Beverage Production and Packaging Agreement - Hansen Beverage Co. and City Brewing Co. LLC d/b/a Midwest Beverage Packers
BEVERAGE PRODUCTION AND PACKAGING AGREEMENT
BETWEEN
HANSEN BEVERAGE COMPANY
Hansen Beverage Company
1010 Railroad Street
Corona, CA 92882
U.S.A.
Telephone: (951) 739-6200
Fax: (951) 739-6210
Attention: Rodney Sacks, Chairman/CEO, or his successor
AND
CITY BREWING COMPANY, LLC d/b/a
MIDWEST BEVERAGE PACKERS
City Brewing Company, LLC
925 South Third Street
La Crosse, WI 54601
U.S.A.
Telephone: (608) 785-4200
Fax: (608) 785-4300
Attention: Randy Hull, Director of Business Development, or his successor
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BEVERAGE PRODUCTION AND PACKAGING AGREEMENT
AGREEMENT dated this 23rd day of February, 2005 between City Brewing Company, a
Wisconsin limited liability company doing business as Midwest Beverage Packers
("Packer") and Hansen Beverage Company, a Delaware Corporation("Customer").
WHEREAS, Packer owns and operates a beverage production and packaging facility
in La Crosse, Wisconsin, and
WHEREAS, Customer desires that Packer produce and package a beverage for
Customer in accordance with terms and conditions set forth herein
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties agree:
1. GENERAL TERMS AND CONDITIONS
This is an agreement by which Packer will produce and package a beverage(s) for
Customer. Packer will perform services in accordance with methods utilized by
Packer to meet Packaged Beverage Specifications set forth more fully herein. In
the event that Customer requests and Packer agrees to perform additional
services or meet different specifications, the parties shall document said
agreement in a Special Services Exhibit attached to and made a part of this
Agreement.
2. DEFINITIONS
As used herein, the following capitalized terms shall have the following
meanings:
2.1 Beverage: The liquid derived from ingredients formulated in the manner
set forth in the Beverage Product Exhibit.
2.2 Beverage Specifications: The written statement of Beverage
characteristics set forth in the Beverage Product Exhibit.
2.3 Change Parts: Packaging machinery parts necessary for handling
Packages not used by Packer.
2.4 Closure: A metal or plastic device used to seal the Beverage into
Containers.
2.5 Container(s): A glass, metal or plastic vessel into which the Beverage
is filled and sealed.
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2.6 Formula: The written instructions set forth in the Beverage Product
Exhibit for combining specified quantities of Ingredients with water
to produce the Beverage.
2.7 Ingredients: The raw materials set forth in the Beverage Product
Exhibit used in production of the Beverage.
2.8 Intellectual Property: Trademarks, trade names, copyrights and other
artwork owned and specified by Customer for application to Packaging
Materials.
2.9 Label: Printed paper or other material affixed to or imbedded in
Containers setting forth information concerning the Beverage and other
Intellectual Property.
2.10 Package: Beverage Containers and the Secondary Package into which they
are enclosed for delivery to Customer.
2.11 Package Specifications: The written statement of Package
characteristics set forth in the Beverage Package Exhibit.
2.12 Packaged Beverage: A Beverage that has been packaged into Packaging
Materials as provided in this Agreement.
2.13 Packaged Beverage Specifications: The written specifications set forth
in the Beverage Package Exhibit applied after the Beverage has been
filled and sealed into a Container.
2.14 Packaging Materials: Containers, Closures, Labels and Secondary
Packaging set forth in the Beverage Package Exhibit.
2.15 Production Fee: Packer's charge for production and packaging Beverages
generally charged per each Shipping Unit
2.16 Secondary Packaging: Paper cartons, cases, carriers, trays and other
devices used to hold Containers for shipment.
2.17 Shipping Unit: The equivalent of one Package regardless of the number
of Containers or their fluid capacity ordered by and delivered to
Customer.
2.18 Special Services: Additional services ordered by Customer and provided
by Packer set forth in the Special Services Exhibit.
2.19 Warehousing Fee: Packer's charge for transporting and storing
Beverages, generally charged per Shipping Unit.
2.20 Storage Fee: Packer's charge for storing Beverages for periods in
excess of thirty (30) days, generally charged on a per Packaged
Beverage pallet basis.
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3. TERM OF AGREEMENT
The initial term of this Agreement shall be from the date first set forth above
and continue through December 31, 2006.
4. PRODUCTION ORDERS
Packer shall produce and package one or more Beverages upon receipt of orders
from Customer and Customer shall purchase from Packer all packaged Beverages so
ordered subject to the terms and conditions of this Agreement. Customer's order
shall specify the Beverage(s) to be produced and the type and quantity of
Packages into which the Beverage shall be packed.
4.1 Production Estimates. Customer shall provide Packer with a six month
rolling forecast of customers' beverage production needs by package by
month. Said forecast to be updated monthly. Customer may change
production orders no later than 30 days from production date. Unless
otherwise agreed in writing, Packer shall not be obligated to accept
monthly production orders that exceed Customer's monthly production
estimates by more than ___ percent (__%).
4.2 Production Orders. Production shall be ordered and performed on a
monthly basis. Customer shall submit to Packer one written production
order per month no later than the 10th day of the month preceding the
desired month of production. All production orders shall be subject to
acceptance by Packer. Packer's acceptance shall be evidenced by a
written acknowledgement to Customer scheduling delivery. Upon
acknowledgement, the order shall be deemed a binding obligation
between the parties.
4.3 Order Limits. Customer's orders to produce and/or package any Beverage
shall be not more than the maximum quantity or less than the minimum
quantity specified in the Beverage Product Exhibit and the Beverage
Package Exhibit.
5. BEVERAGE
Each Beverage shall be produced in accordance with a Formula furnished by
Customer. Each Formula shall be subject to approval by Packer. Approved Formulas
shall be set forth in the Beverage Product Exhibit. Notwithstanding Packer's
approval, Customer shall be exclusively responsible for the Formula used for
each Beverage including, but not limited to consumer acceptance thereof and
compliance with federal, state and local law (statutory or common law) governing
the composition of food and beverage products.
5.1 Modifications. There shall be no change in the Formula of the Beverage
to be packed by the Packer without the prior written consent of both
parties.
5.2 Specifications. Each Beverage shall meet Beverage Specifications set
forth in the Beverage Product Exhibit.
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6. PACKAGING
Each Beverage shall be filled and sealed into Containers and, if applicable,
Labels shall be applied to Containers. Containers shall be packed in Secondary
Packages. Secondary Packages shall be placed on pallets for delivery to
Customer. All Packaging Materials and vendors of Packaging Materials shall be
subject to Packer's approval, which approval shall not be unreasonably withheld
or delayed. Approved Packaging Materials shall be set forth in the Beverage
Package Exhibit.
6.1 Composition and Dimensions. The composition and dimensions of all
Packaging Materials are set forth in the Beverage Package Exhibit and
there shall be no deviation or modification there from except as may
be agreed by the parties in writing.
6.2 Package Specifications. Each Package shall meet the Package
Specifications set forth in the Beverage Package Exhibit.
6.3 Package Coding. Unless otherwise agreed upon in writing, Packer will
apply a printed code agreed to with Customer or failing agreement as
customarily used by Packer on all packages.
6.3 Change Parts. Packer shall have no obligation to install Change Parts
to its packaging machinery in order to accommodate Packaging
Materials. In the event that Customer requests and Packer agrees to
use Packaging Materials that require the acquisition and installation
of Change Parts, the work associated therewith shall be deemed to be a
Special Service subject to the terms and conditions set forth in
writing in the Special Services Exhibit.
6.4 Pallets. Unless otherwise agreed between the parties in writing,
Packer shall place packaged Beverages on standard beverage industry
pallets in Packer's standard pattern for delivery to Customer.
Customer shall pay Packer's standard pallet fee in effect at the time
of delivery unless otherwise specified in the Product Pricing Exhibit.
7. PROCUREMENT
Except for items specifically identified in the Beverage Product Exhibit or
Beverage Packaging Exhibit, Customer shall be responsible for purchasing and
storing all Ingredients used in formulation of each Beverage and all Packaging
Materials used in packaging each Beverage. For purposes of this Agreement,
Packaging Materials shall be deemed to include packaging artwork and the
cylinders, plates, tools and dies used in the creation thereof. Customer will
purchase Ingredients and Packaging Materials from sources approved in advance by
Packer, but Packer may only limit its approval of suppliers of Packaging
Materials if Packer's packaging equipment requires a specific supplier.
7.1 Release From Suppliers. Customer shall make arrangements with
suppliers to release Ingredients and Packaging Materials to Packer to
be used in production and packaging of Beverages in quantities and at
times ordered by Packer. Except as needed for current production,
Packer shall not inventory and store Ingredients and Packaging
Materials for Customer beyond the time necessary for the next
production run. Packer shall not be obligated to inspect or test
materials purchased by Customer prior to their use in production.
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7.2 Rejected Items. Customer shall ensure that all items furnished by its
suppliers conform to specifications set forth in this Agreement and
are fit for their intended use. Packer shall have the right to reject
any item that fails to meet such requirements. Packer shall give
notice to Customer of said rejection. Packer shall be entitled to
suspend its performance under this Agreement if the item(s) rejected
cause Packer to be unable to perform in the manner contemplated
herein. Customer shall be liable to Packer for any financial loss
suffered by Packer as a result thereof.
7.3 Material Safety Data Sheets. Customer will provide or arrange with its
suppliers to provide Packer with any required Material Safety Data
Sheets for any Ingredient.
7.4 Disposition of Materials Following Termination. Following termination
of this Agreement, Ingredients or Packaging Materials held by Packer
on behalf of Customer shall be returned to Customer provided there is
no outstanding balance due Packer from Customer. Packer shall also
have the right to discard or sell any Ingredients or Packaging
Materials held by Packer for more than thirty (30) days following
termination of this Agreement. Upon termination of this agreement,
Customer will purchase, at Packer's cost, any and all unused Packaging
and Raw Materials, to include work in process, purchased by Packer on
behalf of Customer, and held in inventory at Packers warehouse or at
supplier locations. Should Customer be unwilling or unable to purchase
said materials, Customer hereby grants Packer the right to produce and
sell Packaged Beverages under the Energade Tradenames until such time
as either:
7.4a. The material is completely disposed of; or,
7.4b.Any outstanding balance due Packer from Customer is
offset."
8. DELIVERY.
Customer shall take delivery of each Packaged Beverage FOB Packer's La Crosse,
Wisconsin production facility. Packer assumes the cost and risk of loading
trucks at Packers' dock on the date scheduled for delivery or such other date
agreed upon by the parties in writing. Any other provision of this Agreement to
the contrary notwithstanding, Packer shall have the right to withhold delivery
to Customer of any Beverage that fails to meet Packaged Beverage Specifications.
8.1 Loading. Packer shall load Packaged Beverage pallets on delivery
vehicles furnished by Customer. Unless expressly provided herein,
Packer shall not be required to custom load or arrange loading for
more than one destination per delivery vehicle.
8.2 Carriers. All carriers selected by Customer to take delivery on behalf
of Customer shall be subject to Packer's approval, which approval
shall not be unreasonable withheld or delayed.
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8.3 Storage. Unless otherwise expressly provided herein, Packer shall have
no obligation to store Beverages for Customer more than seven (7) days
following the latter of the scheduled or actual date of delivery.
8.4 Warehousing Charge. In the event that Customer fails to take delivery
of the Beverage within the time specified, Packer shall have the
right, at its option, to do one or both of the following on reasonable
notice to Customer: (i) store the Beverage at Packer's warehouse at
the rate of $_ per pallet per month including any portion thereof, or
(ii) transport the Beverage to a commercial warehouse for storage
under terms and conditions established by the storage provider. The
cost of storage shall be due and payable prior to any delivery of the
Product to Customer. Packer shall have no liability to Customer for
damage to or loss of any Packaged Beverages stored at Packer's
production facility or at any commercial warehouse unless caused by
negligence of Packer or Packer's employees.
9. PRODUCTION AND OTHER SERVICE FEES
9.1 Production Fee. In consideration of production and packaging of the
Beverage, Customer shall pay Packer a Production Fee for each Shipping
Unit of the Packaged Beverage delivered as set forth in the Product
Pricing Exhibit. Production Fees shall be paid in accordance with
Packer's credit terms. Initial credit terms are net 15. Packer
maintains the right to reestablish credit terms at its sole
discretion. Prices may be increased by Packer upon written notice to
Customer for any increase in the cost of raw materials or packaging
supplies purchased by Packer on Customer's behalf. Production Fees
will be reestablished annually, with an effective date of January 1st.
9.2 Special Services Fees. The Production Fee is established as
consideration for standard methods of production and packaging of the
Beverage in the manner set forth in this Agreement. In the event that
Customer requests and Packer agrees to perform services beyond those
expressly provided herein, the work associated therewith shall be
deemed to be a Special Service expressly set forth in the Special
Services Exhibit. In consideration of performing Special Service(s),
Packer shall be compensated through payment of Special Services Fees
as set forth in the Pricing Exhibit. Special Service Fees shall be
paid by Customer in the same manner as Production Fees.
9.3 Invoicing. Packer shall provide Customer a final invoice for the Raw
Materials, Packaging Supplies, Production Fees, Alternating
Proprietorship and Special Services Fees, if any, at the conclusion of
each Production Run.
9.4 Taxes. The Production Fee does not include any Federal or other taxes
imposed upon the Product. In the event that Packer is required to pay
any such tax as a result of production of the Beverage, the cost of
such tax shall be in addition to the Production Fee.
9.5 Packaging Materials. In the event that Packer agrees to the purchase
of Packaging Materials specifically on behalf of Customer, and not on
behalf of any specific other customer, or itself, the cost of any
Packaging Materials purchased in excess of those required for
scheduled production shall be in addition to the Production Fee.
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10. PRODUCTION YIELDS
Customer and Packer acknowledge that in the normal course of beverage production
and packaging, the number of Shipping Units of Packaged Beverage delivered will
be less than the sum of Ingredients and Packaging Materials supplied. Production
and packaging losses will vary by the type of Beverage produced, the type of
Packaging Materials used, production and packaging methods specified by Customer
and the size of Customer's Order. Unless otherwise agreed in writing and set
forth in a Special Services Exhibit, Packer shall have no liability to Customer
for the amount of Packaged Beverage yielded from Ingredients or Packaging
Materials consumed in the course of production unless exceeding _% for liquid
contents and _% for Beverage Containers except where losses arise as a result of
theft, misappropriation or intentional acts causing loss of yield.
11. LIMITED INTELLECTUAL PROPERTY LICENSE
Customer hereby grants Packer a non-exclusive license to use the Intellectual
Property strictly limited to uses in fulfillment of Packer's obligations under
this Agreement. Customer retains all rights to the Intellectual Property and all
goodwill accruing as a result of any use thereof shall accrue to Customer. Upon
termination of this Agreement, Packer shall immediately cease use of the
Intellectual Property except in connection with any post-termination use of
Packages provided herein.
12. WARRANTIES
Each party warrants to the other party that it is duly organized and in good
standing in its respective jurisdiction of organization, that it has the
authority to enter into and perform this Agreement and that the consummation of
this Agreement will not violate any agreement or judicial order to which it is a
party or by which it is bound. EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE PARTIES
MAKE NO OTHER WARRANTIES AND HEREBY DISCLAIM ALL OTHER WARRANTIES , EXPRESS OR
IMPLIED. Packer and Customer individually warrant as follows:
12.1 Packer Warranties.
12.1.1 Packer shall produce each Beverage in accordance with the formula.
12.1.2 Each Beverage shall meet Packaged Beverage Specifications at the
time of delivery to Customer.
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12.1.3 Each Beverage shall be free from adulteration as defined by the
United States Food, Drug and Cosmetics Act.
12.2 Customer Warranties.
12.2.1 Ingredients furnished by Customer or Customer's suppliers shall meet
all applicable legal requirements and be fit for use as an ingredient
in food or beverage products.
12.2.2 Customer owns the Formula used in production of each Beverage. The
Formula and the Beverage derived from proper application of the
Formula will not violate the laws and regulations of any government
having jurisdiction over the Beverage or injure or illegally infringe
upon the rights of any other person.
12.2.3 Customer owns the Intellectual Property applied to the Packages. The
Intellectual Property will not violate the laws and regulations of any
government having jurisdiction over the Packages or injure or
illegally infringe upon the rights of any other person.
13. QUALITY ASSURANCE
Packer will monitor production and packaging of each Beverage in accordance
with Packer's standard quality assurance monitoring procedures as detailed
in the Quality Assurance Exhibit. Under such procedures, Packer will
examine samples of each Beverage prior to and after packaging. In the event
that Customer requests and Packer agrees to engage in additional quality
assurance monitoring prescribed by Customer, the work associated therewith
shall be deemed to be a Special Service subject to the terms and conditions
set forth in writing in the Special Services Exhibit.
14. INDEMNFICATION AND INSURANCE
Each party shall indemnify and hold the other party harmless from all liability
arising out of claims made against the party for damage caused by actions in
breach of the other party's respective warranties as set forth herein.
Packer and Customer shall each purchase and maintain the following forms of
insurance:
(i) Product liability insurance with coverage limits not less than $1
million.
(ii) Property insurance with limits sufficient to cover property
replacement value.
The parties shall obtain waivers from their insurance carriers of subrogation
rights against the other party.
In the event that Customer requests and Packer agrees to extend Packer's
insurance coverage to Customer, the cost associated therewith shall be deemed to
be a Special Service subject to the terms and conditions set forth in writing in
the Special Services Exhibit.
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15. ALTERNATING PROPRIETORSHIP
In the event that Customer requests and Packer agrees to alternate
proprietorship of Packer's production facility, the burden associated therewith
shall be deemed to be a Special Service subject to the terms and conditions set
forth in writing in the Special Services Exhibit.
16. FORCE MAJEURE
Notwithstanding any other provision contained in this Agreement, if either party
is delayed or prevented from performing its obligations under this Agreement by
any cause beyond its reasonable control including, but not limited to, acts of
God, war, terror, fire, traffic interruptions, governmental laws or orders,
shortage of materials, strikes or labor disturbances, then that party's
performance shall be suspended or excused without damages, costs or penalties
while such cause exists. The party whose performance is affected by the Force
Majeure shall use its best efforts to overcome the event.
17. TERMINATION
Either party may terminate this Agreement for any reason whatsoever on not less
than ninety (90) days prior written notice to the other Party, effective at any
time on or after the effective date, or upon written notice following occurrence
of any of the following events. Termination of the Agreement shall not affect
the right of either party to obtain such additional relief in law or in equity
to which it may be entitled.
17.1 Payment Breach. Either party fails to make payment for any amount due
under this Agreement (net of any amount due from the other party)
following ten (10) days written notice of payment breach from the
other party,
17.2 Material Breach. Either party materially breaches this Agreement and
fails to cure said breach within thirty (30) days of written notice
thereof by the other party,
17.3 Orders and Acceptance. Either party fails to order or accept orders to
produce and package not less than ______ Shipping Units of the
Beverages for more than one hundred eight (180) consecutive days,
17.4 Force Majeure. A Force Majeure causes either party to suspend
performance for more than ninety (90) consecutive days, or
17.5 Bankruptcy. Bankruptcy proceedings are brought by or against either
party in U.S. Bankruptcy Court.
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18. CLAIM LIMITATIONS
18.1 Time of Assertion. Any claim by either party arising out of or
relating to this Agreement must be brought no later than one year (360
days) after the latter of: (i) the date the claim arises, or (ii) the
date the claimant first becomes aware of the claim. Claims not brought
within the time provided herein shall be barred and forever
discharged.
18.2 Damages. Claims for money damages arising out of any action amounting
to a breach of this Agreement by either party shall be limited to the
actual damages caused by said breach. Neither party shall be entitled
to any consequential, special or exemplary damages.
18.3 Equitable Relief. Either party may make a claim for equitable relief.
19. DISPUTE RESOLUTION
Any claim or dispute arising between the parties that cannot be resolved through
negotiation shall be exclusively resolved through arbitration under rules and
auspices of the American Arbitration Association or such other alternative
dispute-settling forum approved in writing by both parties. The venue for any
arbitration shall be Chicago, Illinois. The arbitrator shall be empowered to
allow discovery and decide claims subject only to the limitations set forth in
this Agreement. The decision of the arbitrator and damages or equitable relief
provided therein may be entered as a judgment in any court of competent
jurisdiction.
20. MARKETING AND SALES OF BEVERAGE
Customer is exclusively responsible for marketing and sale of all Products and
nothing contained in this Agreement shall be interpreted as creating a joint
venture or other business association other than the contractual relationship
between Packer and Customer. Customer will be exclusively responsible for
compliance with all laws or regulations governing sale or distribution of the
Beverage. In the event that state alcoholic beverage control laws require Packer
to file certain information as producer of record for Customer's products,
Customer acknowledges that in doing so, Packer assumes no responsibility for
marketing and sale of the Products.
21. ACCESS TO PRODUCTION FACILITY
Except for public tours to a limited portion of Packer's facility, Packer denies
public access to its facility. Customer or Customer's representative shall have
the right, at any time, to monitor and review the practices and procedures of
Packer in the production of Customers' products at Packers' facility during such
periods that Customer's products are being prepared and packaged. Customer will
use its best efforts to notify Packer at least 24 hours in advance of any visit
to the facility, except in the case of emergency.
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22. CONFIDENTIALITY
Packer and Customer acknowledge that in the performance of this Agreement, each
party may obtain information from the other party deemed confidential. Packer
and Customer will identify in writing all information deemed confidential and
the recipient thereof will not use or disclose such information to anyone except
employees with a need to know in order to accomplish the purposes of this
Agreement. Information shall not be deemed confidential if such information: (i)
was in the public domain at the time of disclosure to the recipient, (ii)
subsequently becomes available to the public without act or negligence of the
recipient, (iii) can demonstrably be shown to have been in the recipient's
possession prior to its receipt from the other party, or (iv) is subsequently
obtained by recipient from an independent third party having a lawful right to
disclose the information.
Packer and Customer shall not disclose the terms, conditions or other details of
this Agreement without the prior written consent of the other party except as
required by law and then, to the extent possible, only upon prior notice to the
other party.
23. ASSIGNMENTS
Neither this Agreement nor any right or obligation under this Agreement may be
assigned by either party without the prior written consent of the other party
hereto, provided that such consent shall not be unreasonably withheld. Any
attempt to assign this Agreement without such consent shall be deemed void. A
change in controlling ownership of either party shall not be deemed as
assignment unless such change has a material adverse impact on the party's
ability to perform its obligations under this Agreement. Either party
experiencing a change in controlling ownership shall provide written notice to
the other party immediately upon its occurrence.
24. SUCCESSORS
Subject to the limitations on assignment set forth herein, this Agreement is
binding upon, and the benefits hereof inure to, the parties hereto and their
respective successors and assigns.
25. ENTIRE AGREEMENT
This Agreement including its Exhibits sets forth the entire agreement between
the parties with respect to the subject matter hereof and supercedes all prior
agreements and understandings. This Agreement may not be modified except by
written amendment signed by both parties.
26. COUNTERPARTS
This Agreement may be executed in one or more counterparts.
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27. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Wisconsin.
28. NOTICES
Notices under this Agreement shall be deemed given when sent via facsimile
transmission and confirmed the same day via overnight mail to the addresses set
forth on the cover page of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
on the date first above written.
CITY BREWING COMPANY, LLC
By: /s/ Randy Hull 2/28/05
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Randy Hull Date
Director
Business Development
City Brewing Company
HANSEN BEVERAGE COMPANY
By:/s/Rodney Sacks 2/28/05
------------------------------
Rodney Sacks Date
Chairman/CEO
Hansen Beverage Company
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