EXHIBIT 10.21
* denotes expurgated
information
January 14, 1997
THE STROH BREWERY COMPANY
100 River Place
Detroit, Michigan 48207
ATTENTION: Christopher T. Sortwell
Senior Vice President, Finance
Ladies and Gentlemen:
The Boston Beer Company, Inc., a Massachusetts corporation,
for itself and its affiliates ("Boston Beer") hereby confirms its
proposal with respect to long-term production arrangements
between Boston Beer and The Stroh Brewery Company ("Stroh"), to
become effective if Boston Beer elects to make an investment (the
"Investment") in Stroh's brewery located in Allentown,
Pennsylvania, known as the "Lehigh Valley Brewery". If it elects
to make the Investment, Boston Beer would invest up to *
(sometimes referred to as the "Project"). The Project entails
* in the brewing and packaging of beer products, a
preliminary schedule of which is attached hereto as Exhibit A
(the " * "). Boston Beer's proposal is as follows:
1. Existing Production Arrangements. Boston Beer and Stroh
are parties to certain existing arrangements, pursuant to which
beer products are produced by Boston Beer at the Lehigh Valley
Brewery under an alternating proprietorship, and at a brewery in
Portland, Oregon (the "Portland Brewery"), acquired by Stroh from
G. Heileman Brewing Company on or about July 1, 1996. Such
existing arrangements are currently intended to remain in effect
until * and are hereby ratified and confirmed by Boston
Beer and Stroh, except as hereinafter provided.
2. Investment: Modification of Existing Arrangements.
Boston Beer, in consideration for * , hereby agrees to
* in accordance with the Schedule of * Production
Requirements attached hereto as Exhibit B, and further agrees
that * .
THE STROH BREWERY COMPANY
January 14, 1997
Page 2
3. New Production Arrangements. Upon the execution of this
Letter of Intent, Boston Beer and Stroh shall enter into the
written contract (the "Production Agreement"), attached hereto as
Exhibit C, pursuant to which such beer products as are requested
from time-to-time by Boston Beer shall be produced by Boston Beer
at the * Brewery under an alternating proprietorship,
the * Brewery and the brewery * (the " *
Brewery"), subject to the conditions and limitations set forth in
the Production Agreement, for a term of up to * years,
commencing effective as of * .
4. Investment by Boston Beer. If Boston Beer elects to
* , it shall, in consideration of the Production Agreement,
invest up to * in the * Brewery, subject to
the following provisions of this Section 4:
(a) Boston Beer shall reimburse Stroh for *
of the * Brewery and the * ,
including installation costs, up to a total
reimbursement of * .
(b) Boston Beer shall be entitled to * .
(c) Stroh shall invoice Boston Beer monthly for
amounts expended by Stroh in the immediately
preceding month for approved Project expenditures.
Each invoice shall be accompanied by a Project
status report and copies of all relevant third
party invoices. Unless challenged in writing prior
thereto, all such invoices shall be payable within
30 days of receipt.
(d) Boston Beer shall have the right on reasonable
notice and during normal business hours to inspect
(i) the status of the Project and (ii) Stroh's
books and records relating to the Project. Such
inspection shall be at the expense of Boston Beer
and may be conducted by such experts and other
representatives of Boston Beer, as Boston Beer
shall select in its sole discretion.
(e) As provided in the Production Agreement, in the
event of a material default by Stroh in the
performance of its obligations to Boston Beer
thereunder,
THE STROH BREWERY COMPANY
January 14, 1997
Page 3
Boston Beer shall be entitled to * .
5. Possible * Investment. The Production
Agreement contains provisions with respect to Stroh's continuing
obligations to provide access to capacity * . In the
event that Boston Beer requests access to * capacity
beyond that called for by the Production Agreement at a time when
Stroh reasonably believes that meeting such request is not
possible, given Stroh's then capacity constraints, Stroh, if so
requested by Boston Beer, will promptly undertake an evaluation
of the cost and feasibility of expanding Stroh's *
production capacity for the benefit of Boston Beer and submit to
Boston Beer for consideration a written * shall be
subject to the terms and conditions then in effect under the
Production Agreement.
6. Access to Information: Conditions. Stroh shall give
Boston Beer access to such information concerning Stroh and the
* Brewery as Boston Beer may reasonably request to assist
Boston Beer in determining * . In addition, if Boston
Beer elects to make the * , its obligations to proceed
with the transactions outlined above are further subject to the
following conditions being met or waived by Boston Beer in its
discretion prior to * :
(a) Stroh shall have executed the Production
Agreement.
(b) Boston Beer shall have received all requisite
governmental and other third-party approvals, as
may be necessary for Boston Beer and Stroh to
enter into and perform the Production Agreement.
7. Exclusivity. From the date of this Letter of Intent
until the earlier of * or the termination of this
Letter of Intent, Stroh shall * , to the extent that
Stroh's obligations under any such agreement might materially
adversely affect Stroh's obligations to Boston Beer under this
Letter of Intent or under the Production Agreement.
8. Binding Intent. It is the intention of Boston Beer and
Stroh that this Letter of Intent shall be and be deemed to
constitute their respective legally binding and enforceable
obligations, with respect to the matters discussed herein. Any
other legally binding obligation with respect to the transactions
contemplated hereby shall arise only upon the execution and
delivery of the Production Agreement. All other obligations or
commitments to proceed with the
THE STROH BREWERY COMPANY
January 14, 1997
Page 4
transactions contemplated hereby shall be only those obligations
as are set forth in the Production Agreement.
9 No Publicity. Neither Boston Beer nor Stroh shall make
any public disclosure relating to the transactions contemplated
hereby or indicate that discussions are taking place between them
regarding * , without first notifying the other party of
the intended disclosure in writing.
10. No Brokers Each party represents and warrants to the
other that it has not made any agreement or taken any action
which might cause any broker or third-party to become entitled to
a finder's fee or brokerage commission as a result of the
transactions contemplated by this Letter of Intent.
11. Expiration of Letter of Intent. This Letter of Intent is
conditioned on your acceptance hereof not later than 5:00 P.M.
EST on Friday, January 17, 1997.
Very truly yours,
THE BOSTON BEER COMPANY, INC.
BY: C. JAMES KOCH, President
ACCEPTED:
THE STROH BREWERY COMPANY
BY: CHRISTOPHER T. SORTWELL, Senior Vice president
EXHIBIT A
TO THE LETTER AGREEMENT DATED JANUARY 14,1997
BETWEEN
THE BOSTON BEER COMPANY, INC.
AND
THE STROH BREWERY COMPANY
PRELIMINARY SCHEDULE OF *
*
EXHIBIT B
TO THE LETTER AGREEMENT DATED JANUARY 14,1997
BETWEEN
THE BOSTON BEER COMPANY, INC.
AND
THE STROH BREWERY COMPANY
*
EXHIBIT C
TO THE LETTER AGREEMENT DATED JANUARY 14,1997
BETWEEN
THE BOSTON BEER COMPANY, INC.
AND
THE STROH BREWERY COMPANY
PRODUCTION AGREEMENT