Contract Brewing & Packaging Agreement

CONTRACT BREWING AND PACKAGING AGREEMENT


This Agreement is made this 29th day of April, 1997, by and between ANHEUSER-BUSCH, INCORPORATED ("ANHEUSER-BUSCH"), a Missouri corporation, with its principal place of business at One Busch Place, St. Louis, Missouri 63118, and AMERICAN CRAFT BREWING INTERNATIONAL LIMITED ("AMBREW"), a Bermuda corporation, with its principal place of business at One Galleria Boulevard, Metairie, Louisiana 70001.


BACKGROUND


A. ANHEUSER-BUSCH has brewed, sold and advertised beer throughout the United States and worldwide.


B. ANHEUSER-BUSCH desires to grant a license to AMBREW and Cerveceria Rio Bravo S.A. de C.V. to utilize the Trademarks and the Formula referred to herein in connection with the manufacturing and packaging of beer in Mexico.


C. AMBREW desires to utilize the Trademarks and Formula, and desires to cause its majority controlled subsidiary, Cerveceria Rio Bravo S.A. de C.V, to utilize such Trademarks and Formula.


AGREEMENT


1. DEFINITIONS


For purposes of this Agreement, the following terms shall have the meanings indicated below:


1.1 "Approved Brewery" means the brewery controlled by AMBREW in Tecate, Mexico, and approved in writing by ANHEUSER-BUSCH for brewing and/or packaging of PRODUCT.


1.2 "PRODUCT" means the beer brewed and packaged by AMBREW and/or AMBREW's subsidiary, Cerveceria Rio Bravo S.A. de C.V. (using the Formula) pursuant to this Agreement and named by ANHEUSER-BUSCH, at its sole discretion, or any other beer brewed by AMBREW at ANHEUSER-BUSCH's request.


1.3 "Confidential Information" means any data, analysis, compilations, forecasts, studies, specifications, formulations, experience, samples, models, procedures, processes, devices, other documents or information relating to the business or affairs of AMBREW or ANHEUSER-BUSCH (including, in relation to ANHEUSER-BUSCH, the Formula). Confidential Information shall not include information (other than, in relation to ANHEUSER-BUSCH, such information which collectively makes up the Formula) which: 2
(i) was already known to the party receiving it at the
time of its receipt, unless such information was provided
subject to an obligation of confidentiality;


(ii) was published or otherwise generally known to the
public at the time of its disclosure to the receiving party;
or


(iii) became known or available to the receiving party from
a source having a right to make such disclosure and without
restriction on said disclosure.


1.4 "CPI Adjustment" is the product derived by multiplying: (i) the then-existing Price for the term in effect (ii) by one-half of the fraction, the numerator of which is the "CPI" (defined herein) as reported on December 31 of the current calendar year for the term in effect, and the denominator of which is the CPI as reported on December 31 of the immediately preceding calendar year. The term "CPI" is the Consumer Price Index for All Urban Consumers for All Cities which is published monthly by the Bureau of Labor Statistics of the U.S. Department of Labor, or its successor.


1.5 "Effective Date" means the execution date of this Agreement.


1.6 "Force Majeure" means causes or contingencies beyond the reasonable control of the respective parties, including but not limited to acts of God, war, hostilities between nations, rebellion, riots, civil commotions, accidents, explosions, fire, wind, cyclones, storms, earthquakes, floods, epidemics, acts of a public enemy, strikes, lockouts, sabotages, boycotts, picketing, labor disturbances or labor difficulties of any and all kinds, embargo, delays in the transportation of materials, delays or defaults caused by public carriers, governmental actions, laws, regulations or orders, which shall render it impossible for such party to perform its obligations under this Agreement. If, as a result of legislation or other governmental action, any party or parties are precluded from receiving any benefit to which they are entitled hereunder, then the parties shall review the terms of this Agreement so as to use their best efforts to restore the party or parties to the same relative positions as previously obtained hereunder.


1.7 "Formula" shall mean any and all of ANHEUSER-BUSCH's procedures, processes, technology, recipes (including, without limitation, ANHEUSER-BUSCH's yeast, malt and other ingredients and brewing materials), specifications, inventions, brewing processes, trade secrets, know-how, and scientific and technical information necessary for the production and packaging of an alcoholic malt beverage having the taste, color, makeup, character and product profile corresponding to the PRODUCT and as more specifically contained in the manual attached hereto as Exhibit 1 (as may be amended from time to time by ANHEUSER-BUSCH), all of which shall be considered Confidential Information.


1.8 "Territory" means the countries of Mexico and the United States of America, including the territories and possessions of the United States of America. 3
1.9 "Trademarks" shall mean all trademarks (whether or not registered) and trademark registrations listed in Schedule A, as well as all trademarks, trade names, slogans and designs now or hereafter owned by ANHEUSER-BUSCH, some of which will appear on the labels and packaging of PRODUCT or will be used in connection with the advertising, promotion or marketing of PRODUCT.


2. APPOINTMENT


2.1 Pursuant to the license contained herein, ANHEUSER-BUSCH hereby authorizes AMBREW to produce and package, and AMBREW agrees to produce and package, PRODUCT at the Approved Brewery in accordance with the Formula, subject to the terms of this Agreement. PRODUCT produced and packaged by AMBREW under this Agreement shall be sold only to ANHEUSER-BUSCH and its authorized agents.


2.2 ANHEUSER-BUSCH shall provide the technical advisory services reasonably required by AMBREW in order to allow AMBREW to produce PRODUCT in accordance with the Formula.


2.3 During the term of this Agreement, AMBREW and its affiliates agree that they will not contract brew or package other malt beverages for brewers that brew in excess of 1,000,000 barrels of malt beverages per year, as determined by the Beer Institute or other reputable industry analyst designated by ANHEUSER-BUSCH.


3. APPROVAL OF BREWERIES.


The Approved Brewery must meet ANHEUSER-BUSCH's requirements, in its sole discretion, and be approved by ANHEUSER-BUSCH in writing no later than May 15, 1997.


4. PURCHASE OF BREWING MATERIALS


4.1 In order to assure the highest quality of PRODUCT, AMBREW acknowledges that it is essential to use brewing materials and only ingredients meeting the specifications set forth in the Formula. AMBREW shall purchase from ANHEUSER-BUSCH, or other suppliers who are approved in writing by ANHEUSER-BUSCH, the yeast, malt, hopping materials, silica xerogel, tannin, diatomaceous earth and all other brewing and finished materials required to produce PRODUCT; provided, however, that ANHEUSER-BUSCH shall not unreasonably withhold its approval of any supplier proposed by AMBREW if such supplier is capable of supplying such brewing materials and ingredients (other than yeast) in accordance with the specifications set forth in the Formula or otherwise specified by ANHEUSER-BUSCH, and on terms which are more favorable than those offered by ANHEUSER-BUSCH. If AMBREW purchases yeast from ANHEUSER-BUSCH, AMBREW shall promptly return all empty yeast kegs to ANHEUSER-BUSCH, at AMBREW's expense, in a clean and sanitary condition. ANHEUSER-BUSCH shall have the option, at any time, of supplying any or all of the brewing materials, at ANHEUSER-BUSCH's cost, necessary to produce PRODUCT, and upon such action the Price shall decrease as more fully set forth in Section 8 hereof. 4


4.2 AMBREW shall not (i) authorize or permit any third party to use any brewing materials or ingredients obtained from ANHEUSER-BUSCH or (ii) sell, transfer or convey any brewing materials or ingredients obtained from ANHEUSER-BUSCH to any third party.


4.3 If AMBREW purchases brewing materials from ANHEUSER-BUSCH, AMBREW shall take title of such materials in the United States and shall be responsible for importing such materials into Mexico at its sole cost and expense.


5. PAYMENT OF COSTS: ADDITIONAL CAPACITY


5.1 AMBREW shall be responsible for the payment of the purchase price, installation costs and any taxes associated with the acquisition of any additional equipment or the upgrade of any existing equipment required by AMBREW to produce PRODUCT in accordance with the Formula.


5.2 Upon a request by ANHEUSER-BUSCH for AMBREW to provide additional capacity to produce PRODUCT at the Approved Brewery or for the designation of an additional Approved Brewery, AMBREW will cooperate with ANHEUSER-BUSCH. AMBREW will complete any modifications as soon as practicable in order to allow for availability of the additional capacity when required by ANHEUSER-BUSCH. AMBREW specifically agrees that (i) upon thirty (30) days advance written notice by ANHEUSERBUSCH to AMBREW, AMBREW shall add a third shift to the Approved Brewery to increase capacity of the Approved Brewery to 200,000 cases; and (ii) upon six (6) months advance written notice from a duly authorized officer of ANHEUSER-BUSCH, AMBREW shall increase the overall capacity of the Approved Brewery up to 300,000 or 400,000 cases per year to meet ANHEUSER-BUSCH's demands, as ANHEUSER-BUSCH directs. In the event ANHEUSER-BUSCH requests a capacity increase pursuant to Section 5.2(ii) and such capacity increase is undertaken by AMBREW for the sole benefit of ANHEUSER-BUSCH, ANHEUSER-BUSCH agrees that one-half of the cost of such expansion, not to exceed $200,000 for an increase to 300,000 cases per year or $400,000 for an increase to 400,000 cases per year, shall be attributed (i.e., no cash outlay) to ANHEUSER-BUSCH and shall be amortized by $1.00 per case for each case purchased by ANHEUSER-BUSCH from AMBREW after completion of such capacity increase. If this Agreement is terminated before reduction of such attribution to $0, ANHEUSER-BUSCH shall pay to AMBREW such remaining unamortized attribution amount in immediately available funds.


6. PRODUCTION AND PACKAGING: QUALITY CONTROL.


AMBREW agrees to produce and package PRODUCT exclusively for sale to ANHEUSER-BUSCH and/or its authorized agents, and ANHEUSER-BUSCH agrees to purchase PRODUCT from AMBREW, on the following terms:


6.1 Until and unless otherwise determined by ANHEUSER-BUSCH, and subject to the limitations set forth in Section 7.4, AMBREW will sell to ANHEUSERBUSCH such 5 quantities of PRODUCT in such packages as ANHEUSER-BUSCH may order from time to time. AMBREW represents and warrants to ANHEUSER-BUSCH that it shall have a minimum annual production capacity available for PRODUCT of 30,000 cases (twenty-four (24) twelve (12) ounce bottles) of beer at all times hereunder and a minimum daily output of 520 cases. Further, AMBREW will use its best efforts to have available at all times sufficient production capacity at its Approved Breweries to satisfy ANHEUSER-BUSCH's requests.


6.2 All PRODUCT shall be brewed and packaged by AMBREW in accordance with all applicable laws and regulations of the United States of America and Mexico. Likewise, all bottles, cans, kegs and other packages of the PRODUCT supplied by AMBREW hereunder shall be labeled in accordance with all applicable laws and regulations and in accordance with specifications furnished by ANHEUSER-BUSCH to AMBREW from time to time; provided, however, that ANHEUSER-BUSCH shall be responsible for such labeling with respect to items supplied by it to AMBREW. The label on each individual bottle or can of PRODUCT shall also bear a statement to the effect that it is "brewed and packaged by Cerveceria Rio Bravo S.A. de C.V. in Tecate, Mexico and imported by Anheuser-Busch, Inc." or such other notice as may reasonably be required by ANHEUSER-BUSCH.


6.3 AMBREW shall monitor PRODUCT code dates and destroy, in accordance with the policies of ANHEUSER-BUSCH from time to time, all PRODUCT in its brewery warehouses which exceed the following age limits (measured from date of packaging):


Bottles/Cans - 30 days
Kegs - 7 days


If the overaged PRODUCT is present at AMBREW's brewery warehouses due to ANHEUSER-BUSCH's failure to comply with the forecast and ordering procedures set forth in this Agreement, then the cost of destruction shall be borne by ANHEUSERBUSCH. If the overaged PRODUCT is present at AMBREW's brewery warehouses due to any other reason, then AMBREW shall bear the cost of such destruction and shall reimburse ANHEUSER-BUSCH for ANHEUSER-BUSCH's out-of-pocket costs related to such destruction, including but not limited to packaging and brewing materials supplied to AMBREW for such destroyed product.


6.4 AMBREW shall purchase from ANHEUSER-BUSCH, or other suppliers who are approved in writing by ANHEUSER-BUSCH, all primary and secondary packaging materials, necessary for the packaging of PRODUCT hereunder, including but not limited to all bottles, crowns, labels (if any), cartons, carriers and boxes. ANHEUSERBUSCH shall promptly reimburse AMBREW for such costs in addition to the Price; provided, however, that AMBREW shall be responsible, and ANHEUSER-BUSCH shall have no obligation to reimburse AMBREW, for any import duties, VAT or import fees related to such items.


6.5 AMBREW shall deliver to ANHEUSER-BUSCH the initial order of PRODUCT no later than June 16, 1997. AMBREW hereby grants to ANHEUSERBUSCH 6 access to the Approved Brewery and its other facilities by any of ANHEUSERBUSCH's employees or representatives to assist AMBREW in meeting such deadline, including, but not limited to, any brewing, engineering, environmental, legal or other personnel.


6.6. PRODUCT shall be free from microbiological contamination or defects in aroma, flavor or appearance. AMBREW shall ensure that PRODUCT is produced and packaged at all times in accordance with the Formula, which may be varied from time to time by ANHEUSER-BUSCH; and ANHEUSER-BUSCH shall provide, at ANHEUSERBUSCH's expense, all reasonable technical assistance to enable AMBREW to comply with any change in the Formula. ANHEUSER-BUSCH shall provide AMBREW with any relevant know-how not contained in the Formula and, from time to time, any improvements or amendments to either the Formula or such know-how.


6.7. ANHEUSER-BUSCH shall have the right, during normal business hours, upon reasonable notice and at its expense, to verify AMBREW's compliance with the Formula by (a) inspecting the Approved Brewery and all facilities and equipment used by AMBREW to brew, package and store PRODUCT, as well as any ingredients, processing aids, materials, supplies and containers used in brewing or packaging PRODUCT; (b) tasting samples of PRODUCT at the Approved Brewery; and (c) obtaining samples of the ingredients used in making PRODUCT. Such inspection may include a complete review of the entire brewing and packaging process for PRODUCT by one or more ANHEUSER-BUSCH brewmasters or members of its technical staff.


6.8. Samples of packaged PRODUCT, ingredients, processing aids and brewing water shall be provided (in accordance with the schedule set forth in the Formula) unless ANHEUSER-BUSCH detects a problem which requires more thorough sampling or unless ANHEUSER-BUSCH requests samples from one or more of the various stages of brewing in which case AMBREW shall furnish such samples as ANHEUSER-BUSCH may request. AMBREW shall also, at ANHEUSER-BUSCH's request, provide ANHEUSER-BUSCH with the results of tests and analyses of PRODUCT made by AMBREW, using normal packaged beer analyses as set forth in the Formula, as well as other analytical methods acceptable to ANHEUSER-BUSCH or as mutually agreed between the brewmasters of ANHEUSER-BUSCH and AMBREW. As appropriate, ANHEUSER-BUSCH shall furnish its comments and recommendations to AMBREW with respect to the samples and test results submitted by AMBREW as aforesaid. AMBREW agrees to abide by ANHEUSER-BUSCH's determination in such matters and to implement, at AMBREW's expense whatever corrective action ANHEUSER-BUSCH may require under the circumstances in order to produce PRODUCT having a taste which is satisfactory to ANHEUSER-BUSCH.


6.9. If ANHEUSER-BUSCH determines that the taste of PRODUCT is unsatisfactory, it shall so notify AMBREW in writing and the parties shall immediately work together in good faith in attempting to resolve such taste problem. The first step shall be a meeting at the Approved Brewery or other facility where the problem exists, which shall be held as soon as practicable, but in any event within two calendar days after the date of such notice. Depending on the severity of the problem, ANHEUSERBUSCH may require AMBREW to (i) suspend brewing, packaging and shipment of PRODUCT until the problem 7 is resolved to ANHEUSER-BUSCH's satisfaction, and (ii) recover from wholesalers and retailers previous shipments of unsatisfactory PRODUCT, which AMBREW shall then destroy or use in another mutually agreeable manner.


6.10. ANHEUSER-BUSCH shall provide AMBREW with full technical and analytical support to assist AMBREW in identifying the problem and determining the correct procedures for resolving the same. Until the problem is resolved, AMBREW shall undertake sampling as requested by ANHEUSER-BUSCH, and only beer which ANHEUSER-BUSCH has approved shall be packaged and sold as PRODUCT pursuant to this Agreement. ANHEUSER-BUSCH and AMBREW shall continue to cooperate in good faith to resolve the problem and shall take such action as they shall agree is reasonably necessary in connection therewith.


6.11. ANHEUSER-BUSCH's determinations and conclusions in the foregoing matters shall be final and shall not be subject to arbitration or judicial review.


7. PROCEDURES RELATING TO FORECASTING AND ORDERING


7.1 Annual Volume Projection. ANHEUSER-BUSCH shall supply AMBREW, on or before October 31 of each year, with a non-binding schedule of ANHEUSER-BUSCH's projected monthly purchases by package for the following calendar year (the "Annual Volume Projection").


7.2 Monthly Forecasts. On or before the 15th day of each month, ANHEUSERBUSCH will provide to AMBREW a non-binding, month-by-month forecast of ANHEUSER-BUSCH 's total requirements for production by AMBREW hereunder for the three-month period commencing in the next month following the month in which such forecast is given.


7.3 Inventory Information. AMBREW shall monitor inventory levels of PRODUCT as well as packaging and brewing materials and will advise ANHEUSERBUSCH weekly as to the levels of AMBREW's inventory of packaging and brewing materials required for the production of the PRODUCT, and of any anticipated shortages in the supply of any such materials.


7.4 Ordering Procedures. Subject to the other provisions of this Agreement, all purchases by ANHEUSER-BUSCH hereunder shall be on an order-to-order basis. Upon receipt by AMBREW of an order for PRODUCT which complies with the foregoing requirements, each order shall represent a firm commitment by ANHEUSER-BUSCH to purchase and a firm commitment by AMBREW to sell and deliver the quantity and package mix of the PRODUCT so ordered, subject to the following:


(i) ANHEUSER-BUSCH shall place firm orders, specifying the
quantity of each package, not later than 35 days prior to the
scheduled date of packaging and delivery, and shall be
obligated to take delivery of the products promptly upon
completion of packaging, which shall be no later than such 35
days. 8
(ii) AMBREW shall use its good faith efforts to accommodat ...