Document:

exv10w4

 

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 this
Agreement.

	 	 	 
	“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 their
brands (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 and
WHOLESALER regarding the sale, purchase, distribution, resale, quality control and
promotion of the PRODUCTS in the TERRITORY.

	B.	 	The PRODUCTS are high-quality non-pasteurized malt beverage products brewed in small
batches. Consumer demand for PYRAMID’s PRODUCTS is driven by their high quality and
distinctive flavors. The success of PYRAMID and of WHOLESALER in the TERRITORY will depend
on (a) fulfillment of the needs of beer retailers and beer consumers, (b) execution of
aggressive, sound and ethical marketing efforts to realize the existing and potential
market for PYRAMID’s PRODUCTS in the TERRITORY, (c) ensuring that draft PRODUCTS are served
to consumers in their peak condition and that all PRODUCTS are offered for sale to
consumers before their shelf life expiration and “enjoy by” dates, and (d) conscientious
regard for customer service and quality control in all operations.

	C.	 	PYRAMID has entered into this Agreement in reliance on WHOLESALER’s representations and
other information WHOLESALER has provided to PYRAMID regarding the abilities and capacities
of WHOLESALER’s existing ownership and management to meet and perform the obligations of an
exclusive distributor of PYRAMID’s PRODUCTS. This is an agreement for the sale of goods
between merchants and for personal services as specified herein.

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	D.	 	WHOLESALER has entered into this Agreement because of WHOLESALER’s knowledge of
PYRAMID’s reputation for brewing and promoting quality products and the benefits to
WHOLESALER of the resulting substantial retailer and consumer acceptance of the Marks.

	E.	 	WHOLESALER represents that (a) its management and sales personnel have the capability
and resources to actively, aggressively, and ethically market and promote the sale of
PYRAMID’s PRODUCTS in the TERRITORY and to provide regular deliveries and the highest
quality of service to all beer customers in the TERRITORY, (b) it maintains a business
organization, personnel and equipment sufficient to enable WHOLESALER to function properly
as a distributor of PYRAMID’s PRODUCTS and to fully carry out this Agreement and makes no
additional investment or allocation of resources to enable it to carry out its duties under
this Agreement, (c) it has the resources, ability and organization to ensure that draft
PRODUCTS are served to consumers in their peak condition and that all PRODUCTS will be
delivered 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 conduct
WHOLESALER’s business in a manner that will reflect favorably upon WHOLESALER, PYRAMID, and
PRODUCTS.

	F.	 	No joint enterprise is created hereby. Adoption of marketing methods in the conduct of
its business is within the sole discretion of WHOLESALER. No marketing expense required by
this agreement would cause WHOLESALER’s total marketing expenditures of its business
substantially to increase. No requirements hereunder would cause WHOLESALER’s total
capitalization devoted to inventory substantially to increase. WHOLESALER has not paid or
promised any party any consideration for rights granted hereunder. Rights and obligations
created 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 general
interest in the success of one another’s independent businesses that is inherent in all
recurring sales of goods for resale.

REPRESENTATIONS, TERMS & CONDITIONS:

	1.	 	REPRESENTATIONS:

	 	1.1.	 	Each party hereto hereby expressly represents, warrants and stipulates, and each agrees
further 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 the
Recitals and Representations by such party set forth herein are material, true, and
controlling as to establishment of fact related thereto, including without limitation
ultimate facts.
	 
	 	1.2.	 	WHOLESALER represents and warrants the truth of each of the following, knowing that
PYRAMID is relying on each of the following as a material inducement to enter into this
Agreement:

	 	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 any
assets 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 information
contained in the credit application, is correct, not misleading, and contains no
material omissions.

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	 	1.1.3.	 	WHOLESALER holds all permits and licenses, in full force and effect, necessary for
WHOLESALER 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 monetary
consideration, or transfer of anything, tangible or intangible, of value to any person
whomsoever, 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 right
conferred under this Agreement.

	2.	 	EXCLUSIVE TERRITORY:

	 	2.1.	 	During the term hereof, PYRAMID will not sell PRODUCTS to another wholesale distributor
in the TERRITORY or to any other person or entity that, to PYRAMID’s knowledge, intends to
resell the PRODUCTS to businesses located within the TERRITORY.
	 
	 	2.2.	 	WHOLESALER will not sell or cause to be delivered any of the PRODUCTS directly or
indirectly to any party located outside the TERRITORY or to any party in any location it
has reason to believe will sell any of the PRODUCTS outside the TERRITORY or any of the
PRODUCTS 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 demand
therefor 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 its
products among its customers to accommodate its production schedules and marketing plans
and to deal with scarcity of supply.
	 
	 	3.2.	 	PYRAMID’s applicable supplier price postings, as they may be modified from time to
time, are hereby made part of this Agreement.
	 
	 	3.3.	 	PYRAMID may, in the exercise of its business judgment, at any time discontinue any item
or 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 foregoing
undertaking, but may do so in its discretion, in which case delivery of goods within four
weeks 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 whose
authority PYRAMID has advised WHOLESALER in writing and must be in such format and executed
in such manner as PYRAMID may reasonably specify.
	 
	 	3.5.	 	Goods sold by PYRAMID hereunder shall be delivered to WHOLESALER, and risk of loss of
the goods shall pass to WHOLESALER, upon transfer of possession of the goods free on board
such carrier as may be specified by WHOLESALER at PYRAMID’s dock at the place of production
or at such other reasonable delivery point as PYRAMID may specify. All right of inspection
of the goods and of rejection of nonconforming goods shall be exercisable only at said time
and place, and
WHOLESALER shall expressly authorize such carrier to confirm the conformity of the goods to
order. The goods upon such delivery shall be deemed part of the inventory of WHOLESALER
hereunder for the purposes hereof other than part 4.7 hereof. PYRAMID will render reasonable
assistance to WHOLESALER in arranging for 

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	 	 	 	shipment, but will not be responsible for any
delay caused by transportation difficulties, labor or material shortages, strikes, fires, or
other cause beyond the control of PYRAMID.

	 	3.6.	 	WHOLESALER shall pay PYRAMID the amount due for goods sold and delivered hereunder no
later 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 Chief
Financial Officer before the Payment Due Date, on the terms set forth in the invoice or
order confirmation applicable to such shipment, time being of the essence of this
Agreement. PYRAMID will pay credits, rebates, and adjustments due WHOLESALER hereunder from
separate invoice and with separate instrument, but will not unreasonably refuse to
authorize credits against amounts payable to PYRAMID for any sums that have been payable to
WHOLESALER hereunder for more than sixty (60) days.
	 
	 	3.7.	 	PYRAMID may at any time reserve a security interest in any goods sold hereunder to
secure payment in accordance with the terms hereof, and WHOLESALER agrees to execute upon
request 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 of
any other security interest in any of WHOLESALER’s inventory of the Products without the
prior written permission of PYRAMID, whether voluntarily or, if not permanently removed
within fifteen (15) days of its attachment, involuntarily created.
	 
	 	3.8.	 	PYRAMID may from time to time, in accordance with a credit policy of general
application and taking into account the financial condition and payment history of
WHOLESALER, require different terms of payment. Without limiting the generality of the
foregoing, if Distributor fails to make any payment when due, PYRAMID may, upon written
notice to WHOLESALER, and until WHOLESALER’s account balance is paid in full and PYRAMID
has 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 or
such other means as PYRAMID may specify upon shipment, in which case the “Payment Due
Date” 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 Automated
Clearing House, in which case WHOLESALER shall pay all outstanding invoices within
fifteen (15) days from the date Pyramid delivers the PRODUCTS to the carrier for
shipment, 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 to
make 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 not
insolvent 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 capability
necessary to achieve efficient and effective distribution of all PRODUCTS.
	 
	 	4.2.	 	Maintain the quality and package integrity of PRODUCTS in the manner set forth by
PYRAMID 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 this
Agreement.
	 
	 	4.5.	 	Keep current, valid and in full force and effect all licenses, permits, bonds, and
evidence of payment of taxes required lawfully to conduct the business of dealing in
PRODUCTS.
	 
	 	4.6.	 	Promote the sale of each of the PRODUCTS to all retail businesses licensed under the
alcohol 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 meet
or exceed the performance standards applicable hereunder to WHOLESALER’s performance (the
“Goals”), WHOLESALER hereby expressly assuming the risk that the efforts required to assure
such 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 anticipated
sales 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 representing
and 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 to
PYRAMID, showing for each of the PRODUCTS WHOLESALER’s sales, by account, as well as
shipments and remaining inventory of that Product.
	 
	 	4.10.	 	Conduct and provide to PYRAMID at least once every six months, in form acceptable to
PYRAMID, market profiles and competitive market surveys.
	 
	 	4.11.	 	Identify promotional opportunities for PRODUCTS and promptly communicate them to
PYRAMID.
	 
	 	4.12.	 	Make effective use of such advertising and/or promotional opportunities as may be made
available in the TERRITORY by PYRAMID in conformity with this Agreement.
	 
	 	4.13.	 	Allow PYRAMID reasonable access to WHOLESALER’s personnel for face-to-face
communication of matters relating to performance of duties under this Agreement and at
reasonable times to WHOLESALER’s business records relating to PRODUCTS and to the discharge
of WHOLESALER’s duties hereunder, including without limitation
such access as may be required to audit transactions related to any payments that may be due
from either party to the other.

	5.	 	MARKET CLEAN-UP: Until July 24th 2005, WHOLESALER shall apply its best
efforts immediately to identify and rotate out all out-of-code (i.e., past the age
specifications set forth in Exhibit E hereto) PRODUCTS in the TERRITORY, irrespective of
origin, replacing such out-of-code PRODUCTS with in-code PRODUCTS from WHOLESALER’s inventory
in

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	 	 	conformity with applicable law. PYRAMID shall reimburse WHOLESALER for the laid-in cost of
all in-code PRODUCTS used for such rotation upon receipt of evidence of pick-up and
destruction 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 without
limitation:

	 	6.1.1.	 	Continual distribution of draft PRODUCTS to retailers identified by PYRAMID as key
on-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 commensurate
with 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 PYRAMID
to 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 WHOLESALER
management about the business factors bearing on the Goals and shall set the Goals for the
ensuring period in the reasonable exercise of its business judgment, taking into account
performance of other brands in the TERRITORY and of PYRAMID’s brands in comparable
territories, WHOLESALER’s results for the preceding period, the effects of market
conditions, and the projected size of the market in the TERRITORY for specialty beers. In
setting 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 purchasing
decision is made in response to sales efforts occurring outside the TERRITORY or to
PYRAMID’s sales efforts directed to house accounts.
	 
	 	6.3.	 	The parties shall participate in regular meetings at least four (4) times annually, to
review WHOLESALER’s performance relative to the Goals. Such meetings shall be held pursuant
to at least twenty (20) business days’ written notice by PYRAMID to WHOLESALER, specifying
the 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 performance
other than the Goals (“Operational Standards”), as may be required by newly evaluated
business factors with direct material impact on the marketing, distribution, freshness,
quality, or servicing of the PRODUCTS in the TERRITORY. PYRAMID will give WHOLESALER
written notice of proposed Operational Standards at least fourteen (14) days in advance of
the proposed effective date. If WHOLESALER does not within said time give PYRAMID written
notice of objection to
specific proposed standards in sufficient detail for PYRAMID to evaluate the basis of the
objection, the Operational Standards applicable to all PYRAMID’s wholesale customers in the
area comprising the states of Washington, Oregon, and Idaho shall upon expiration of such
time be incorporated in this agreement, and WHOLESALER shall comply with them.
	 
	 	6.5.	 	PYRAMID shall evaluate in good faith WHOLESALER’s timely objections to proposed
Operational Standards and shall, within five (5) business days of receipt thereof, notify
WHOLESALER in writing of any modification or withdrawal of proposed standards it may, in
the exercise of its business judgment elect to make, or of its election not to

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	 	 	 	modify or
withdraw. If WHOLESALER does not, within three (3) business days of such notice, give
PYRAMID written notice of election to arbitrate the reasonableness of the proposed
Operational Standards pursuant to part 16.1 hereof, the Operational Standards applicable to
all 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 the
question of reasonableness to arbitration as provided herein. Any of the Operational
Standards applicable to all PYRAMID’s wholesale customers in the area comprising the states
of Washington, Oregon, and Idaho that are not found unreasonable by arbitration shall, upon
rendition of the arbitrator’s decision, be incorporated in this agreement, and WHOLESALER
shall comply with them.

	7.	 	COOPERATIVE PROGRAMS: PYRAMID may propose promotional and/or advertising programs to
stimulate sales of PRODUCTS in the TERRITORY, with costs to be shared equally by PYRAMID and
WHOLESALER (“Cooperative Programs”). WHOLESALER will evaluate proposed Cooperative Programs in
its good faith business judgment and timely respond to such proposals with respect to its
participation, and shall cooperate fully in execution of those Cooperative Programs in which
it agrees to participate.

	8.	 	QUALITY CONTROL:

	 	8.1.	 	WHOLESALER acknowledges:

	 	8.1.1.	 	PRODUCTS are not pasteurized, and continuous monitoring is necessary to maintain
PRODUCTS’ quality. Exhibit D hereto sets forth proper temperature ranges currently
applicable hereto, but PYRAMID may at any time establish different proper temperature
ranges.
	 
	 	8.1.2.	 	Each package and keg of the PRODUCTS has an “enjoy by” date, which is normally one
hundred, 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 establish
other intervals from fill to expiration of product life for purposes of proper
servicing and rotation in the market.
	 
	 	8.1.3.	 	Sales to the retail trade must occur within the time specified herein before “enjoy
by” dates, to maintain product quality in light of the non-pasteurized condition of
PRODUCTS and the need for PRODUCTS to reach consumers within the appropriate time after
packaging.

	 	8.2.	 	PYRAMID will not ship to WHOLESALER PRODUCTS with less than ninety (90) days remaining
before the “enjoy by” date unless WHOLESALER has approved such
PRODUCTS prior to shipment. Shipment of such PRODUCTS shall not alter the rotation
obligations of WHOLESALER hereunder.

	 	8.3.	 	WHOLESALER shall:

	 	8.3.1.	 	Store, ship, and carry all PRODUCTS constantly within temperature ranges
then-currently specified by PYRAMID.
	 
	 	8.3.2.	 	Take all commercially reasonable measures to cause its customers to store all draft
PRODUCTS 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 shelf
life 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) calendar
days before the “enjoy by” date, as it may be established according to PYRAMID’s
then-current quality assurance policies, which may modify or augment information set
forth in Exhibit E hereto.
	 
	 	8.3.5.	 	At all times know industry standards in the TERRITORY for product service related to
quality control, and adopt and implement the highest of such standards for quality and
level of service to draft PRODUCT accounts, which service shall include draft
installations, draft cleaning, and urgent deliveries of PRODUCTS.
	 
	 	8.3.6.	 	Rotate stock in WHOLESALER’s warehouse, on its vehicles, and at retail accounts to
assure that PRODUCTS with the “enjoy by” date closest to the date of retail sale are
shipped, sold and consumed before PRODUCTS with a later “enjoy by” date, and remove and
destroy, at WHOLESALER’s expense except as otherwise provided in part 5 hereof, any and
all 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 from
customer premises, and destruction of PRODUCTS after their “enjoy by” date, including
pick-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 to
cause, its employees personally to discharge of all duties of WHOLESALER hereunder, full
time and on-site, devoting their best personal efforts to the discharge of said duties in
accordance with the letter and spirit of this agreement and refraining from all activities
which might detract from the rendition of such personal management. WHOLESALER represents,
warrants and covenants that the personal knowledge, skills and experience of said persons
are unique and valuable and will at all times hereunder be available to WHOLESALER for the
purpose of carrying out the terms of this Agreement.
	 
	 	9.2.	 	The provisions of this part 9 are part of the bargained-for consideration of this
Agreement 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 hereunder
may be sold, assigned, transferred or licensed in whole or
in part in any manner whatsoever without the prior written consent of PYRAMID. For the
purposes of this agreement, any change in personnel or duties from WHOLESALER’s current
management and their current responsibilities at the level of general manager of beer sales
or higher (which specifically includes Bob Stevens as general manager) shall be deemed
delegation of duties hereunder.
	 
	 	9.4.	 	If WHOLESALER is a corporation, partnership, limited liability company, or similar
entity, any change in its, or its direct or indirect parent’s, capital stock, ownership
structure, 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 distributions
shall 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 successor
in 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 it
such weight as PYRAMID may determine in its sole discretion. Such business factors may
include without limitation whether a proposed assignee appears to have the financial
capacity, staffing, business experience, marketing skills, strategic direction,
distribution experience, and other abilities to maintain or increase market share for
PRODUCTS in TERRITORY to the same extent as other potential distributors, PYRAMID retaining
the right to compare its projection of results of the proposed change with its assessments
of all other wholesalers that might distribute PRODUCTS in TERRITORY, including, if
applicable, WHOLESALER without the proposed change, and to select its wholesale customer
accordingly. PYRAMID may consent or decline to consent to delegation of duties hereunder in
its business judgment.
	 
	 	10.2.	 	WHOLESALER shall give PYRAMID at least ninety (90) days’ written notice before any
proposed transfer of rights or delegation of duties, identifying all transferees and
delegates, all parties with interests in transferees or delegates, and all other parties
with interests in such interested parties, and providing the following additional
information:

	 	10.2.1.	 	In case of a delegation of duties by reason of change in personnel or assigned
duties, notice hereunder shall set forth the business history and personal information
of any proposed delegate in a statement substantially equivalent in content to State of
Washington form BLS 700-301.
	 
	 	10.2.2.	 	In case of transfer of an interest by reason of change of ownership or equitable
interest, notice hereunder shall set forth (a) a signed financial statement,
substantially equivalent in content to State of Washington form BLS 700-303, by each
proposed transferee and each party holding more than a 10% equity interest in the
transferee or in any party holding such an interest in the transferee and (b) a
business plan describing in detail the sales and promotional strategies, staffing, and
financing of operations following the proposed change.
	 
	 	10.2.3.	 	WHOLESALER shall promptly obtain and provide to PYRAMID responses to PYRAMID’s
reasonable requests during the notice period for other information
regarding proposed assignees or delegates it deems necessary for making its
determination.

	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 to
parts 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, substantially
abandons its business, has a negative net worth measured by its balance sheet prepared
in accordance with generally accepted accounting principles, or commits or suffers any
act indicating inability to pay its debts as they fall due, including without
limitation failure to provide proof of solvency after delinquency pursuant to part
3.9.1 hereof (said conditions being referred to herein as “insolvency”), provided,
however, that in the event of bankruptcy under federal law cancellation for insolvency
shall not occur if this Agreement is duly adopted by a party with power under the
jurisdiction 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 surrendered
under threat of revocation.
	 
	 	  11.3.3.	 	Suspensions of WHOLESALER’s state license as a distributor of beer during the term
hereof have cumulatively exceeded fourteen (14) days.

	 	11.4.	 	“Deficiency” means cause for cancellation or termination of this agreement
constituting 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 are
not susceptible of cure within said period, including without limitation those set forth in
part 11.3 hereof, are not deficiencies. To “rectify” a deficiency means to put PYRAMID in
all 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 fails
fully to live up to the terms and conditions of this Agreement, whether or not as the
result of deficiency, PYRAMID may cancel this agreement on sixty (60) days’ notice to
WHOLESALER, 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 of
deficiency, and WHOLESALER rectifies the claimed deficiency within sixty (60) days of
notice of cancellation, the notice will be of no effect. Recurrence of the same deficiency
during the term hereof is conclusive proof that it was not rectified, in which event the
original notice shall be effective on the later of its stated effective date or the
recurrence.
	 
	 	11.7.	 	WHOLESALER’s undertakings remain fully in force during the period of any notice of
cancellation or termination. WHOLESALER shall assure that both its draft sales and its
package sales of PRODUCTS in the TERRITORY are no less during a notice period than during a
period 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 sales
thus based of PRODUCTS, determined separately for draft and packaged, in any month during a
notice period be less than average monthly sales respectively of such draft or packaged
PRODUCTS during the corresponding Pre-Notice Period, PYRAMID shall be entitled to
compensation for WHOLESALER’s failure to carry out said assurance. This part 11.7 does not
constitute election of remedy or diminish any express rights of either party under this
Agreement. The parties recognize that if WHOLESALER allows or causes sales to decline
following such notice, PYRAMID will suffer lost profits and loss of goodwill in the
TERRITORY that will be difficult to measure. Damages for such losses shall be calculated as
the decline in 

10

 

	 	 	 	WHOLESALER’s sales in the notice period as compared to the Pre-Notice
Period, multiplied by PYRAMID’s average gross revenues for sales during the three calendar
months preceding such notice. The parties, after independent consideration, agree that this
amount is a reasonable estimate of PYRAMID’s damages and that this provision does not
constitute a penalty.

	12.	 	Inventory Purchase: Upon the effective date of cancellation or termination of this
Agreement by PYRAMID:

	 	12.1.	 	PYRAMID will purchase from WHOLESALER, and WHOLESALER will sell and deliver to PYRAMID
at WHOLESALER’s premises, WHOLESALER’s inventory of the PRODUCTS that have “enjoy by” dates
that are at least fifteen (15) days after the date WHOLESALER physically delivers these
fully merchantable PRODUCTS to PYRAMID or its designated carrier (“Qualifying Inventory”).
The purchase price for Qualifying Inventory will be WHOLESALER’s landed cost, consisting of
original 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 will
pay WHOLESALER fifty percent (50%) of the amount it would have paid for purchase of such
items under part 12.1 hereof, upon receipt of proof of destruction of those items in
accordance with part 14 hereof.

	13.	 	VALUATION: Upon termination of this Agreement by PYRAMID solely pursuant to part 11.2
hereof, PYRAMID will pay WHOLESALER compensation for the laid-in cost of inventory pursuant to
part 12 hereof and liquidated damages measured on the fair market price of the business of
distributing the PRODUCTS in the TERRITORY under this Agreement (the “Business”), as provided
in this part 13. The parties, after independent consideration, conclude that the value of the
Business would be difficult to determine accurately. The parties therefore agree, making their
best estimate of a fair evaluation, that the liquidated value of the Business is equal to the
WHOLESALER’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 a
penalty.

	14.	 	DESTRUCTION OF NON-QUALIFYING INVENTORY: In the event of cancellation or termination
by either party, WHOLESALER shall destroy all PRODUCTS that are not Qualifying Inventory in
accordance with PYRAMID’s procedures for destruction of non-merchantable products, and shall
provide 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 the
distribution 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 or
damaging the sales, merchandising, tap and shelf positions, goodwill, or consumer
acceptance of PRODUCTS.
	 
	 	15.3.	 	Provide to PYRAMID a complete list of each customer to which it has sold any of the
PRODUCTS during the previous twelve (12) months, stating for each the name, 

11

 

	 	 	 	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 parties
relating in any way to this Agreement or its performance, interpretation, validity,
valuation, or breach, or any other matter between the parties including any tort or
statutory claim, or any claims for injunctive relief (collectively, “Covered Disputes”),
shall be arbitrated under the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”) in Seattle, Washington, before one neutral arbitrator who is a member
of the AAA’s Large Complex Case Panel. All documents, materials and information in the
possession of each party and in any way relevant to the claims or disputes, shall be made
available to the other party for review and copying not later than sixty (60) days after
the demand for arbitration is served. The arbitrator may permit such depositions or other
discovery deemed necessary for a fair hearing. The arbitrator shall take all necessary
steps to conclude the hearing within two (2) days, and to issue a written decision not
later than ninety (90) days from the arbitrator’s appointment. The parties have included
these time limits to expedite the proceeding, but the arbitrator may make reasonable
extensions, 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 court
having jurisdiction over either party.
	 
	 	16.2.	 	Notwithstanding part 16.1 hereof, either party may bring claims against the other
party (a) as part of litigation commenced by an independent third party and in the same
forum or (b) to seek preliminary injunctive relief pending arbitration.
	 
	 	16.3.	 	In any arbitration, litigation, or other proceeding between the parties, the
prevailing 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 to
order of a court of competent jurisdiction holding part 16.1 hereof inapplicable, the
exclusive jurisdiction and venue for any dispute between the parties shall be the courts of
the State of Washington in Seattle, Washington or the U.S. District Court, Western District
of Washington in Seattle, Washington. In such event,
after satisfactory opportunity to consult legal counsel, and being fully informed, to the
fullest extent permitted by law, as separately bargained-for consideration, EACH PARTY
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND INVOLVING ANY COVERED DISPUTES.

	17.	 	INSURANCE: Pyramid will maintain comprehensive general liability insurance and
products liability insurance, with a total aggregate limit of $2 million for each type of
coverage and will upon execution of this Agreement promptly forward a current certificate
thereof to WHOLESALER. WHOLESALER will maintain comprehensive general liability insurance and
liquor liability insurance, with a total aggregate limit of $2 million for each type of
coverage and will upon execution of this Agreement promptly forward a current certificate
thereof 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 and
all claims, actions, demands, causes of actions, attorneys fees, expenses, and costs arising
from any claims against WHOLESALER relating to defects in

12

 

	 	 	PRODUCTS caused by PYRAMID.
WHOLESALER agrees to defend and hold harmless, and hereby indemnifies, PYRAMID and all
PYRAMID’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 and
supersedes all prior agreements, understandings and representations, oral or written, if
any, between the parties, the parties expressly agreeing that except for warranties and
representations set forth herein they rely entirely upon their own judgment and are
satisfied that they have had adequate opportunity to examine and consider all matters
pertaining to the premises. The captions are for convenience only and are not parts of the
agreement, nor shall they be used in interpreting the agreement. This agreement may be
modified only by subsequent writing signed by both parties.
	 
	 	19.2.	 	No waiver: Failure in any particular instance to exercise any right hereunder or to
object to any breach hereof shall not constitute waiver of any such right or of any remedy
or 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 be
given by first class mail addressed to the party receiving notice at the address set forth
herein.
	 
	 	19.4.	 	Choice of law: This agreement shall be interpreted and enforced in all respects
exclusively under the law applicable to domestic winery sales contracts made and to be
performed entirely within the state of Washington.
	 
	 	19.5.	 	Severance: Invalidity or non-enforceability of any provision hereof, other than an
obligation 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 consideration
necessary to secure consent hereto be affected by a ruling of a court with respect to such
invalidity or non-enforceability, such court shall modify such provision so as to render it
valid and enforceable with the least possible change of its effect.

	 	 	 	 	 	 	 	 	 	 	 
	PYRAMID BREWERIES INC.,	 	 	 	 	 	ALASKA
DISTRIBUTORS CO.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ GARY MCGRATH
	 	 	 	By:
	 	/s/ STEPHEN B. LOEB	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 
	 
	 	GARY MCGRATH
	 	 	 	 	 	STEPHEN B. LOEB,

PRESIDENT	 	 

13

 

Exhibits to this Agreement are intentionally omitted.

14exv10w22

 

Exhibit 10.22

LEASE EXTENSION AGREEMENT

THIS LEASE EXTENSION AGREEMENT (“Agreement”) is entered into this 31st day of July,
2006, by and between MACTARNAHAN LIMITED PARTNERSHIP, an Oregon limited partnership (“Landlord”),
and PBC ACQUISITION, LLC, a Delaware limited liability company (“Tenant”).

Recital

     A. Landlord, as landlord, and Tenant, as tenant, entered into that certain Indenture of Lease
(the “Brewery Lease”) dated effective July 31, 2004, for all portions of the Building located at
2730 NW 31st Avenue, Portland, Oregon, except portions of the first floor of said Building
consisting of the “Alehouse” and “common areas”, which Premises are more particularly described in
the Brewery Lease.

     B. The Brewery Lease was scheduled to terminate on July 31, 2006, unless Tenant exercised its
option to extend the term as contained in the Brewery Lease. Tenant timely exercised the option to
extend the term of the Brewery Lease. By this Agreement, the parties hereby set forth their
agreement regarding the same.

Agreement

     For good and valuable consideration, the adequacy of which the parties hereby acknowledge, the
parties hereby agree as follows:

     1. Capitalized Terms. Capitalized terms used in this Agreement shall have the same meaning as
set forth in the Brewery Lease, except as otherwise expressly provided herein.

     2. Extension and Term of Extension. The Brewery Lease is hereby extended for an additional
period of five (5) years, commencing on August 1, 2006, and terminating on July 31, 2011 (the
“Renewal Term”); on and subject to all of the terms and conditions set forth in the Brewery Lease,
except that (i) the number of options to extend the Brewery Lease under Article VI thereof shall be
two instead of three, and (ii) Base Rent during the Renewal Term shall be $6,177.04 per month,
payable in accordance with the provisions of the Brewery Lease.

     3. No Other Changes. Except as specifically provided herein to the contrary, all of the terms
and conditions of the Brewery Lease shall remain in full force and effect. In the event of a
conflict between the terms of this Agreement and the Brewery Lease, the terms of this Agreement
shall control.

     4. Counterparts. This Agreement may be executed and delivered in counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one and the same
instrument; facsimile delivery of signatures is sufficient to form a binding agreement.

1

 

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first written
above.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LANDLORD:	 	 	 	TENANT:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MACTARNAHAN LIMITED PARTNERSHIP,	 	 	 	PBC ACQUISITION, LLC, a Delaware
	an Oregon limited partnership	 	 	 	limited liability company
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	Harmer Mill & Logging Supply Co., an

Oregon corporation, General Partner	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	     /s/ R. Scott MacTarnahan
	 	 	 	By:
	 	       /s/ Jason Rees	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Name:

	 	   R. Scott MacTarnahan
	 	 	 	Name:
	 	      Jason Rees	 	 	 	 	 	 
	Title:

	 	   Pres.
	 	 	 	Title:
	 	      Manager	 	 	 	 	 	 

2

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