Eastern Territory during such calendar quarter; and (iii) within thirty daysafter the end of each calendar quarter beginning with the calendar quarter endedDecember 31, 2014 and ending with the calendar quarter ended September 30, 2015, ABIshall reimburse to CBA 33.3% of the Margin retained by ABI for Product sold in theEastern Territory during such calendar. Thereafter, ABI shall have noreimbursement obligations with respect to Margin.     (c) The provisions of Section 4.04(b) shall apply only so long asRedhook continues to operate its Portsmouth, New Hampshire brewery andmaintains production capacity and output therein substantially at or abovethe levels existing on the Effective Date. Should Redhook cease to do so,on the date of such cessation the provisions of Section 4.04(b) shall be ofno further force and effect.     1.3 Section 4.06 is deleted in its entirety and replaced as follows:4.06 (a) Within 45 days after the end of each calendar quarter, Redhookshall pay to ABI the product of (x) the Incremental Margin and (y) theamount, if any, by which the aggregate volume (in case-equivalents ofProducts) sold by Redhook to ABI or any wholesaler in such calendar quarterin the Territory exceeds the amount of Product sold by Redhook and Widmer inthe Territory in the respective calendar quarter in 2003.     (b) Notwithstanding the foregoing, for purposes of Section 4.06(a)the aggregate volume will be calculated to exclude: (i) for sales ofProduct in the fourth calendar quarter of 2010 through the third calendarquarter of 2013, 100% of the aggregate volume of Products sold in theEastern Territory; (ii) for sales of Product effected in the fourth calendarquarter of 2013 through the third calendar quarter of 2014, 66.7% of theaggregate volume of Products sold in the Eastern Territory; and (iii) forsales effected in the fourth calendar quarter of 2014 through the thirdcalendar quarter of 2015, 33.3% of the aggregate volume of Products sold inthe Eastern Territory. Thereafter, this provision shall be given no effectin calculating Incremental Margin.     (c) The provisions of Section 4.06(b) shall apply only so long asRedhook continues to operate its Portsmouth, New Hampshire brewery andmaintains production capacity and output therein substantially at or abovethe levels existing on the Effective Date. Should Redhook cease to do so,on the date of such cessation the provisions of Section 4.06(b) shall be ofno further force and effect.     (d) For purposes of determining the Incremental Margin, the partiesagree that Schedule 4.06 sets forth the quantity of Product sold by Redhookand Widmer in each calendar quarter of 2003 and Redhook represents that suchquantities do not include sales by any Brewpub or at any beer festival. Ifduring any calendar year, the product of the
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(i) Incremental Margin and (ii) the amount by which the aggregate volume (incase-equivalents of Product) sold in the Territory (as adjusted by theexclusions provided for in Section 4.06(b)) exceeded the aggregate volume ofProduct sold by Redhook and Widmer in the Territory during 2003 does notequal the amounts paid by Redhook for such calendar year pursuant to thissection, then, within 45 days after the end of such calendar year ABI shallpay to Redhook any amount by which the payments previously made by Redhookfor such calendar year exceed such product or Redhook shall pay to ABI anyamount by which the payments previously made by Redhook for such calendaryear are less than such product.     1.4 The following is added as Section 4.08:4.08 For each of the periods from October 1, 2010 through December 31,2010; from January 1, 2011 through December 31, 2011; from January 1, 2012through December 31, 2012; from January 1, 2013 through December 31, 2013;from January 1, 2014 through December 31, 2014; and from January 1, 2015through September 30, 2015, Redhook’s out of pocket expenses incurred inthe sales and marketing of its products for the Eastern Territory shall beno less than the sum of (i) the amount incurred therefor in the samecalendar period in 2009 for the Eastern Territory, as increased by thecumulative change in the Consumer Price Index from December 31, 2009; plus(ii) the reimbursements to be paid by ABI for Margin relating to suchperiod resulting from the provisions of Section 4.04(b) and the decrease inthe aggregate amounts of Incremental Margin resulting from the provisionsof Section 4.06(b).2. Effect of Agreement. This Amendment is binding on and inures to the benefit of CBAI,ABI, and their respective successors and permitted assigns.3. Choice of Law. This Amendment shall be governed by and construed in accordance with thelaw of the State of Washington, without regard to the principles thereof regarding conflicts oflaws.     The duly authorized representatives of the undersigned have executed and delivered this SecondAmendment to Master Distributor Agreement as of the Effective Date.      **Craft Brewers Alliance, Inc.**