted, and to execute, deliver and carry out the terms of this Agreement
and has all permits and authorizations necessary to carry on its business as
presently conducted.
13.02 This Agreement and all related documents have been duly
authorized, executed and delivered by ABI and constitute legal, valid and
binding agreements or
24
obligations of ABI enforceable against it in accordance with their terms,
subject to applicable bankruptcy, insolvency, and similar laws affecting the
enforcement of creditors' rights generally. Neither the execution and delivery
nor the performance by ABI of this Agreement will contravene any law or
governmental rule or regulation, or any judgment or order, applicable to or
binding on ABI, or ABI's charter documents, or result in any breach of or
constitute any default under, or result in the creation of any lien upon any
property of ABI under, any indenture, mortgage or other agreement or instrument
to which ABI is a party or by which it, or any of its properties may be bound or
affected.
13.03 Neither the execution and delivery nor the performance by ABI of
this Agreement requires any consent or approval of, giving notice to,
registration with, or taking of any other action in respect of, any federal or
state governmental authority or agency, which has not been obtained prior to the
date hereof.
13.04 ABI shall comply in material respects with all governmental laws,
regulations and orders covering the re-sale and distribution of the Products.
ARTICLE XIV
INDEMNIFICATION
14.01 In addition to any other indemnities set forth in this Agreement,
Redhook will indemnify, protect, defend and hold harmless each of ABI, its
Affiliates, wholesalers and each of their respective directors, officers,
employees and agents, from and against all claims, liabilities, losses, damages,
injuries, demands, actions, causes of action, suits, proceedings, judgments and
expenses, including, without limitation, reasonable attorneys' fees, court costs
and other legal expenses arising from, connected with or attributable to: (a)
the Products; (b) the breach by Redhook of any provision hereof; (c) ABI's use
of the Intellectual Property in conjunction with the distribution and sale of
the Products in accordance with the terms hereof; (d) the inaccuracy of any
warranty or representation made by Redhook herein or in connection herewith; or
(e) the termination of the distribution rights of any Affiliated Wholesaler or
Alliance Wholesaler pursuant to Section 11.05. None of the above indemnities
shall require Redhook to indemnify, protect, defend or hold harmless any
indemnitee with respect to any claim to the extent such claim arises from, is
connected with or is attributable to the negligence or willful misconduct of
such ABI Indemnitee. Expiration or termination of this Agreement shall not
affect the continuing obligations of Redhook to indemnify ABI under this Section
14.01.
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14.02 In addition to other indemnities set forth in this Agreement, ABI
will indemnify, protect, defend and hold harmless each of Redhook, its
Affiliates and each of their respective directors, officers, employees and
agents, from and against all claims, liabilities, losses, damages, injuries,
demands, actions, causes of action, suits, proceedings, judgments and expenses,
including, without limitation, reasonable attorneys' fees, court costs and other
legal expenses arising from, connected with or attributable to: (a) the breach
by ABI of any provision hereof; (b) the inaccuracy of any warranty or
representation made by ABI herein or in connection herewith; or (c) any action
taken by Redhook at the written direction of ABI pursuant to Section 11.04.
Expiration or termination of this Agreement shall not affect the continuing
obligations of ABI to indemnify Redhook under this Section 14.02. Nothing herein
shall require ABI to indemnify, protect, defend or hold harmless any indemnitee
with respect to any claim to the extent such claim arises from, is connected
with or is attributable to the negligence or willful misconduct of such
indemnitee or the actions of any Non-Alliance Wholesalers.
14.03 If a claim by a third party is made against a party indemnified
pursuant to this Article XIV, and if such indemnified party intends to seek
indemnity with respect thereto under this Article XIV, the indemnified party
shall promptly (and in any case within 30 days of such claim being made) notify
the indemnifying party of such claim; provided, however, that any failure of the
indemnified party to promptly notify the indemnifying party of such claim shall
not relieve the indemnifying party of its obligations pursuant to this Section
14.03 except to the extent that the indemnifying party would be responsible for
the payment of any additional amounts or be actually prejudiced in any other way
as a result of such failure. The indemnifying party shall have the right (but
not the obligation) to undertake, conduct and control, through counsel of its
own choosing and at the indemnifying party's expense, the settlement or defense
thereof, provided the indemnifying party proceeds in good faith, expeditiously
and diligently. If the indemnifying party does not notify the indemnified party
in writing that it will defend any matter within 20 business days after receipt
of notice from the indemnified party of
26
the existence of such matter, or if the indemnifying party disputes that it is
liable to the indemnified party for any sum pursuant to this Section 14.03, the
indemnifying party shall have no right to defend such matter, and the
indemnified party shall have full right and power to defend or otherwise deal
with and dispose of the matter and shall be indemnified for the fees and
expenses of counsel retained for such purpose. The indemnified party shall
cooperate with the indemnifying party in connection with any defense by the
indemnifying party of a claim, but the indemnifying party shall permit the
indemnified party to participate in such settlement or defense through counsel
chosen by the indemnified party and the fees and expenses of such counsel shall
be borne by the indemnified party. Without the prior written consent of the
indemnified party, the indemnifying party will not enter into any settlement of
any such claim which would lead to liability or create any financial or other
obligation on the part of the indemnified party, and the indemnifying party
shall after any such settlement or the resolution of any claim promptly
reimburse the indemnified party for the full amount of any loss resulting from
such claim not theretofore paid by the indemnifying party. The indemnified party
will not enter into any settlement or pay (except pursuant to a judgment) any
such claim without the prior written consent of the indemnifying party, which
consent shall not unreasonably be withheld or delayed. Notwithstanding the
foregoing, the indemnified party shall have the right to pay or settle any such
claim, in the event the indemnified party has not assumed or is not pursuing the
defense of any claim or is in breach of its indemnification obligations
hereunder. The indemnification required by this Section 14.03 shall be made by
periodic payments of the amount thereof as losses are incurred and as and when
bills are received.
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ARTICLE XV
INSURANCE
Redhook shall procure and maintain from qualified and licensed insurers
with Best's Ratings of at least A-: (i) a comprehensive or commercial general
liability insurance policy with at least $10,000,000 in coverage for each
occurrence, including liquor liability; (ii) a worker's compensation policy with
at least $2,000,000 in coverage for each occurrence; and (iii) a property
insurance policy covering damage to the Product owned by Redhook. Coverage shall
be on an occurrence rather than a claims made basis. The policy shall name ABI
as an additional insured and shall include coverage for Redhook's
indemnification obligations under this Agreement. The policy shall provide that
ABI will be notified of the cancellation or any restrictive amendment of the
policy at least 15 days prior to the effective date of such cancellation or
amendment. Redhook shall not violate, or permit to be violated, any conditions
of such insurance policies, and Redhook shall at all times satisfy the
requirements of the insurance carrier writing said policy.
From time to time at the request of ABI, Redhook shall provide ABI with
a certificate from such insurer certifying that the insurance policy described
in this section is in force and the evidence of coverage shall specifically
state that coverage as it pertains to ABI shall be primary regardless of any
other coverage that may be available to ABI. Failure to procure and maintain the
insurance coverage specified herein shall be deemed a material breach of this
Agreement
ARTICLE XVI
FORCE MAJEURE
16.01 If by reason of Force Majeure either party is unable in whole or
in part to carry out any of its agreements contained herein, such party shall
not be deemed in default during the continuance of such inability. The term
"Force Majeure" as used herein shall mean, without limitation, the following:
acts of God; strikes, lockouts or other industrial disturbances; acts of public
enemies; orders or restraints of any kind from any government of the United
States of America or from a state or from any of their departments, agencies or
officials (except when such governmental action results from
28
a party's failure or refusal to comply with any applicable law, rule or
regulation), or of any civil or military authority; insurrections; riots;
landslides; earthquakes; fires; storms; droughts, floods, explosions; and any
other cause or event not reasonably within the control of the respective
parties. Each party agrees, however, to remedy with all reasonable dispatch the
cause or causes preventing it from carrying out the Agreement, provided that the
settlement of strikes, lockouts and other course is in its judgment unfavorable
to it.
16.02 The response to an act of Force Majeure resulting from industrial
disturbance shall be entirely within the discretion of the affected party, and
the affected party shall not be required to make settlement of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties.
ARTICLE XVII
AUDIT AND INSPECTION RIGHTS
(a) During the Term and for a period of at least two years
following the termination of this Agreement, each party shall maintain such
books and records (collectively, "Records") in accordance with generally
accepted accounting principles consistently applied as are necessary to
substantiate that:
(i) All invoices and other charges submitted to the
other for payment hereunder were valid and proper;
(ii) No payments have been made, directly or
indirectly, by or on behalf of either party to or for the
benefit of any employee or agent of the other party who may
reasonably be expected to influence such other party's
decision to enter into this Agreement, or the amount to be
paid by such other party pursuant hereto (as used herein,
"payment" shall include money, property, services, and all
other forms of consideration); and
(iii) Such party has conformed to the provisions of
this Agreement.
(b) Each party and/or its representative shall have the right
at any time during normal business hours, upon five business days' notice, to
have PricewaterhouseCoopers LLP, or such other internationally recognized
accounting firm as agreed to by the parties audit the Records of the other in a
manner which does not create unreasonable disruption to the audited party's
normal conduct of business.
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ARTICLE XVIII
CONFIDENTIALITY
18.01 (a) During and subsequent to the Term of this Agreement, each
party shall treat and shall cause its respective employees, officers, directors,
advisors, representatives, subsidiaries, Affiliates, assigns, subcontractors and
any and all persons or business entities acting under one or any of them, to
treat, as confidential property and not disclose to any other Person or use in
any manner, except as is necessary to perform this Agreement, (and then only on
a confidential basis satisfactory to both parties), any information regarding
the other party's prices, plans, programs, processes, products, costs,
equipment, operations or customers (including without limitation information
received by ABI with respect to Product formula and ingredient and information
by Redhook received regarding the distribution and logistics programs used by
ABI) ("Confidential Information") which may come within the knowledge of such
party, its officers, employees or advisors in the performance of this Agreement,
without in each instance securing the prior written consent of the other party;
nor shall ABI use such Confidential Information to produce a beer whose formula
duplicates any of the Product formulas.
(b) Nothing above, however, shall prevent either ABI or
Redhook from disclosing to any other Person or using in any manner, information
that such party can show:
(i) has been published or has become part of the
public domain without any breach of this Agreement other than
by acts, omissions or fault of such party or its employees or
agents;
(ii) has been furnished or has been made known to
such party by third parties (other than those acting directly
or indirectly for or on behalf of the disclosing party) as a
matter of legal right without restrictions on its disclosure;
(iii) was in such party's lawful possession prior to
the disclosure thereof by the other party;
30
(iv) is later independently developed by the
receiving party; or
(v) has been required to be disclosed by law, court
order, or government order or regulation.
(c) If any party is required by law, court order or government order or
regulation to disclose Confidential Information, such party shall provide notice
thereof to the other party and undertake reasonable steps to provide the other
party with an opportunity to object to such disclosure.
(d) Except as required by law, neither party shall release, or cause or
allow the release of, information to the communications media or to any other
third party concerning the specific terms of this Agreement or any amendment or
modification thereto without the prior written consent of the other party;
provided, however, that if in the reasonable opinion of the disclosing party's
counsel, the failure to disclose any such information would create a reasonable
risk of non-compliance with applicable securities laws, then such disclosing
party may so disclose such information provided it gives the other party as much
advance notice as is reasonably possible.
18.02 Neither party shall make any Confidential Information available
to anyone other than those of its respective employees and advisors who need
such Confidential Information to enable them to perform this Agreement.
18.03 These secrecy obligations with respect to the Confidential
Information shall survive the termination or expiration of this Agreement.
ARTICLE XIX
ASSIGNMENT
19.01 This Agreement will be binding upon, and will inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
19.02 Redhook may not assign this Agreement to any Person without the
prior written consent of ABI.
31
19.03 Provided that such assignment does not deny Redhook the practical
benefits of this Agreement, ABI may assign this Agreement to any entity
controlled by Anheuser-▇▇▇▇▇ Companies, Inc., or to any entity which succeeds
through any transaction to the business of ABI substantially as a whole, but no
such assignment shall release ABI from its obligations as primary obligor
hereunder without Redhook's prior written consent, and ABI shall retain the sole
right to provide any consents or waivers under this Agreement.
ARTICLE XX
NOTICES
All notices required or permitted hereunder shall be in
writing and shall be deemed duly given if either personally delivered, sent by
electronic facsimile or sent by overnight courier service or certified mail,
return receipt requested, addressed to the parties as follows:
If to ABI: Anheuser-▇▇▇▇▇, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President - Business and
Wholesaler System Development
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile Number: (314)765 -9167
If to Redhook: Redhook Ale Brewery, Incorporated
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Chief Executive Officer
Facsimile Number:(▇▇▇) ▇▇▇-▇▇▇▇
or to such other address, facsimile number or attention as either party shall
provide to the other in accordance herewith. Notices delivered in person, by
overnight courier or by facsimile shall be effective when received. Notices
given by certified mail shall be effective on the third business day after
mailing unless sooner received, in which case they shall be effective upon
receipt.
32
ARTICLE XXI
INDEPENDENT CONTRACTORS
The parties shall be and act as independent contractors and under no
circumstances shall this Agreement be construed to create any agency,
partnership, joint venture or employment relationship between the parties.
Neither party has any authority to bind the other in any way except as may be
otherwise expressly stated in this Agreement. The parties recognize that during
the period of this Agreement, there will be employees of one party upon the
premises of the other. It is understood and agreed that on such occasions the
employees of each party shall remain the employees of that party solely, and
that each party shall be solely responsible for the wages and benefits for its
employees, and that any injury which may be sustained by an employee shall be
covered under the worker's compensation insurance of the party by which he is
employed.
ARTICLE XXII
MISCELLANEOUS
22.01 In exercising their respective rights (including, without
limitation, the making of any determinations under this Agreement, discretionary
or otherwise) and performing their respective obligations hereunder, each of the
parties shall act in good faith and in a commercially reasonable manner; except
that with respect to (a) the determination of Incompatible Conduct or the cure
thereof by ABI, (b) ABI's decision to terminate distribution of a Modified
Product (as described in Section 11.08 above), (c) ABI's judgment made pursuant
to Section 7.03(i) or determination made pursuant to Section 7.03(iii); ABI
shall only be required to act in good faith and need not act in a commercially
reasonable manner.
22.02 If any provision of this Agreement shall be determined to be
illegal and unenforceable by any court of law or any competent governmental or
other authority, the remaining provisions shall be severable and enforceable in
accordance with their terms so long as this Agreement without such terms or
provisions does not fail in its essential commercial purpose or purposes. The
parties will negotiate in good faith to replace any such illegal or
unenforceable provision or provisions with suitable substitute provisions that
will maintain the economic purposes and intentions of this Agreement.
33
22.03 Failure by either party to insist on strict performance by the
other of any term, condition or obligation set forth in this Agreement shall not
be deemed a waiver of the same or any similar breach, and no waiver of any
provision hereof shall be effective unless in writing, specifying the provision
to be waived.
22.04 This Agreement is entered into in the State of Missouri and will
be governed by and construed under the laws of Missouri, including the Uniform
Commercial Code as in effect in the State. The parties agree that any legal or
equitable action or proceeding with respect to this Agreement shall be brought
in the United States District Court for the Eastern District of Missouri (or if
such court does not have jurisdiction, in any court of general jurisdiction in
the County of St. Louis, Missouri) or in the United States District Court for
the Western District of Washington (or if such court does not have jurisdiction,
in any court of general jurisdiction in Washington).
22.05 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior or
contemporaneous agreements in regard thereto. This Agreement cannot be altered
or modified except by an agreement in writing signed by authorized
representatives of both parties and specifically referring to this Agreement.
The section headings are inserted for convenience only and are in no way
intended to define or limit the scope, extent or intent of any provision of this
Agreement.
22.06 Nothing in this Agreement, express or implied, is intended or
shall be construed to give any Person other than the parties to this Agreement,
and the indemnitees specified in Article XIV or their respective successors or
assigns any legal or equitable right, remedy or claim under or in respect of any
agreement or any provision contained herein.
22.07 This Agreement may be executed in one or more counterparts and
shall be the valid and binding agreement of the parties when the counterparts of
this Agreement have been duly executed and delivered by each party hereto.
34
22.08 Redhook acknowledges that ABI is reviewing changes to the
procedures by which Affiliated Wholesalers and Alliance Wholesalers generate and
transmit orders for Products. ABI may request from Redhook reimbursement of out
of pocket costs incurred to analyze or implement such change, and Redhook shall
reasonably consider such requests. Redhook and ABI acknowledge that implementing
such changes may require an amendment hereto and each party shall reasonably
consider such amendment.
(SIGNATURE PAGE FOLLOWS)
35
IN WITNESS WHEREOF, this Agreement is executed on behalf of the parties
by their duly authorized representatives as of the day and year first above
written.
ANHEUSER-▇▇▇▇▇, INCORPORATED REDHOOK ALE BREWERY,
INCORPORATED
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------ ----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Vice President - Administration Chief Executive Officer
and President
ATTACHMENT A
STAGING COSTS AND COOPERAGE HANDLING COST MODIFICATION
For each calendar year during the Term, the Staging Costs and the Cooperage
Handling Costs shall each be recalculated each January to be an amount equal to:
*
where:
* = the Staging Costs or the Cooperage Handling Costs, as applicable, in
effect for the prior calendar year
* = the percentage change (in decimal fraction form) in the Average
Budgeted Hourly Fully Loaded Labor Rate for beer packaging and
shipping laborers, budgeted for the calendar year for which the
calculation is made, as compared to the amount which had been
budgeted for the prior calendar year.
The Average Budgeted Hourly Fully Loaded Labor Rate for each calendar year shall
be determined by taking the arithmetic average of the Budgeted Hourly Fully
Loaded Labor Rates for the subject year (as set forth in the annual budget in
the CMS/SAP system) in effect on December 31 preceding the subject year for all
ABI breweries in the Territory.
EXAMPLE:
2004 Package Staging Cost *
Budgeted Avg. Fully Loaded Labor
Rate
2004 *
2005 *
% change *
2005 Package Staging Cost *
2004 Cooperage Handling Cost *
Budgeted Avg. Fully Loaded Labor Rate
2004 *
2005 *
% change *
2005 Cooperage Handling Cost *
*CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT B
INCOMPATIBLE CONDUCT
A. Examples of activities that constitute Incompatible Conduct:
(1) Advertising by Redhook directed at underage drinkers;
(2) Production by Redhook of a high alcohol beer; provided that high alcohol
beer shall not include production of a beer whose alcohol content does not
exceed the alcohol content of (a) a similar Product currently distributed
hereunder or (b) a product that is made or distributed currently by ABI;
(3) Advertising by Redhook based upon the high alcohol content of its beer;
(4) Statements by Redhook defaming ABI or its products;
(5) Criminal activities by Redhook or its senior executives; and
(6) Quality and wholesomeness of Product is materially affected, taking into
account the permitted tolerances and Product specifications.
B. Examples of activities that do not constitute Incompatible Conduct:
(1) Poor operating results by Redhook;
(2) Poor performance of Redhook or unsuccessful product introduction by Redhook;
(3) Introduction by Redhook of products directly competitive with ABI products;
(4) Any activity the sole effect of which on ABI is to decrease the value of
ABI's investment in Redhook or the value of ABI's distribution rights of
Redhook products; and
(5) Isolated, non-repetitive, inadvertent minor regulatory infractions.
PAGE 1 0F 2
ATTACHMENT C
METHODOLOGY TO ANNUALLY MODIFY THE
INCREMENTAL MARGIN, MARGIN,
AND THE INVOICING COSTS
For each calendar year during the Term, the Incremental Margin, Margin and the
Invoicing Costs shall each be recalculated (rounding to the nearest one
one-hundredth of a cent) each January to be an amount equal to:
*
where:
* = the Incremental Margin, Margin or the Invoicing Costs, as applicable, in
effect for the prior calendar year
* = the forecasted annual rate of change (in per cent) in the "GDP Deflator
(Implicit)" for the subject calendar year, as published by DRI/McGraw
Hill division of Standard & Poor's Corporation in the "Inflation
Summary" table in the October issue in the preceding year of REVIEW OF
THE U.S. ECONOMY (or such other index or publication as may be
reasonably acceptable to Redhook and ABI if such index or publication is
no longer published).
EXAMPLE:
Assume the October 2004 issue of REVIEW OF THE U.S. ECONOMY, shows the Inflation
Summary table as follows:
Years
-----------------------------
2001 2002 2003 2004
-----------------------------
GDP Deflator (Implicit) ................ 1.6 1.7 2.1 2.0
The 2005 Base Margin would be calculated by multiplying the 2004 Base Margin
*
The 2005 Incremental Margin would be calculated by multiplying the 2004
Incremental Margin
*
* CONFIDENTIAL TREATMENT REQUESTED
PAGE 2 OF 2
The 2005 Invoicing Costs would be calculated by multiplying the 2004 Invoicing
Costs (* per Pallet Lift) by *
*
* CONFIDENTIAL TREATMENT REQUESTED
2
ATTACHMENT D
NON-ALLIANCE WHOLESALERS
Redhook has no Non-Alliance Wholesalers
ATTACHMENT E
PROCEDURES RELATING TO PRICING MATTERS
1. *
2. *
3. *
4. *
5. *.
* CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT F
FACTORS NEEDED TO EVALUATE NEW PRODUCTS
Redhook must provide at least the following information to ABI in order for ABI
to make an evaluation of New Product:
1. Proposed Name of New Product
2. Proposed New Product Packages
3. Proposed New Product Label
4. Proposed Ingredients and Proposed Suppliers
5. Alcohol Content
6. Beginning Gravity
7. IBU
8. Comprehensive Marketing Plan 9. Consumer Research