exv10w25





Exhibit 10.25



SERVICES AGREEMENT

(AP2 — Portland)




	 	 	 
	By:

	 	Craft Brewers Alliance, Inc., a Washington corporation (“Host Brewer”)
929 N. Russell
Portland, Oregon 97227
	 
	and:

	 	Kona Brewery LLC, a Hawaii limited liability company (“Tenant Brewer”)

75-5629 Kuakini Highway

Kailua Kona, Hawaii 96740
	 
	Date:

	 	January 1, 2009






     This Services Agreement (this “Agreement”) is entered into by and between Tenant Brewer and
Host Brewer as of the date first set forth above.



BACKGROUND




     A. Tenant Brewer uses Host Brewer’s facility in Portland, Oregon (the “Facility”), to
manufacture KONA brand malt beverage products (“Products”) as a tenant brewer.



     B. The Products manufactured by Tenant Brewer as of the date of this Agreement are set forth
in Schedule 1.



AGREEMENT




     Host Brewer and Tenant Brewer agree as follows:



     1. Raw Materials. Raw materials include all materials and ingredients necessary for
the brewing of Products (“Tenant Raw Materials”). If Tenant Brewer purchases any Tenant Raw
Materials initially owned by Host Brewer, the purchase price payable by Tenant Brewer for such
Tenant Raw Materials is equal to Host Brewer’s actual cost, with no markup. If Tenant Brewer
purchases Tenant Raw Materials directly from any supplier, or through Host Brewer as agent of
Tenant Brewer, Tenant Brewer is responsible for payment of the purchase price for the Tenant Raw
Materials to such supplier, or for reimbursement of Host Brewer’s actual costs incurred in
purchasing any Tenant Raw Materials as agent of Tenant Brewer. The Tenant Raw Materials purchased
will be based upon the current recipes in Exhibit A. Host Brewer will provide to Tenant
Brewer a monthly inventory of Tenant Raw Materials. Host Brewer will promptly notify Tenant Brewer
in writing of any long or short positions on Raw Materials that Host Brewer determines will
negatively impact the production schedule for Products or that will result in Raw Materials
becoming obsolete or being destroyed.



     2. Tenant Packaging Components. Packaging components include all materials (other
than the malt beverage itself) required in the production process including glass bottles, labels,
corrugated packaging components, and closures (“Tenant Packaging Components”). If Tenant Brewer
purchases any Tenant Packaging Components initially owned by Host Brewer, the purchase price
payable by Tenant Brewer for such Tenant Packaging Components is equal to



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Host Brewer’s actual cost, with no markup. If Tenant Brewer purchases Tenant Packaging
Components directly from any supplier, or through Host Brewer as agent of Tenant Brewer, Tenant
Brewer is responsible for payment of the purchase price for the Tenant Packaging Components to such
supplier, or for reimbursement of Host Brewer’s actual costs incurred in purchasing any Tenant
Packaging Components as agent of Tenant Brewer. Host Brewer will provide Tenant Brewer with a
monthly inventory of Tenant Packaging Components. Host Brewer will promptly notify Tenant Brewer
in writing of any long or short positions on Tenant Packaging Components that Host Brewer
determines will negatively impact the production schedule for Products or that will result in
Tenant Packaging Components becoming obsolete or being destroyed.



     3. The Services.



          3.1 Host Brewer will provide on a timely basis all information that is required for Tenant
Brewer to file its regulatory reports and tax returns on a timely basis.



          3.2 Upon the reasonable request of Tenant Brewer, from time to time and at any time, Host
Brewer will provide the following services (the “Services”) to Tenant Brewer subject to periodic
review and adjustment by mutual written agreement:



               (a) Accounting



               (i) billing for Tenant Raw Materials;



               (ii) billing for Tenant Packaging
Components; and



               (iii) billing of the Facility Use Fees



          (b) Regulatory



               (i) assist with federal, state, and
local label registrations;



               (ii) assist with federal, state, and
local licensing;



               (iii) production of Tenant Brewer’s
on-site regulatory reports and records; and



               (iv) interface with ABI legal
personnel



          (c) Production Scheduling



               (i) production planning based on
system demand;



               (ii) review of weekly brewing and packaging plans;



               (iii) review of weekly AOM orders;



               (iv) reporting of final production volumes; and




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               (v) actual and anticipated
“out-of-stock at wholesale” situations



          (d) Warehousing & Shipping


               (i) shipping and receiving on behalf
of Tenant Brewer;



               (ii) best scheduling efforts by Host
Brewer to facilitate shipping of all Tenant Products;



               (iii) storage and daily finished item
counts;



               (iv) monthly Tenant Raw Material
inventory;



               (v) monthly Tenant Packaging
Component inventory;



               (vi) report of shipments on order; and



               (vii) actual shipping documents



          (e) Quality Control


               (i) conduct quality assurance tests;



               (ii) report test results on a monthly
basis;



               (iii) report “out of spec” results to
Tenant Brewer, as soon as reasonably possible; and



               (iv) ship samples to Tenant Brewer for
testing



          (f) New Product Development



               (i) assist with Additional Product
development; and



               (ii) conduct trial batches at Tenant
Brewer’s direction



     4. Facility Use Fees. Tenant Brewer shall pay Host Brewer the fees in the initial
amounts set forth on Exhibit B (the “Facility Use Fees”) for Tenant Brewer’s use of the
Facility and for provision of the Services by Host Brewer. Host Brewer may amend the Facility Use
Fees at any time and from time to time upon 45 days’ written notice to Tenant Brewer.



     5. Additional Products — Facility Use Fee. If Tenant Brewer manufactures malt
beverage products other than the Products at the Facility (“Additional Products”), the Facility Use
Fees for such Additional Products will be equal to the Facility Use Fee for the most similar
Product (with respect to labor costs and production services as reasonably determined by Host
Brewer) manufactured under this Agreement at the Facility.



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     6. Term and Termination.



          6.1 Term. The term of this Agreement commences on the date first set forth above and
continues until December 31, 2018 (the “Initial Term”). Following the Initial Term, this Agreement
will automatically renew for an additional ten-year term, unless either party gives the other party
written notice of termination on or prior to June 30, 2018.



          6.2 Termination by Tenant Brewer. Tenant Brewer may terminate this Agreement at any
time with at least one year’s prior written notice. Tenant Brewer may, in its sole discretion,
elect to terminate this Agreement upon 90 days’ written notice if Host Brewer increases the
Facility Use Fee by more than 15% in any measurement period comprising four consecutive fiscal
quarters. Tenant Brewer has no termination right related to increases in the spot price of Tenant
Raw Materials or Tenant Packaging Components.



          6.3 Termination by Host Brewer. Host Brewer may terminate this Agreement at any time
with at least two years’ prior written notice.



          6.4 Termination by Either Party. Either party may terminate this Agreement upon
written notice given to the other party following the occurrence of any of the following events:



               6.4.1 The other party materially breaches any representation, warranty, or obligation
under this Agreement and such failure remains uncured for a period of 30 days following the
other party’s receipt of written notice thereof from the nonbreaching party.



               6.4.2 The other party becomes the subject of insolvency or bankruptcy proceedings,
ceases doing business, makes an assignment of assets for the benefit of creditors,
dissolves, or has a trustee appointed for all or a substantial portion of such party’s
assets.



               6.4.3 Any government authority makes a final decision invalidating a substantial
portion of this Agreement.



          6.5 Survival of Rights and Obligations. Termination of this Agreement shall not
prejudice any rights of either party hereto against the other which may have accrued up to the date
of termination. In addition, all covenants respecting indemnification, governing law, attorneys
fees, arbitration, confidentiality, warranties, termination, and continuing liability for amounts
payable hereunder shall survive the termination of this Agreement as expressly set forth elsewhere
herein.



     7. Indemnity.



          7.1 Host Brewer. Host Brewer agrees to indemnify, defend, and hold Tenant Brewer
harmless on account of any legal action or claim brought against Tenant Brewer by a third party to
the extent arising out of Host Brewer’s negligence or willful misconduct; provided,
however, that Host Brewer has no indemnification obligation under this section to the
extent that



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any such legal action or claim brought against Tenant Brewer arises out of Tenant Brewer’s
negligence or willful misconduct.



          7.2 Tenant Brewer. Tenant Brewer agrees to indemnify, defend, and hold Host Brewer
harmless on account of any legal action or claim brought against Host Brewer by a third party to
the extent arising out of Tenant Brewer’s negligence or willful misconduct; provided,
however, that Tenant Brewer has no indemnification obligation under this section to the
extent that any such legal action or claim brought against Host Brewer arises out of Host Brewer’s
negligence or willful misconduct.



          7.3 Indemnification Procedures. With respect to claims made by third parties, if any
party that is entitled to indemnification hereunder (an “Indemnitee”) is threatened with any claim,
or any claim is presented to or any action or proceeding commenced against the Indemnitee, which
may give rise to the right of indemnification hereunder, the Indemnitee will give prompt written
notice thereof to the other party obligated to indemnify the Indemnitee hereunder (the
“Indemnitor”). The Indemnitor, by delivery of written notice to the Indemnitee within 20 days of
receipt of notice of a claim for indemnification from the Indemnitee, may elect to assume the
defense of any such third party claim at the Indemnitor’s expense. If the Indemnitor assumes the
defense, it shall have the right to settle an indemnifiable matter without the consent of the
Indemnitee unless the settlement would have a material adverse effect on the Indemnitee. If the
Indemnitor does not timely elect to defend an indemnifiable matter, the Indemnitee shall have the
exclusive right to prosecute, defend, compromise, settle, or pay any claim, without prejudice to
the right of the Indemnitee to recover any and all losses and reasonable expenses incurred
(including attorneys’ fees and costs, however incurred including in any bankruptcy proceeding, at
trial, on appeal, and on any petition for review). The Indemnitee shall permit the Indemnitor
reasonable access to the books and records of the Indemnitee and shall otherwise cooperate with the
Indemnitor in connection with any matter or claim of indemnification.



          7.4 Limitation of Liability. Except with respect to, and to the extent of, damages
arising out of the negligence or willful misconduct of a party to this Agreement, and except with
respect to violations of the confidentiality provisions of this Agreement, in no event is either
party to this Agreement to be liable for special, incidental, or consequential damages or lost
revenues or profits, except to the extent that the damages arise out of or are related to an
occurrence that is covered by any insurance policy maintained by the party from whom damages are
sought or which that party was obligated to maintain under this Agreement.



          7.5 Insurance. So long as this Agreement is in force, each party must maintain
general liability insurance policies issued by an insurer with a minimum Best’s Financial Strength
Rating of “A-”, with both “products” and “contractual” coverage of $1,000,000 per occurrence and an
additional $2,000,000 in excess liability coverage. Each party must cause its commercial general
liability insurer to name the other party as an additional insured. Upon request, each party must
furnish the other party with an insurance certificate and copies of relevant policies,
declarations, and endorsements evidencing that the required insurance is in force.



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     8. Cooperation; Access; Audit.



          8.1 Each of the parties hereto agrees to fully cooperate in good faith with the others in
connection with the Services provided under this Agreement and matters related to or arising
hereunder.



          8.2 For purposes of verifying the accuracy of charges for Services rendered hereunder and to
verify transaction data in connection with audit and regulatory compliance reviews, each party
shall be entitled to have reasonable access during regular business hours, during the period
extending from the date of this Agreement until 60 days after the termination of this Agreement,
upon reasonable prior notice, to: (i) such premises of the other party that are being used in the
provision of Services hereunder; (ii) such records of the other party that relate primarily to the
provision of Services hereunder; and (iii) any employee of the other party involved in the
performance of Services or generally familiar with, or involved in, the alternating proprietorship
relationship between Host Brewer and Tenant Brewer.



     9. Notices. Any notice, request or demand to be given or made under this Agreement
shall be in writing and shall be deemed to have been duly given or made: (i) upon delivery, if
delivered by hand and addressed to the party for whom intended at the address listed below; (ii)
ten days after deposit in the mails, if sent certified or registered air mail (if available) with
return receipt requested, or five days after deposit if deposited for delivery with a reputable
courier service, and in each case addressed to the party for whom intended at the address listed
below; or (iii) upon completion of transmission, if sent by facsimile transmission to the party for
whom intended at the fax number listed below, provided that a copy of the facsimile transmission is
promptly deposited for delivery by one of the methods listed in (i) or (ii) above:




	 	 	 
	     If to Tenant Brewer, to:

	 	Kona Brewery LLC
	 

	 	75-5629 Kuakini Highway
	 

	 	Kailua Kona, Hawaii 96740
	 

	 	Attn: Mattson C. Davis
	 

	 	Fax: 808-334-1884
	 
	 	 
	     If to Host Brewer, to:

	 	Craft Brewers Alliance, Inc.
	 

	 	929 N. Russell Street
	 

	 	Portland, Oregon 97227
	 

	 	Attn: Chief Executive Officer
	 

	 	Fax: (503) 281-1496





          Any party may change its address and/or fax number for the purposes of this section by written
notice hereunder given to the other parties at least ten days prior to the effective date of such
change.



     10. Miscellaneous.



          10.1 Assignment. Except as set forth herein, neither party shall have the right to
assign, encumber, or otherwise transfer its rights and obligations under this Agreement except with
the prior written consent of the other party. Transfer of this Agreement by operation of law



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does not constitute a prohibited assignment or transfer of this Agreement. Any prohibited
assignment or transfer is voidable in the sole discretion of the non-assigning party.



          10.2 Entire Agreement. THIS AGREEMENT, INCLUDING ALL ATTACHMENTS HERETO, CONSTITUTES
THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERSEDES ALL
PREVIOUS AGREEMENTS BY AND BETWEEN THE PARTIES AS WELL AS ALL PROPOSALS, ORAL OR WRITTEN, AND ALL
NEGOTIATIONS, CONVERSATIONS, OR DISCUSSIONS HERETOFORE HAD BETWEEN THE PARTIES RELATED TO THIS
AGREEMENT.



          10.3 Amendment. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled, or waived, in whole or in part, except by written amendment signed by
the parties hereto.



          10.4 Severability. In the event that any of the terms of this Agreement are in
conflict with any rule of law or statutory provision or are otherwise unenforceable under the laws
or regulations of any government or subdivision thereof, such terms shall be deemed stricken from
this Agreement, but such invalidity or unenforceability shall not invalidate any of the other terms
of this Agreement and this Agreement shall continue in force, unless the invalidity or
unenforceability of any such provisions hereof does substantial harm to, or where the invalid or
unenforceable provisions comprise an integral part of, or are otherwise inseparable from, the
remainder of this Agreement.



          10.5 Counterparts. This Agreement may be executed in two or more counterparts, and
each such counterpart shall be deemed an original hereof.



          10.6 Waiver. No failure by either party to take any action or assert any right
hereunder shall be deemed to be a waiver of such right in the event of the continuation or
repetition of the circumstances giving rise to such right.



          10.7 Attorneys’ Fees. If either party to this Agreement materially breaches any
representation, warranty or obligation under this Agreement and such failure remains uncured for a
period of 30 days following written notice thereof by the nonbreaching party, the breaching party
shall pay to the non-breaching party as part of a judgment all of the non-breaching party’s costs
and expenses, including reasonable attorneys’ fees and expenses (however incurred, including at
trial, on appeal, or in any bankruptcy proceeding), incurred by the non-breaching party in
enforcing the terms of this Agreement or collecting any payment due under this Agreement.



          10.8 Force Majeure. Neither party shall be liable for any delay or default in
performing its obligations if such default or delay is caused by any event beyond the reasonable
control of such party, including, but not limited to, acts of nature, terrorism, war, or
insurrection, civil commotion, destruction of production facilities or materials by earthquake,
fire, storm, or flood, labor disturbances or strikes, epidemic, materials shortages, equipment
malfunction, failure of ABI distributors, or other similar event. The party suffering such cause
shall immediately notify the other party of the cause and the expected duration of such cause. If
either



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party’s performance is delayed by more than 90 days pursuant to this section, the other party
may immediately terminate this Agreement by written notice given before the affected party resumes
performance.



          10.9 Governing Law. This Agreement shall be governed by the laws of the State of
Oregon, without regards to the principles of conflicts of laws.



          10.10 Arbitration. Any claim or dispute arising out of, or related to, this Agreement
will be subject to arbitration which, unless Host Brewer and Tenant Brewer agree otherwise in
writing, will be in accordance with the rules of the Arbitration Service of Portland, Inc. as such
rules are in effect at the time such claim or dispute is submitted to arbitration. Any demand for
arbitration must be filed in writing with the other party to this Agreement and with the
Arbitration Service of Portland, Inc. The exclusive venue of any hearing on the merits of a
dispute is Multnomah County, Oregon. Any demand for arbitration must be delivered in writing to
the other party within a reasonable time after the claim or dispute has arisen; provided,
however, that in no event may such demand be made after the date when institution of legal
or equitable proceedings based on such claim or dispute would be barred by the applicable statute
of limitations. The foregoing agreement to arbitrate is specifically enforceable in accordance
with applicable law in any court having adequate jurisdiction. The award rendered by the
arbitrator will be final, and judgment may be entered upon such award in accordance with applicable
law in any court having adequate jurisdiction. The parties may endeavor to resolve disputes by
mediation at any time and as they may agree, provided, however, that resolution of
disputes by mediation is not be required prior to resolution of disputes by arbitration.



[one signature page follows]




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          The duly authorized representatives of the undersigned parties have executed this Services
Agreement as of the date first written above.



	 	 	 	 	 
	 	CRAFT BREWERS ALLIANCE, INC.

 	 
	 	By:  	/s/ Terry E. Michaelson
 	 
	 	Name:  	Terry E. Michaelson 	 
	 	Title:	Chief Executive Officer 		 
	 



	 	 	 	 	 
	 	KONA BREWERY LLC

 	 
	 	By:  	/s/ Mattson Davis
 	 
		Name:  	Mattson Davis 	 
	 	Title: 	President / Manager 
	 



[signature page 1 of 1 to Services Agreement]