MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING is entered into this 6th day of August, 1987,
by and between MONTEREY FARMING CORPORATION, a California corporation ("MFC" or
"Grower"), and HEUBLEIN, INC., a Corporation authorized to and doing business in
the State of California ("Heublein"), as follows:
RECITALS:
A. On February 12, 1973, MFC entered into a Long Term Grape Purchase
Contract ("Contract") with Almaden Vineyards, Inc. ("Almaden"), a true and
correct copy of which is attached hereto as Exhibit A.
B. Almaden also entered into three other substantially identical
long-term grape purchase contracts as follows:
(1) On February 12, 1973, Almaden entered into a contract with
Vineyard 405, a California Limited Partnership, by Monterey Farming Corporation
as General Partner.
(2) On November 30, 1973, Almaden entered into a contract with
Monterey Partners 1974, a California Limited Partnership, by Monterey Farming
Corporation, as General Partner.
(3) On December 31, 1972, Almaden entered into a contract with
Vineyard Investors 1972, a California limited partnership, by Monterey Farming
Corporation, as general partner.
C. In 1985, a dispute arose between Almaden and MFC on behalf of each of
the limited partnerships above-named, as well as on its
-1-
own behalf, concerning the rights and obligations of Almaden, as a winery, on
the one hand, and the above-referenced entities on the other hand as growers.
As a result of said dispute, the growers filed an action in the Superior Court
of Monterey County, California entitled MONTEREY FARMING CORPORATION, A
CALIFORNIA CORPORATION, ET AL., V. ALMADEN VINEYARDS, INC., A DELAWARE
CORPORATION, ET AL., Action No. 83846, seeking declaratory relief as well as
payment for sums alleged to be owing for the harvest year 1985-86 to said
growers. Said action is currently pending in that Court.
D. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest to the Contract as well as each of the
contracts referred to in Recital B above.
X. Xxxxxxxx and MFC (and by separate agreement each of the other entities
referenced in recital B above) wish to settle and resolve the disputes
heretofore existing to assure a harmonious relationship between Heublein and
MFC.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. 1985 CROP SETTLEMENT. In settlement of the claim of MFC (together
with each other grower referred to in Recital B above), for all sums claimed to
be due as a result of the 1985 harvest season, Heublein agrees to pay MFC on
behalf of all such growers, the sum of Three Hundred Sixty-Five Thousand Five
Hundred Five and 07/100 Dollars ($365,505.07) claimed by Grower in the action
together with interest and less credits for uncashed checks previously delivered
by Almaden to MFC as set forth below:
-2-
Principal Demand
Action No. 83846 $ 337,505.07
Interest 28,000.00
------------
Gross sums due for 1986 Crop 365,505.07
Credit:
Almaden check 4870 to MFC
held uncashed (14,877.00)
Almaden Check 8076 to MFC
held uncashed (80,078.17)
------------
Net due for 1985 crop $ 270,549.90
------------
------------
Heublein warrants and represents that said Almaden check nos. 4870 and
8076 being held by MFC are drawn on an account now owned by Heublein; that said
checks are now negotiable and may be cashed by MFC; that sufficient funds exist
in said account; and that, if said checks are dishonored for any reason that
Heublein will reissue such checks.
2. 1986 CROP SETTLEMENT. In settlement of all disputes with respect to
sums payable by Heublein to MFC for the 1986 crop, the parties agree that
Heublein is entitled to a credit computed as follows:
Sums alleged by MFC to be due
for the 1986 crop $ 10,640.57
Less adjustment on Early Burgundy
to $250 per ton (20,427.50)
Add marketing order assessment at
.008 cents for Early Burgundy 163.42
-----------
Net credit to Heublein for 1986 crop $ 9,263.51
-----------
-----------
The balance of $270,549.90, as provided in paragraph 1.
-3-
above, less a credit of $9,263.51 as provided in this paragraph 2 below, or a
net sum of $261,286.39 shall be paid by Heublein to MFC concurrently with the
execution of this Memorandum of Understanding.
3. GUIDELINES FOR INTERPRETATION OF CONTRACT. Heublein, as successor in
interest to Almaden and MFC agree that they are bound by and agree that they
shall continue to perform each and every term of the Contract; provided,
however, that the following provisions shall govern the interpretation of said
Contract as set forth below:
A. The price paid by winery to grower as provided in paragraph
5(a)(ii) of the Contract shall continue, as it has in the past, to be determined
by reference to the Preliminary Grape Crush Report published by the California
Department of Food and Agriculture based upon information furnished by
processors to said Department on or before January 10 of each year. In the
event that said Preliminary Grape Crush Report is determined by the Department
of Agriculture to be erroneous on or before June 30 following publication of the
report, each party agrees that the price to be paid under paragraph 5(a)(ii) of
the Contract shall be adjusted, and sums paid and/or refunded, as the case may
be, to reflect any such inaccuracies as may be determined by said Department of
Agriculture.
B. The parties agree that a bona fide "highest price" as provided
for in paragraph 5(a)(ii) of the Contract is established by a minimum of 7-1/2
percent of the total purchased tonnage of each variety in the applicable
district as shown in the Preliminary Grape Crush Report.
-4-
C. MFC agrees that during the remaining life of the Contract the sum
of $7.50 per ton shall be deducted from the price determined in paragraph 3 B
above to establish the "FOB carrier roadside" price to be paid in accordance
with the terms of the contract.
D. Notwithstanding the provisions of paragraph 6 of the Contract,
the parties agree that grapes delivered pursuant to the Contract may be
additionally tested for sugar, MOG, and defects by independent inspectors at the
receiving winery to determine whether grapes are delivered in compliance with
the Contract and this Memorandum of Understanding. MFC shall have the right at
any time to observe such testing and, in its discretion, to also take samples
for testing. This paragraph shall not be deemed to relieve Heublein from its
obligation to specify a reasonable time for harvest of each vineyard as provided
in paragraph 3(c) and make such inspections of the grapes prior to or during
harvest as may be necessary to determine a reasonable time for harvest.
Independent weighing of all loads shall be determined in accordance with
paragraph 5(b) of the Contract.
E. Complete and full payment by Heublein of the preliminary grape
price shall be made within ten (10) days of receipt of written notice of
completion of the harvest by reference to the most current industry or
government publications containing such prices as provided in paragraph 5(c)
of the Contract. Any sums still owing as determined by the Preliminary Grape
Crush Report shall be made by Heublein on or before February 25 following the
crop year. Any portion of the preliminary price
-5-
not paid within ten (10) days after receipt of written notice of completion
of the harvest or any portion of final price payment not paid by February
25th, following the crop year shall bear interest at one percentage point
above the prime rate then being charged by Bank of America National Trust and
Savings Association. For purposes of this paragraph, "completion" shall mean
the substantial completion of the harvest of grapes to be delivered during
the harvest year, notwithstanding the existence of some grapes on which
harvest may have been deferred at the request of Heublein for later delivery.
MFC shall give written notice to Heublein of completion of the harvest.
F. It is understood and agreed by the parties that the provisions of
this Memorandum of Understanding concern a contract entered into prior to
January l, 1977; that paragraphs 3 and 4 of this Memorandum of Understanding are
intended by the parties to serve as interpretive guidelines and shall not be
deemed to modify or amend said Contract; and to the extent that the provisions
of this Memorandum of Understanding may be held to violate Food and Agriculture
Code Section 55601.5(g) or any other statute or public policy, then either party
may file an appropriate petition with a court of competent jurisdiction for the
purpose of establishing the rights and responsibilities of the parties under the
existing Contract.
4. GRAPE QUALITY STANDARDS. The parties agree that with respect to the
obligation of MFC to follow good cultural practices and to use its best efforts
to produce quality grapes for wine making, MFC agrees that the following quality
standards shall be
-6-
adopted in determining the suitability of grapes delivered under the Contract
for crushing into wine. Said grape quality standards adopted by the parties are
as follows:
A. SUGAR CONTENT. Attached as Exhibit "B" are the minimum and
optimum sugar levels set forth as standards for grapes grown pursuant to the
Contract. The optimum brix represents the sugar content which Heublein wishes
to receive for each variety set forth in Exhibit "B." MFC agrees that it will
endeavor to achieve optimum brixes as set forth in Exhibit "B." Heublein may,
during each harvest year, specify an optimum brix and MFC will make reasonable
efforts to achieve the optimum brix for that harvest year.
Minimum brix represents the minimum acceptable sugar content
based upon the Grower's delivered average sugar. If occasional loads, not more
than two (2) per variety or fifty percent (50%) of MFC committed tonnage per
variety, whichever is less, drop below the minimum brix level, such loads will
be accepted and included in the Grower average.
There shall be no maximum acceptable brix.
B. MIXED LOADS
1. BLACK AND GRENACHE GRAPES IN WHITE LOADS. Each load of
white grapes which contains any amount of black grapes shall be considered
unacceptable and may be rejected.
2. MIXED VARIETIES AND WHITE GRAPES IN BLACK OR GRENACHE LOADS.
Loads containing two or more varieties of the same color grape, or loads of
black or Grenache grapes containing some amount of white grapes, are not
desirable. If accepted by Heublein
-7-
Wines, they will be paid on the basis of the lowest price variety in the load.
C. DEFECTS.
1. "Defects" shall be defined in accordance with the custom of
the grape industry and the practice of the Grape Inspection Service of the
California Department of Food and Agriculture and shall include grapes with mold
and/or rot.
2. 1.0 PERCENT OR LESS DEFECTS. Any otherwise satisfactory
load and grapes delivered having 1.0 percent or less defects shall be considered
acceptable.
3. MORE THAN 1.0 PERCENT DEFECTS. Any load of grapes delivered
having over 1.0 percent and up to 6.0 percent is not desirable. 1.5 times the
total weight of defects in loads above 1.0 percent will be deducted from the
weight of the load. Each load of grapes delivered having over 6.0 percent
defects shall be considered unacceptable for winemaking and will be rejected.
4. In the event inclement weather causes excessive and
unavoidable deterioration of grapes throughout the industry, Heublein will
consider the advisability of accepting delivery of loads with higher percent
defects.
D. MATERIAL OTHER THAN GRAPES (MOG)
1. Material Other than Grapes (MOG) shall be defined in
accordance with the custom of the grape industry and the practice of the Grape
Inspection Service of the California Department of Food and Agriculture and
shall include leaves, leaf stems, canes and any other foreign materials.
-8-
2. 1.0 Percent or Less MOG. Any otherwise satisfactory load of
grapes delivered having 1.0 percent or less MOG will be considered acceptable.
Any otherwise satisfactory load of French Colombard or Flora grapes with 1.5
percent or less MOG will be considered acceptable.
3. Between 1.0 Percent and 2.0 Percent MOG. Each load of
grapes having over 1.0 percent or over 1.5 percent French Colombard and Flora
a,-d up to 2.0 percent MOG is not desirable; 1.5 times the weight of all MOG
will be deducted from the weight of the load.
4. MORE THAN 2.0 PERCENT MOG. Each load of grapes delivered
having more than 2.0 percent MOG will be considered unacceptable for winemaking
and will be rejected.
E. CONTAMINATION, INSECT OR WORM INFESTATION
Loads of grapes will be rejected where potential contamination of
the winery may occur, and where there is significant visible insect or worm
infestation.
F. WILD FERMENTATION
Loads which are in the process of fermentation are not desired.
Where fermentation is suspected, a load will be analyzed for volatile acid and
ethyl alcohol. If the volatile acid is greater than 0.015 gm/100 ml, or if the
ethyl alcohol is greater than 0.08 percent by volume, the load will be
considered unacceptable for winemaking and will be rejected.
-9-
G. OVER AGE LOADS
Grapes harvested prior to the day of delivery without permission
or scheduling by Winery will be rejected.
H. UNAUTHORIZED DELIVERIES
Grapes delivered in excess of Heublein Wines' daily schedule by
variety or any unscheduled grapes to any plant will be rejected.
I. MECHANICALLY HARVESTED GRAPES
MFC shall continue to have the right to determine in its
discretion whether or not to machine harvest grapes after consultation with
Heublein.
J. GENERAL REQUIREMENTS
The dosage and time of application of pesticides, herbicides, and
nematocides must have been controlled and recorded according to recommendations
of the California Department of Agriculture so that the residues are within
tolerances for grapes by law.
K. IMPLEMENTATION
1. Every load of grapes will be tested for sugar content.
2. Every load of grapes will be tested for MOG unless the test
is deemed to be unnecessary after visual inspection by Heublein's
representative.
L. GRAPE INSPECTION OPTION
If in the opinion of the Plant Manager (or Winemaker) any load of
grapes is unfit for making quality wine through contami-
-10-
nation by foreign substances, he will contact the Heublein Xxxxxxxx responsible
for MFC's load. The Plant Manager (or Winemaker) and the Heublein Xxxxxxxx will
jointly inspect the load. They will then jointly confer with MFC prior to
rejection of a load which is deemed to be unfit for making quality wine.
M. REJECTED LOADS
Any loads of grapes rejected by Heublein for crushing into wine
under the provisions of the quality standards set forth in this paragraph shall
be disposed of and paid for in accordance with paragraph 5(a)(iii) of the
Contract. All loads accepted for wine shall be paid at the price set forth in
paragraph 5(a)(ii) paid in the manner and at the times set forth in this
Agreement.
N. WAIVER
No failure or omission by either party to insist upon or enforce
any of the provisions of these quality standards shall be deemed a waiver of
such provision.
5. DISMISSAL OF ACTION. MFC agrees, on execution of this Memorandum of
Understanding to cause to be filed with the Clerk of the Superior Court of
California, County of Monterey, a dismissal of Action No. 83846 dismissing the
First Cause of Action (declaratory relief) without prejudice and the Second
Cause of Action (complaint for money) of the First Amended Complaint for
Declaratory Relief and Complaint for Money with prejudice. To the extent that
this Memorandum of Understanding addresses issues and controversies set forth in
the First Cause of Action in said Complaint in Action No. 83846, the rights and
obligations of MFC and Heublein, as successor to the
-11-
interests of Almaden, shall be determined with reference to this Memorandum of
Understanding.
6. GOOD FAITH. MFC acknowledges that Heublein, as successor to Almaden
and otherwise, has heretofore been engaged in the wine-making business and has
certain business customs and practices which may to some extent differ from
those of Almaden: Heublein acknowledges that MFC has had a contractual
relationship with Almaden which has been seasoned by years of delivering grapes
pursuant to the Contract. The parties, therefore, agree that they shall each in
good faith endeavor to resolve any differences which may arise to create a
harmonious working relationship between them for the balance of the Contract
term.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding the day and year first above written.
MONTEREY FARMING CORPORATION, a
California Corporation, a General Partner
By /s/ Xxxxxx X. Xxxxxx
--------------------------------------
GROWER
HEUBLEIN, INC.,
a Corporation
By /s/ Xxxxxx X. Xxxxx
--------------------------------------
By
--------------------------------------
-12-
LONG TERM GRAPE PURCHASE CONTRACT
This Contract entered into the 12th day of February, 1973, is between
MONTEREY FARMING CORPORATION, a California corporation (Grower) and ALMADEN
VINEYARDS, INC., a Delaware corporation (Winery).
RECITALS:
A. Winery desires to augment its annual supply of wine grapes on a
long term basis;
B. Grower intends to develop approximately 352 acres of land by
planting this acreage to vineyards for the purpose of growing and producing
certain selected varieties of wine grapes;
C. Grower anticipates that this development program will commence
with the planting of these 352 acres in the calendar year of 1973; and
D. While Grower has leased and will develop approximately 352
acres of land and plant them in 1973, as described in Recitals B and C, supra,
and will make every reasonable effort to complete planting thereof during the
1973 planting season, the total number of acres planted by Grower may be less
than 352 acres and the planting thereof may not be completed during the 1973
planting season; Winery and Grower nonetheless desire and intend to have the
terms
hereof apply to such lesser number of acres as are in fact planted by Grower,
provided at least 300 acres are planted, and to post-1973 plantings, provided
all planting is completed not later than the 1974 planting season;
IT IS THEREFORE AGREED:
1. Grower has contracted for approximately 160,000 certified virus-
free plants and to the extent the contractor is able to deliver, agrees to plant
by no later than August 31, 1973, the varieties of grapes and number of acres
set forth and described on Exhibit A attached hereto and made a part hereof.
2. Any obligation of Grower to plant the varieties of grapes in the
quantities referred to in Section 1, above, shall be conditioned upon:
(a) Grower's ability to obtain the plants described on Exhibit A
at reasonable prices;
(b) Grower's prior lease of the total vineyard acreage described
on Exhibit A sufficiently in advance of the 1973 planting season to reasonably
permit completion of the planting prior to August 31, 1973.
-2-
In the event Grower is not able to complete, prior to August 31,
1973, the planting of the vineyard acreage in fact leased by Grower, the number
of acres and number of plants to be planted by Grower shall be reduced for this
lesser acreage and the period within which planting shall be completed shall be
extended to permit completion of the planting provided Grower shall plant not
less than 300 acres and shall complete all planting on or before August 31,
1974.
3. (a) Grower shall have the exclusive right and sole discretion
to make all decisions in farming and management of the vineyards; but in making
such decisions Grower agrees to follow good cultural practices and to use its
best efforts to produce quality grapes for wine making.
(b) During each year of the term of this Contract, Grower
agrees to harvest, deliver and sell to Winery, and Winery agrees to accept
delivery of and purchase all grapes grown and produced on acreages subject to
this Contract.
(c) Winery shall specify a reasonable time for the harvest of
each vineyard and shall furnish
-3-
carriers at Grower's vineyards to accept delivery of harvested grapes from
Grower. Title to such grapes shall pass from Grower to Winery upon delivery to
the carrier; if Grower shall suffer any net loss as the result of the
specification of the time for harvest and delivery, Winery shall compensate
Grower for such net loss.
4. This Contract shall be binding and effective for a term
ending thirty (30) years following conclusion of the first harvest but not later
than 2006.
However, if the economic life of a producing vineyard or
portion thereof designated hereunder is less than thirty (30) years, this
contract shall terminate as to such vineyard or portion thereof at the end of
its economic life. If Grower pulls out vines, such decision by Grower shall be
a determination that such vines have reached the end of their economic life.
However, prior to the pulling of such vines, Grower must notify Winery of such
intention three (3) years prior to the actual pulling of such vineyard or
portion thereof.
-4-
5. (a) The prices paid by Winery to Grower shall be determined on
the following basis:
(i) Prices for all grapes shall be f.o.b. carrier "roadside"
Grower's vineyards designated in this Contract.
(ii) In each crop year the prices paid for each variety of grape
suitable for wine shall be at the highest price paid by Winery in such
year for the same or a corparable variety or the higher of prices
paid by other wineries to growers for such variety or comparable
variety (assuming sales of such variety or comparable variety are in
quantities sufficient to establish a bona fide price) in Monterey
County. If no prices are established for Monterey County, the price
paid will be that established for the Northern Coastal growing area.
(iii) In each crop year the price paid for grapes which are not
suitable for wine, shall be the price generally established in the
industry for such lower quality grapes if the Winery retains
-5-
such grapes for processing into distilling material or for other uses,
or the best prices Winery can obtain by using its best efforts if such
grapes are resold.
(b) All grapes shall be weighed on certified scales in the vicinity
of the vineyard and payment shall be on the basis of certified weight tags
furnished by Grower to Winery.
(c) As such weight tags are received, Winery shall promptly pay
Grower at Los Angeles, California initial payments determined by use of prices
stated in the most current industry or government publication containing such
prices.
(d) As soon as the actual prices payable under this Contract can be
determined for each variety delivered, final price adjustments shall be made,
and all amounts due shall be promptly paid by Winery to Grower at Los Angeles,
California.
6. Winery shall make such inspections of the Grapes prior to and
during harvest as may be required to determine whether or not such grapes are
suitable for crushing into wine. Such determination shall be in accordance with
generally recognized industry standards, and Grower shall immediately be advised
of any negative determinations. Should Grower disagree with Winery's
-6-
determination, the matter shall be submitted to arbitration and the arbitrator
shall make a decision, based upon recognized industry standards, as to whether
or not the grapes are suitable for crushing into wine.
7. In case of dispute under the provisions of Sections 3(c), 5 and 6
of this Contract, such dispute shall be subject to arbitration if either Grower
or Winery makes written demand for arbitration on the other party. If the
parties agree on his selection, there shall be one arbitrator; but, if no such
agreement is reached within five (5) days after demand for arbitration, there
shall be three (3) arbitrators, one named in writing by Grower and a second by
Winery within ten (10) days after demand for arbitration, and a third chosen by
the two (2) who are appointed. If there is one (1) arbitrator, his decision
shall be binding; and if there are three (3) arbitrators, the decision of any
two (2) of them shall be binding. No one shall act as an arbitrator who is
employed by Grower or Winery or who is in any way 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 will be
relieved of its obligations under this Contract.
-7-
8. Grower represents that it has not sold or contracted to sell
grapes from the designated acreages to any other person, and that such grapes
will be kept free of any and all liens and encumbrances except those of which
Winery has from time to time been notified by Grower and as described in Section
9 hereof.
9. Grower agrees so long as this Agreement is in effect that it will
not create or incur any lien, charge or other encumbrance on the lands
designated pursuant to this Contract which would defeat the rights of Winery
hereunder, excepting deeds of trust securing long term indebtedness to
institutional lenders, and Grower further agrees that except for such deeds of
trust it will not transfer, assign or convey any interest in such lands in a
manner that would defeat the rights of Winery hereunder.
10. No failure or omission by either party to this Contract to
insist upon or enforce any of its terms, which may have been breached by the
other party, shall be deemed a waiver unless the same shall be in writing. No
representative or agent of either party shall have any authority to waive,
change or add to any of the terms or conditions specified herein except by a
writing duly executed by said representative or agent.
-8-
11. Time is of the essence of this Contract which embodies the
entire understanding and agreement between the parties.
12. This Contract shall be deemed modified to the extent
necessary to comply with valid State and Federal laws, rules or regulations
pursuant thereto and any valid marketing order or agreement under authority of
State or Federal law.
13. This Contract shall be binding on the heirs, assigns,
legatees, devisees, transferees, or other successors in interest, partial or
entire of each party.
IN WITNESS WHEREOF, the parties have executed this Contract as of
the date first above written.
MONTEREY FARMING CORPORATION
By /s/ Xxxxxxx Xxxxxx
-------------------------------
ALMADEN VINEYARDS, INC.
By /s/ X.X. Xxxxx, V.P.
-------------------------------
-9-
EXHIBIT A
MONTEREY FARMING CORPORATION
ACREAGE TO BE PLANTED IN 1973
Varieties by Acreage by Ranch
XXXXX
352
-----
GRENACHE 22
GAMAY 22
MERLOT 22
CABERNET SAUVIGNON 22
ZINFANDEL 22
RUBY CABERNET 22
PETITE SIRAH 22
GAMAY BEAUJOLAIS 22
EARLY BURGUNDY 22
TINTA MADEIRA 22
GEWURZTRAMINER 22
XXXX. RIESLING 22
PINOT CHARDONNAY 22
CHENIN BLANC 22
SAUVIGNON BLANC 22
SEMILLON 22
-----
TOTAL 352
-----
-----
[MFC LETTERHEAD]
May 14, 1990
Mr. Xxxxxx Xxxxx
Xxxxxxxx Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Dear Xxx:
As you know, we supervise and administer four seperate grape purchase
contracts with Hueblein. We would like your agreement that we may, each
harvest, keep up to six tons of each variety covered by these contracts. By
this, we mean six tons of each variety, not six tons per variety and per
contract. This will enable us to acquaint a few wineries with our grapes and
perhaps open some doors for the future. This would be very beneficial for
Heublein and for us.
Please sign below signifying your agreement.
Many thanks for you cooperation and I'll see you Tuesday evening.
Sincerely,
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
President
Agreed and Accepted by:
Hueblein Inc.
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Xxxxxx X. Xxxxx
Vice President - Wines
EXHIBIT F
AMENDMENT TO
LONG TERM GRAPE PURCHASE CONTRACT
THIS AMENDMENT TO LONG TERM GRAPE PURCHASE CONTRACT (this
"AMENDMENT") is made and entered into as of this 12th day of March, 1993, by and
between XXXXXX VINEYARDS AND MANAGEMENT CO. (formerly known as Monterey Farming
Corporation), a California corporation ("XXXXXX VINEYARDS" or "GROWER"), and
HEUBLEIN, INC., a corporation authorized to do and doing business in the State
of California ("HEUBLEIN" or "WINERY").
RECITALS
A. On February 12, 1973, Xxxxxx Vineyards entered into a Long Term Grape
Purchase Contract (the "ORIGINAL CONTRACT") with Almaden Vineyards, Inc.
("ALMADEN").
B. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest of Almaden with respect to the Original
Contract.
C. On August 6, 1987, the parties entered into a Memorandum of
Understanding (the "MEMORANDUM") concerning disputes that had arisen under the
Original Contract and the manner in which the Original Contract was to be
understood and interpreted by the parties.
D. On May 14, 1990, the parties executed a letter agreement (the "LETTER
AGREEMENT") with respect to the Original Contract as amended.
E. The Original Contract, the Memorandum and the Letter Agreement
hereinafter collectively are referred to as the "EXISTING CONTRACT". The
Existing Contract as amended by this Amendment hereinafter is referred to as the
"CONTRACT".
F. The parties desire to amend the Existing Contract in certain
additional respects as hereinafter provided.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. VINEYARDS AND VARIETIES.
(a) VINEYARDS AND VARIETIES COVERED. The vineyards (the "VINEYARDS")
and wine grapes (the "WINE GRAPES") currently subject to the provisions of the
Existing Contract shall continue to be subject to the provisions of the Existing
Contract following execution of this Amendment. Similarly, Xxxxxx Vineyards
shall continue to produce existing Wine Grape varieties in existing locations on
the Vineyards following execution of this Amendment; PROVIDED, HOWEVER, that
Xxxxxx Vineyards shall
convert the existing varieties to the proposed varieties as specified in EXHIBIT
A attached hereto in accordance with the methods and in the calendar years
respectively identified therein. Notwithstanding the foregoing, Xxxxxx Vineyards
shall not be required to sell 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 under the Contract:
VARIETY AVERAGE TONS PER ACRE
------- ---------------------
Chardonnay 8.0
Cabernet Sauvignon 7.5
Merlot 7.5
(b) RETENTION OF WINE GRAPES BY XXXXXX VINEYARDS. Not-
withstanding any provision of the Contract to the contrary, each harvest
Xxxxxx Vineyards, in its sole discretion, may retain for its own use up to 25
tons of Wine Grapes of each variety produced on the Vineyards. The provisions
of this SECTION 1(b) hereby supersede the provisions of the Letter Agreement.
2. PRICING. The price to be paid by Winery to Grower for each
variety of Wine Grapes purchased under the Contract 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 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 the Contract shall be
equal to [ ]* (the "PRICING DISTRICTS"), as
established by the Department, determined by:
[ ]*
______________________________
*Confidential Treatment Requested for Redacted Portion.
-2-
[ ]*
Application of the provisions of this SECTION 2(a) is
illustrated by the example set forth in EXHIBIT B attached hereto.
(b) MERLOT. The price per ton for Merlot under the Contract shall be
the lower of:
[ ]*
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 2(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 2(b) is illustrated by the example set forth in EXHIBIT C
attached hereto.
(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 2, 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.
______________________________
*Confidential Treatment Requested for Redacted Portion.
-3-
The provisions of this SECTION 2 shall supersede in their entirety the
provisions of SECTION 5(a)(ii) of the Original Contract and SECTIONS 3A and 3B
of the Memorandum relating to determination of the prices to be paid by Winery
to Grower for Wine Grapes purchased under the Contract.
3. PAYMENT. Winery shall pay Grower the price (the "PRELIMINARY
PRICE") for Wine Grapes purchased under the Contract, determined in accordance
with SECTION 2 above based on all available information 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 payments or refunds necessary
to reconcile the Final Price with the Preliminary Price. For purposes of this
SECTION 3, the term "COMPLETION OF THE APPLICABLE HARVEST" shall mean the
substantial completion of the harvest of Wine Grapes to be delivered 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. The provisions of this SECTION 3 shall supersede and replace, to
the extent otherwise applicable, the provisions of SECTIONS 5(c) and 5(d) of the
Original Contract and the provisions of Section 3E of the Memorandum.
4. TERM AND TERMINATION.
(a) TERM. The term of the Contract shall continue until
terminated in accordance with the provisions of this SECTION 4.
(b) TERMINATION BY EITHER PARTY. Either party may terminate the
Contract after the 2003 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, 2003, the Contract would terminate after delivery of the
2006 crop by Grower to Winery.
(c) WITHDRAWAL BY GROWER. In the event Winery properly delivers a
Termination Notice to Grower under SECTION 4(b) above, Grower at its option (i)
may withdraw up to 1/3 of any or all varieties of Wine Grapes from coverage by
the Contract 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.
5. FARM MANAGEMENT DECISIONS. Grower shall have the exclusive right
and sole discretion to replant any Wine Grape variety produced on the Vineyards
with the same variety at any time Grower determines that such replanting will
improve production levels with respect to such variety, and to replant and
interplant Wine Grapes to maintain contracted varieties at viable and economic
levels; PROVIDED, HOWEVER, that Grower will continue to follow
-4-
"good cultural practices and use its best efforts to produce quality grapes for
winemaking" as provided in Section 3(a) or the Original Contract.
6. INCORPORATION BY REFERENCE. Exhibits attached to this Amendment
hereby are incorporated by reference herein.
7. EFFECTIVENESS OF THE EXISTING CONTRACT. Except as specifically set
forth herein, the Existing Contract shall remain unchanged and in full force and
effect. In the event of any conflict between the provisions of this Amendment
and the provisions of the Existing Contract, the provisions of this Amendment
shall govern.
8. AUTHORITY. Each corporate or partnership party executing this
Amendment and the agent executing this Amendment on such party's behalf hereby
warrants that such party is a corporation or partnership in good standing and is
fully authorized to execute this Amendment and any other documents called for
hereunder and that such agent is properly authorized to act for such party.
IN WITNESS WHEREOF, the parties have executed this Amendment 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
"XXXXXX VINEYARDS" OR "GROWER"
HEUBLEIN, INC., a corporation
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Xxxxx X. Xxxxxxx
Its: Vice President
-----------------------
"HEUBLEIN" OR "WINERY"
-5-
