GRAPE PURCHASE AGREEMENT
This Grape Purchase Agreement (the "Agreement") is entered into as of July 1,
1996 between XXXXXXX XXXXXX WINE CO., INC, a California corporation, and THE
CHALONE WINE GROUP, LTD., a California corporation (collectively, the "Winery"),
and XXXXXX VINEYARDS AND MANAGEMENT CO., a California corporation ("Grower").
RECITALS
A. Grower is the lessee of the San Xxxxx Xxxxxxxx in San Xxxxx, California on
which Grower grows approximately 25 acres of Chardonnay grapes (the
"Vineyards"). The Vineyards are more particularly described in Exhibit "A"
to this Agreement.
B. Winery wishes to purchase the wine grapes grown on the Vineyards from
Grower under the terms of this Agreement
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. PURCHASE. Grower agrees to sell, and Winery agrees to purchase, all the
production of Chardonnay grapes ("Grapes") grown on the Vineyard each year
that this Agreement is in effect.
2. TERM AND TERMINATION.
(A) The initial term of this Agreement ("Term") is for the crop years
1997 through 2011; provided, however, that unless written notice of
termination has been given by either party prior to May 31, 2010, the Term
will automatically convert to a two-year evergreen contract beginning June
1, 2010. Thereafter, written notice of termination may be given before May
31st of any year and shall be effective at the completion of the second
harvest following such written notice.
(B) Either party (the "Nonbreaching Party") shall have the right to
terminate this Agreement for cause in the event the other party (the
"Breaching Party") breaches any material provision or condition of this
Agreement; and
A. such breach remains uncured for a period of thirty (30) days
following the Nonbreaching Party giving written notice of
such breach to the Breaching Party, or if any such breach
shall not reasonably be susceptible of cure within such
thirty (30) day
period; then
B. the Breaching Party shall fail to take steps reasonably
designed to cure such breach and such breach is not cured as
expeditiously as reasonably possible thereafter.
3. PRICE.
(a) Except as provided in Paragraphs 3(b) and 3(c) below, the price
per ton (the "Price") to be paid with respect to each crop year by Winery
to Grower for Grapes shall be determined with reference to the Final Grape
Crush Report (the "Crush Report"), published by the California Department
of Food and Agriculture (the "Department") on or about March 10 of each
year, for the crop year (the "Applicable Crop Year") preceding the harvest
of such Grapes, as it may be supplemented or corrected by the Department up
through the succeeding first day of August (the "Applicable Crush Report").
The price per ton for Grapes shall be equal to
[ ]*
See Exhibit "B" attached hereto for an example of this price calculation.
(b) If the Crush Report shall no longer be published, then any
appropriate substitute for the Crush Report mutually agreed upon by Winery
and Grower shall be used and the computations set forth in Paragraph 3(a)
shall be appropriately adjusted. In
-------------------------------
* Confidential Treatment Requested for Redacted Portion.
2
the event that no substitute for a discontinued Crush Report can be agreed
upon, then the substitution shall be determined in accordance with
Paragraph 10.
(c) In the event that the Department changes the format of the Crush
Report from the format of the Crush Report dated March 8, 1996, the source
of data (from within the applicable Crush Report) for determining the Price
shall be [ ]*
(d) In the event that the reporting rules of the Department are
changed to include related party transactions in the Crush Report, then
Winery and Grower shall negotiate in good faith an alternative pricing
method. A related party transaction is a transaction where there is a
relationship between the buyer and seller other than arms-length.
4. PAYMENT. For the purchase of the Grapes for each crop year, Winery will
pay one-half the amount due to Grower within thirty (30) days after the
final harvest of Grapes, with the remaining balance due sixty (60) days
after such harvest.
5. STANDARDS. Grower agrees to deliver whole, sound, mature Grapes, free from
commercial defects, in good and merchantable condition suitable for use in
the production of premium wine produced on a bonded winery premise
("Acceptable Grapes"). Grapes will not be Acceptable Grapes
("Non-Acceptable Grapes") if:
(a) They are infected, adulterated (including with pesticide or other
residues) or misbranded under any federal or state law regulation, or may
not be introduced into interstate commerce pursuant to any federal or state
law or regulation; or
(b) any truckload ("Load") of such Grapes which has two percent (2%)
or more by weight of material other than grapes ("MOG"), such as leaves,
canes or other material foreign to grapes, or three percent (3%) or more by
weight of rot or mold; or
(c) the Load of such Grapes is delivered to Winery more than twelve
(12) hours after the completion of the harvesting of such Grapes; or
(d) Brix of such Load of Grapes is below 21.0 DEG. Brix.
Winery will have the right to reject any Non-Acceptable Grapes. In the
event Winery elects to reject any load of Grapes, Winery shall immediately
notify Grower of such election. If such election is made due to MOG in
excess of two percent (2%), Grower will be given the opportunity to remove
such MOG and the Load shall be re-tested. Rejection or acceptance of any
Non-Acceptable Grapes by Winery does not relieve Grower from obligations
under this Agreement for delivering the remaining Grapes to Winery.
Inspection by Winery in the field prior to hauling of Grapes to the Winery
shall not be deemed an acceptance of Grapes.
----------------------
* Confidential Treatment Requested for Redacted Portion.
3
6. GRAPE MATURITY. The desired target Brix at harvest is 23.0 DEG. Brix, with
a target Brix window of 22.0 DEG. to 24.5 DEG., as measured by a properly
calibrated refractometer. If any Load of Grapes is delivered to the
processing facility below 22.0 DEG. Brix, the Price for such Load will be
adjusted downwards by one percent (1%) for each 0.1 below 22.0 DEG. Brix,
with a maximum adjustment of ten percent (10%) downwards at 21.0 DEG. Brix.
When Grapes are tested pursuant to Paragraph 6 of this Agreement, Winery
shall provide Grower with the results. Winery shall immediately notify
Grower of any Load of Grapes which is determined to be subject to
adjustment in purchase price.
All inspections to determine acceptability of the Grapes pursuant to
paragraphs 5 and 6 must be made by the Bureau of Food and Vegetable
Standardization of the Department of Food and Agriculture of the State of
California, another comparable official agency, or by a certified,
independent testing laboratory. Winery and Grower agree to be bound by
such inspections as to whether the Grapes are Acceptable Grapes or
Non-Acceptable Grapes. In the event of such inspections, Grower will pay
for all additional costs if the Grapes are deemed Non-Acceptable Grapes,
and Winery will pay for all additional costs if the Grapes are deemed
Acceptable Grapes.
7. VITICULTURAL PRACTICES. Grower and Winery will maintain open communication
regarding viticultural practices of the Vineyards. Upon request, Winery
personnel will be permitted to enter the Vineyards to inspect farming
practices and harvesting operations. Grower will follow the Viticultural
Plan as set forth in Exhibit "C" to this Agreement.
8. HARVESTING, WEIGHING AND DELIVERY. Grower and Winery will cooperate in
establishing a delivery schedule during each harvest. Grower will notify
Winery by telephone or facsimile transmission when Grower wishes to deliver
the Grapes to Winery in order to satisfy the foregoing standards. If
Winery is unable to comply with Grower's requirements within 24 hours
following such notice, Grower shall be relieved of the obligation to
satisfy the foregoing standards, except those for MOG. Grapes shall be
delivered in clean gondolas of no more than six (6) tons each.
All Loads of Grapes will be weighed on a certified scale at the processing
facility. Grower will bear the cost of delivery of the Grapes to Winery's
facility in Xxxxxxx or to a delivery location specified by Winery in Paso
Xxxxxx, including costs of harvesting, delivery, and of the gondolas in
which the Grapes are delivered. If Winery designates a delivery location
outside of Xxxxxxx or Paso Xxxxxx, Grower shall deliver Grapes to such
location, provided that Grower will be reimbursed by Winery for any costs
of delivery in excess of the cost that would have been incurred if such
Loads were delivered to Winery's facility in Xxxxxxx. Title and risk of
loss shall pass to Winery upon delivery to Winery premises or such other
designated delivery location.
Grower represents that Winery will have good title to all Grapes sold, free
of all security interests and other encumbrances.
4
9. ASSIGNMENT AND BINDING EFFECT. This Agreement shall bind and inure to the
benefit of the parties hereto, their respective heirs, executors,
administrators, grantees, vendees, transferees, assignees, legatees,
devisees and other successors in interest whether partial or entire.
10. ARBITRATION. The parties will attempt to settle any dispute in a mutually
agreeable manner. Any controversy or claim arising out of or relating to
this Agreement or any breach thereof that is not settled by the parties,
shall be determined by arbitration in San Jose, California (or such other
location in California as the parties may agree upon) before a panel of
arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party's request for arbitration
shall be given in writing by first-class mail, postage prepaid, addressed
to the party at the address set forth in paragraph 12. The arbitration
hearing shall be held within thirty (30) days after arbitration is
requested. The panel of arbitrators shall consist of three people, who
shall be independent of either party's business. Winery and Grower shall
each select an arbitrator and these two arbitrators will select a third
arbitrator.
11. ATTORNEYS' FEES. If any arbitration, action or other proceeding is brought
for the enforcement of this Agreement or because of an alleged dispute in
connection with this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in such
arbitration, action or proceeding, in addition to any other relief to which
such party is entitled.
12. NOTICE. Whenever the term "notice" is used in this Agreement, it means a
written notice or facsimile transmission delivered or sent to that party's
address or facsimile shown below or to such other address or facsimile
number as the party specifies by notice. All facsimile transmissions will
be followed by a "hard copy" letter sent via regular mail.
GROWER: WINERY:
NAME: Xxxxxx Vineyards and Management Co. Xxxxxxx Xxxxxx Wine Co., Inc
ADDRESS: 00000 Xxxxxxxxxx Xxxx. 0000 Xxxx Xxxxxx
Xxxxx 000 Xxx Xxxx Xxxxxx, XX 00000
Marina del Xxx, XX 00000
CONTACT: Xxxxxx Xxxxxx or Xxxxx Xxxxxx Xxxxxxx Xxxxxx
PHONE: 310/000-0000 805/000-0000
FAX: 310/000-0000 805/594-1318
WITH A COPY TO:
NAME: Xxxxxx Vineyards and Management Co.
ADDRESS: 0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
CONTACT: Xxxx Xxxxxxxx
PHONE: 408/000-0000
FAX: 408/000-0000
5
13. CONFIDENTIALITY. Grower and Winery both warrant that the other party's
name will not be used in any fashion or context with respect to the
representation, sales, or marketing of grapes, bulk wine, vineyards, or
bottled products without the other party's prior written consent.
14. SEVERABILITY. If any part or parts of this Agreement are found to be
illegal or unenforceable, the remainder shall be considered severable,
shall remain in full force and effect, and shall be enforceable.
15. GENERAL PROVISIONS. This Agreement, along with Exhibits "A", "B" and "C"
attached hereto are the entire agreement between the parties, and
supersedes all other written or oral agreements. This Agreement may only
be amended or modified by a written document signed by the party against
whom the modification is to be enforced. Each party will perform such
other acts as are reasonably necessary or desirable to carry out the
purposes of this Agreement.
16. FORCE MAJEURE. Grower shall not be liable to Winery for any failure to
perform any of its duties or obligations hereunder or for any loss or
damage of any kind, nor shall any such failure give Winery the right to
reject any Grapes pursuant to Paragraph 5(c), so long as such failure to
perform or loss or damage is the result of any act of God or any normal
hazard of farming, including, without limitation, rain, hail, frost,
drought, flooding, windstorm or other action of the elements, strike, work
slow-down, worker unavailability, fire, truck, car, rail, labor, equipment
or material shortage or unavailability, freight embargo, transportation
delays or difficulties, governmental action or any other cause beyond
Grower's reasonable control. If Grower is prevented from performing its
obligations hereunder in part or in full as a result of an occurrence set
forth in this Paragraph 16, it shall give prompt notice thereof in writing
to Winery, which notice shall specify the nature of such occurrence and an
estimate of the date when full performance will be resumed hereunder.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first indicated above.
Grower: XXXXXX VINEYARDS AND Winery: XXXXXXX XXXXXX WINE CO., INC.
MANAGEMENT CO.
By: /s/ Xxxxx X. Xxxxxx By: /s/ S.R. Xxxxxx
--------------------------- ---------------------------
Its: Vice President of Planning Its: President
-------------------------- ----------------------
Winery: THE CHALONE WINE GROUP, LTD.
By: /s/ X.X. Xxxxxx
---------------------------
Its: V.P. Production
----------------------
6
