Related Party Transactions

For additional related party transactions, see Notes 5 and 19.

As of December 31, 2019 and 2018, A-B owned approximately 31.1% and 31.3%, respectively, of our outstanding common stock.

Transactions with Anheuser-Busch, LLC (“A-B”), Ambev and Anheuser-Busch Worldwide Investments, LLC (“ABWI”)

In December 2015, we partnered with Ambev, the Brazilian subsidiary of Anheuser-Busch InBev SA, to distribute Kona beers into Brazil. In August 2016, we also entered into an International Distribution Agreement with ABWI, an affiliate of A-B, pursuant to which ABWI will distribute our malt beverage products in jurisdictions outside the United States, subject to the terms and conditions of our agreement with our other international distributor, CraftCan Travel LLC, and certain other limitations summarized in "International Distribution Agreement" below.

Transactions with A-B, Ambev and ABWI consisted of the following (in thousands):



	Year Ended December 31,
	2019		2018		2017
Gross sales to A-B and Ambev	$	162,658	$	166,534	$	163,368
International distribution fee earned from ABWI	3,248		3,400		3,400
Cumulative international distribution fee from ABWI, recorded as deferred revenue	22,736		5,985		3,384
Margin fee paid to A-B, classified as a reduction of Sales	2,294		2,296		2,277
Inventory management and other fees paid to A-B, classified in Cost of sales	384		383		384
Media reimbursement from A-B, classified as a reduction of Selling, general and administrative expenses	—		500		290

Amounts due to or from A-B and ABWI were as follows (in thousands):



	December 31,
	2019			2018
Amounts due from A-B related to beer sales pursuant to the A-B distributor agreement	$	11,394		$	17,946
Amounts due from ABWI and A-B related to international distribution fee and media reimbursement	—			6,000
Refundable deposits due to A-B	(1,197		)	(2,840		)
Amounts due to A-B for services rendered	(5,976		)	(5,140		)
Net amount due from A-B and ABWI	$	4,221		$	15,966

Agreements with Anheuser-Busch, LLC

Contract Brewing Agreements

On August 23, 2016, we entered into a Contract Brewing Agreement (the “Brewing Agreement”) with A-B Commercial Strategies, LLC (“ABCS”), an affiliate of A-B, pursuant to which ABCS will brew, bottle and package up to 300,000 barrels of our mutually agreed products annually, in facilities owned by ABCS within the United States, for an initial term through December 31, 2026. Production of CBA's products in ABCS’s brewery in Fort Collins, Colorado, began in the second quarter of 2017.We share equally with ABCS in any cost savings arising from the Brewing Agreement, provided that our cost savings will equal at least $10.00 per barrel on an aggregate basis, following certain adjustments as set forth in the Brewing Agreement. The Brewing Agreement provides specified termination rights, including, among other things, the right of either party to terminate the Brewing Agreement if (i) the other party fails to perform any material obligation under the Brewing Agreement, subject to certain cure rights, (ii) the International Distribution Agreement (as defined above) is terminated pursuant to certain specified provisions thereof, or (iii) subject to certain conditions, if the A-B Distributor Agreement (as defined above) is terminated pursuant to certain specified provisions thereof.

On January 30, 2018, we also entered into a Contract Brewing Agreement with ABC, pursuant to which we agreed to brew, package, and palletize certain malt beverage products of A-B's craft breweries at our Portland, Oregon, and Portsmouth, New Hampshire breweries, as selected by ABC. Under the terms of this agreement, ABC paid us a per barrel fee that varies based on the annual volume of the specified product brewed by us, plus (a) our actual incremental costs of brewing the product, and (b) certain capital costs and costs of graphics and labeling that we incur in connection with the brewed products. The agreement expired on December 31, 2019.

Distributor Agreement

The Master A-B Distributor Agreement (the "A-B Distributor Agreement"), as amended in August 2016, provides for the distribution of our brands in all states, territories and possessions of the United States, including the District of Columbia and, except with respect to Kona beers, all U.S. military, diplomatic, and governmental installations in a U.S. territory or possession. Under the A-B Distributor Agreement, we have granted A-B the right of first refusal to distribute our products, including any internally developed new products, but excluding new products that we may acquire. We are responsible for marketing our products to A-B’s wholesalers, as well as to retailers and consumers.

As amended in August 2016, the term of the A-B Distributor Agreement will expire on December 31, 2028, unless terminated earlier as a result of the Merger or otherwise. The A-B Distributor Agreement is also subject to immediate termination, by either party, upon the occurrence of standard events of default as defined in the agreement. Additionally, the A-B Distributor Agreement may be terminated by A-B, with six months’ prior written notice to us, upon the occurrence of any of the following events:


•	we engage in incompatible conduct that damages the reputation or image of A‑B or the brewing industry;


•	any A-B competitor or affiliate thereof acquires 10% or more of our outstanding equity securities, and that entity designates one or more persons to our board of directors;


•	our current chief executive officer ceases to function in that role or is terminated, and a satisfactory successor, in A‑B’s opinion, is not appointed within six months;


•	we are merged or consolidated into or with any other entity or any other entity merges or consolidates into or with us without A-B’s prior approval; or


•	A-B, its subsidiaries, affiliates, or parent, incur any obligation or expense as a result of a claim asserted against them by or in our name, or by our affiliates or shareholders, and we do not reimburse and indemnify A-B and its corporate affiliates on demand for the entire amount of the obligation or expense.

Under the A-B Distributor Agreement, we pay $0.25 per case-equivalent as a margin fee. In addition, since January 1, 2019, we have been required to reinvest an aggregate amount equal to $0.25 per case-equivalent in sales and marketing efforts for our products.

International Distribution Agreement

On August 23, 2016, we also entered into an International Distribution Agreement (the “International Distribution Agreement”) with ABWI pursuant to which ABWI is the sole and exclusive distributor of our malt beverage products in jurisdictions outside the United States, subject to the terms and conditions of our agreement with our other international distributor, CraftCan Travel LLC, and certain other limitations, in each case as set forth in the International Distribution Agreement. Under the International Distribution Agreement, following delivery of notice to us, ABWI may also elect to commence brewing outside of the United States some or all of the products to be distributed in the non-U.S. jurisdictions covered by the International Distribution Agreement.

Under the terms of the International Distribution Agreement, with respect to our exported products produced by us, ABWI pays us our costs of production plus reasonable out-of-pocket expenses relating to export shipment costs. Additionally, ABWI pays us an international royalty fee based on volume of our products sold by ABWI, equal to either $40 per barrel or $30 per barrel, depending on certain factors described in the International Distribution Agreement, which royalty fee is subject to escalation annually, beginning in calendar year 2018, on the terms described in the International Distribution Agreement. For calendar years 2016, 2017, 2018, and 2019 ABWI has paid us one-time fees of $3.0 million, $5.0 million, $6.0 million and $20.0 million in January of 2017, 2018 and 2019 and August 2019, respectively. The sum of the fees is recognized in Beer Related Net sales on a straight-line basis over the 10-year contract term.

The International Distribution Agreement contains specified termination rights, including, among other things, the right of either party to terminate the International Distribution Agreement if (a) the other party fails to perform any material obligation under the International Distribution Agreement, subject to certain cure rights or (b) the Brewing Agreement (as defined below) is terminated pursuant to certain specified provisions thereof. Unless terminated sooner, including upon completion of the Merger, the International Distribution Agreement will continue in effect until December 31, 2026.

Contract pricing may not be commensurate with amounts that an independent market participant would pay due to the related party nature of the agreements.

Exchange Agreement

We have also entered into an Amended and Restated Exchange and Recapitalization Agreement (the “Exchange Agreement”) with A-B, pursuant to which we have granted A-B certain contractual rights. The Exchange Agreement originally was entered into in 2004 as part of a recapitalization in which we redeemed preferred shares held by A-B in exchange for cash and the shares of our common stock currently held by A-B. A-B owned 6,069,047, or approximately 31.1%, of our outstanding shares of common stock at December 31, 2019.

The Exchange Agreement entitles A-B to designate two members of our board of directors. A-B also generally has the right to have a designee on each committee of the board of directors, except where prohibited by law or stock exchange requirements, or with respect to a committee formed to evaluate transactions or proposed transactions between A-B and us. The Exchange Agreement contains limitations on our ability to take certain actions without A-B’s prior consent, including, but not limited to, our ability to issue equity securities or acquire or sell assets or stock, amend our Articles of Incorporation or Bylaws, grant board representation rights, enter into certain transactions with affiliates, distribute our products in the United States other than through A-B or as provided in the A-B Distributor Agreement, or voluntarily terminate our listing on the Nasdaq Stock Market.

Transactions with Wynwood

As of December 31, 2019 and 2018, Wynwood was a wholly owned subsidiary and, as of December 31, 2017, we owned a 24.5% interest in Wynwood. See Note 5 for additional information.

Transactions with Wynwood consisted of the following (in thousands):



	Year Ended December 31,
	2019		2018		2017
Master distributor fee earned	$	—	$	27	$	18
Royalty fee paid	—		—		94
Brewery representative reimbursement, classified as a reduction of Selling, general and administrative expenses	—		—		90
Share of loss, classified as a component of Other income (expense), net	—		44		75
Refund of investment, classified as a reduction in the carrying value of the equity method investment	—		23		—