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EXHIBIT 10.47
[ * ] DENOTES EXPURGATED INFORMATION
PRODUCTION AGREEMENT
BETWEEN
SAMUEL ADAMS BREWERY COMPANY, LTD.
AND
BROWN-FORMAN DISTILLERY COMPANY
THIS
AGREEMENT ("Agreement"), effective as of the 11th day of April,
2005
(the "Effective Date"), by and between
Samuel Adams Brewery Company, Ltd., an
Ohio limited liability company with a
principal place of business at 1625
Central Parkway, Cincinnati, OH 45214
("SABC"), and Brown-Forman Distillery
Company, a division of Brown-Forman
Corporation, a Delaware corporation with a
principal place of business at 850 Dixie
Highway, Louisville, KY 40210
("Brown-Forman").
WHEREAS,
SABC has the capacity to provide fermented malt liquid for use
as
a base in the production of a clear malt
base;
WHEREAS,
Brown-Forman has a design for technology to "cleanse" such
liquid
to create a clear malt base; and
WHEREAS,
the parties wish to enter into an arrangement whereby SABC will
provide the fermented malt liquid for
processing using Brown-Forman's technology
to produce clear malt base for use by SABC
and for sale to Brown-Forman;
ACCORDINGLY, for and in consideration of the mutual agreements
contained
herein and for other good and valuable
consideration, the receipt and
sufficiency of which are hereby
acknowledged, the parties, intending to be
legally bound, hereby agree as follows:
1. SCOPE
OF AGREEMENT; COMMITTED CAPACITY.
(a) COMMITMENT. During the Term of this Agreement, upon the
purchase
and installation at the Brewery of the ISEP
and the fermentation and storage
tanks required to meet the Production
Capacity as set forth in Section 8 of this
Agreement, SABC will ferment and process
Product at the Brewery and will sell
and ship in bulk container trucks Base2 to
Brown-Forman; and Brown-Forman will
purchase Base2 from SABC, all in accordance
with and subject to the terms and
conditions set forth herein.
(b) DEFINITIONS. For purposes of the Agreement, the following
terms
shall have the respective meanings ascribed
to them:
"BARREL" means 31 U.S. gallons (3,968 ounces).
"BASE1" means fermented liquid malt beverage developed by SABC
designed
to be used with ISEP.
"BASE2" means clear malt beverage resulting from the processing
of
Base1
through ISEP.
"BREWERY" means SABC's brewery located in Cincinnati, Ohio.
"FERMENTING CAPACITY" means the number of tanks used for
fermenting
Base1
necessary to meet the Base2 production requirements of
Brown-Forman.
"FERMENTING INGREDIENTS" means all materials, ingredients and
processing
aids needed for the production of Base1.
[ * ] Indicates that information has been
omitted and filed separately with the
Securities and Exchange Commission pursuant
to a request for confidential
treatment.
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"INCREMENTAL EFFLUENT COSTS" means the cost to SABC of
processing
effluent
resulting from production of Base2 from Base 1.
"ISEP" means equipment that contains the malt beverage cleaning
technology
developed by Brown-Forman.
"ISEP MATERIALS" means all materials, ingredients, re-agents
and
processing
aids needed for the operation of ISEP and the production of
Base2.
"ISEP OPERATING COSTS" means all direct costs associated with
the
operation
and running of ISEP, including energy costs, direct operating
labor and
labor overhead, maintenance and repair costs, and regeneration
costs of
ISP re-agents.
"PRODUCT" means the Base2 produced for Brown-Forman.
"PRODUCTION CAPACITY" means the monthly functional output
capacity
of ISEP on
a 156 hour per week schedule.
"STORAGE CAPACITY" means the number of tanks used to receive
and
hold Base2
necessary to meet the Base2 production requirements of
Brown-Forman.
(c) COMMITTED CAPACITY. Upon the purchase and installation of
the
equipment in accordance with Section 8 of
this Agreement, SABC shall provide
Brown-Forman [ * ] of Production Capacity.
The Parties shall use their best
efforts to share the allocation of the
Production Capacity in order to meet the
seasonal demands of both parties.
(d) CHANGE IN LOCATION. SABC may, at its sole option, meet its
production obligations hereunder at another
brewery owned by SABC or by an
affiliate, except that Brown Forman's net
delivered cost from the new facility
shall be no higher than if the Base2 had
been supplied from the Brewery in
Cincinnati. SABC shall bear all costs of
movement of the equipment necessary to
produce Base2, including the ISEP, and
shall reimburse Brown-Forman for its
incremental shipping costs from the new
location, if any. SABC shall use
commercially reasonable efforts to ensure
that there is no material disruption
in production of Base2 as a result of such
change in location.
2. PRICE
AND MANNER OF PAYMENT.
(a) Except as otherwise provided in this Agreement,
Brown-Forman
shall purchase the Product from SABC for an
amount (the "Price") equal to [ * ]
per Barrel. In addition, Brown-Forman will
pay for [ * ] used for the production
of the volume of Base1 required to produce
the volume of Base2 ordered by
Brown-Forman. Further, Brown-Forman will
pay for [ * ], except that Brown-Forman
will not be responsible for costs
associated with production losses that are not
normal and customary for production of this
nature. [ * ] will be purchased by
SABC and billed to Brown-Forman [ * ].
(b) Prices are F.O.B. the carrier's trucks at the Brewery's
docks
(i.e., the Price includes the cost and risk
of loading trucks at SABC's dock).
(c) On the date the Product is shipped, SABC will invoice
Brown-Forman for the Price and all federal,
state and local excise taxes
attributable to the Product that are paid
by SABC. SABC will invoice
Brown-Forman for [ * ] incurred by SABC in
the production of the Product ordered
by Brown-Forman [ * ] when the Product is
shipped (with monthly reconciliation
to reflect SABC's actual cost). SABC may,
upon at least ten (10) days prior
written notice, adjust [ * ]. All invoices
will be sent to Brown-Forman
electronically and Brown-Forman will pay [
* ] by electronic funds transfer all
timely invoices that relate to shipments of
the Product made by SABC during the
previous week.
[ * ] Indicates that information has been
omitted and filed separately with the
Securities and Exchange Commission pursuant
to a request for confidential
treatment.
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(d) SABC may designate an affiliate organization to process
invoicing and receive such payments.
3.
TERM.
The
Initial Term of this Agreement shall commence on the Effective
Date
and, absent earlier termination pursuant to
Section 9 hereof, it shall expire on
[ * ]. [ * ] Notice of intent to not renew
this Agreement after the Initial Term
shall be provided as set forth in Section
9(c).
4. MINIMUM
ORDERS.
(a) ANNUAL FORECASTS. Upon the execution of this Agreement and on
or
before each October 1 thereafter during the
term of the Agreement, Brown-Forman
shall provide SABC with a forecast for its
aggregate volume requirements by
month for the following calendar year (the
"Annual Forecast"). The Annual
Forecast for calendar year 2005 is attached
as SCHEDULE 1 hereto. The Annual
Forecast may not, without the approval of
SABC, include any month where the
volume exceeds [ * ] of the Production
Capacity.
(b) PRODUCTION PLAN. On a weekly basis, Brown-Forman shall
provide
SABC with a 12-week Production Plan for the
Product (the "Production Plan"). The
Production Plan shall be a rolling 12-week
schedule setting forth requirements
for the Product for each week during the
twelve (12) weeks covered by the
Production Plan. All requirements for the
Product during the first six (6) weeks
of the Production Plan shall constitute
firm orders by Brown-Forman. All
requirements for the Product during the
remaining six weeks of the Production
Plan shall be a forecast of Brown-Forman's
best estimate of requirements for the
Product and shall be used by SABC for
capacity planning purposes. Brown-Forman
shall update the Production Plan each week
by providing its best estimate of
requirements for the twelfth week and by
revising the schedule for brewing and
packaging requirements in the seventh
through eleventh weeks of the Production
Plan The batch size that Brown-Forman shall
utilize in the Production Plan shall
be SABC's maximum batch based on the size
of the tanks in the Fermenting
Capacity and Storage Capacity. SABC will
have no obligation to accept a
Production Plan that exceeds [ * ] of the
Production Capacity nor that exceeds
the capacity of the Fermenting Capacity or
the Storage Capacity.
(c) SHIPPING SCHEDULE. Brown-Forman shall place all orders for
the
Product by the fifith business day of each
month (the "Shipping Schedule"). The
Shipping Schedule shall set forth the
quantity of the Product and the day and
week in which each order shall be shipped
in the following month. If the
Shipping Schedule is not sufficient to
allow the Storage Capacity or
Fermentation Capacity to be emptied in a
timely manner, SABC shall not be
required to produce the Production Forecast
for Brown-Forman, until sufficient
orders are placed and shipped and
Fermenting Capacity and Storage Capacity
become available. SABC will provide notice
to Brown Forman prior to the
cessation of production for this
reason.
(d) MINIMUM PURCHASE REQUIREMENT.
(i) [ * ].
(ii) [ * ].
5. RISK OF
LOSS.
Brown-Forman shall have sole responsibility for selecting
carriers
and making all arrangements for shipment of
the Product from the Brewery, except
that SABC shall be responsible for the
actual scheduling of the carriers on a
day-to-day basis. Brown-Forman shall be
responsible for any
[ * ] Indicates that information has been
omitted and filed separately with the
Securities and Exchange Commission pursuant
to a request for confidential
treatment.
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costs associated with its carrier failing
to meet SABC's pick-up time
guidelines. Brown-Forman shall pay for all
costs associated with shipment of the
Product from the Brewery. SABC and
Brown-Forman each 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 SABC.
However, the carrier's driver shall
have the right to inspect each shipment for
damage prior to leaving the loading
dock and, accordingly, Brown Forman shall
bear the risk of loss on any shipment
of Product once the carrier's truck leaves
the loading dock.
6. BREWERY
OF RECORD
(a) SABC shall provide all Product produced hereunder under
such
trade name(s) specified by Brown-Forman as
the Brewery of Record, provided that
Brown-Forman secure and maintain such
permits, licenses, approvals and the like
required by any federal, state or local
governmental agency with respect related
to such production. SABC shall work
cooperatively with Brown-Forman to secure
such permits and licenses, and Brown-Forman
shall reimburse SABC promptly for
any out-of-pocket costs, including, without
limitation, legal expenses, incurred
in connection therewith.
(b) SABC and Brown-Forman shall maintain an alternating
proprietorship whereby the Product is
produced at the Brewery under a Brewer's
Notice for such premises issued to
Brown-Forman. SABC shall maintain separate
records for the Product produced under the
Brown-Forman alternating
proprietorship and shall provide
Brown-Forman in a timely manner with such
information and documentation as may be
required by Brown-Forman so that it can
file monthly reports and federal excise tax
returns in a timely manner.
Brown-Forman will pay SABC its
out-of-pocket costs, including, without
limitation legal expenses, incurred in
connection with maintaining the
Brown-Forman alternating
proprietorship.
7. FORCE
MAJEURE.
(a) Neither party shall be liable for failure to perform any
obligation of this Agreement which may
arise as a result of any present or
future statute, law, ordinance, regulation,
order, judgment or decree, failure
to obtain required permits, licenses or
approvals, any weather related or
natural disaster, explosion, lockout,
boycott, strike, riot, war or similar
occurrence. Notwithstanding the foregoing,
Brown-Forman's obligation to make
payments to SABC for capital investments
made by SABC under Section 8 and
Section 9(a) below prior to a force majeure
event shall be unaffected by the
force majeure event and remain in full
force and effect.
(b) The party claiming to be so affected shall promptly give
notice
to the other party after it learns of the
occurrence of said event and any delay
or failure shall not be excused unless such
notice is given.
8. CAPITAL
INVESTMENTS, EXPANSIONS AND MODIFICATIONS.
(a) ISEP Investments. Within [ * ] after the Effective Date,
SABC
will initiate the purchase and installation
of the ISEP at the Brewery with a
rated Production Capacity of at least [ *
]. Brown-Forman shall reimburse SABC
for [ * ] of the such amount paid by SABC
for such purchase and installation,
plus interest at the annual rate of [ * ].
Brown-Forman shall pay SABC such
amount in [ * ] equal installments on or
before [ * ] of each of the first [ * ]
years of the Initial Term, except that the
first installment shall be due and
payable on the initial commissioning of
ISEP. Brown-Forman may prepay the amount
owed pursuant to this Section 8(a) without
penalty. [ * ].
(b) Fermentation and Storage Tanks. SABC shall purchase and
install
such fermentation and storage tanks,
process piping and related equipment that
shall be required to produce the Product to
be purchased by Brown-Forman as more
fully set forth on Schedule 3 attached
hereto
[ * ] Indicates that information has been
omitted and filed separately with the
Securities and Exchange Commission pursuant
to a request for confidential
treatment.
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(the
Fermentation Capacity and Storage Capacity). Brown-Forman shall
reimburse
SABC for [ * ] such amount paid by SABC for such purchase and
installation, plus interest at the annual rate of [ * ].
Brown-Forman
shall pay
SABC such amount in [ * ] equal installments on or before [ * ]
of each of
the first [ * ] years of the Initial Term, except that the
first
installment shall be due and payable on the initial commissioning
of
ISEP.
Brown-Forman may prepay the amount owed pursuant to this
Section
8(b)
without penalty. [ * ]. Such reimbursement for fermentation and
storage
tanks is to provide adequate capacity at the Brewery to meet
the
production
requirements to fulfill Brown-Forman orders, but does not give
Brown-Forman any ownership rights or control over the use of such
tanks.
(c) Brown-Forman shall reimburse SABC for any modifications it
must make
to the Brewery or its equipment necessary for the safe loading
of Base2
on to tanker trucks for shipment. Such payment shall be made
within
thirty (30) days of receipt of an invoice therefore from SABC.
Brown-Forman may prepay the amount owed pursuant to this Section
8(b)
without
penalty.
(d) SCHEDULE 2 attached hereto sets forth the anticipated
costs for
the equipment and brewery modifications described in
subsections
(a), (b)
and (c) above and is hereby incorporated herein by this
reference.
(e) Either party may, at its own expense, expand the
Production
Capacity of ISEP and, unless otherwise mutually agreed to, the
party
funding the expansion shall have the sole right to the
additional
Production
Capacity resulting from such additional investment during the
term of
this Agreement.
(f) The parties antici
