**Exhibit 10.4****PYRAMID BREWERIES DISTRIBUTION AGREEMENT****STATE OF WASHINGTON****CERTAIN DEFINITIONS****:**The following definitions of terms in quotation marks and the attached exhibits are part of thisAgreement.   “**PYRAMID**”: PYRAMID BREWERIES INC.  91 S. Royal Brougham Way  Seattle, Washington 98134  Phone: (206) 682-8322  Fax: (206) 682-8420   “**WHOLESALER**”: Alaska Distributors Co.  4201 6th Avenue S  Seattle WA 98108   “**COMMENCEMENT DATE**”: June 24, 2005   “**PRODUCTS**”: Each of the ales & lagers described in Exhibit A hereto,bearing trademarks of PYRAMID corresponding to theirbrands (the “Marks”).   “**TERRITORY**”: The area within the State of Washington (the “**State**”)described in Exhibit B hereto.**RECITALS**:A. The purpose of this Agreement is to set forth the rights and obligations of PYRAMID andWHOLESALER regarding the sale, purchase, distribution, resale, quality control andpromotion of the PRODUCTS in the TERRITORY.B. The PRODUCTS are high-quality non-pasteurized malt beverage products brewed in smallbatches. Consumer demand for PYRAMID’s PRODUCTS is driven by their high quality anddistinctive flavors. The success of PYRAMID and of WHOLESALER in the TERRITORY will dependon (a) fulfillment of the needs of beer retailers and beer consumers, (b) execution ofaggressive, sound and ethical marketing efforts to realize the existing and potentialmarket for PYRAMID’s PRODUCTS in the TERRITORY, (c) ensuring that draft PRODUCTS are servedto consumers in their peak condition and that all PRODUCTS are offered for sale toconsumers before their shelf life expiration and “enjoy by” dates, and (d) conscientiousregard for customer service and quality control in all operations.C. PYRAMID has entered into this Agreement in reliance on WHOLESALER’s representations andother information WHOLESALER has provided to PYRAMID regarding the abilities and capacitiesof WHOLESALER’s existing ownership and management to meet and perform the obligations of anexclusive distributor of PYRAMID’s PRODUCTS. This is an agreement for the sale of goodsbetween merchants and for personal services as specified herein.
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D. WHOLESALER has entered into this Agreement because of WHOLESALER’s knowledge ofPYRAMID’s reputation for brewing and promoting quality products and the benefits toWHOLESALER of the resulting substantial retailer and consumer acceptance of the Marks.E. WHOLESALER represents that (a) its management and sales personnel have the capabilityand resources to actively, aggressively, and ethically market and promote the sale ofPYRAMID’s PRODUCTS in the TERRITORY and to provide regular deliveries and the highestquality of service to all beer customers in the TERRITORY, (b) it maintains a businessorganization, personnel and equipment sufficient to enable WHOLESALER to function properlyas a distributor of PYRAMID’s PRODUCTS and to fully carry out this Agreement and makes noadditional investment or allocation of resources to enable it to carry out its duties underthis Agreement, (c) it has the resources, ability and organization to ensure that draftPRODUCTS are served to consumers in their peak condition and that all PRODUCTS will bedelivered in ample time to assure they are offered for sale to consumers well before their“enjoy by” dates, and (d) it is willing to fully carry out this Agreement and to conductWHOLESALER’s business in a manner that will reflect favorably upon WHOLESALER, PYRAMID, andPRODUCTS.F. No joint enterprise is created hereby. Adoption of marketing methods in the conduct ofits business is within the sole discretion of WHOLESALER. No marketing expense required bythis agreement would cause WHOLESALER’s total marketing expenditures of its businesssubstantially to increase. No requirements hereunder would cause WHOLESALER’s totalcapitalization devoted to inventory substantially to increase. WHOLESALER has not paid orpromised any party any consideration for rights granted hereunder. Rights and obligationscreated by this agreement are strictly limited to the express terms of this agreement,which shall not be construed to create any community of interest other than the generalinterest in the success of one another’s independent businesses that is inherent in allrecurring sales of goods for resale.**REPRESENTATIONS, TERMS & CONDITIONS**:**1.** **REPRESENTATIONS****:** 1.1. Each party hereto hereby expressly represents, warrants and stipulates, and each agreesfurther to stipulate upon request by the other, in all proceedings of whatever nature,including without limitation at law, at equity and before administrative agencies, that theRecitals and Representations by such party set forth herein are material, true, andcontrolling as to establishment of fact related thereto, including without limitationultimate facts.  1.2. WHOLESALER represents and warrants the truth of each of the following, knowing thatPYRAMID is relying on each of the following as a material inducement to enter into thisAgreement: 1.1.1. WHOLESALER has previously acquired, in order to distribute other brands it carries,all assets it needs to carry out this Agreement, and WHOLESALER will not acquire anyassets specifically to distribute the PRODUCTS.  1.1.2. All information submitted to PYRAMID by WHOLESALER, including all marketing plans,balance sheets and income statements, and the informationcontained in the credit application, is correct, not misleading, and contains nomaterial omissions.
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 1.1.3. WHOLESALER holds all permits and licenses, in full force and effect, necessary forWHOLESALER lawfully to distribute PYRAMID’s products in WHOLESALER’s TERRITORY.  1.1.4. WHOLESALER has not paid, caused to be paid, or agreed to pay any fee, other monetaryconsideration, or transfer of anything, tangible or intangible, of value to any personwhomsoever, or to or for the benefit of PYRAMID or any of its officers, directors,employees or representatives with respect to the this Agreement or to any rightconferred under this Agreement.**2.** **EXCLUSIVE TERRITORY****:** 2.1. During the term hereof, PYRAMID will not sell PRODUCTS to another wholesale distributorin the TERRITORY or to any other person or entity that, to PYRAMID’s knowledge, intends toresell the PRODUCTS to businesses located within the TERRITORY.  2.2. WHOLESALER will not sell or cause to be delivered any of the PRODUCTS directly orindirectly to any party located outside the TERRITORY or to any party in any location ithas reason to believe will sell any of the PRODUCTS outside the TERRITORY or any of thePRODUCTS in any location for resale.**3.** **PRODUCT AVAILABILITY, PRICE, DELIVERY & PAYMENT****:** 3.1. PYRAMID will endeavor to supply the needs of WHOLESALER for PRODUCTS to meet the demandtherefor in the TERRITORY, but reserves the right in its sole discretion to accept, reject,reduce, combine, or otherwise modify orders upon acceptance thereof and to allocate itsproducts among its customers to accommodate its production schedules and marketing plansand to deal with scarcity of supply.  3.2. PYRAMID’s applicable supplier price postings, as they may be modified from time totime, are hereby made part of this Agreement.  3.3. PYRAMID may, in the exercise of its business judgment, at any time discontinue any itemor items of PRODUCTS.  3.4. WHOLESALER shall submit all orders at least four weeks ahead of proposed shipment date.PYRAMID shall not be required to process any order not conforming to the foregoingundertaking, but may do so in its discretion, in which case delivery of goods within fourweeks of receipt of the order shall be timely, notwithstanding any provision in the order.Orders may be submitted directly to PYRAMID or to any marketing agent of PYRAMID of whoseauthority PYRAMID has advised WHOLESALER in writing and must be in such format and executedin such manner as PYRAMID may reasonably specify.  3.5. Goods sold by PYRAMID hereunder shall be delivered to WHOLESALER, and risk of loss ofthe goods shall pass to WHOLESALER, upon transfer of possession of the goods free on boardsuch carrier as may be specified by WHOLESALER at PYRAMID’s dock at the place of productionor at such other reasonable delivery point as PYRAMID may specify. All right of inspectionof the goods and of rejection of nonconforming goods shall be exercisable only at said timeand place, andWHOLESALER shall expressly authorize such carrier to confirm the conformity of the goods toorder. The goods upon such delivery shall be deemed part of the inventory of WHOLESALERhereunder for the purposes hereof other than part 4.7 hereof. PYRAMID will render reasonableassistance to WHOLESALER in arranging for 
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   shipment, but will not be responsible for anydelay caused by transportation difficulties, labor or material shortages, strikes, fires, orother cause beyond the control of PYRAMID. 3.6. WHOLESALER shall pay PYRAMID the amount due for goods sold and delivered hereunder nolater than fifteen (15) days from delivery (the “Payment Due Date”), without deduction,offset, set-off or credit unless specifically agreed to in writing by PYRAMID’s ChiefFinancial Officer before the Payment Due Date, on the terms set forth in the invoice ororder confirmation applicable to such shipment, time being of the essence of thisAgreement. PYRAMID will pay credits, rebates, and adjustments due WHOLESALER hereunder fromseparate invoice and with separate instrument, but will not unreasonably refuse toauthorize credits against amounts payable to PYRAMID for any sums that have been payable toWHOLESALER hereunder for more than sixty (60) days.  3.7. PYRAMID may at any time reserve a security interest in any goods sold hereunder tosecure payment in accordance with the terms hereof, and WHOLESALER agrees to execute uponrequest any and all documents which may be necessary or convenient to create, file,perfect, or execute upon such interest. WHOLESALER shall not cause or suffer creation ofany other security interest in any of WHOLESALER’s inventory of the Products without theprior written permission of PYRAMID, whether voluntarily or, if not permanently removedwithin fifteen (15) days of its attachment, involuntarily created.  3.8. PYRAMID may from time to time, in accordance with a credit policy of generalapplication and taking into account the financial condition and payment history ofWHOLESALER, require different terms of payment. Without limiting the generality of theforegoing, if Distributor fails to make any payment when due, PYRAMID may, upon writtennotice to WHOLESALER, and until WHOLESALER’s account balance is paid in full and PYRAMIDhas removed all credit holds in accordance with its regular procedures: 3.8.1. require payment in full for future or pending orders to be made by wire transfer orsuch other means as PYRAMID may specify upon shipment, in which case the “Payment DueDate” will be the date the PRODUCTS are delivered to the carrier for shipment, or  3.8.2. require payment in full for future or pending orders to be made through AutomatedClearing House, in which case WHOLESALER shall pay all outstanding invoices withinfifteen (15) days from the date Pyramid delivers the PRODUCTS to the carrier forshipment, or  3.8.3. require payment in full for each future or pending order to be tendered with order. 3.9. In addition to any other course of action authorized hereunder, if WHOLESALER fails tomake any payment when due, PYRAMID may give WHOLESALER written notice of the delinquency,itemizing each invoice that is unpaid, in which case WHOLESALER shall within five (5)business days after receipt of notice: 3.9.1. provide PYRAMID with written evidence satisfactory to PYRAMID that WHOLESALER is notinsolvent within the meaning of 11 U.S.C. § 101, or  3.9.2. pay in full the entire delinquency itemized in the notice.
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**4.** **SALES, SERVICE AND PROMOTION DUTIES****:**WHOLESALER shall: 4.1. At all times during the term hereof, maintain the financial and competitive capabilitynecessary to achieve efficient and effective distribution of all PRODUCTS.  4.2. Maintain the quality and package integrity of PRODUCTS in the manner set forth byPYRAMID pursuant to this Agreement.  4.3. Exert its best efforts to sell PRODUCTS.  4.4. Merchandise PRODUCTS in the stores of its retail customers as set forth in thisAgreement.  4.5. Keep current, valid and in full force and effect all licenses, permits, bonds, andevidence of payment of taxes required lawfully to conduct the business of dealing inPRODUCTS.  4.6. Promote the sale of each of the PRODUCTS to all retail businesses licensed under thealcohol beverage laws applicable in the TERRITORY in an aggressive, effective, diligent,and ethical manner to the best of WHOLESALER’s ability, doing all things necessary to meetor exceed the performance standards applicable hereunder to WHOLESALER’s performance (the“Goals”), WHOLESALER hereby expressly assuming the risk that the efforts required to assuresuch performance may be greater than estimated.  4.7. Order and maintain a balanced inventory of PRODUCTS sufficient to satisfy thirty (30)calendar days of demand for PRODUCTS in the TERRITORY, taking into account anticipatedsales and demand arising from advertising, post-off pricing, other promotional activities,and other known circumstances.  4.8. Maintain a sufficient and well trained sales force capable of effectively representingand promoting sales of all PRODUCTS in the TERRITORY.  4.9. Provide PYRAMID by the 10th day of each calendar month a report in form acceptable toPYRAMID, showing for each of the PRODUCTS WHOLESALER’s sales, by account, as well asshipments and remaining inventory of that Product.  4.10. Conduct and provide to PYRAMID at least once every six months, in form acceptable toPYRAMID, market profiles and competitive market surveys.  4.11. Identify promotional opportunities for PRODUCTS and promptly communicate them toPYRAMID.  4.12. Make effective use of such advertising and/or promotional opportunities as may be madeavailable in the TERRITORY by PYRAMID in conformity with this Agreement.  4.13. Allow PYRAMID reasonable access to WHOLESALER’s personnel for face-to-facecommunication of matters relating to performance of duties under this Agreement and atreasonable times to WHOLESALER’s business records relating to PRODUCTS and to the dischargeof WHOLESALER’s duties hereunder, including without limitationsuch access as may be required to audit transactions related to any payments that may be duefrom either party to the other.**5.** **MARKET CLEAN-UP****:**Until July 24th 2005, WHOLESALER shall apply its bestefforts immediately to identify and rotate out all out-of-code (*i.e*., past the agespecifications set forth in Exhibit E hereto) PRODUCTS in the TERRITORY, irrespective oforigin, replacing such out-of-code PRODUCTS with in-code PRODUCTS from WHOLESALER’s inventoryin
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  conformity with applicable law. PYRAMID shall reimburse WHOLESALER for the laid-in cost ofall in-code PRODUCTS used for such rotation upon receipt of evidence of pick-up anddestruction of such out-of-code PRODUCTS on or before said date.**6.** **PERFORMANCE STANDARDS****:** 6.1. The Goals at all times during the term of this Agreement shall include withoutlimitation: 6.1.1. Continual distribution of draft PRODUCTS to retailers identified by PYRAMID as keyon-sale accounts;  6.1.2. Effective use of brand-identified tap handles in all on-sale accounts;  6.1.3. Favorable market share for draft PRODUCTS in the TERRITORY; and  6.1.4. Dollar volume and market share for packaged PRODUCTS in the TERRITORY commensuratewith their sales potential. 6.2. The Goals for the first six months of this Agreement are stated in Exhibit C hereto.The Goals for subsequent periods will be as set forth in written communications by PYRAMIDto WHOLESALER, not more frequently than at six-month intervals. At least fifteen (15)business days before any revision of the Goals, PYRAMID will confer with WHOLESALERmanagement about the business factors bearing on the Goals and shall set the Goals for theensuring period in the reasonable exercise of its business judgment, taking into accountperformance of other brands in the TERRITORY and of PYRAMID’s brands in comparableterritories, WHOLESALER’s results for the preceding period, the effects of marketconditions, and the projected size of the market in the TERRITORY for specialty beers. Insetting the Goals and measuring performance, PYRAMID will exclude sales to chain accounts,whether or not listed in the attachment to Exhibit D hereto, for which the purchasingdecision is made in response to sales efforts occurring outside the TERRITORY or toPYRAMID’s sales efforts directed to house accounts.  6.3. The parties shall participate in regular meetings at least four (4) times annually, toreview WHOLESALER’s performance relative to the Goals. Such meetings shall be held pursuantto at least twenty (20) business days’ written notice by PYRAMID to WHOLESALER, specifyingthe time and place, which may be the principal place of business of either party hereto.  6.4. PYRAMID may from time to time propose standards in areas of WHOLESALER’s performanceother than the Goals (“Operational Standards”), as may be required by newly evaluatedbusiness factors with direct material impact on the marketing, distribution, freshness,quality, or servicing of the PRODUCTS in the TERRITORY. PYRAMID will give WHOLESALERwritten notice of proposed Operational Standards at least fourteen (14) days in advance ofthe proposed effective date. If WHOLESALER does not within said time give PYRAMID writtennotice of objection tospecific proposed standards in sufficient detail for PYRAMID to evaluate the basis of theobjection, the Operational Standards applicable to all PYRAMID’s wholesale customers in thearea comprising the states of Washington, Oregon, and Idaho shall upon expiration of suchtime be incorporated in this agreement, and WHOLESALER shall comply with them.  6.5. PYRAMID shall evaluate in good faith WHOLESALER’s timely objections to proposedOperational Standards and shall, within five (5) business days of receipt thereof, notifyWHOLESALER in writing of any modification or withdrawal of proposed standards it may, inthe exercise of its business judgment elect to make, or of its election not to
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   modify orwithdraw. If WHOLESALER does not, within three (3) business days of such notice, givePYRAMID written notice of election to arbitrate the reasonableness of the proposedOperational Standards pursuant to part 16.1 hereof, the Operational Standards applicable toall PYRAMID’s wholesale customers in the area comprising the states of Washington, Oregon,and Idaho shall be incorporated in this agreement, and WHOLESALER shall comply with them.If WHOLESALER has given notice of election to arbitrate, the parties shall submit thequestion of reasonableness to arbitration as provided herein. Any of the OperationalStandards applicable to all PYRAMID’s wholesale customers in the area comprising the statesof Washington, Oregon, and Idaho that are not found unreasonable by arbitration shall, uponrendition of the arbitrator’s decision, be incorporated in this agreement, and WHOLESALERshall comply with them.**7.** **COOPERATIVE PROGRAMS****:**PYRAMID may propose promotional and/or advertising programs tostimulate sales of PRODUCTS in the TERRITORY, with costs to be shared equally by PYRAMID andWHOLESALER (“Cooperative Programs”). WHOLESALER will evaluate proposed Cooperative Programs inits good faith business judgment and timely respond to such proposals with respect to itsparticipation, and shall cooperate fully in execution of those Cooperative Programs in whichit agrees to participate.**8.** **QUALITY CONTROL****:** 8.1. WHOLESALER acknowledges: 8.1.1. PRODUCTS are *not pasteurized*, and continuous monitoring is necessary to maintainPRODUCTS’ quality. Exhibit D hereto sets forth proper temperature ranges currentlyapplicable hereto, but PYRAMID may at any time establish different proper temperatureranges.  8.1.2. Each package and keg of the PRODUCTS has an “enjoy by” date, which is normally onehundred, twenty (120) calendar days from the fill date for packaged PRODUCTS, ninety(90) days after the fill date for kegged PRODUCTS. PYRAMID may at any time establishother intervals from fill to expiration of product life for purposes of properservicing and rotation in the market.  8.1.3. Sales to the retail trade must occur within the time specified herein before “enjoyby” dates, to maintain product quality in light of the non-pasteurized condition ofPRODUCTS and the need for PRODUCTS to reach consumers within the appropriate time afterpackaging. 8.2. PYRAMID will not ship to WHOLESALER PRODUCTS with less than ninety (90) days remainingbefore the “enjoy by” date unless WHOLESALER has approved suchPRODUCTS prior to shipment. Shipment of such PRODUCTS shall not alter the rotationobligations of WHOLESALER hereunder. 8.3. WHOLESALER shall: 8.3.1. Store, ship, and carry all PRODUCTS constantly within temperature rangesthen-currently specified by PYRAMID.  8.3.2. Take all commercially reasonable measures to cause its customers to store all draftPRODUCTS under refrigeration and within temperature ranges specified by PYRAMID.
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 8.3.3. Determine, and make its sales and service personnel continuously aware of, the shelflife of all PRODUCTS in inventory and in the trade.  8.3.4. Not deliver any PRODUCTS to any customer at any time less than fifteen (15) calendardays before the “enjoy by” date, as it may be established according to PYRAMID’sthen-current quality assurance policies, which may modify or augment information setforth in Exhibit E hereto.  8.3.5. At all times know industry standards in the TERRITORY for product service related toquality control, and adopt and implement the highest of such standards for quality andlevel of service to draft PRODUCT accounts, which service shall include draftinstallations, draft cleaning, and urgent deliveries of PRODUCTS.  8.3.6. Rotate stock in WHOLESALER’s warehouse, on its vehicles, and at retail accounts toassure that PRODUCTS with the “enjoy by” date closest to the date of retail sale areshipped, sold and consumed before PRODUCTS with a later “enjoy by” date, and remove anddestroy, at WHOLESALER’s expense except as otherwise provided in part 5 hereof, any andall product that remains unsold by the retailer after the “enjoy by” date.  8.3.7. Comply with PYRAMID’s standards and policies regarding (a) handling, removal fromcustomer premises, and destruction of PRODUCTS after their “enjoy by” date, includingpick-up and destruction of out-of-code PRODUCTS in retail accounts as permitted by law,and (b) delivery to PYRAMID of samples of any off-condition PRODUCTS.**9.** **PERSONAL SERVICES:** 9.1. WHOLESALER warrants that it has the right and power to cause, and hereby agrees tocause, its employees personally to discharge of all duties of WHOLESALER hereunder, fulltime and on-site, devoting their best personal efforts to the discharge of said duties inaccordance with the letter and spirit of this agreement and refraining from all activitieswhich might detract from the rendition of such personal management. WHOLESALER represents,warrants and covenants that the personal knowledge, skills and experience of said personsare unique and valuable and will at all times hereunder be available to WHOLESALER for thepurpose of carrying out the terms of this Agreement.  9.2. The provisions of this part 9 are part of the bargained-for consideration of thisAgreement without which PYRAMID would not have entered into this Agreement.  9.3. No duty of WHOLESALER hereunder may be delegated, and no right of WHOLESALER hereundermay be sold, assigned, transferred or licensed in whole orin part in any manner whatsoever without the prior written consent of PYRAMID. For thepurposes of this agreement, any change in personnel or duties from WHOLESALER’s currentmanagement and their current responsibilities at the level of general manager of beer salesor higher (which specifically includes Bob Stevens as general manager) shall be deemeddelegation of duties hereunder.  9.4. If WHOLESALER is a corporation, partnership, limited liability company, or similarentity, any change in its, or its direct or indirect parent’s, capital stock, ownershipstructure, or underlying agreement that results in holdings of less than fifty-one percent(51%) interest by its present shareholders, partners, or equivalent interest-holders as a
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   group with full voting power and right to receive dividends or equivalent distributionsshall be deemed a transfer of rights hereunder by WHOLESALER.**10.** **TRANSFER AND DELEGATION PROPOSALS****:** 10.1. PYRAMID will not withhold its consent to assignment of rights hereunder to a successorin interest of WHOLESALER except according to application of reasonable business standards,but may apply such standards by taking into account any business factor and according itsuch weight as PYRAMID may determine in its sole discretion. Such business factors mayinclude without limitation whether a proposed assignee appears to have the financialcapacity, staffing, business experience, marketing skills, strategic direction,distribution experience, and other abilities to maintain or increase market share forPRODUCTS in TERRITORY to the same extent as other potential distributors, PYRAMID retainingthe right to compare its projection of results of the proposed change with its assessmentsof all other wholesalers that might distribute PRODUCTS in TERRITORY, including, ifapplicable, WHOLESALER without the proposed change, and to select its wholesale customeraccordingly. PYRAMID may consent or decline to consent to delegation of duties hereunder inits business judgment.  10.2. WHOLESALER shall give PYRAMID at least ninety (90) days’ written notice before anyproposed transfer of rights or delegation of duties, identifying all transferees anddelegates, all parties with interests in transferees or delegates, and all other partieswith interests in such interested parties, and providing the following additionalinformation: 10.2.1. In case of a delegation of duties by reason of change in personnel or assignedduties, notice hereunder shall set forth the business history and personal informationof any proposed delegate in a statement substantially equivalent in content to State ofWashington form BLS 700-301.  10.2.2. In case of transfer of an interest by reason of change of ownership or equitableinterest, notice hereunder shall set forth (a) a signed financial statement,substantially equivalent in content to State of Washington form BLS 700-303, by eachproposed transferee and each party holding more than a 10% equity interest in thetransferee or in any party holding such an interest in the transferee and (b) abusiness plan describing in detail the sales and promotional strategies, staffing, andfinancing of operations following the proposed change.  10.2.3. WHOLESALER shall promptly obtain and provide to PYRAMID responses to PYRAMID’sreasonable requests during the notice period for other informationregarding proposed assignees or delegates it deems necessary for making itsdetermination.**11.** **CANCELLATION AND TERMINATION****:** 11.1. WHOLESALER may cancel or terminate this agreement in its business judgment on ninety(90) days’ notice to PYRAMID.  11.2. PYRAMID may cancel or terminate this agreement in its business judgment on sixty (60)days’ notice to WHOLESALER, subject to payment of such sums as may be owing pursuant toparts 12 and 13 hereof.  11.3. PYRAMID may cancel this agreement on notice to WHOLESALER, irrespective of fault, if:
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   11.3.1. WHOLESALER makes an assignment for benefit of creditors, is placed in receivership,transfers its assets otherwise than in the normal course of business, substantiallyabandons its business, has a negative net worth measured by its balance sheet preparedin accordance with generally accepted accounting principles, or commits or suffers anyact indicating inability to pay its debts as they fall due, including withoutlimitation failure to provide proof of solvency after delinquency pursuant to part3.9.1 hereof (said conditions being referred to herein as “insolvency”), *provided*,however, that in the event of bankruptcy under federal law cancellation for insolvencyshall not occur if this Agreement is duly adopted by a party with power under thejurisdiction of the bankruptcy court to affirm the debtor’s agreements.    11.3.2. WHOLESALER’s state license as a distributor of beer has been revoked or surrenderedunder threat of revocation.    11.3.3. Suspensions of WHOLESALER’s state license as a distributor of beer during the termhereof have cumulatively exceeded fourteen (14) days. 11.4. “Deficiency” means cause for cancellation or termination of this agreementconstituting a fault of WHOLESALER that can be rectified by WHOLESALER within a sixty-day(60) period. Causes for cancellation or termination that do not constitute faults or arenot susceptible of cure within said period, including without limitation those set forth inpart 11.3 hereof, are not deficiencies. To “rectify” a deficiency means to put PYRAMID inall material respects in the same position as if the cause had not occurred.  11.5. If WHOLESALER materially breaches any provision hereof or in any other respect failsfully to live up to the terms and conditions of this Agreement, whether or not as theresult of deficiency, PYRAMID may cancel this agreement on sixty (60) days’ notice toWHOLESALER, specifying the nature of each cause for the cancellation.  11.6. If notice of cancellation pursuant to part 11.5 hereof is based on a claim ofdeficiency, and WHOLESALER rectifies the claimed deficiency within sixty (60) days ofnotice of cancellation, the notice will be of no effect. Recurrence of the same deficiencyduring the term hereof is conclusive proof that it was not rectified, in which event theoriginal notice shall be effective on the later of its stated effective date or therecurrence.  11.7. WHOLESALER’s undertakings remain fully in force during the period of any notice ofcancellation or termination. WHOLESALER shall assure that both its draft sales and itspackage sales of PRODUCTS in the TERRITORY are no less during a notice period than during aperiod of equivalent duration ending upon the giving of such notice (“**Pre-Notice Period**”)and are based upon proper distribution, retail inventory, and merchandising. If the salesthus based of PRODUCTS, determined separately for draft and packaged, in any month during anotice period be less than average monthly sales respectively of such draft or packagedPRODUCTS during the corresponding Pre-Notice Period, PYRAMID shall be entitled tocompensation for WHOLESALER’s failure to carry out said assurance. This part 11.7 does notconstitute election of remedy or diminish any express rights of either party under thisAgreement. The parties recognize that if WHOLESALER allows or causes sales to declinefollowing such notice, PYRAMID will suffer lost profits and loss of goodwill in theTERRITORY that will be difficult to measure. Damages for such losses shall be calculated asthe decline in 
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   WHOLESALER’s sales in the notice period as compared to the Pre-NoticePeriod, multiplied by PYRAMID’s average gross revenues for sales during the three calendarmonths preceding such notice. The parties, after independent consideration, agree that thisamount is a reasonable estimate of PYRAMID’s damages and that this provision does notconstitute a penalty.**12.** **Inventory Purchase****:**Upon the effective date of cancellation or termination of thisAgreement by PYRAMID: 12.1. PYRAMID will purchase from WHOLESALER, and WHOLESALER will sell and deliver to PYRAMIDat WHOLESALER’s premises, WHOLESALER’s inventory of the PRODUCTS that have “enjoy by” datesthat are at least fifteen (15) days after the date WHOLESALER physically delivers thesefully merchantable PRODUCTS to PYRAMID or its designated carrier (“**Qualifying Inventory**”).The purchase price for Qualifying Inventory will be WHOLESALER’s landed cost, consisting oforiginal purchase price from PYRAMID invoices less any discounts, rebates, or adjustments,plus freight charges and taxes paid as documented to PYRAMID’s satisfaction by WHOLESALER,plus $20.00 handling charge per properly secured pallet of the Qualifying Inventory.  12.2. For PRODUCTS in WHOLESALER’s inventory that are not Qualifying Inventory, PYRAMID willpay WHOLESALER fifty percent (50%) of the amount it would have paid for purchase of suchitems under part 12.1 hereof, upon receipt of proof of destruction of those items inaccordance with part 14 hereof.**13.** **VALUATION****:**Upon termination of this Agreement by PYRAMID solely pursuant to part 11.2hereof, PYRAMID will pay WHOLESALER compensation for the laid-in cost of inventory pursuant topart 12 hereof and liquidated damages measured on the fair market price of the business ofdistributing the PRODUCTS in the TERRITORY under this Agreement (the “Business”), as providedin this part 13. The parties, after independent consideration, conclude that the value of theBusiness would be difficult to determine accurately. The parties therefore agree, making theirbest estimate of a fair evaluation, that the liquidated value of the Business is equal to theWHOLESALER’s gross margin for the PRODUCTS (defined as total sales revenues less laid-in cost)during the three hundred, sixty-five (365) days preceding the effective date of termination.The parties agree that this amount is reasonable and that this provision does not constitute apenalty.**14.** **DESTRUCTION OF NON-QUALIFYING INVENTORY****:**In the event of cancellation or terminationby either party, WHOLESALER shall destroy all PRODUCTS that are not Qualifying Inventory inaccordance with PYRAMID’s procedures for destruction of non-merchantable products, and shallprovide PYRAMID with a written description of the products and amounts destroyed.**15.** **TRANSITION****:**Upon notice of cancellation or termination, WHOLESALER shall: 15.1. Cooperate fully with PYRAMID and PYRAMID’s customers throughout transition of thedistribution of the PRODUCTS to such party or parties as PYRAMID may designate.  15.2. Not commit any act or omission with the purpose, effect, or tendency of impeding ordamaging the sales, merchandising, tap and shelf positions, goodwill, or consumeracceptance of PRODUCTS.  15.3. Provide to PYRAMID a complete list of each customer to which it has sold any of thePRODUCTS during the previous twelve (12) months, stating for each the name, 
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   address,telephone number, and total dollar purchases for said period by item of the PRODUCTS.**16.** **DISPUTE RESOLUTION****:** 16.1. Except as stated in part 16.2 hereof, all claims and disputes between the partiesrelating in any way to this Agreement or its performance, interpretation, validity,valuation, or breach, or any other matter between the parties including any tort orstatutory claim, or any claims for injunctive relief (collectively, “**Covered Disputes**”),shall be arbitrated under the Commercial Arbitration Rules of the American ArbitrationAssociation (“AAA”) in Seattle, Washington, before one neutral arbitrator who is a memberof the AAA’s Large Complex Case Panel. All documents, materials and information in thepossession of each party and in any way relevant to the claims or disputes, shall be madeavailable to the other party for review and copying not later than sixty (60) days afterthe demand for arbitration is served. The arbitrator may permit such depositions or otherdiscovery deemed necessary for a fair hearing. The arbitrator shall take all necessarysteps to conclude the hearing within two (2) days, and to issue a written decision notlater than ninety (90) days from the arbitrator’s appointment. The parties have includedthese time limits to expedite the proceeding, but the arbitrator may make reasonableextensions, which shall not affect the validity of the award. Any award of the arbitrator(including awards of interim or final remedies) may be confirmed or enforced in any courthaving jurisdiction over either party.  16.2. Notwithstanding part 16.1 hereof, either party may bring claims against the otherparty (a) as part of litigation commenced by an independent third party and in the sameforum or (b) to seek preliminary injunctive relief pending arbitration.  16.3. In any arbitration, litigation, or other proceeding between the parties, theprevailing party will be awarded its costs and fees of attorneys and expert witnesses.  16.4. For any proceeding commenced by a party in conformity with this part 16 or pursuant toorder of a court of competent jurisdiction holding part 16.1 hereof inapplicable, theexclusive jurisdiction and venue for any dispute between the parties shall be the courts ofthe State of Washington in Seattle, Washington or the U.S. District Court, Western Districtof Washington in Seattle, Washington. In such event,after satisfactory opportunity to consult legal counsel, and being fully informed, to thefullest extent permitted by law, as separately bargained-for consideration, EACH PARTYHEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OFANY KIND INVOLVING ANY COVERED DISPUTES.**17.** **INSURANCE****:**Pyramid will maintain comprehensive general liability insurance andproducts liability insurance, with a total aggregate limit of $2 million for each type ofcoverage and will upon execution of this Agreement promptly forward a current certificatethereof to WHOLESALER. WHOLESALER will maintain comprehensive general liability insurance andliquor liability insurance, with a total aggregate limit of $2 million for each type ofcoverage and will upon execution of this Agreement promptly forward a current certificatethereof to PYRAMID.**18.** **INDEMNITY****:**Pyramid agrees to defend and hold harmless, and hereby indemnifies,WHOLESALER and all WHOLESALER’s shareholders, officers, employees, and agents, from any andall claims, actions, demands, causes of actions, attorneys fees, expenses, and costs arisingfrom any claims against WHOLESALER relating to defects in
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  PRODUCTS caused by PYRAMID.WHOLESALER agrees to defend and hold harmless, and hereby indemnifies, PYRAMID and allPYRAMID’s shareholders, officers, employees, and agents, from any and all claims, actions,demands, causes of actions, attorneys fees, expenses, and costs arising from receipt,transportation, storage, sale, or distribution of PRODUCTS by WHOLESALER.**19.** **MISCELLANEOUS PROVISIONS** 19.1. Integration: This document constitutes the complete agreement between the parties andsupersedes all prior agreements, understandings and representations, oral or written, ifany, between the parties, the parties expressly agreeing that except for warranties andrepresentations set forth herein they rely entirely upon their own judgment and aresatisfied that they have had adequate opportunity to examine and consider all matterspertaining to the premises. The captions are for convenience only and are not parts of theagreement, nor shall they be used in interpreting the agreement. This agreement may bemodified only by subsequent writing signed by both parties.  19.2. No waiver: Failure in any particular instance to exercise any right hereunder or toobject to any breach hereof shall not constitute waiver of any such right or of any remedyor affect the enforceability or interpretation of any obligation of a party hereto.  19.3. Notice: Except as may otherwise be expressly provided herein, notice hereunder may begiven by first class mail addressed to the party receiving notice at the address set forthherein.  19.4. Choice of law: This agreement shall be interpreted and enforced in all respectsexclusively under the law applicable to domestic winery sales contracts made and to beperformed entirely within the state of Washington.  19.5. Severance: Invalidity or non-enforceability of any provision hereof, other than anobligation to pay money for goods received, shall not affect the other provisions hereof,which shall be construed as if such invalid or unenforceable provision had been omitted,except that if any provision expressly identified as considerationnecessary to secure consent hereto be affected by a ruling of a court with respect to suchinvalidity or non-enforceability, such court shall modify such provision so as to render itvalid and enforceable with the least possible change of its effect.           PYRAMID BREWERIES INC.,     ALASKADISTRIBUTORS CO.             By: /s/ GARY MCGRATH   By: /s/ STEPHEN B. LOEB               GARY MCGRATH     STEPHEN B. LOEB,