LONG TERM WINE GRAPE PURCHASE AGREEMENT
THIS LONG TERM WINE GRAPE PURCHASE AGREEMENT (this "AGREEMENT") is
made and entered into as of this 12th day of March, 1993, by and between XXXXXX
VINEYARDS AND MANAGEMENT CO., a California corporation ("GROWER"), and HEUBLEIN,
INC., a corporation authorized to do and doing business in the State of
California ("WINERY").
RECITALS
A. Winery desires to purchase from Grower, and Grower desires to sell to
Winery, certain wine grapes (the "Wine Grapes") grown and to be grown on
Grower's land commonly referred to as the San Xxxxx Ranch (the "Vineyard").
B. Winery desires for Grower to convert certain Wine Grape varieties
currently grown on the Vineyard over to certain other varieties and thereafter
to purchase such converted varieties, and Grower is willing to convert to and
sell such other varieties to Winery hereunder.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. PURCHASE AND SALE OF WINE GRAPES. During the term of this
Agreement, Grower shall sell to Winery, and Winery shall purchase from Grower,
(i) the Wine Grape varieties currently produced on the Vineyard in accordance
with SECTION 2 below, and (ii) the Wine Grape varieties into which varieties
currently produced on the Vineyard are converted in accordance with SECTION 3
below.
2. CURRENTLY PRODUCED VARIETIES. The Wine Grape varieties currently
produced and subject to this Agreement are as follows:
(a) CHARDONNAY AND CABERNET SAUVIGNON. The Chardonnay and
Cabernet Sauvignon produced on the two portions of the Vineyard currently
planted with such varieties, consisting of approximately 174 acres each, in
accordance with the following Tonnage Schedule:
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TONNAGE SCHEDULE
Approximate Minimum Approximately Minimum Tons
Crop Year Tons of Chardonnay of Cabernet Sauvignon
--------- ------------------ ---------------------
1993 400 0
1994 800 225
1995 All 475
1996 " 775
1997 " 1000
1998-2002 " All
and Until
Termination
Notwithstanding the foregoing, Winery may elect to purchase Chardonnay and
Cabernet Sauvignon produced on the Vineyard in excess of the tonnage
specified above by giving Grower written notice of such election on or
before the first day of April of the crop year to which such election is to
apply; PROVIDED, HOWEVER, that the tonnage of each such variety required to
be purchased in each crop year succeeding any such election shall be the
greater of the total tonnage purchased pursuant to such election and the
tonnage specified in the Tonnage Schedule above. The parties acknowledge
that the tonnage amounts specified above are approximations only, and that
the delivery of Wine Grapes by Grower to Winery hereunder may be up to 15
tons above or below the amounts specified in the Tonnage Schedule above.
(b) ZINFANDEL. All Zinfandel produced on the 24 acres of the
Vineyard currently planted with such variety, commencing with the 1993 crop
year, all of which shall be harvested as White Zinfandel hereunder.
3. CONVERSIONS.
(a) CHENIN BLANC AND SAUVIGNON BLANC. Grower shall convert
approximately 200 acres of the Vineyard currently planted with Chenin Blanc
and/or Sauvignon Blanc to acres planted with Merlot in accordance with the
following schedule:
Approximate
Crop Year Number of Acres
--------- ---------------
1993 70
1994 30
1995 50
1996 50
PROVIDED, HOWEVER, that Winery may elect:
(i) to cause Grower to convert the acres specified above
for any crop year to Chardonnay or Cabernet Sauvignon in lieu of
Merlot; or
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(ii) to enter into good faith negotiations with Grower to
convert such acres to a variety other than Merlot, Chardonnay or
Cabernet Sauvignon,
by giving Grower written notice of such election prior to the first day of
November preceding the crop year to which such conversion is to apply. If
Winery fails to elect a conversion variety by such first day of November or
elects to enter into negotiations with Grower in accordance with the
foregoing and agreement is not reached on an alternative variety by the
succeeding 15th day of December, Grower shall convert the acres specified
for such crop year to Merlot as provided above.
(b) ZINFANDEL. Grower may elect to convert the 24 acres of the
Vineyard currently planted with Zinfandel to acres planted with Merlot,
Chardonnay or Cabernet Sauvignon:
(i) if gross revenues received by Grower for Zinfandel
hereunder are less than $72,000 ($3,000 per acre) in any crop year; or
(ii) after completion of the harvest for the 1995 crop
year,
by giving Winery written notice (the "GROWER ELECTION NOTICE") prior to the
first day of December preceding the crop year to which the election is to
apply. If Grower gives a Grower Election Notice, Winery shall have the
right to elect (x) which of the varieties such acres will be converted
into, or (y) to enter into good faith negotiations with Grower to convert
to a variety other than Merlot, Chardonnay or Cabernet Sauvignon, by giving
Grower written notice within 15 days following the Grower Election Notice.
If Winery fails to make such election within the 15-day period, or elects
to negotiate and agreement is not reached within 20 days thereafter, Grower
may convert such acres to Merlot, Chardonnay or Cabernet Sauvignon or
withdraw the acres from coverage by this Agreement by giving written notice
to Winery not more than 60 days after the date Grower gives the Grower
Election Notice.
(c) LIMITATIONS. Notwithstanding any provision of SECTIONS 3(a)
and 3(b) above to the contrary, Grower shall not be required:
(i) to convert acres of the Vineyard currently planted with
Chef Blanc, Sauvignon Blanc or Zinfandel to acres planted with any
other variety unless such other variety (x) was purchased under this
Agreement at a price in excess of $500 per ton in the crop year
preceding the crop year to which such conversion is to apply, or (y)
would have generated a price in excess of $500 per ton for such
preceding crop year using the method for determining price specified
in SECTION 6 below if such variety was not so purchased; or
(ii) to sell to Winery, and Winery shall not be required to
purchase, in excess of the following average tons per acre of the
following Wine Grape varieties in any crop year hereunder:
3
Variety Average Tons Per Acre
------- ---------------------
Chardonnay 8.0
Cabernet Sauvignon 7.5
Merlot 7.5
(d) CONVERSION METHOD. Any conversion in accordance with
SECTIONS 3(a) and 3(b) above shall be effected by interplanting, replanting
or grafting in the sole discretion of Grower.
4. DELIVERY. Deliveries of Wine Grapes hereunder shall be FOB
Heublein in Paicines, California. In the event Winery desires Grower to deliver
Wine Grapes to another location, delivery shall be FOB such other location, and
Winery shall reimburse Grower for all carrier costs in excess of the carrier
costs that would have been required to be paid to deliver such Wine Grapes to
Paicines. All risk of loss and risk of damage and depreciation with respect to
The Wine Grapes to be sold and delivered to Winery hereunder shall be borne by
Grower until actually delivered to and accepted without unreasonable delay by
Winery hereunder.
5. RETENTION OF WINE GRAPES BY GROWER. Notwithstanding the
provisions of SECTIONS 2 and 3 above to the contrary, each harvest Grower, in
its sole discretion, may retain for its own use up to 25 tons of Wine Grapes of
each variety produced on the Vineyard.
6. TERM AND TERMINATION.
(a) TERM. The term of this Agreement shall extend from the date
hereof until terminated in accordance with the provisions of this SECTION
6.
(b) TERMINATION BY EITHER PARTY. Either party may terminate
this Agreement after the 1999 crop year by giving written notice (a
"TERMINATION NOTICE") to the other party. Termination shall be effective
upon completion of the third crop year following the thirty-first day of
December next succeeding the Termination Notice. For example, if a party
were to give a Termination Notice on November 30, 1999, this Agreement
would terminate after delivery of the 2002 crop by Grower to Winery.
(c) WITHDRAWAL BY GROWER. In the event Winery properly delivers
a Termination Notice to Grower under SECTION 6(b) above, Grower at its
option (i) may withdraw up to 1/3 of any or all varieties of Wine Grapes
from coverage by this Agreement by delivery to Winery of written notice (a
"WITHDRAWAL NOTICE") of its intent to do so prior to the first day of April
following the Withdrawal Notice, and (ii) may withdraw up to 2/3 of any or
all varieties of Wine Grapes from such coverage by delivery of a Withdrawal
Notice prior to the succeeding first day of April.
7. PRICING. The price to be paid by Winery to Grower for each
variety of Wine Grapes purchased under this Agreement shall be determined with
reference to the Final Grape Crush Report (the "CRUSH REPORT"), currently
published by the California Department of Food and Agriculture (the
"DEPARTMENT") on the 10th day of March of each year, for the crop year (the
"APPLICABLE CROP YEAR") preceding the harvest of such Wine Grape variety, as
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it may be supplemented or corrected by the Department up through the succeeding
first day of August (the "APPLICABLE CRUSH REPORT"), in accordance with the
following:
(a) VARIETIES OTHER THAN MERLOT. The price per ton for each
variety of Wine Grapes other than Merlot under this Agreement shall be
equal to [ ]* (the
"PRICING DISTRICTS"), as established by the Department, determined by:
[ ]*
Application of the provisions of this SECTION 7(a) is illustrated by the
example set forth in EXHIBIT A attached hereto and by this reference
incorporated herein.
(b) MERLOT. The price per ton for Merlot under this Agreement
shall be the lower of:
---------------------------------
* Confidential Treatment Requested for Redacted Portion.
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[ ]*
Notwithstanding the foregoing, if the price per ton for Merlot calculated
above is the highest of the prices calculated for varieties other than
Merlot under SECTION 7(a), the price per ton for Merlot hereunder shall
equal the price per ton of the variety having the next highest price.
Application of the provisions of this SECTION 7(b) is illustrated by the
example set forth in EXHIBIT B.
(c) UNAVAILABILITY OF CRUSH REPORT. If the Department shall
cease to publish the Crush Report or shall cease to publish the Crush
Report in substantially its present form with respect to any crop year
necessary for determining prices under this SECTION 7, the prices to be
paid hereunder shall be determined with reference to the price information
for the Pricing Districts, in form and substance as nearly identical as
possible to the price information for the Pricing Districts in the Crush
Report, in an alternative government publication.
8. PAYMENT. Winery shall pay Grower the price (the "PRELIMINARY
PRICE") for Wine Grapes purchased under this Agreement, determined in accordance
with SECTION 7 above and subject only to minor adjustment as hereinafter
provided, within 10 days after Grower gives Winery written notice of completion
of the applicable harvest. The parties shall have an additional 30 days after
the expiration of such 10-day period to determine the final price (the "FINAL
PRICE") to be paid by Winery to Grower for such Wine Grapes based on corrected
sugar, defect or M.O.G. penalties, weight tags or similar minor adjustments, and
to make any Winery payments and/or Grower refunds necessary to reconcile the
Final Price with the Preliminary Price. For purposes of this SECTION 8, the
term "COMPLETION OF THE APPLICABLE HARVEST" shall mean the substantial
completion of the harvest of all varieties of Wine Grapes to be delivered under
this Agreement during the applicable crop year, notwithstanding the existence of
certain Wine Grapes with respect to which harvest may have been deferred at the
request of Winery for later delivery.
9. GRACE QUALITY STANDARDS. Wine Grapes purchased by Winery
hereunder shall be required to meet the quality standards set forth in EXHIBIT C
attached hereto and by this reference incorporated herein. Grower represents
and warrants that the Wine Grapes delivered hereunder to Winery will not be
adulterated or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act, as amended, and will not be an article that may not under the
provisions of Section 301(d), 404 or 405 of that Act, be introduced into
interstate commerce. Grower further represents and warrants that all such Wine
Grapes will in all respects conform to all requirements of the Xxxxxxx Food,
Drug and Cosmetic law of California, and the regulations of the California State
Department of Public Health, and that it will comply in all
---------------------------------
* Confidential Treatment Requested for Redacted Portion.
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material respects with all other state and federal laws pertaining to Wine
Grapes sold under this Agreement. If Grower breaches its obligations under the
preceding two sentences, Grower shall indemnify and hold harmless Winery from
any costs, expenses, damages or claim arising out of such breach. In the event
any litter or foreign material is present in the Wine Grapes, it shall be
presumed that such litter or foreign material originated with Grower, and Grower
shall be responsible for all damages caused by such litter and foreign material.
10. FARM MANAGEMENT DECISIONS. Grower shall have the exclusive right
and sole discretion to make all decisions with respect to the farming and
management of the Vineyard and the Wine Grapes subject to this Agreement,
including but not limited to the right and discretion to replant and interplant
Wine Grapes to maintain contracted varieties at viable and economic levels;
PROVIDED, HOWEVER, that Grower will follow good farming and viticultural
practices in growing Wine Grapes sold to Winery hereunder.
11. MATTERS BEYOND PARTIES' CONTROL.
(a) INTERRUPTION OF OR INTERFERENCE WITH BUSINESS. If the
business of either party is interrupted or interfered with due to a
condition beyond its reasonable control, including without limitation fire,
flood, storm, earthquake, explosion, war, rebellion, insurrection,
quarantine, act of God, boycott, embargo, strike or other labor
disturbance, riot, any governmental law, directive or regulation or a
shortage of fuel or natural gas, materially and adversely affecting such
parties' business, such party shall, at its option, be excused for the
duration of the intervention or interference from its performance under
this Agreement with respect to the Wine Grapes thereby affected. A party
wishing to have its performance excused under this SECTION 11(a) shall
first give written notice to the other party as soon as such party
determines a sufficient condition of intervention or interference may
exist.
(b) RELEASE OF LIABILITY DURING INTERRUPTION OR INTERFERENCE.
If performance under this Agreement by either party is excused under
SECTION 11(a) above, each party shall be released from any and all
liability for its failure to purchase or sell the Wine Grapes, as
applicable, during the duration of the condition which resulted in the
excuse of performance, including without limitation all liability for loss
of market, loss of price and any other claim whatsoever which a party might
have against the other party as a result of such condition, except only the
obligation of Winery to pay for Wine Grapes already delivered by Grower and
accepted by Winery hereunder.
(c) WINERY'S UNDERTAKING IN THE EVENT OF INTERRUPTION OR
INTERFERENCE. If Winery is the party whose performance is excused under
SECTION 11(a) above, Winery shall use its reasonable best efforts to accept
and process the Wine Grapes affected thereby at a facility other than
Winery's facility in Paicines, California. If Winery designates another
point of delivery, the provisions of SECTION 4 above with respect to the
allocation of carrier costs shall apply. If Winery does not designate
another delivery point, it shall use its reasonable best efforts to find an
alternative purchaser for the affected Wine Grapes.
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12. ARBITRATION. In the event of any dispute under the provisions of
this Agreement, such dispute shall be subject to arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association if
either party makes written demand for arbitration on the other party; PROVIDED,
HOWEVER, that each party shall be limited to a period of 5 days for presentation
of its case in arbitration, and any briefs submitted by the parties in support
of their respective positions shall be limited to 20 pages each. If the parties
agree on his or her selection, there shall be one arbitrator; but, if no such
agreement is reached within 5 days after demand for arbitration, there shall be
three arbitrators, one appointed by Grower and a second appointed by Winery
within 10 days after demand for arbitration, and a third chosen by the two who
are so appointed within 10 days after expiration of the foregoing 10-day period.
If there is one arbitrator, his or her decision shall be binding; and if there
are three arbitrators, the decision of any two of them shall be binding. No one
shall act as an arbitrator who is employed by Grower or by Winery or who in any
way is financially interested in the business affairs of either Grower or
Winery. All costs of such arbitration shall be borne equally by the parties.
While any such dispute is being resolved, neither party shall be relieved of its
obligations under this Agreement.
13. LIENS AND ENCUMBRANCES. During the term of this Agreement,
Grower will not create or incur any lien, charge or other encumbrance on the
Vineyard which would defeat the rights of Winery hereunder, except deeds of
trust securing indebtedness (including but not limited to crop loans) to
institutional lenders, and except for such deeds of trust Grower will not
transfer, assign or convey any interest in the Vineyard that would defeat the
rights of Winery hereunder.
14. MISCELLANEOUS.
(a) NOTICES. All notices under this Agreement shall be in
writing and shall be deemed to be given when personally delivered or when
sent by United States Registered or Certified Mail, postage prepaid, or
when sent by facsimile or telegraph, addressed to the party for whom
intended at the following addresses:
IF TO GROWER:
Xxxxxx Vineyards and Management Co.
0000 0xx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: President
IF TO WINERY:
Heublein, Inc.
00 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxxx
AND:
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Heublein, Inc.
00000 Xxxx #00
Xxxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxxxx
Either party may change the address to which notices shall be sent by
giving written notice to such effect in accordance with the terms of this
SECTION 14(a) provided that notice of change of address shall not be deemed
given until received.
(b) AMENDMENTS AND MODIFICATIONS. This Agreement may not be
supplemented, altered, modified, amended or otherwise changed except by an
instrument in writing signed by the parties.
(c) HEADINGS. The headings of the various Sections of this
Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
(d) ENTIRE AGREEMENT; WAIVERS. This Agreement constitutes the
entire agreement between the parties and supersedes all prior and
contemporaneous agreements, representations and understandings of the
parties pertaining to the subject matter hereof. No waiver of any
provision of this Agreement shall be deemed or shall constitute a waiver of
any other provision, nor shall any waiver constitute a continuing waiver.
No waiver shall be binding unless executed in writing by the party making
the waiver.
(e) ATTORNEYS' FEES AND COSTS. If any action or other
proceeding, including arbitration, is brought by either party against the
other to enforce this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys'
fees and other costs incurred in such action or proceeding, in addition to
any other relief to which such party may be entitled.
(f) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with and by the laws of the State of California.
(g) TIME OF THE ESSENCE. Time is of the essence of this
Agreement, and the time for performance of any act provided in this
Agreement shall be strictly construed.
(h) ASSIGNMENT. This Agreement may not be assigned by either
party without the prior written consent of the other party, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, either
party may assign this Agreement to one or more of such party's affiliates,
a partnership in which such party is a general partner or a joint venture
in which such party is a joint venturer, without the prior written consent
of the other party.
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(i) BINDING EFFECT. This Agreement and the covenants herein
contained shall run with and bind the land covered by this Agreement and
shall bind the parties hereto, their heirs, executors, administrators,
grantees, vendees, transferees, assignees, legatees, devisees and other
successors in interest, whether partial or entire. Grower shall cause any
of its successors in interest to sign an agreement with Winery to assume
and be bound by this Agreement in form suitable for recording, and Winery
agrees that on execution of such an assumption agreement Grower will be
relieved from this Agreement.
(j) SEVERABILITY. If any provision or any application of any
provision of this Agreement shall be invalid or unenforceable, the
remainder of this Agreement and all other applications of such provision
shall be unaffected by such invalidity or unenforceability.
(k) ENTRY TO THE VINEYARD. Throughout the term hereof, Winery's
representatives may enter upon the Vineyard at reasonable times and in a
reasonable manner following reasonable notice for the purpose of inspecting
the Vineyard and the Winegrapes and observing the viticultural practices
being followed. Such inspections may include, without limitation, taking
samples of Wine Grapes in reasonable quantities and taking pictures of and
otherwise recording data with respect to the Vineyard and the Wine Grapes.
No such sampling shall be deemed to be acceptance by Winery of such
WineGrapes.
(l) AUTHORITY. Each corporate party executing this Agreement
and the agent executing this Agreement on such party's behalf hereby
warrants that such party is a corporation in good standing and is fully
authorized to execute this Agreement and any other documents called for
here under and that such agent is properly authorized to act for such
party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
XXXXXX VINEYARDS AND MANAGEMENT
CO., a California corporation
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Xxxxxx X. Xxxxxx
Its: President
"GROWER"
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HEUBLEIN, INC., a corporation
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Its: Vice President
-----------------------------
"WINERY"
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