Production Agreement - Boston Beer Corp. and High Falls Brewing Co. LLC
SECOND AMENDED AND RESTATED
AGREEMENT BETWEEN
BOSTON BEER CORPORATION
AND
HIGH FALLS BREWING COMPANY, LLC
THIS AGREEMENT ("Agreement"), effective as of the 15th day of April, 2002
(the "Effective Date"), by and between BOSTON BEER CORPORATION, a Massachusetts
corporation with its principal place of business at 75 Arlington Street, Boston,
MA 02116 ("Boston Beer"), and HIGH FALLS BREWING COMPANY, LLC, a New York
limited liability company with its principal place of business at 445 St. Paul
Street, Rochester, NY 14605 ("High Falls"), shall modify, amend and restate the
Amended and Restated Agreement entered into on the 30th day April, 1997, by and
between BOSTON BREWING COMPANY, INC., d/b/a THE BOSTON BEER COMPANY, a
Massachusetts corporation ("Boston Brewing"), for itself and as the sole general
partner of Boston Beer Company Limited Partnership, a Massachusetts limited
partnership ("BBCLP"), and THE GENESEE BREWING COMPANY, INC., a New York
corporation ("Genesee").
WHEREAS, as of July 25, 1995, Boston Brewing, for itself and as the sole
general partner of BBCLP, and Genesee entered into a production agreement under
which Genesee agreed to brew, package and sell Products for Boston Brewing and
BBCLP, which agreement was amended and restated by instrument dated April 30,
1997 (the "Prior Agreement");
WHEREAS, as of December 15, 2000, Genesee assigned the Prior Agreement to
High Falls;
WHEREAS, on December 31, 2000, BBCLP transferred all of its assets and
liabilities to Boston Beer and consequently Boston Beer assumed the rights and
obligations of BBCLP and Boston Brewing under the Prior Agreement; and
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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WHEREAS, Boston Beer and High Falls (sometimes hereinafter referred to as
the "Parties" or either of them as a "Party") wish to further amend the terms
and conditions of the Prior Agreement as set forth below.
ACCORDINGLY, for and in consideration of the mutual agreements contained
herein, the Parties, intending to be legally bound, hereby agree as follows:
1. SCOPE OF AGREEMENT
(a) During the term of this Agreement as set forth in Paragraph 4
hereof and in accordance with the terms set forth herein, High Falls
agrees to brew, package and sell the Products to Boston Beer and Boston
Beer agrees to purchase the Products from High Falls. High Falls and
Boston Beer acknowledge that they both wish to develop a mutually
beneficial, long-term relationship under this Agreement. The Parties agree
to act in good faith and to use their best efforts to resolve differences
arising during the course of their relationship in a mutually agreeable
manner. The Parties acknowledge that future needs may require one or both
of the Parties to make capital investments in High Falls' plant and
equipment and that in the event any such investment is contemplated by
Boston Beer, the Parties will negotiate in good faith and use their best
efforts to agree upon any amendments to this Agreement that may be
required to facilitate the long-term relationship contemplated by the
Parties.
(b) CORE PRODUCT. For purposes of this Agreement, "Core Product"
shall mean: (i) *, in each case packaged in cases of 4/6, 2/12 packs in a
tray, or 24 loose twelve ounce bottles and 12 twenty-two ounce bottles, in
half barrel or quarter barrel kegs, and any other package types or
configurations that the parties mutually agree to use for packaging such
products, or (ii) any other Boston Beer * product(s) that the parties
mutually agree in writing shall replace one or more of such products as
the Core Product.
(c) OTHER PRODUCTS. High Falls acknowledges that Boston Beer has
requested that High Falls evaluate the feasibility of producing other
Boston Beer products, recognizing limitations that may exist due to
storage of multiple ingredients and yeast varieties, the
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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availability and capacity of brewing vessels and storage tanks and the
like. It is the intention of the Parties that High Falls shall brew,
package and sell to Boston Beer other Boston Beer products upon terms
mutually agreed to in writing by High Falls and Boston Beer. For purposes
of this Agreement, "Other Products" shall mean any Boston Beer brand or
brands other than the Core Product, whether currently offered or developed
in the future, which the parties mutually agree to add to this Agreement
during any calendar year in accordance with the following procedure: By
November 1st in each calendar year, Boston Beer shall provide High Falls
with an annual forecast for the following calendar year, showing Boston
Beer's monthly projections by package for the Core Product and any Other
Products. At least *% of the projected volume in each calendar year shall
be the Core Product. In the event that the annual forecast includes any
proposed Other Products, Boston Beer will furnish High Falls with the
brewing formula and procedures and product specifications for the proposed
Other Products. High Falls shall: (i) review the specifications and
brewing formula for any proposed Other Products; (ii) propose a Fixed Cost
for each of the proposed Other Products; and (iii) propose to Boston Beer
the minimum order size, tank usage and other production and capacity
parameters. Boston Beer may accept or reject High Falls' proposal with
respect to each of the proposed Other Products. If Boston Beer accepts the
High Falls proposal for a proposed Other Product, such Other Product shall
be deemed to be added to this Agreement only for the calendar year covered
by the annual forecast. If in any annual forecast, Boston Beer proposes an
Other Product that was produced by High Falls in a prior year, and: (x)
the specifications, brewing formula and procedures, Brewing Ingredients,
Packaging Materials and the timing and volume of production for such Other
Product have not changed, and (y) the capacity utilization required for
High Falls' own products and, from and after * (if applicable), other
contract products, are substantially the same; then High Falls shall not
unreasonably refuse to produce such Other Product and the Fixed Charge
proposed by High Falls for such Other Product shall be the Fixed Charge
paid by Boston Beer for such Other Product in the most recent prior year,
increased by the annual adjustment factor for the Core Product set forth
in Subparagraph 2(b) hereof.
(d) The Fixed Charge proposed by High Falls for any Other Products,
and for the Core Product in any package size or type other than those
identified in Subparagraph
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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1(b) hereof, shall be based on the expected incremental cost differences,
when compared with Samuel Adams Boston Lager, associated with the brewing
and/or packaging formulations and processes required in the production of
such Other Products or package. If High Falls determines during the trial
brews or initial production of any Other Product that the brewing formula,
procedures or product specifications furnished by Boston Beer are
materially inaccurate, then High Falls shall notify Boston Beer in writing
and High Falls may cease production of such Other Product (after
completion of any production in progress) until the parties mutually agree
on adjustment of the brewing formula, procedures or product specifications
and/or the Fixed Charge for such Other Product.
(e) PRODUCTS. For purposes of this Agreement, the Core Product and
all Other Products produced during any calendar year shall be collectively
referred to as the "Products".
(f) BARREL. For purposes of this Agreement, the term "barrel" shall
mean 31 U.S. gallons (3,968 ounces). The following calculation shall be
used to measure barrels of the Products packaged in containers other than
Kegs:
CONTAINER VOLUME IN OUNCES X CONTAINERS PER CASE UNIT X NO. OF CASE UNITS
Barrel Volume in Ounces
2. PRICE AND MANNER OF PAYMENT
(a) Except as otherwise provided in the following subparagraphs of
this Paragraph 2, Boston Beer shall pay High Falls for the Products an
amount (the "Unit Price") equal to: (i) a "Fixed Charge" as determined in
accordance with Subparagraphs 1(c) and 1(d) hereof or as set forth in
Subparagraph 2(b) hereof, plus (ii) except as otherwise provided in
Subparagraph 3(a)(iv), the net cost to High Falls of all Brewing
Ingredients [as defined in Paragraph 3(a)] purchased by High Falls and
used in producing the Products; all federal, state and local excise taxes
attributable to the Products that are paid by High Falls; and deposit
charges of $* per Keg, $* per bottle pallet and $* per draft pallet, or
such other
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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amounts as the parties mutually agree. For this purpose, "net cost to High
Falls" shall include purchase discounts, but not discounts resulting from
credit terms.
(b) The Fixed Charge for Samuel Adams Boston Lager packaged in
bottles, shall be $* per unit of twenty-four loose 12-ounce bottles, 4/6
12-ounce bottles, 2/12 12 ounce bottles in a tray or twelve 22-ounce
bottles (in each instance, a "Case Unit;" it being the intent that the
Fixed Charge for other 22 ounce package configurations produced by High
Falls be prorated) plus an amount per Case Unit to be agreed upon from
time to time which reflects the savings inuring to the benefit of Boston
Beer (currently $* per case) if High Falls should elect, in its sole
discretion, to utilize in its production process bulk glass as opposed to
set-up glass used as of the date hereof by High Falls. The Fixed Charge
for Samuel Adams Boston Lager packaged in one-half barrel (15.5 U.S.
gallons) or one-quarter barrel (7.75 U.S. gallons) kegs (individually
referred to as a "Keg" and collectively referred to as "Kegs") shall be $*
per Keg. Commencing on January 1, * and on each January 1 thereafter
during the term of this Agreement through and including January 1, *, the
Fixed Charge component of the Unit Price for the Products shall be
increased by *%. If the term of this Agreement has been extended by Boston
Beer pursuant to Subparagraph 4(b), then, effective January 1, *, the
Fixed Charge component of the Unit Price for the Products shall be
increased by an amount equal to * percent (*%) of the increase in the
Consumer Price Index - All Urban Consumers as published by the United
States Department of Commerce - Bureau of Labor Statistics (the "CPI
Increase") for the previous 12-month period. If the term of this Agreement
has been extended by Boston Beer pursuant to Subparagraph 4(b), on *, the
Fixed Charge for all Products shall be increased by $* per barrel, or $*
per Case Unit (the "Fixed Charge Adjustment"). On January 1, *, the Fixed
Charge component of the Unit Price for the Products shall be increased by
an amount equal to (i) * percent (*%) of the CPI Increase applied to the
Fixed Charge in effect on * (the "Fixed Charge Component Increase"), plus
(ii) the difference between *% of the CPI Increase less *% applied to the
Fixed Charge Adjustment (i.e., the $* referred to above) (the "Fixed
Charge Adjustment Increase"), except that if the calculation pursuant to
this clause (ii) results in a negative number, the Fixed Charge Adjustment
Increase shall be zero. For example, if the Fixed
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Charge effective January 1, * were $* per Case Unit and the CPI Increase
for calendar year * were *%, then the Fixed Charge effective January 1, *
would be calculated as follows:
CALCULATION OF FIXED CHARGE COMPONENT INCREASE:
Fixed Charge at * $*
times *% of CPI Increase (*%) X .*
------
Fixed Charge Component Increase = = $*
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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CALCULATION OF FIXED CHARGE ADJUSTMENT INCREASE:
-----------------------------------------------
Fixed Charge Adjustment (per Case Unit) $*
times *% of CPI Increase (*%)
minus *% (*%--*%=*%) X .*
-----
Fixed Charge Adjustment Increase = $*
CALCULATION OF FIXED CHARGE EFFECTIVE JANUARY 1, *:
--------------------------------------------------
Fixed Charge at * $*
plus Fixed Charge Component Increase +*
plus Fixed Charge Adjustment +*
plus Fixed Charge Adjustment Increase +*
----
Fixed Charge effective 1/1/* = $*
Effective January 1 of each calendar year during the remainder of the term of
this Agreement, with the first adjustment to be effective January 1, *, the
Fixed Charge component of the Unit Price for the Products shall be increased by
an amount equal to * percent (*%) of the increase of the CPI for the previous
12-month period. High Falls must notify Boston Beer of any adjustments pursuant
to this Subparagraph 2(b) no later than March 31 of each year (or, if later, the
date that is 30 days after the Department of Commerce publishes the Consumer
Price Index covering the relevant period), with appropriate documentation
supporting any change in such Fixed Charge.
(c) Until and including *, notwithstanding Paragraph 2(b) above: (i)
if volume of all bottled Products during any calendar year exceeds in the
aggregate * barrels, the then current Fixed Charge components of the Unit
Price on all such excess volume of bottled Products during such calendar
year shall be reduced by $* per Case Unit; and (ii) if volume of all
Products packaged in the Sankey Keg during any calendar year exceeds in
the aggregate * barrels, the then current Fixed Charge components of the
Unit Price on all Products packaged in the Sankey Keg in excess of *
barrels during such calendar year shall be reduced by $.* per Keg. The
foregoing reductions in the Fixed Charge shall apply only if the Core
Product comprises at least *% of all Products purchased by Boston Beer
during such calendar year, and are subject to the provisions of
Subparagraph 4(e) below. If the term of this Agreement is extended by
Boston Beer pursuant to Subparagraph 4(b), this Subparagraph 2(c) shall no
longer apply, effective as of *.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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(d) Boston Beer and High Falls (or their predecessors in interest)
have undertaken improvements and modifications to * and Boston Beer
contributed an agreed upon amount to the capital cost of such improvements
and modifications. In consideration thereof, High Falls will pay to Boston
Beer an annual fee (or ratable portion thereof) for each calendar year or
portion thereof during the term of this Agreement through and including *,
based on the volume of Products packaged in bottles during each calendar
year under this Agreement. The obligation to pay this fee under this
Agreement shall commence as of * and shall terminate * and is subject to
the provisions of Subparagraph 4(e) below. The fee shall be paid within
thirty (30) days after the end of each calendar year and shall be
calculated as follows:
Volume of
Products Produced in Bottles
During Calendar Year Annual Fee
-------------------- ----------
Less than * bbls $*
* up to * bbls $*
* up to * bbls $*
More than * bbls $*
If the term of this Agreement is extended by Boston Beer pursuant to
Subparagraph 4(b), this Subparagraph 2(d) shall no longer apply, effective as of
*.
(e) Unit Prices are F.O.B. the carrier's trucks at High Falls' docks
(i.e., the Unit Price includes the cost and risk of loading trucks at High
Falls' dock) and include High Falls' labor costs, overhead, profit and
other costs incurred in the brewing and packaging of the Product.
(f) On the date the Products are shipped, High Falls will invoice
Boston Beer for the Fixed Charge, all federal, state and local excise
taxes attributable to the Products that are paid by High Falls and the Keg
and pallet deposit charges. High Falls will invoice Boston Beer for all
Brewing Ingredients purchased by High Falls at High Falls' standard cost
when the Products are shipped (with monthly reconciliation to reflect High
Falls' actual
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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cost). High Falls may periodically adjust its standard cost for Brewing
Ingredients to more accurately reflect its actual costs. High Falls shall
notify Boston Beer in writing of any adjustment in its standard cost at
least ten (10) days prior to the date such adjustment will take effect.
All invoices will be sent to Boston Beer by telecopier and Boston Beer
will pay each Friday by electronic funds transfer all invoices that relate
to shipments of the Products made by High Falls during the previous week.
If High Falls should elect, in its sole discretion, to utilize electronic
invoicing, Boston Beer will pay on each Wednesday all invoices that relate
to shipments made during the previous week.
(g) On the later of the Effective Date or the date upon which both
Parties have executed this Agreement, Boston Beer will pay to High Falls
the sum of $*. In addition, Boston Beer will pay to High Falls * percent
(*%) of the amount that Genesee or its affiliates pays to Boston Beer,
directly or indirectly, in consideration of its release of the guaranty of
Genesee of High Falls' obligations to Boston Beer as set forth in the
Guaranty executed by Genesee on December 15, 2000 (the "Genesee
Guaranty"). Boston Beer's release of the Genesee Guaranty is contingent on
its receipt of High Falls' audited financial statements for 2001 and
current pro-formas that reflect positive cash flow, results of operations
and debt coverage at levels reasonably acceptable to Boston Beer.
3. BREWING INGREDIENTS, PACKAGING MATERIALS AND BREWING SUPPLIES
(a) For purposes of this Agreement, "Brewing Ingredients" shall be
defined as all * used to produce the Products. Brewing Ingredients shall
be purchased and supplied as follows:
(i) All * used in the brewing of the Products shall be purchased by
Boston Beer or High Falls (at Boston Beer's cost) directly from High Falls'
commercial * suppliers. High Falls and Boston Beer will use their best efforts
to agree upon * specifications for * that will allow High Falls to commingle
storage of * used to produce the Products with * used to produce High Falls' own
products. If High Falls and Boston Beer cannot agree upon
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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standard * specifications, the Fixed Charge shall be increased to reflect any
additional cost incurred by High Falls for separate handling and storage of *
used in the Products.
(ii) All * used in the brewing of the Products shall be purchased by
High Falls from Boston Beer. Delivery of * shall be coordinated between High
Falls and Boston Beer.
(iii) All * used in the brewing of the Products shall be supplied by
Boston Beer at *. All * supplied by Boston Beer shall remain the property solely
and exclusively of Boston Beer and shall be segregated and identified by High
Falls as such. Delivery of * to High Falls shall be coordinated between High
Falls and Boston Beer.
(iv) All * used in the brewing and packaging of the Products shall
be purchased by High Falls directly from High Falls' commercial * suppliers.
Commencing on the Effective Date, Boston Beer shall pay * percent (*%) of the
cost of all * used in the brewing and packaging of the Products, and High Falls
shall pay the other * percent (*%).
(b) For purposes of this Agreement, "Packaging Materials" shall be
defined as all bottles, crowns, labels, cases, cartons, Kegs, tap covers,
pallets and dust covers and the like used in the packaging and shipment of
the Products. Packaging Materials shall be purchased and supplied as
follows:
(i) Bottles, crowns, labels, cases, cartons, tap covers and the like
shall be purchased by Boston Beer and supplied to High Falls as needed to meet
the Packaging Schedule for the Products.
(ii) Unless otherwise mutually agreed, Kegs and pallets in
quantities adequate for the volume of the Products to be packaged under this
Agreement shall be purchased by Boston Beer and supplied to High Falls from time
to time. All such Kegs and pallets shall be returned and reused in accordance
with High Falls' standard policies for Keg and pallet return and reuse. From
time to time during the term of this Agreement, Boston Beer shall purchase and
supply to High Falls additional Kegs and pallets in numbers adequate to replace
Kegs and pallets lost or otherwise rendered unusable. All Kegs and pallets shall
conform to the specifications of
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Kegs and pallets used by High Falls in packaging and shipping its own products.
High Falls may reject any Kegs or pallets that are damaged, are unacceptably
dirty or do not otherwise conform to High Falls' specifications. All rejected
Kegs shall be held by High Falls for periodic removal by Boston Beer. All
rejected pallets shall be disposed of by High Falls at no charge to Boston Beer.
Upon each delivery to High Falls of Kegs and pallets purchased by Boston Beer,
High Falls shall issue to Boston Beer a credit of $* per Keg, $* per bottle
pallet and $* per draft pallet. High Falls shall maintain records of all Kegs
and pallets received from Boston Beer and provide a monthly reconciliation
showing Kegs and pallets received, Kegs rejected and returned to Boston Beer,
pallets disposed of by High Falls, Kegs and pallets on hand at High Falls and
Kegs and pallets in the float.
(iii) * shall purchase and supply at its own cost Lock n' Pop, shrink
wrap, label adhesive, hot melt glue and bungs used in packaging and shipping of
the Products.
(c) Boston Beer has the right, subject to the approval of High
Falls, which approval will not be unreasonably withheld, to make changes
in the Packaging Materials. If the proposed new Packaging Materials can be
produced without modification or addition to High Falls' existing
equipment, High Falls shall produce the Products using the new Packaging
Materials upon mutual agreement by High Falls and Boston Beer to any
adjustment to the Fixed Charge required to compensate High Falls for any
difference in production cost compared to the cost to produce the Core
Product in the comparable bottle package. If the proposed new Packaging
Material requires any modifications or additions to High Falls' existing
equipment, then the obligations of the parties with respect to such
modifications or additions shall be governed by Paragraph 9 of this
Agreement.
(d) For purpose of this Agreement, "Brewing Supplies" shall be
defined as zinc sulfate, gypsum, Diatomaceous Earth, and Chill-Garde. *
shall purchase and supply at its own cost all Brewing Supplies used in the
brewing of the Product.
(e) Boston Beer shall have sole responsibility for the selection and
approval of all Brewing Ingredients, Packaging Materials and Brewing
Supplies used to produce the
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Products. Boston Beer shall have sole responsibility for the content and
design of all labels, tap covers, crowns, cartons, cases and other
Packaging Materials.
(f) Upon the termination of this Agreement for any reason: (i)
Boston Beer will purchase from High Falls (w) all Kegs and pallets
furnished by Boston Beer that are on hand at High Falls at their
respective credit amounts set forth in Subparagraph 3(b)(ii) above, (x)
all finished Products at the Fixed Charge, (y) all inventory of work in
process of the Products at High Falls' cost, and (z) all inventory of
Brewing Ingredients, Packaging Materials and Brewing Supplies purchased by
High Falls that are not reasonably useable by High Falls in its own
products at High Falls' cost; and (ii) High Falls will make available for
pick up by Boston Beer at High Falls' dock all finished Products, all
Brewing Ingredients, Packaging Materials and Brewing Supplies referred to
in Subparagraph 3(e) hereof, and all Kegs, pallets and dust covers on hand
at High Falls that were furnished by Boston Beer. In the event sales of
the Products are substantially less than forecasted by Boston Beer
resulting in abnormally excess inventories of Brewing Ingredients,
Packaging Materials and Brewing Supplies purchased by High Falls, Boston
Beer will purchase such excess from High Falls at High Falls' cost.
4. TERM
(a) The term of this Agreement shall commence on the Effective Date
and, unless sooner extended by the following provisions of this Paragraph
4 or terminated pursuant to Paragraph 10 hereof, this Agreement shall
expire on *.
(b) Provided that Boston Beer is not then in default under this
Agreement, Boston Beer may, in its
(c) sole discretion, extend the term of this Agreement for a period
of * (*) months (i.e., until *), provided that it gives High Falls written
notice thereof on or before *.
(d) If Boston Beer has extended the term of this Agreement pursuant
to Subparagraph 4(b), then, provided (i) that Boston Beer is not then in
default under this Agreement, and (ii) the aggregate volume of Products
produced by High Falls for Boston
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Beer during calendar year * is equal to or greater than * barrels, Boston
Beer may, in its sole discretion, extend the term of this Agreement for an
additional * years (i.e., until *), provided that it gives High Falls
written notice thereof on or before *.
(e) The Parties acknowledge that Boston Beer' s obligations pursuant
to this Agreement to make payments to High Falls and the Parties'
respective rights and obligations under Paragraphs 3(e), 9, 10, 11, 12,
14, 16, 17 and 26 shall survive the expiration or termination of this
Agreement.
(f) If Boston Beer does not elect to extend the term of this
Agreement pursuant to Subparagraph 4(b), any adjustments based on volume
for * shall use * of the volume (forecasted or actual, as the case may be)
in lieu of twelve-month volume.
5. MINIMUM ORDERS
(a) (i) Effective *, the Core Product shall comprise at least *%
of all the Products produced, and the maximum quantity
of the Products that High Falls shall be required to
produce under this Agreement in any calendar year shall
be * barrels. No * shall be required for * of the
Products.
(ii) On or before November 1 of each year, Boston Beer shall
provide High Falls with a forecast for its aggregate
volume requirements for the following calendar year (the
"Annual Forecast"). The Annual Forecast for calendar
year * is attached as Schedule 1 hereto. The Annual
Forecast shall be no more than * percent (*%) greater
nor more than * percent (*%) less than the actual
purchases made by Boston Beer in the 12-full-month
period immediately preceding such Annual Forecast. For
example, if the actual purchases for the 12-month period
from November * to October * were * barrels, Boston
Beer's Annual Forecast for the calendar year * shall be
no greater than * barrels and no less than * barrels.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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The Annual Forecast shall contain monthly projections by
package for each Core Product and any Other Products,
with the understanding that Boston Beer may, at any
time, through the Production Plan process described in
Subparagraph 5(b), substitute one or more of the Core
Products for any other Core Product or permitted Other
Product for the forecasted Products.
(iii) Effective *, if Boston Beer's actual purchases during a
calendar year are less than * percent (*%) of the total
volume set forth in the Annual Forecast ("Annual Minimum
Volume"), Boston Beer shall pay to High Falls a fee of
$* per barrel for each barrel below the Annual Minimum
Volume (the "Volume Short-Fall Fee"), except that the
Volume Short-Fall Fee shall not exceed $* in calendar
year *, nor, if the term of this Agreement is not
extended by Boston Beer pursuant to Subparagraph 4(b),
$* for the first eight months of calendar year *. The
Volume Short-Fall Fee, if any, shall be paid on or
before January 31 of the following year (or on or before
* for the first * months of * if the term of this
Agreement is not extended by Boston Beer pursuant to
Subparagraph 4(b)).
(iv) Boston Beer may elect to pay High Falls a fee which,
when added to its actual Product purchases for the
applicable calendar year, will be treated as actual
purchases made for the purposes of forecasting and
determination of volume obligations, as follows: (a) $*
per barrel for the first * barrels, (b) $* per barrel
for the next * barrels, and (c) $* per barrel for each
barrel thereafter, offset by the Volume Short-Fall Fee,
if any, paid by Boston Beer for the same calendar year.
Such payment, if elected, shall be made by Boston Beer
to High Falls on or before January 31 of the following
year.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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For example, if Boston Beer's Annual Forecast for *
barrels were * barrels, but it only purchased * barrels,
Boston Beer could (after paying the Volume Short-Fall
Fee required by Subparagraph 5(a)(iii)) pay a fee,
calculated as set forth below, for up to * barrels (*%
increase over * forecasted barrels, or * barrels, less
actual purchases of *):
$*/bbl for first * bbls = $ *
+ $*/bbl for next * bbls = $ *
+ $*/bbl for next * bbls = $ *
-----
= $*
less $*/bbl Volume Short-Fall Fee of
* barrels (amount below *% of
* forecasted barrels) = $ (*)
------
TOTAL FEE paid by Boston Beer to
obtain maximum barrelage for *
of * = $ *
(b) On a weekly basis, Boston Beer shall provide High Falls with a
twelve (12) week Production Plan for the Products (the "Production Plan").
The Production Plan shall be a rolling twelve-week schedule setting forth
brewing and packaging requirements for the Products for each week during
the twelve weeks covered by the Production Plan. All brewing requirements
for the Products during the first six weeks of the Production Plan shall
constitute firm orders by Boston Beer. All brewing requirements for the
Products during the second six weeks of the Production Plan and all
packaging requirements set forth in the Production Plan shall be a
forecast of Boston Beer's best estimate of brewing and packaging
requirements for the Products and shall be used by High Falls for capacity
planning purposes. Boston Beer shall update the Production Plan each week
by providing its best estimate of brewing and packaging requirements for
the twelfth week and by revising the schedule for brewing and packaging
requirements in the sixth through eleventh weeks of the Production Plan.
The brew size that Boston Beer shall utilize in the Production Plan shall
be High Falls' maximum brew based on High Falls' current brewing vessels,
currently estimated to yield approximately * * (*) barrels of the Core
Product (a "Brew"). The minimum brewing requirement that Boston Beer may
specify
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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during any week shall be * (*) Brews. The maximum brewing requirement that
Boston Beer may specify shall not exceed * barrels in any consecutive * (*) week
period. High Falls shall have the right, in its sole discretion, to set the
actual time and date on which each Brew shall be brewed, provided that High
Falls shall use its best efforts to (i) minimize the length of time that the
Products remain in storage prior to packaging, and (ii) meet the shipment dates
specified on the Packaging Schedule.
(c) Boston Beer shall place all orders for packaging and shipment of
the Product by the eighth business day of each month (the "Packaging Schedule").
The Packaging Schedule shall set forth the quantity of the Products by package
type and the week in which each order shall be shipped in the following month.
Packaging shall be scheduled in increments of * cases for 22 oz. bottles; *
cases for 12 oz. bottles in new glass; and * cases for 12 oz. bottles in
refillable glass. The minimum order for packaging the Products, in Kegs shall be
* (*) Kegs.
6. RISK OF LOSS
Boston Beer shall have sole responsibility for selecting carriers
and making all arrangements for shipment of the Products to its customers.
Boston Beer shall pay for all costs associated with shipment of the Products
from High Falls's facility. High Falls and Boston Beer acknowledge and agree
that, consistent with the F.O.B. pricing terms, the risk of loss in loading the
carrier's trucks shall be borne by High Falls. However, the carrier's driver
shall have the right to inspect each shipment for damage prior to leaving the
loading dock and, accordingly, Boston Beer shall bear the risk of loss on any
shipment of Products, once the carrier's truck leaves the loading dock.
7. BREWERY OF RECORD
(a) High Falls shall provide all Products brewed hereunder under the
name of "The Boston Beer Company," as the Brewery of Record. High Falls shall
secure and maintain any permits, licenses, approvals and the like required by
any federal, state or local governmental agency on behalf of Boston Beer. *
out-of-pocket costs, including, without limitation, legal expenses, incurred in
connection therewith.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
Page 17
(b) High Falls and Boston Beer shall maintain an alternating
proprietorship whereby the Products are produced at High Falls's facility under
a Brewer's Notice for such premises issued to Boston Beer. High Falls shall
maintain separate records for the Products produced under the Boston Beer
alternating proprietorship and shall file monthly reports and federal excise tax
returns in a timely manner on behalf of the Boston Beer alternating
proprietorship. High Falls shall, to the extent reasonably possible, but subject
to and in compliance with all applicable federal, state or local laws, rules and
regulations, identify Boston, Massachusetts, as the sole label source for the
Product. * out-of-pocket costs, including, without limitation legal expenses,
incurred in connection with maintaining the Boston Beer alternating
proprietorship.
8. FORCE MAJEURE
(a) High Falls shall not be liable to Boston Beer in the event that
High Falls shall delay in or fail to deliver Products to Boston Beer hereunder
for any reason or cause beyond its control, including but not limited to a
slowdown, stoppage or reduction of High Falls's production or delivery due to
strikes, fire, flood, labor stoppage or slowdown, inability to obtain materials
or packages, shortage of energy, acts of God, a limitation or restriction of its
production by action of any military or governmental authority, or any other
such causes.
(b) In the event of any such slowdown, stoppage or reduction of High
Falls's production or deliveries, High Falls will allocate its remaining
capacity pro rata between High Falls's own products, the Products, and, from and
after *, the other contract products produced by High Falls, provided that
Boston Beer shall use reasonable efforts to move production of the Products to
its other suppliers for the duration of any such slowdown, stoppage or reduction
so as to minimize the amount of the Products that High Falls is required to
produce for Boston Beer during such slowdown, stoppage or reduction. Such pro
rata allocation of High Falls's remaining production capacity shall be based on
the proportionate volume of High Falls's own products, the Products, and other
contract products produced by High Falls during the * (*) month period
immediately preceding the
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
Page 18
month in which occurred the event which gave rise to the slowdown,
stoppage or reduction of High Falls's production or delivery. In
allocating the proportionate share of its remaining capacity to be devoted
to the Products, High Falls shall use its best efforts to accommodate the
mix of Core Products and Other Products specified by Boston Beer.
9. CHANGE PARTS AND BREWERY MODIFICATIONS
The Parties anticipate that production of Other Products or the use
of new Packaging Materials may require changes or modifications to High Falls's
brewing equipment and facilities, or the installation of new equipment by High
Falls to accommodate Other Products or new Packaging Materials. Subject to the
obligations of Boston Beer and High Falls under Subparagraph 1(a) of this
Agreement, High Falls shall have no obligation to make any modifications to its
equipment or facilities to accommodate the production of the Products unless
agreed to by High Falls in writing. If the change parts, modifications or new
equipment required to produce any Other Products or use any new Packaging
Materials would, in High Falls's reasonable judgment, have a material adverse
impact on High Falls's operations, including without limitation, space
availability, plant capacity, or cost of production, then High Falls shall not
be required to produce any such Other Products or use any such new Packaging
Materials. If High Falls determines that the required changes, modifications or
new equipment would not have a material adverse impact, then the allocation of
cost, ownership and the other terms and conditions relating to such change
parts, modifications or new equipment shall be determined as provided herein:
(a) Boston Beer will pay for all change parts, brewery,
modifications or new equipment that are unique to producing the Products
at High Falls's facility, provided that High Falls notifies Boston Beer in
advance of making any such expenditures. Boston Beer shall own all change
parts and brewery modifications paid for by Boston Beer and High Falls
shall allow Boston Beer to remove all such change parts and brewery
modifications at the termination or expiration of this Agreement, provided
that Boston Beer shall restore, or reimburse High Falls for its cost to
restore, High Falls's equipment or facilities to their
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
Page 19
condition prior to the installation of such change parts or modifications,
ordinary wear and tear excluded.
(b) The cost and ownership of any change parts, brewery
modifications or new equipment that can also be used by High Falls to
produce its own products shall be allocated between High Falls and Boston
Beer by prior written agreement based on the following: (i) if High Falls
determines that the change parts, modifications or new equipment would
have been purchased by High Falls even without the need to accommodate the
Products or new Packaging Materials, then High Falls shall pay the entire
cost of such change parts, modifications or new equipment and High Falls
shall have exclusive ownership thereof; (ii) if High Falls determines that
it would benefit from the change parts, modifications or new equipment but
High Falls would not have purchased them if not for the need to
accommodate the Products or new Packaging Materials, then the cost and
ownership of such change parts, modifications or new equipment shall be
allocated between the Parties as the Parties mutually agree based on the
relative benefit that each party will derive from such change parts,
modifications or new equipment.
(c) With respect to any change parts, modifications or new equipment
paid for in part by Boston Beer under Subparagraph 9(b)(ii) hereof,
including the improvements and modifications to * referred to in
Subparagraph 2(d) hereof, the amount paid by Boston Beer shall be
amortized based on a mutually agreeable amortization schedule. The
amortization schedule for the improvements and modifications to * is
attached as Schedule 2 hereto.
(i) If Boston Beer elects to extend the term of this Agreement
pursuant to Subparagraph 4(b) hereof, then, if High Falls is not in default
under this Agreement on *, any change parts, modifications or new equipment paid
for in part by Boston Beer under Subparagraph 9(b)(ii) hereof prior to * will no
longer be subject to repayment by High Falls under any circumstances, all right,
title and ownership thereof will automatically transfer to High Falls as of *,
and Boston Beer will have no further interest therein.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
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(ii) Subject to Subparagraph 9(c)(i) hereof, upon expiration of the
amortization schedule with respect to each change part, modification or new
piece of equipment paid for in part by Boston Beer, all right, title and
ownership thereof shall automatically transfer to High Falls and Boston Beer
shall have no further interest therein.
(iii) Upon: (A) the expiration of this Agreement; or (B) the
termination of this Agreement by Boston Beer under Subparagraphs 10(c) or 10(d)
hereof, High Falls shall reimburse Boston Beer for the unamortized balance of
the cost of any change parts, modifications or new equipment paid for in part by
Boston Beer under Subparagraph 9(b)(ii), provided that the amortization shall
continue during any applicable Notice Period and the unamortized balance shall
be calculated as of and paid on the effective date of any such termination. If
Boston Beer does not extend the term of this Agreement, High Falls'
reimbursement obligations shall include any equipment for which High Falls had a
reimbursement obligations pursuant to Subparagraph 9(b)(ii) (including the *)
under the Prior Agreement. If Boston Beer extends the term of this Agreement,
then, effective *, High Falls' reimbursement obligations shall specifically
exclude any change parts, modifications or new equipment paid for in whole or in
part by Boston Beer prior to * (including the *). Upon payment by High Falls of
the unamortized balance, all right, title and ownership of such change parts,
modifications or new equipment shall automatically transfer to High Falls and
Boston Beer shall have no further interest therein. Notwithstanding the
foregoing, High Falls shall have no obligation to reimburse Boston Beer for the
unamortized balance of the cost of change parts, modifications or new equipment
if, during the twelve (12) calendar months immediately preceding the effective
date of termination: (X) Boston Beer purchased less than * barrels of the
Products; or (Y) Boston Beer failed to purchase at least * percent (*%) of the
volume of the Products that was purchased by Boston Beer during the twelve (12)
calendar months immediately preceding said twelve (12) calendar month period;
and in either such event, all right, title and ownership of such change parts,
modifications or new equipment shall automatically transfer to High Falls on the
effective date of such termination and Boston Beer shall have no further
interest therein.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
Page 21
(iv) If this Agreement is terminated for any other reason, then High
Falls shall have no obligation to reimburse Boston Beer for the unamortized
balance of the cost of any change parts, modifications or new equipment paid for
in part by Boston Beer under Subparagraph 9(b)(ii) hereof, and all right, title
and ownership of such chance parts, modifications or new equipment shall
automatically transfer to High Falls on the effective date of such termination
and Boston Beer shall have no further interest therein.
(d) The parties agree to execute appropriate UCC financing
statements to reflect their respective interests in any change parts,
brewery modifications or new equipment paid for, in whole or in part, by
Boston Beer. Boston Beer shall execute and deliver to High Falls UCC
termination statements, bills of sale and any other documentation
reasonably requested by High Falls upon the transfer of ownership to High
Falls of any change parts, modification, or new equipment pursuant to
Subparagraph 9(c) hereof.
10. TERMINATION
(a) If Boston Beer has extended the term of this Agreement pursuant
to Subparagraph 4(b) or 4(c) hereof, then Boston Beer may terminate this
Agreement effective no less than * (*) months after written notice to High
Falls.
(b) If Boston Beer has extended the term of this Agreement pursuant
to Subparagraph 4(b) or 4(c) hereof, High Falls may terminate this
Agreement, effective no less than * (*) months after written notice to
Boston Beer, if Boston Beer has failed to purchase or to have been deemed
to have purchased pursuant to Subparagraph 5(a)(iv) hereof at least *
barrels of Product in any period of twelve consecutive months.
(c) In addition to exercising its rights under Paragraph 21 hereof,
either Party may also terminate this Agreement effective immediately upon
written notice to the other Party in the event that the other Party is in
default of any of its obligations under this Agreement, which default
continues for a period of * (*) calendar days following receipt of written
notice of such default.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
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(d) Either Party may terminate this Agreement effective immediately
upon written notice to the other Party in the event that: (i) the other
Party makes an assignment for the benefit of creditors or files a
voluntary bankruptcy, insolvency, reorganization or similar petition
seeking protection from creditors; (ii) the other Party fails to vacate
any involuntary bankruptcy, insolvency or reorganization petition filed
against such Party within sixty (60) days after the filing of such
petition; or (iii) the other Party liquidates, dissolves or ceases to do
business as a going concern.
(e) Between the date of receipt of a notice of termination pursuant
to this Paragraph 10 and the effective date of such termination (such
period, the "Notice Period"), the volume of Products purchased by Boston
Beer for the * month period following notice of termination or any
successive * month period (or such lesser period as may be remaining)
prior to the effective date of termination shall be not less than *% of
the volume purchased in the immediately preceding * month period. If
Boston Beer fails or is unable or unwilling, for any reason, to purchase
the required volume of the Products during the Notice Period, then Boston
Beer shall pay a termination fee of $* per barrel for each barrel under
the amount required to be purchased during the Notice Period. The
termination fee, if any, shall be paid each January 1, April 1, July 1 and
October 1 during the Notice Period. The quarterly payment shall be
calculated by multiplying the $* per barrel termination fee by the
difference between (x) the number of barrels of the Products that Boston
Beer would have to purchase during the three calendar months preceding
each payment date if the volume of the Products that Boston Beer must
purchase during the entire Notice Period was spread evenly over the entire
Notice Period (the "Quarterly Volume"), and (y) the actual number of
barrels of the Products purchased by Boston Beer during the three calendar
months preceding each payment date, provided that if the amount of the
Products purchased by Boston Beer in any calendar quarter exceeds the
Quarterly Volume, then such excess shall be carried forward and applied to
reduce any termination fee that would otherwise be payable in any
subsequent calendar quarter.
(f) Upon termination pursuant to this Paragraph 10, Boston Beer
shall promptly pay to High Falls all unpaid invoices in full and all
unpaid costs incurred by High
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
<PAGE>
Boston Beer Agreement
Page 23
Falls pursuant to this Agreement in the brewing, packaging, shipping and
storage for the Product. High Falls will use all reasonable efforts to
minimize such costs upon termination and Boston Beer will have the right
to review documentation evidencing such costs.
11. AGENCY AND INDEMNIFICATION
High Falls and Boston Beer understand and agree that neither Party
is, by virtue of this Agreement or anything contained herein, including High
Falls affixing to any Product and/or registering the name of "The Boston Beer
Company" or "Boston Beer Company," constituted or appointed the agent of the
other Party for any purpose whatsoever, nor shall anything herein contained be
deemed or construed as granting Boston Beer or High Falls 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. Boston Beer shall indemnify and hold harmless High Falls from
and against any and all claims, expenses, causes of action or liabilities of any
nature whatsoever (collectively, "Damages"), to the extent that Damages arise
solely from the independent conduct of Boston Beer; provided that Damages shall
not include any loss, liability, cost or expense incurred by High Falls as a
consequence of the exercise by Boston Beer of any of its rights under this
Agreement.
12. PRODUCT LIABILITY
(a) High Falls and Boston Beer shall each maintain product liability
insurance coverage in the respective amount of not less than $* per
occurrence and $* combined single limit, and in the amount of not less
than $* combined single limit in the aggregate relating to the Products
produced by High Falls for Boston Beer hereunder.
(b) High Falls shall indemnify and hold harmless Boston Beer and all
of its affiliates from and against any and all loss, liability, cost or
expense of any nature whatsoever, including reasonable attorney's fees
(collectively, "Product Liability Damages"), arising out of or associated
with the manufacture and/or packaging of the Products by High Falls,
regardless of when manufactured or packaged, and whether under this
Agreement or otherwise, except to the extent that (i) Product Liability
Damages were
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
<PAGE>
Boston Beer Agreement
Page 24
caused solely by improper storage, handling or alteration of the Products
after delivery to Boston Beer, (ii) Product Liability Damages are based on
or result from a claim that the Products are inherently defective, or
(iii) Product Liability Damages were caused by Brewing Ingredients,
Packaging Materials (other than bottles) or Brewing Supplies specified or
otherwise approved by Boston Beer.
(c) Boston Beer shall indemnify and hold harmless High Falls and all
of its affiliates from and against any and all Product Liability Damages
to the extent arising out of the causes excepted from High Falls's duty to
indemnify Boston Beer under clauses (i), (ii) and (iii) of subparagraph
(b) of this Paragraph 12.
(d) Notwithstanding the provisions of subparagraphs (b) and (c) of
Paragraph 12, in no event shall either Party be liable to indemnify the
other Party for consequential damages suffered by the other Party in an
amount greater than the lesser of (i) $* or (ii) $* plus * (*) times the
aggregate Fixed Charge paid by Boston Beer for all Products during the *
(*) months preceding the month in which occurred the event giving rise to
the claim for indemnification.
13. RECIPE AND QUALITY
(a) High Falls shall produce the Products using the ingredients and
brewing formula and procedures specified in the Brewing Package provided
by Boston Beer Company to High Falls on June 8, 1995, as updated from time
to time. High Falls shall produce any new Core Product or any Other
Products using the brewing formula and procedures specified in the Brewing
Package provided by Boston Beer to High Falls for such Core Product or
Other Products. Boston Beer shall have the right to change ingredients
and/or brewing formula and procedures upon reasonable prior written
notice, provided that the cost of any such change shall be borne by Boston
Beer and, provided further, that the specified ingredients are readily
available in the necessary timeframe.
(b) High Falls shall use its best efforts to meet the specifications
for the Core Product attached hereto as Exhibit A, as amended from time to
time. High Falls shall use its
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
Page 25
best efforts to meet the specifications for any new Core Product or any
Other Products which are furnished in writing by Boston Beer at the time
the parties agree to add a new Core Product or Other Products to this
Agreement. Boston Beer has the right to reject batches of the Products
which it determines to taste materially different from representative
sample of the Products, such rejection not to be arbitrary or
unreasonable. Any rejected batches *.
(c) The Products shall be brewed and packaged according to Boston
Beer's specifications, including the maintenance of standards and quality
control programs furnished to High Falls in writing by Boston Beer. Boston
Beer 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 beer taste and quality to be
the same as if Boston Beer were the owner of High Falls's brewing
facility. Boston Beer shall have the right, at any time, to monitor and
review the practices and procedures of High Falls in the production and
packaging of the Products and inspect High Falls's brewing facility. If a
decision made by Boston Beer in the exercise of its authority under this
Subparagraph 13(c) results in *, High Falls shall be entitled to *. In
addition, in the exercise of its authority under this Subparagraph 13(c),
Boston Beer shall not interfere with High Falls's production process for
its own proprietary brands or other contract products.
(d) Consistent with the provisions of Subparagraph 13(c), High Falls
and Boston Beer will, in any and all public statements or comments,
recognize that Boston Beer controls the ingredients, recipe, brewing
processes and procedures and quality parameters for all Products produced
for Boston Beer by High Falls, and that Boston Beer is the brewer of all
such Products. Neither Party will make any public statements inconsistent
with the foregoing.
14. TRADEMARKS
(a) High Falls acknowledges that no trademark or trade name rights
in SAMUEL ADAMS, SAM ADAMS, "The Boston Beer Company" and any other
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
Page 26
trademarks, trade names, domain names, service marks, logos or other
intellectual property of Boston Beer (collectively, the "Trademarks") are
granted by this Agreement.
(b) Boston Beer hereby represents, warrants and covenants to High
Falls that it has and will maintain its right to use the Trademarks and
will indemnify and hold harmless High Falls from any alleged infringement
by any Party against High Falls including, but not limited to, High
Falls's reasonable costs of legal expenses.
15. TEST BREWING
Notwithstanding anything to the contrary in this Agreement, Boston
Beer may, at any time after notice to High Falls engage any other brewer for the
purpose of conducting test production and distribution of the Products in order
to ensure the delivery of the Product following termination of this Agreement.
16. COMPETING PRODUCTS
(a) High Falls will not at anytime use the brewing formula for the
Products which Boston Beer has supplied to High Falls or any yeast
supplied to High Falls by Boston Beer to produce a malt beverage product
for itself (or any of its affiliates) or on behalf of any unaffiliated
person.
(b) Boston Beer acknowledges that High Falls is currently in the
business of brewing craft and specialty malt beverage products, both for
itself and on behalf of other unaffiliated persons, that are similar to
and compete with the Products, and Boston Beer agrees that nothing in this
Agreement shall prevent High Falls from continuing or expanding its craft
and specialty business or its contract brewing business, provided that
High Falls shall not intentionally copy the brewing formula for the
Products or use any yeast supplied to High Falls by Boston Beer to produce
craft and specialty products for itself, any of its affiliates, or for any
third parties. Further, High Falls shall use its best efforts to ensure
that any production, whether for itself, its affiliates, or other
unaffiliated persons, shall not diminish in any material respect the
quality or frequency of the brewing, packaging,
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Boston Beer Agreement
Page 27
shipping or other levels of service provided by High Falls to Boston Beer
prior to the Effective Date.
17. RIGHTS OF OFFSET
The parties acknowledge and agree that, to the extent a Party is at
any time owed money by the other Party, such Party may set off such amount
against any monies owed by such Party from time to time to such other Party,
said set-off to be accomplished by written notice to such other Party effective
upon being sent.
18. NOTICES
All notices required herein shall be given by registered airmail,
return receipt requested, or by overnight courier service, in both cases with a
copy also sent by telecopier, to the following addresses (unless change thereof
has previously been given to the Party giving the notice) and shall be deemed
effective when received:
If to Boston Beer: Jeffrey D. White, COO, and
Martin F. Roper, President and CEO
Boston Beer Corporation
75 Arlington Street
Boston, MA 02116
Telecopier: (617) 368-5553
with a copy to: Frederick H. Grein, Jr., Esq.
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Telecopier: (617) 951-1295
If to High Falls: Samuel T. Hubbard, Jr., President and CEO
High Falls Brewing Company, LLC
445 St. Paul Street
Rochester, NY 14605
Telecopier: (585) 235-1964
with a copy to: Paul J. Yesawich, III, Esq.
Harris Beach LLP
99 Garnsey Road
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Pittsford, New York 14534
Telecopier: (585) 419-8801
19. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Parties, but shall not be assigned by any Party,
whether by merger, consolidation, reorganization, operation of law or otherwise,
without the prior written consent of the other Party, which consent will not be
unreasonably withheld. Notwithstanding the foregoing, Boston Beer may assign
this Agreement without the consent of High Falls to its successor corporation or
other successor entity in the event of any reorganization, public offering or
change in the form of entity of Boston Beer, provided that *. No failure of a
Party to consent to a proposed assignment of this Agreement by the other Party
shall be deemed unreasonable if such Party believes in good faith that the
proposed assignee is not capable of performing the financial or production
obligations of the Party proposing to assign this Agreement. Permitted
assignment of this Agreement shall relieve the assigning Party of its financial
obligations hereunder, including its indemnification obligations hereunder.
20. GOVERNING LAW
This Agreement shall be interpreted and construed in accordance with
the laws of the State of New York.
21. DISPUTE RESOLUTION
Any disputes arising out of, or relating to the terms of, this
Agreement shall be resolved by arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Any arbitration shall
take place in New York City, New York and shall be the Parties' sole and
exclusive remedy and forum for the resolution of any such disputes.
22. EXECUTION IN COUNTERPARTS
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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This Agreement may be executed in one or more counterparts each of
which shall be deemed to be an original but all of which together shall
constitute one and the same document.
23. AMENDMENTS
No amendment, change or modification of any of the terms, provisions
or conditions of this Agreement shall be effective unless made in writing and
signed or initialed on behalf of the Parties hereto by their duly authorized
representatives.
24. NO THIRD PARTY BENEFICIARIES
High Falls and Boston Beer agree that this Agreement is solely for
their benefit and it does not nor is it intended to create any rights in favor
of, or obligations owing to, any person not a Party to this Agreement.
25. MERGER; SEPARABILITY
This Agreement terminates and supersedes all prior formal or
informal understandings between the Parties with respect to the subject matter
contained herein. Should any provision or provisions of this Agreement be deemed
ineffective or void for any reason whatsoever, such provision or provisions
shall be deemed separable and shall not effect the validity of any other
provision.
26. LIMITATION PERIOD ON CLAIMS
All claims hereunder must be brought no later than * after such claims
arose or the Party having such claim shall be deemed to have waived and forever
released it; provided that for this purpose, a claim will be deemed to have
arisen at the time the Party asserting the claim first became aware of it.
IN WITNESS WHEREOF, the parties hereto enter into this Second Amended and
Restated Agreement this ___ day of April, 2002.
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
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Witness: BOSTON BEER CORPORATION
By:
-------------------------- -----------------------------------------
Martin F. Roper, President and
Chief Executive Officer
Witness: HIGH FALLS BREWING COMPANY, LLC.
By:
-------------------------- -----------------------------------------
Samuel T. Hubbard, Jr., Chairman and
Chief Executive Officer
[*] Indicates that information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.