EXHIBIT 10.2
CONTRACT BREWING AGREEMENT
BY AND BETWEEN
MOJO HIGHWAY BREWING
COMPANY, LLC
AND
XXXXXXXXX BREWING CO.
DATED: June 19, 1998
TABLE OF CONTENTS
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Section Page
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PREAMBLE ............................................................ 1
1. SCOPE OF AGREEMENT. ............................................. 1
2. PRICE AND MANNER OF PAYMENT. .................................... 4
3. BREWING INGREDIENTS, PACKAGING MATERIALS AND BREWING SUPPLIES. .. 6
4. TERM. ........................................................... 7
5. MINIMUM ORDERS. ................................................. 8
6. RISK OF LOSS. ................................................... 9
7. BREWERY OF RECORD. .............................................. 9
8. FORCE MAJEURE. .................................................. 9
9. CHANGE PARTS AND BREWERY MODIFICATIONS. ......................... 10
10. TERMINATION. .................................................... 11
11. AGENCY AND INDEMNIFICATION. ..................................... 12
12. PRODUCT LIABILITY. .............................................. 12
13. RECIPE AND QUALITY. ............................................. 13
14. TRADEMARKS. ..................................................... 14
15. TEST BREWING. ................................................... 14
16. COMPETING PRODUCTS. ............................................. 14
17. RIGHTS OF OFFSET. ............................................... 15
18. NOTICES. ........................................................ 15
19. SUCCESSORS AND ASSIGNS. ......................................... 16
20. GOVERNING LAW. .................................................. 16
21. DISPUTE RESOLUTION. ............................................. 16
22. EXECUTION IN COUNTERPARTS. ...................................... 17
23. AMENDMENTS. ..................................................... 17
24. NO THIRD PARTY BENEFICIARIES. ................................... 17
25. MERGER; SEPARABILITY. ........................................... 17
SIGNATURES .......................................................... 18
(iii)
CONTRACT BREWING AGREEMENT
BETWEEN
XXXXXXXXX BREWING CO.
AND
MOJO HIGHWAY BREWING COMPANY, LLC
THIS CONTRACT BREWING AGREEMENT is dated as of the day of ,
1988 (the "Effective Date") by and between FREDERICK BREWING CO., a Maryland
corporation ("FBC") and MOJO HIGHWAY BREWING COMPANY, LLC, a Maryland limited
liability company ("MOJO"). FBC and MOJO are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."
WHEREAS, MOJO is a recently formed Maryland limited liability company
having as its members FBC and C&L Brewing Company, Inc., a Maryland corporation;
WHEREAS, FBC and MOJO desire to enter into this Contract Brewing Agreement
to set forth the terms and conditions pursuant to which FBC will brew all MOJO
products produced for distribution in the North American Continent;
WHEREAS, the Parties believe that this Contract Brewing Agreement is in
their best interests;
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 Contract Brewing Agreement and any
extension thereof (even if there is no written contract in existence during any
such extension), MOJO hereby grants to FBC, and FBC hereby accepts from MOJO,
the exclusive right to brew, produce, package and supply to MOJO all Products
(as defined in Section 1(c), below) of MOJO produced for distribution in the
North American Continent (which shall include, but not be limited to, the United
States, Mexico, the islands in the Atlantic and Caribbean oceans and all of
Canada).
(b) During the term of this Contract Brewing Agreement as set
forth in Paragraph 4 hereof and in accordance with the terms set forth herein,
FBC agrees to brew, package and sell the Products (defined in Section 1(c)
below) to MOJO, and MOJO agrees to purchase the Products from FBC. MOJO and FBC
acknowledge that they both wish to develop a mutually beneficial, long term
relationship under this Contract Brewing Agreement. In order to facilitate a
long term relationship, the Parties acknowledge that modifications, changes and
other capital improvements to FBC's plant and equipment may be required to allow
FBC to efficiently produce Products for MOJO while also producing its own
products. However, the exact nature of any such modifications, changes or
capital improvements will depend on the competitive conditions, product mix and
volume, brewing and packaging capacity, and other circumstances that develop or
exist at various times
Contract Brewing Agreement
Page 3
during the term of this Contract Brewing Agreement which cannot be completely
determined at this time. In light of such uncertainty, and to allow FBC to
adequately meet the production requirements of MOJO for the Products and for
FBC's own products, the Parties agree that they shall: (i) meet on a regular
basis during the term of this Contract Brewing Agreement to discuss anticipated
needs; and (ii) establish for each year during the term of this Contract Brewing
Agreement a mutually agreeable capital investment plan. The Parties agree to act
in good faith and to use their best efforts to resolve differences arising
during the course of such discussions in a mutually agreeable manner. The
Parties acknowledge that future needs may require one or both of the Parties to
make capital investments in FBC's plant and equipment and that in the event of
any such investment is contemplated by MOJO, the Parties will negotiate in good
faith and use their best efforts to agree upon any amendments to this Contract
Brewing Agreement that may be required to facilitate the long term relationship
contemplated by the Parties.
(c) For purposes of this Contract Brewing Agreement, "Product"
shall mean: (i) alcoholic malt beverages, including but not limited to, beers,
ales, malt liquor, barley wine, cider or any other alcoholic product produced
from grain, fruit or vegetable matter, with or without the introduction of yeast
and/or hops, packaged in cases of 4 by 6 or 24 loose twelve 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 Product,
or (ii) any other beverage product which the Parties mutually agree in writing
shall be included in the definition of Product.
(d) It is the intention of the Parties that FBC shall brew,
package and sell to MOJO other MOJO products upon terms mutually agreed to in
writing by FBC and MOJO. For purposes of this Contract Brewing Agreement,
"Other Products" shall mean any MOJO product other than the Product, whether
currently offered or developed in the future, (including, but not limited to,
soft drinks) which the Parties mutually agree to add to this Contract Brewing
Agreement during any calendar year in accordance with the following procedure.
By November 15 in each calendar year, MOJO shall provide FBC with an annual
forecast for the following calendar year, showing MOJO's monthly projections by
package for the Product and any Other Products. At least 90% of the projected
volume in each calendar year shall be the Product. In the event that the annual
forecast includes any proposed Other Products, MOJO will furnish FBC with the
brewing formula or recipe and procedures and product specifications for the
proposed Other Products. FBC shall: (i) review the specifications and brewing
formula or recipe for any proposed Other Products; (ii) propose a Unit Price for
each of the proposed Other Products; and (iii) propose to MOJO the minimum order
size, tank usage and other production and capacity parameters. MOJO may accept
or reject FBC's proposal with respect to each of the proposed Other Products. If
MOJO accepts the FBC proposal for a proposed Other Product, such Other Product
shall be deemed to be added to this Contract Brewing Agreement only for the
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Page 4
calendar year covered by the annual forecast. If in any annual forecast, MOJO
proposes an Other Product that was produced by FBC 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 FBC's own products is
substantially the same; then FBC shall not unreasonably refuse to produce such
Other Product and the Unit Price proposed by FBC for such Other Product shall
be the Unit Price paid by MOJO for such Other Product in the most recent prior
year, increased by the annual adjustment factor for the Product set forth in
Subparagraph 2(b) hereof.
(e) The Unit Price proposed by FBC for any Other Products, and for
the Product in any package size or type other than those identified in Section
1(c) hereof, shall be based on the expected incremental cost differences, when
compared with FBC's Xxxxx Xxxxx, associated with the brewing and/or packaging
formulations and processes required in the production of such Other Products or
package. If FBC determines during the trial brews or initial production of any
Other Product that the brewing formula, procedures or product specifications
furnished by MOJO are materially inaccurate, then FBC shall notify MOJO in
writing and FBC 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 Unit
Price for such Other Product.
(f) For purposes of this Contract Brewing Agreement, the term
"barrel" shall mean 31 U.S. gallons (3,748 ounces). The following calculation
shall be used to measure barrels of the Product and other 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 subsections of this
Section 2, MOJO shall pay FBC for the Product and/or Other Products an amount
(the "Unit Price") equal to: (i) based on MOJO's individual purchase orders, for
Product and the volume ordered as follows:
Price Per Price Per
Volume Ordered Case Unit Keg
-------------- ----------- ----------
100 Barrels $10.00 $40.00
200 Barrels 9.00 35.00
400 Barrels 8.50 30.00
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plus (ii) all state and local excise taxes attributable to the Product
and/or Other Products that are paid by FBC; plus (iii) the then-applicable
per-use fee charged by Micro-Star Keg Management, Inc., a deposit of $7.50 per
pallet, or such other amounts as the Parties mutually agree.
(b) The Unit Price quoted in Section 2(a) above for any Product and/or
Other Products packaged in a "Case" represents the price for a boxed unit of
twenty-four loose 12-ounce bottles or 4-6 packs of 12-ounce bottles (in each
instance, a "Case Unit"). The Unit Price for any Product and/or Other Product
packaged in a "Keg" shall represent the price for a one-half barrel (15.5 U.S.
gallons) keg (individually referred to as a "Keg" and collectively referred to
as "Kegs"). FBC may charge to MOJO, as an adjustment to the Unit Price, an
amount equal to 110% of any price increases in the net cost to FBC for Brewing
Ingredients, Brewing Supplies or Packaging Materials for any month (the "Base
Month") in which the net cost of such item to FBC exceeds the cost paid by FBC
for such item in the immediately prior month (the "Prior Month"), and FBC may
continue to charge such adjustment in each succeeding month (and may make
similar adjustments) until the net cost to FBC for such item in any month is
equal to or is lower than the net cost to FBC for such item was in the Prior
Month. For this purpose, "net cost to FBC" shall include purchase discounts, but
not discounts resulting from credit terms.
(c) Notwithstanding the above, the Unit Price that MOJO shall pay to FBC
shall, in no event, exceed the highest Unit Price paid by any other third party
brand owner whose products are produced by FBC for orders of similar volume. In
addition, Unit Price plus the costs of warehousing and shipping of the first two
100 barrel batches of MOJO Product shall be paid by FBC.
(d) Unit Prices are F.O.B. the carrier's trucks at FBC's docks (i.e., the
Unit Price includes the cost and risk of loading trucks at FBC's dock) and
include FBC's labor costs, overhead, profit and other costs incurred in the
brewing and packaging of the Product.
(e) On the date the Product and/or Other Products is shipped, FBC will
invoice MOJO for the Unit Price. The portion of the Unit Price attributed to
Brewing Ingredients purchased by FBC will be billed at FBC's standard cost when
the Product and/or Other Products is shipped (with monthly reconciliation to
reflect FBC's actual cost). FBC may periodically adjust its standard cost for
Brewing Ingredients to more accurately reflect its actual costs. FBC shall
notify MOJO 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 MOJO by telecopier and MOJO will pay each Friday by electronic funds
transfer all invoices that relate to shipments of the Product and/or Other
Products made by FBC during the previous week.
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3. BREWING INGREDIENTS, PACKAGING MATERIALS AND BREWING
SUPPLIES.
(a) For purposes of this Contract Brewing Agreement, "Brewing Ingredients"
shall be defined as all grain, malt, yeast and hops used to produce the Product.
Brewing Ingredients shall be purchased and supplied as follows:
(i) All grain and/or malt used in the brewing of the Product shall be
purchased by FBC directly from commercial grain and/or malt suppliers. FBC and
MOJO will use their best efforts to agree upon specifications for grain and/or
malt that will allow FBC to commingle storage of grain and/or malt used to
produce the Product with grain and/or malt used to produce FBC's own products.
If FBC and MOJO cannot agree upon standard grain and/or malt specifications, the
Unit Price shall be increased to reflect any additional cost incurred by FBC for
separate handling and storage of grain and/or malt used in the Product.
(ii) All hops used in the brewing of the Product shall be purchased by
FBC from usual and customary sources.
(b) For purposes of this Contract Brewing 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 Product. Packaging Materials shall be purchased and supplied as follows:
(i) Except for the first production runs of Packaging Materials
adequate for the production of up to the first 200 barrels (which shall be paid
by FBC as set forth in Section 2(c), above), bottles, crowns, labels, cases,
cartons, tap covers and the like shall be purchased by FBC from usual and
customary sources as needed to meet the Packaging Schedule for the Product.
(ii) Unless otherwise mutually agreed, Kegs and pallets in quantities
adequate for the volume of the Product and/or Other Products to be packaged
under this Contract Brewing Agreement shall be purchased by FBC from usual and
customary sources from time to time. All such Kegs and pallets shall be
returned and reused in accordance with FBC's standard policies for Keg and
pallet return and reuse. From time to time during the term of this Contract
Brewing Agreement, FBC shall purchase 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 Kegs and pallets used by
FBC in packaging and shipping its own products.
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(c) MOJO has the right, subject to the approval of FBC, 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 FBC's existing equipment, FBC shall produce the
Product using the new Packaging Materials upon mutual agreement by FBC and MOJO
to any adjustment to the Unit Price required to compensate FBC for any
difference in production cost compared to the cost to produce the Product in the
comparable bottle package. If the proposed new Packaging Material requires any
modifications or additions to FBC's existing equipment, then the obligations of
the parties with respect to such modifications or additions shall be governed by
Sections 1(b) and 9 of this Contract Brewing Agreement.
(d) For purpose of this Contract Brewing Agreement, "Brewing Supplies"
shall be defined as all Kettle additives, brewing liquor treatments and
chill-proofing and fining agents used to produce the Product. FBC shall purchase
all Brewing Supplies from usual and customary sources.
(e) MOJO shall have sole responsibility for the selection and approval
of all Brewing Ingredients, Packaging Materials and Brewing Supplies used to
produce the Products. MOJO 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 Contract Brewing Agreement for any
reason: (i) MOJO will purchase from FBC (w) all Kegs and pallets purchased by
FBC on behalf of MOJO pursuant to this Contract Brewing Agreement at their
documented cost to FBC, (x) all finished Product and/or Other Products at the
Unit Price, (y) all inventory of work in process of the Product and/or Other
Products at FBC's cost, and (z) all inventory of Brewing Ingredients, Packaging
Materials and Brewing Supplies purchased by FBC that are not reasonably useable
by FBC in its own products at FBC's cost; and (ii) FBC will make available for
pick up by MOJO at FBC's dock all finished Product and/or Other Products, all
Brewing Ingredients, Packaging Materials and Brewing Supplies referred to in
Section 3(e) hereof, and all Kegs, pallets and dust covers on hand at FBC that
were purchased by FBC on behalf of MOJO pursuant to this Contract Brewing
Agreement. In the event that sales of the Product are greater than 2,500 barrels
within 12 months after the shipment to MOJO's distributors, but such sales are
substantially less than forecasted by MOJO, resulting in abnormally excess
inventories of Packaging Materials purchased by FBC, MOJO will purchase such
excess from FBC at FBC's cost.
4. TERM.
The term of this Contract Brewing Agreement shall commence on the
Effective Date and, unless sooner terminated pursuant to Section 10 hereof, this
Contract Brewing
Contrct Brewing Agreement
Page 8
Agreement shall expire on December 31, 2008. However, this Agreement shall be
automatically renewed on January 1, 2009 and each subsequent January 1 (the
"Annual Renewal Date") thereafter for one (1) additional year unless a party
hereto shall, within sixty (60) days prior to such Annual Renewal Date, provide
notice to the other party that the other party is in breach of this Agreement
and that the notifying party will not renew the Agreement as a consequence
thereof on the Annual Renewal Date. The parties acknowledge that MOJO's
obligations pursuant to this Contract Brewing Agreement to make payments to FBC
and the Parties' respective rights and obligations under Sections 3(e), 9,
10(a), 11, 12, 14, 16(a), 16(c) and 17 shall survive the expiration or
termination of this Contract Brewing Agreement.
5. MINIMUM ORDERS.
(a) On a weekly basis, MOJO shall provide FBC with a twelve (12) week
Production Plan for the Product (the "Production Plan"). The Production Plan
shall be a rolling twelve week schedule setting forth brewing and packaging
requirement for the Product for each week during the twelve weeks covered
by the Production Plan. All brewing requirements for the Products during the
first two weeks of the Production Plan shall constitute firm orders by MOJO. All
brewing requirements for the Product during the twelve (12) weeks of the
Production Plan and all packaging requirements set forth in the Production Plan
shall be a forecast of MOJO's best estimate of brewing and packaging
requirements for the Product and shall be used by FBC for capacity planning
purposes. MOJO shall update the Production Plan each week by providing its best
estimate of brewing and packaging requirements for the next week and by revising
the schedule for brewing and packaging requirements in the remaining weeks of
the Production Plan. The minimum brew size that MOJO shall utilize in the
Production Plan shall be FBC's maximum brew based on FBC's current brewing
vessels, currently estimated to yield approximately 100 barrels of the Product
(a "Brew"). The minimum brewing requirement that MOJO may specify during any six
month period shall be two Brews. The maximum brewing requirement that MOJO may
specify shall not exceed 400 Barrels in any consecutive four (4) week period.
FBC shall have the right, in its sole discretion, to set the actual time and
date on which each Brew shall be brewed, provided that FBC shall use its best
efforts to (i) minimize the length of time that the Product remains in storage
prior to packaging, and (ii) meet the shipment dates specified on the Packaging
Schedule.
(b) MOJO shall place all orders for packaging and shipment of the
Product not less than 28 days in advance of the proposed shipping date (the
"Packaging Schedule"). The Packaging Schedule shall set forth the quantity of
the Product by package type and the week in which each order shall be shipped in
the following month. Packaging shall be scheduled in increments of 100, 200 and
400 barrels and shall specify the number of Kegs and Case limits.
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6. RISK OF LOSS.
MOJO shall have sole responsibility for selecting carriers and making
all arrangements for shipment of the Product to its customers. MOJO shall pay
for all costs associated with shipment of the Product from FBC's facility. FBC
and MOJO 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 FBC. However,
the carrier's driver shall have the right to inspect each shipment for damage
prior to leaving the loading dock and, accordingly, MOJO shall bear the risk of
loss on any shipment of Product, once the carrier's truck leaves FBC's loading
dock.
7. BREWERY OF RECORD.
(a) FBC shall provide all Product brewed hereunder under the name
of "The MOJO Highway Company, LLC" as the Brewery of Record. FBC shall secure
and maintain any permits, licenses, approvals and the like required by any
federal, state or local governmental agency on behalf of MOJO, and FBC shall pay
for any out-of-pocket costs, including, without limitation, legal expenses,
incurred in connection therewith.
(b) FBC and MOJO shall maintain an alternating proprietorship whereby
the Product is produced at FBC's facility under a Xxxxxx'x Notice for such
premises issued to MOJO. FBC shall maintain separate records for the Product
produced under the MOJO alternating proprietorship and shall file monthly
reports and federal excise tax returns in a timely manner on behalf of the MOJO
alternating proprietorship. FBC shall, to the extent reasonably possible, but
subject to and in compliance with all applicable federal, state or local laws,
rules and regulations, identify Frederick, Maryland, as the sole label source
for the Product. FBC shall pay for its out-of-pocket costs, including, without
limitation, legal expenses, incurred in connection with maintaining the MOJO
alternating proprietorship.
8. FORCE MAJEURE.
(a) FBC shall not be liable to MOJO in the event that FBC shall delay
in or fail to deliver Product and/or Other Products to MOJO hereunder for any
reason or cause beyond its control, including but not limited to a slowdown,
stoppage or reduction of FBC's production or delivery due to strikes, fire,
flood, labor stoppage or slowdown, inability to obtain materials or packages,
shortage of energy or water, acts of God, a limitation or restriction of its
production by action of any military or governmental authority, or any other
causes, outside of its control.
(b) In the event of any such slowdown, stoppage or reduction of FBC's
production or deliveries, FBC will allocate its remaining capacity pro-rata
between FBC's
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Page 10
own products, other products being brewed and produced under contract by FBC,
and the Product, provided that MOJO, upon the request of FBC, shall use
reasonable efforts to move production of the Product to other suppliers for the
duration of any such slowdown, stoppage or reduction so as to minimize the
amount of the Product that FBC is required to produce for MOJO during such a
slowdown, stoppage or reduction. The pro rata allocation of FBC's remaining
production capacity shall be based on the proportionate volume of FBC's own
products, products being brewed and produced for other third party brand owners
under contract with FBC, and the Product produced by FBC during the three month
period immediately preceding the month in which occurred the event which gave
rise to the slowdown, stoppage or reduction of FBC's production or delivery. In
allocating the proportionate share of its remaining capacity to be devoted to
the Product, FBC shall use its best efforts to accommodate the mix of Product
and Other Products specified by MOJO.
9. CHANGE PARTS AND BREWERY MODIFICATIONS.
(a) The Parties anticipate that production of Other Products or the use
of new Packaging Materials may require changes or modifications to FBC's brewing
equipment and facilities, or the installation of new equipment by FBC to
accommodate Other Products or new Packaging Materials. Subject to the
obligations of MOJO and FBC under Section 1(b) of this Contract Brewing
Agreement, FBC shall have no obligation to make any modifications to its
equipment or facilities to accommodate the production of the Product unless
agreed to by FBC in writing. If the change parts, modifications or new equipment
required to produce any Other Products or use any new Packaging Materials would,
in FBC's reasonable judgment, have a material adverse impact on FBC's
operations, including without limitation, space availability, plant capacity, or
cost of production, then FBC shall not be required to produce any such Other
Products or use any such new Packaging Materials. If FBC 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.
(b) MOJO will pay for all change parts, brewery modifications or new
equipment that are unique to producing the Product and/or Other Products at
FBC's facility, provided that FBC notifies MOJO in advance of making any such
expenditures. FBC shall own all change parts and brewery modifications paid for
by MOJO and MOJO shall not be entitled to such change parts or to remove any
such change parts and brewery modifications at the termination or expiration of
this Contract Brewing Agreement. The payment by MOJO for all change parts,
brewery modifications or new equipment shall be on an amortization schedule
mutually agreed upon by the Parties. If such agreed upon changes and
modifications are used in the production or packaging of FBC's products or other
products manufactured by FBC under contract at the termination or expiration of
this
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Page 11
Agreement, FBC shall compensate MOJO for the fair market value of the changes
and modifications, taking into account depreciation and wear and tear.
10. TERMINATION.
(a) Unless the reason for termination is governed by Sections 10(c) or
10(d) of this Contract Brewing Agreement, either Party may terminate this
Agreement for any other reason in accordance with the terms set forth in this
Section 10(a). If either Party wishes to terminate this Contract Brewing
Agreement, the Party wishing to terminate shall first notify the other Party in
writing explaining all of the reasons causing it to seek termination. The other
Party shall have ten (10) business days after receipt of the notice explaining
reasons to present to the Party that gave notice a written proposal setting
forth all of the proposed measures, concessions, amendments or other actions
which the Parties would undertake to alleviate the reasons cited in the
notice. The Parties shall then negotiate in good faith to reach mutual agreement
on the proposal. The Parties will not disclose to any third party that notice
has been given, that discussions are taking place or the content of any such
notice or discussions, except that either Party may issue any press release or
make any public disclosure which such Party determines to be required by law,
regulation or by the rules or regulations of any self-regulating securities
exchange. If, within twenty (20) business days after receipt of the notice
explaining reasons, the Parties have not mutually agreed in writing on all of
the measures, concessions, amendments and other actions to be undertaken to
alleviate the reasons cited by the Party that gave notice, then the Party that
gave notice may notify the other Party in writing that it is terminating this
Contract Brewing Agreement. A Party wishing to terminate this Contract Brewing
Agareement shall use good faith and exercise reasonable judgment in concluding
that it has reasons for terminating this Contract Brewing Agreement. Reasons
that may cause a party to terminate this Contract Brewing Agreement shall
include without limitation: a material default by any Party of any of its
obligations under this Contract Brewing Agreement; a material violation of the
laws and regulations governing the production, marketing or sale of alcoholic
beverages; the material violation by either Party of the terms of the MOJO
Operating Agreement of the limited liability company.
(b) Either Party may terminate this Contract Brewing 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 ten (10) business days after the filing of such petition; or (iii)
the other Party liquidates, dissolves or ceases to do business as a going
concern.
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(c) Upon termination pursuant to this Section 10, MOJO shall promptly
pay to FBC all unpaid invoices in full and all unpaid costs incurred by FBC
pursuant to this Contract Brewing Agreement in the brewing, packaging, shipping
and storage for the Product and/or Other Products. FBC will use all reasonable
efforts to minimize such costs upon termination and MOJO will have the right to
review documentation evidencing such costs. FBC also agrees, upon reasonable
assurance of payment, to complete the production of all work-in-process and,
upon payment of all sums due, to make all finished product, packaging materials
and unused ingredients available for shipping to MOJO.
11. AGENCY AND INDEMNIFICATION.
FBC and MOJO understand and agree that neither Party is, by virtue of
this Contract Brewing Agreement or anything contained herein, including FBC
affixing to any Product and/or registering the name of "The MOJO Highway Brewing
Company, LLC" or "MOJO Highway," constituted or appointed the agent of the other
Party for any purpose whatsoever, nor shall anything herein contained be deemed
or constructed as granting MOJO or FBC 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. MOJO shall indemnify and hold harmless FBC 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 MOJO; provided that Damages shall not include any loss,
liability, cost or expense incurred by FBC as a consequence of the exercise by
MOJO of any of its rights under this Contract Brewing Agreement.
12. PRODUCT LIABILITY.
(a) FBC and MOJO shall each maintain product liability insurance
coverage in the respective amount of not less than $1,000,000 per occurence and
$1,000,000 combined single limit, and in the amount of not less than $1,000,000
combined single limit in the aggregate relating to the Product produced by FBC
for MOJO hereunder.
(b) FBC shall indemnify and hold harmless MOJO 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 Product and/or Other Products by FBC, regardless of when
manufactured or packaged, except to the extent that (i) Product Liability
Damages were caused solely by improper storage, handling or alteration of the
Product and/or Other Products after delivery to MOJO, (ii) Product Liability
Damages are based on or result from a claim that the Product and/or Other
Product is inherently defective, (iii) Product Liability Damages were caused by
Brewing Ingredients, Packaging
Contract Brewing Agreement
Page 13
Materials (other than bottles) or Brewing Supplies specified or otherwise
approved by MOJO which have not been altered by FBC without MOJO's consent, or
(iv) Product Liability Damages relating to the health aspects of the consumption
of alcoholic beverages or to damage, injury or death as a result of the
ingestion of any Product and/or Other Products.
(c) MOJO shall indemnify and hold harmless FBC and all of its affiliates
from and against any and all Product Liability Damages to the extent arising out
of the causes excepted from FBC's duty to indemnify MOJO under clauses (i), (ii)
and (iii) of Section 12(b).
13. RECIPE AND QUALITY.
(a) FBC shall produce the Product and/or Other Products using the
ingredients and brewing formula and procedures specified in the Brewing Package
provided by MOJO to FBC within thirty (30) days after the execution of this
Contract Brewing Agreement. FBC shall produce any new Product or any Other
Products using the brewing formula and procedures specified in the Brewing
Package provided by MOJO to FBC for such Product and/or Other Products. MOJO
shall have the right to change ingredients and/or brewing formula and procedures
upon reasonable prior written notice to FBC, provided that the cost of any such
change shall be borne by MOJO and, provided further, that the specified
ingredients are readily available to FBC in the necessary time frame.
(b) FBC shall use its best efforts to meet the specifications for the
Product to be provided by MOJO in the Brewing Package. FBC shall use its best
efforts to meet the specifications for any new Product and/or any Other Products
which are furnished in writing by MOJO at the time the Parties agree to add a
new Product and/or Other Products to this Contract Brewing Agreement. MOJO has
the right to reject batches of the Product which it determines to taste
materially different from representative sample of the Product, such rejection
not to be arbitrary or unreasonable. Any rejected batches shall not be charged
to MOJO by FBC.
(c) The Product shall be brewed and packaged according to MOJO's
specifications, including the maintenance of standards and quality control
programs furnished to FBC in writing by MOJO. MOJO shall have ultimate
responsibility and authority over every detail of the production process for the
Product, with such responsibility and authority as to those parameters affecting
beer taste and quality to be the same as if MOJO were the owner of FBC's brewing
facility. MOJO shall have the right, at any time, to monitor and review the
practices and procedures of FBC in the production and packaging of the Product
and inspect FBC's brewing facility. If a decision made by MOJO in the exercise
of its authority under this Section 13(c) results in a rejection of two or more
Contract Brewing Agreement
Page 14
consecutive batches by MOJO, the Parties shall work together in good faith to
resolve all such problems. In addition, in the exercise of its authority under
this Section 13(c), MOJO shall not interfere with FBC's production process for
its own proprietary brands.
(d) Consistent with the provisions of Section 13(c), FBC and MOJO
will, in any and all public statements or comments, recognize that MOJO controls
the ingredients, recipe, brewing processes and procedures and quality parameters
for all Product and/or Other Products produced for MOJO by FBC, and that MOJO is
the xxxxxx of all such Product. Neither Party will make any public statement
inconsistent with the foregoing.
14. TRADEMARKS.
(a) FBC acknowledges that no trademark or trade name rights in
"MOJO", "MOJO Highway", "MOJO Highway Brewing Company" and any other trademarks,
trade names, service marks or logos owned or held under license by MOJO
(collectively, the "Trademarks") are granted by this Contract Brewing Agreement.
(b) MOJO hereby represents, warrants and covenants to FBC that it
has and will maintain its right to use the Trademarks and will indemnify and
hold harmless FBC from any alleged infringement by any Party against FBC
including, but not limited to, FBC's reasonable costs of legal expenses.
15. TEST BREWING.
Nothwithstanding anything to the contrary in this Contract Brewing
Agreement, MOJO may, at any time after notice to FBC, engage any other xxxxxx
for the purpose of conducting test production and distribution of the Product in
order to ensure the delivery of the Product following termination of this
Contract Brewing Agreement.
16. COMPETING PRODUCTS.
(a) FBC will not at any time use the brewing formula for the
Product and/or Other Products which MOJO has supplied to FBC to produce a malt
beverage product for itself (or any of its affiliates) or on behalf of any
unaffiliated person.
(b) For so long as this Contract Brewing Agreement remains in
effect, FBC shall not, without the prior written consent of MOJO, produce for or
on behalf of any person unaffiliated with FBC or MOJO a malt beverage product
for sale in the United States which is targeted to be marketed and sold
primarily to the African-American demographic segment of the population, nor
will FBC produce, market or sell brands to such segment in conjunction with any
other entity owned or controlled by African-Americans
Contract Brewing Agreement
Page 15
without the prior written consent of C&L Brewing Company, Inc., the controlling
member of MOJO. The foregoing restrictions shall not apply in any calendar year
after 2000 unless MOJO has purchased at least the volume of the Products set
forth in Section 10(a) hereof.
(c) MOJO acknowledges that FBC is currently in the business of
brewing craft and specialty malt beverage products for sale by FBC and by other
third party brand owners that are similar to and compete with the Product, and
MOJO agrees that nothing in this Contract Brewing Agreement shall prevent FBC
from continuing or expanding its craft and specialty brewing or contract brewing
business, provided that FBC shall not intentionally copy the brewing formula for
the Product and/or Other Products or use any yeast supplied to FBC by MOJO to
produce craft and specialty products for itself or any of its affiliates or any
other third party brand owners. All of the Product and/or Other Products
produced by FBC for purposes of this Contract Brewing Agreement, including all
work in process, shall be produced solely for the benefit of MOJO and used for
no other purpose.
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 or certified
mail, 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 MOJO: Xxx X. Xxxxxxx
Manager-Chief Executive Officer
MOJO Highway Brewing Company, LLC
00 Xxxx Xxxxxx, Xx. 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (212)
Telecopier: (000) 000-0000
Contract Brewing Agreement
Page 16
If to FBC: Xxxxx X. Xxxxxxx
Chief Executive Officer
Xxxxxxxxx Brewing Co.
0000 Xxxxxxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
With a copy to: Xxxxxxx X. Xxxxxxx
Elias, Marz, Xxxxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
00xx Xxxxx
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
19. SUCCESSORS AND ASSIGNS.
This Contract Brewing 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. No failure of a Party to consent to a
proposed assignment of this Contract Brewing 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 Contract Brewing Agreement. Assignment of
this Contract Brewing Agreement shall not relieve the assigning Party of its
financial obligations hereunder, including its indemnification obligations
hereunder.
20. GOVERNING LAW.
This Contract Brewing Agreement shall be interpreted and construed in
accordance with the laws of the State of Maryland.
21. DISPUTE RESOLUTION.
Any disagreement, dispute, controversy or claim with respect to the
validity of this Contract Brewing Agreement or arising out of or in relation to
the Contract Brewing Agreement, or breach hereof, shall be submitted to
arbitration in Baltimore, Maryland, in accordance with the articles of the
American Arbitration Association for Commercial Arbitration. The arbitrator(s)
shall have the right to assess costs including legal expenses,
CONTRACT BREWING AGREEMENT
PAGE 17
in favor of the prevailing Party. The decision of the arbitrator(s) shall be
final and binding on both Parties. Notwithstanding the foregoing, the Parties
may, prior to submitting a dispute to arbitration, have recourse to the courts
of the United States of America or the State of Maryland for the purpose of
obtaining a temporary restraining order or other preliminary injunctive relief.
22. EXECUTION IN COUNTERPARTS.
This Contract Brewing 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 Contract Brewing 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.
FBC and MOJO agree that this Contract Brewing 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 Contract Brewing
Agreement.
25. MERGER; SEPARABILITY.
This Contract Brewing Agreement terminates and supersedes all prior
formal or informal understandings between the Parties with respect to the
subject matter contained herein, including that letter of intent dated April 3,
1998. Should any provision or provisions of this Contract Brewing Agreement be
deemed ineffective or void for any reasons whatsoever, such provision or
provisions shall be deemed separable and shall not effect the validity of any
other provision.
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Page 18
IN WITNESS WHEREOF, the Parties hereto enter into this Contract Brewing
Agreement as of the date first above written.
Witness: /s/ Illegible MOJO HIGHWAY BREWING COMPANY, LLC
-------------
By: /s/ Xxx X. Xxxxxxx
-----------------------------
Xxx X. Xxxxxxx
Manager-Chief Executive Officer
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx, XX
Manager-Chief Operating Officer
Witness: /s/ Illegible XXXXXXXXX BREWING CO.
-------------
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Xxxxx X. Xxxxxxx, Chairman
and Chief Executive Officer
