Exhibit 10.56
ADDENDUM TO
PRODUCTION AGREEMENT
BETWEEN
MILLER BREWING COMPANY
AND
BOSTON BEER CORPORATION
THIS ADDENDUM, made as of the 31st day of August, 2006, supplements and
modifies the Amended and Restated Production Agreement (the "Agreement") dated
as of November 1, 1998 between Miller Brewing Company ("Miller"),
successor-in-interest to The Stroh Brewery Company, and Boston Beer Corporation
("Boston Beer"), successor-in-interest to Boston Beer Company Limited
Partnership, as amended and modified by letter agreement dated September 9,
2000.
WHEREAS, Boston Beer has been brewing and packaging Beer Products under the
Agreement as an alternating proprietor at the breweries owned and operated by
Miller;
WHEREAS, the requirements for operating as an alternating proprietor have
been modified pursuant to Industry Circular 2005-2 promulgated by the Alcohol
and Tobacco Trade and Tax Bureau of the U.S. Department of the Treasury (the
"TTB"), which, in turn, have required certain clarifications and/or changes to
be made in the administration of the relationship between the Parties in order
for Boston Beer to continue to operate at Miller's breweries as an alternating
proprietor; and
WHEREAS, this Addendum is intended only to affect those processes or
procedures as are necessary for Boston Beer to continue to brew and package its
Beer Products under an alternating proprietorship approved by the TTB at
Miller's breweries and is not intended to otherwise affect the existing
contractual relationship or the economic arrangement between the Parties;
NOW, THEREFORE, in consideration of the mutual agreements contained in this
Addendum, the parties, intending to be legally bound, hereby agree as follows:
1. It is the intention of the Parties that Miller will alternate
proprietorship of Miller's brewery located in Eden, North Carolina (the
"Eden Brewery") with Boston Beer so that Boston Beer will function as the
brewer when the Beer Products are brewed and packaged at the Eden Brewery.
Miller shall give Boston Beer access to the Eden Brewery and shall make
available to Boston Beer its production personnel to allow Boston Beer to
produce such volume of Boston Beer's proprietary Beer Products as has been
agreed to by the Parties in the Agreement. All Beer Products shall be
brewed and packaged according to Boston Beer's specifications, including
the maintenance of standards and quality control programs. Boston Beer
shall have ultimate responsibility and authority over every detail of the
production process for Beer Products at the Brewery, with such
responsibility and authority as to those
-1-
parameters affecting beer taste and quality to be the same as if Boston
Beer were the owner of the Brewery. Boston Beer shall monitor and review
the practices and procedures of Miller in the production and packaging of
Beer Products and periodically inspect the Brewery. Miller acknowledges
that Boston Beer shall be afforded unrestricted 24-hour access to the
portion of the facility where Boston Beer's records are separately
maintained and the warehouse area where Beer Products are stored, and shall
be afforded access to the Miller facility during the time(s) that Boston
Beer production requests are being processed. The Beer Products shall be
separated and identifiable from the beer products by Miller for itself or
other brewers at all stages, including prior to fermentation, during
fermentation, during cellar storage and as finished beer after production
and before removal from the Brewery.
2. Miller has dedicated and will continue to maintain a space in the Eden
Brewery where Boston Beer's records of operations and all other associated
records are kept separate and apart from corresponding Miller records,
pursuant to powers of attorney issued by Boston Beer to Miller employees.
3. The Price paid by Boston Beer to Miller for allowing Boston Beer access to
the Brewery and use of Miller's employees for the production of the Beer
Products at the Brewery, includes compensation for Miller's employees,
overhead, profit, and other costs, including lab tests, cleaning, brewing
and filtration processing aids, packaging glues, shrink wrap, packaging
process supplies and the like, incurred by Miller in the production of
packaged Beer Products suitable for shipment by truck.
(a) The Price does not include the cost of raw materials (such as
hops, malt and flavorings), ingredients and packaging materials
used in the production of the Beer Products, which costs shall be
borne directly by Boston Beer.
(b) Further, the Price excludes any federal and state excise taxes
(but specifically excluding any taxes in the nature of a tax on
income or profits), which shall be paid by Boston Beer.
4. Miller shall issue a Bill of Sale in substantially the same form as
attached hereto as Exhibit A for all raw materials, ingredients and other
recipe materials used in the brewing of the Beer Products, including but
not limited to hops, malt, and flavorings at the beginning of the
manufacturing process, at which time title to all such brewing materials
shall pass to and thereafter be the property solely and exclusively of
Boston Beer and shall be segregated and identified as such at the brewery.
The consideration for this sale and conveyance of the Production Materials
will be incorporated into the lump sum charge to Boston Beer for the
production of Beer Products at the Eden Brewery, which will be invoiced and
paid by Boston Beer when the production of the malt beverage is completed
pursuant to this Addendum and the underlying Production Agreement between
Miller and Boston Beer.
5. Boston Beer shall bear the risk of loss for the packaging materials, raw
materials, ingredients and other recipe materials used by Boston Beer in
producing the Beer
-2-
Products, Beer Products in process and finished goods, except where losses
arise as a result of gross negligence or willful misconduct of Miller.
6. It is understood that, consistent with the concept of an alternating
proprietorship, Boston Beer's request to produce its Beer Products should
not be referred to as "production orders" but, rather, "production
requests." Therefore, wherever the words "minimum order" appears in the
Agreement they shall be understood to mean "minimum production request."
7. The Parties shall cooperate in taking such other actions, including
modification of this Addendum, if so required by the TTB in order for
Boston Beer to maintain its alternating proprietorship at the Eden Brewery.
In the event Boston Beer is not able to maintain its alternating
proprietorship or directly due to the Addendum, experiences a material
adverse change in its costs to produce, package and ship its Beer Products
at the Eden Brewery or such other Miller brewery where Boston Beer produces
its Beer Products pursuant to the Agreement, Boston Beer may, in its sole
discretion, terminate this Addendum to the Agreement upon thirty (30) days
written notice to Miller.
8. In the event that Miller exercises its right to transfer the production of
the Beer Products to another brewery in accordance with the terms of the
Agreement, the terms and conditions of this Addendum shall apply to such
brewery.
9. Except for the changes enumerated above, all other terms and conditions of
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Miller and Boston Beer have executed this Addendum to
the Agreement as of the date first above written.
MILLER BREWING COMPANY
By: /s/ Michael T. Jones
------------------------------------
Michael R. Jones, Senior VP
General Counsel
BOSTON BEER CORPORATION
By: /s/ C. James Koch
------------------------------------
C. James Koch, Chairman
-3-
EXHIBIT A
BILL OF SALE
THIS BILL OF SALE is given this ___ day of _________, 20__, by MILLER
BREWING COMPANY ("Seller") to BOSTON BEER CORPORATION ("Purchaser").
Seller has bargained and sold and with this Bill of Sale conveys to
Purchaser the raw materials, ingredients and packaging materials to be used by
Purchaser in the brewing and packaging of a specified malt beverage product,
which raw materials and ingredients and other recipe materials are listed and
described on Schedule A attached to this Bill of Sale (the "Production
Materials"). The specific malt beverage product/brand for which title to these
Production Materials are hereby transferred is also identified on Exhibit A.
The consideration for this sale and conveyance of the Production Materials
is incorporated into a lump sum charge to Purchaser for the production of
specific malt beverage products at the brewing facility owned by Seller, which
will be paid by Purchaser to Seller when the production of the malt beverage is
completed pursuant to the Production Agreement between Seller and Purchaser (the
"Agreement"). Subject to the Agreement, the unconditional obligation of
Purchaser to pay to Seller the assigned costs of the Production Materials is
confirmed by Purchaser by the beginning of the manufacturing process to produce
the malt beverage product for which the Production Materials are purchased from
the Seller.
Seller has caused this Bill of Sale to be executed by its duly authorized
representative as of the day and year first above written.
MILLER BREWING COMPANY
By:
------------------------------------
Typed Name:
----------------------------
Title:
---------------------------------
1
SCHEDULE A
PRODUCTION MATERIALS
____________________
(product/brand)
Material Quantity Cost
-------- ---------------- -------------
1 - ________________________ ________________ ____________
2 - ________________________ ________________ ____________
3 - ________________________ ________________ ____________
4 - ________________________ ________________ ____________
5 - ________________________ ________________ ____________
6 - ________________________ ________________ ____________
7 - ________________________ ________________ ____________
8 - ________________________ ________________ ____________
9 - ________________________ ________________ ____________
10 - ________________________ ________________ ____________
Total Cost $____________
2