GRAPE PURCHASE AGREEMENT
This GRAPE PURCHASE AGREEMENT ("AGREEMENT") is made as of August 25,
2000, by and between X. X. XXXXXXXX, INC., a California corporation ("WINERY"),
and JK VINEYARDS, LLC, a California limited liability company ("GROWER").
BACKGROUND
Grower plans to acquire up to 275 vine acres of land, in one or more
parcels, and plans to develop and plant wine grape varieties which may include
Chardonnay, Merlot, Petite Verdot, Viognier, Syrah, Cabernet Sauvignon and/or
Malbec and/or such other varieties as the parties may mutually agree (the
"DESIGNATED VARIETIES"). Subject to the conditions in this Agreement, Winery
wishes to purchase all the grapes grown on the property to insure a source for
its growing wine business.
The parties will work together to develop a vineyard using vineyard
management techniques which will produce grapes suitable for wine production and
sale in the super premium and ultra premium price segments. Similarly, to the
extent Grower produces and delivers such grapes, Winery will employ such
production techniques, including but not limited to fermentation, aging, storage
and bottling methods, required to produce super premium and ultra premium wines.
The entry into this Agreement is a part of and a condition to the
consummation of the transactions contemplated by a Merger Agreement dated August
25, 2000, entered into between Vincor International, Inc. and Winery, pursuant
to which control of Winery is being transferred to Vincor International, Inc.
The obligation of Winery to perform its obligations under this
Agreement is subject to the conditions set forth in Section 15 of this
Agreement, and the obligation of Grower to perform its obligations under this
Agreement is subject to the conditions set forth in Section 16 of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants contained herein,
incorporating in all respects the Background, and subject to the conditions set
forth herein, the parties hereto agree as follows:
1. PROPERTY. Grower shall use its best efforts to acquire up to 275
plantable vine acres of land, in one or more parcels, to be located in one or
more of the following
-1-
appellations, or any other appellation mutually agreed to between Winery and
Grower: Xxxxxxxx Hills, Paso Xxxxxx, Monterey County, Lake County, Mendocino
County or North Coast (the "PROPERTY"). Grower shall use its best efforts to
acquire Property that (a) will meet the standards referred to in the
Background section of this Agreement and (b) is capable of producing Grapes
that will meet the Quality Standards in this Agreement. Such Property, and
the parcels that comprise the same, must be approved by Winery as provided in
Section 15 hereof.
2. PLANTING OF VINEYARD. The schedule for planting, the varieties, clones
and rootstock to be planted, and the vineyard development plan must be approved
by Winery as provided in Section 15 herein. The varietal allocation will be
determined taking into account Winery's projected needs and soil, climate and
other viticultural considerations of the Property. Grower shall plant the agreed
varieties on phylloxera resistant rootstock reasonably acceptable to Winery and
in accordance with the Vineyard Development Plan as approved by Winery in
accordance with Section 15.3.
3. SALE AND PURCHASE. Subject to and in accordance with the terms and
conditions of this Agreement, Grower hereby agrees to sell and Winery hereby
agrees to purchase the entire production of wine grapes ("GRAPES") grown on the
Property.
4. PRICE. The Price to be paid for Grapes delivered to and accepted by
Winery for each harvest year during the term described in Section 5 shall be
determined in accordance with EXHIBIT A attached hereto.
5. TERM. The initial term of this Agreement will be for fifteen (15)
harvest years or, if Winery shall so elect and shall so notify Grower on or
before December 31 of the fourteenth harvest year, then twenty (20) harvest
years ("ORIGINAL TERM"), and the term will continue from year to year thereafter
("EVERGREEN PERIOD"), unless, no later than December 31 following the last
harvest of the Original Term or the same date for any year during the Evergreen
Period, Notice of termination is given by either party ("NOTICE OF
TERMINATION"). Upon Notice of Termination to the other party, for each harvest
thereafter, Winery's obligation to buy and Grower's obligation to sell the
Grapes will be reduced by twenty percent (20%) of the total acreage of the
Property devoted to each variety, with the Agreement expiring following the
fifth harvest after Notice of Termination is given.
6. QUALITY.
6.1 QUALITY STANDARDS. All Grapes shall be inspected for quality
and acceptance on a load-by-load basis and must meet the grape quality standards
in EXHIBIT B hereto (the "QUALITY STANDARDS"). Any Grapes or load of Grapes not
meeting any or all of the Quality Standards may, at Winery's option, be rejected
by Winery in addition to any other rights Winery may have.
-2-
6.2 BUREAU INSPECTION. If Winery determines that any load or loads
of Grapes are not in compliance with the Quality Standards set forth in this
Agreement, Grower, upon notice to Winery, may have such load or loads inspected
by the Bureau of Food and Vegetable Standardization of the Department of
Agriculture of the State of California ("BUREAU") or other official agency. If
Grower has a load inspected by the Bureau, and the Bureau determines that the
load is in compliance with the Quality Standards set forth in this Agreement,
then Winery shall pay for the cost of the inspection by the Bureau; provided,
however, if the Bureau determines that the load is not in compliance with the
Quality Standards set forth in this Agreement, then Grower shall pay for the
cost of the inspection by the Bureau. The determination by the Bureau or other
official agency as to the compliance of such load or loads with the Quality
Standards set forth in this Agreement shall be conclusive and binding on the
parties.
6.3 REJECTION. Winery may not reject Grapes if such Grapes and the
harvesting and delivery thereof comply with the Quality Standards and the other
provisions of this Agreement.
6.4 OBJECTIVE OF PARTIES. The parties acknowledge that it is their
mutual objective to produce super premium and ultra premium wines from the
Grapes delivered hereunder. For purposes of this Agreement, "super premium" and
"ultra premium" wines shall be those wines in the second and third price tiers
generally used by the industry, on an increasing price basis, over popular
premium, which is the lowest tier of 750 ml cork-finished products; provided,
however, that for purposes of this Agreement the "super premium" category shall
not include wines sold at less than a $10 retail price (such $10 base price to
be increased or decreased from time to time during the term hereof in accordance
with percentage increases or decreases in the industry in the price points for
the super premium category.) As of the date of and for purposes of this
Agreement, super premium is wine sold at $10 to $14 per bottle retail price and
ultra premium is wine sold at over $14 per bottle retail price. Grower shall use
its best efforts to develop and operate vineyards on the Property using
viticultural practices to produce grapes suitable for making super and ultra
premium wines, including in this respect, employing yield management practices
and being guided by Winery's reasonable requests regarding yield levels, as
provided in Section 7.2. To the extent Grower produces and delivers such grapes
hereunder, Winery shall use its best efforts to produce super and ultra premium
wines from the Grapes utilizing fermentation, aging, storage and bottling
methods and techniques suitable for the production of super and ultra premium
wines.
-3-
7. VINEYARD MANAGEMENT.
7.1 VINEYARD MANAGER. With respect to any Property located in the
Xxxxxxxx Hills area or any Property located in an area in which Winery then
farms its own vineyards or those of any third party, for the period during which
either Xxxx Xxxxxxxx or Xxxx Xxxxxxxx are employed by or serve as consultants to
Winery, Winery shall have the right, but not the obligation, to act as the
vineyard manager of the Property on terms and for compensation that is standard
and customary in the area in which the portion of the Property being farmed is
located. In connection therewith, the parties shall negotiate, execute and
deliver a vineyard management agreement incorporating such standard and
customary terms, including a management fee of Thirteen Dollars ($13.00) per
acre per month (for the initial five-year term) and all reasonable and customary
out-of-pocket costs incurred by the vineyard manager. In the event Winery is not
the vineyard manager of the Property, Grower shall comply, and cause its
vineyard manager to comply, with the farming and viticultural practices in
EXHIBIT C hereto. In the event that Winery determines, in its sole discretion,
to make Winery's equipment available for use, Grower may use Winery's equipment
with respect to the Property at a charge based on prevailing market rates in the
area in which the Property is located and subject to terms mutually agreed to
between Winery and Grower. For any calendar year that Winery determines not to
make its equipment available for use with respect to the Property, Winery shall
give Notice of such determination to Grower no later than December 31st of the
preceding calendar year.
7.2 NO REPRESENTATION AS TO TONNAGE. Without affecting the
provisions of this Agreement regarding Grower's yield management practices and
being guided by reasonable requests from Winery regarding yield levels, but
notwithstanding any other provision of this Agreement, Winery acknowledges that
Grower does not and has not made any representation as to the number of tons of
grapes to be yielded by the Property for any particular harvest. Grower will
work with Winery and its winemaker in good faith regarding such yield for each
harvest year and be guided by reasonable requests provided from time to time by
Winery regarding yield levels as to varieties of Grapes grown on various
portions of the Property, taking into account the objective of producing super
premium and ultra premium wines from the Grapes delivered hereunder.
7.3 INSPECTION. Upon prior reasonable Notice to Grower, Winery
will have the right to enter upon the Property to inspect the vineyards and the
viticultural practices of Grower at any reasonable time.
8. GRAPE MATURITY AND HARVESTING. Grower shall harvest and deliver the
Grapes in the manner described in EXHIBIT D hereto.
-4-
9. WEIGHING AND DELIVERY.
9.1 DELIVERY LOCATION, ETC. All deliveries shall be made to
Winery's winery located at Esparto, California, or other location (whether or
not owned or operated by Winery) as designated by Winery, and shall occur on the
day of harvest. Grower shall pay the cost of delivery to such winery and/or to a
designated facility within a 150 mile radius of the point of harvest or, if any
portion of the Property is located more than 150 miles from the Winery's closest
crush facility, then within a radius equal to such longer distance to such
portion of the Property. All Grape loads shall be weighed by a certified
weighmaster on certified scales at the location designated for delivery. The
risk of loss remains with Grower until such time as Grapes have been delivered
to and accepted by Winery. All Grapes shall be delivered in clean and sanitary
trucks and gondolas which are equipped for side-dumping and do not exceed sixty
(60) feet in length. All such containers shall be painted with the food grade
materials approved by the Food and Drug Administration. Gross weight of trucks
will not exceed the legal limit. All deliveries shall be subject to being
weighed by Winery on Winery's scale, or other designated scale.
9.2 INDEMNIFICATION. Grower indemnifies and holds Winery harmless
from and against direct damage caused by foreign objects or materials contained
in loads of Grapes delivered to and accepted by Winery pursuant to this
Agreement.
10. PAYMENT. Winery will pay the purchase price (based on the "Price" as
calculated pursuant to EXHIBIT A) for all Grapes from each year's harvest
delivered to and accepted by Winery, as follows: fifty percent (50%) of the
total Price shall be due and payable on or before November 1 immediately
following the harvest, and the remaining fifty percent (50%) shall be due and
payable not earlier than January 1 nor later than January 5 of the calendar year
immediately following the harvest. If payment is not made when due, Winery will
pay Grower interest compounded monthly on the unpaid balance at 100 basis points
over the prime rate as quoted in the WALL STREET JOURNAL at the time of default
until the payment is made.
11. FORCE MAJEURE. In the event of strikes, quarantine, boycott, embargo,
fire, climatic conditions, or other similar reasons ("FORCE MAJEURE EVENTS")
beyond the control of Winery whereby Winery determines it is unable to receive
and/or process Grapes covered by this Agreement, Winery shall give prompt Notice
of such event to Grower. If after discussions between Winery and Grower, Winery
is still unable to commit to receive and/or process Grapes covered by this
Agreement, Winery will be excused from purchasing any loads of Grapes affected
by the Force Majeure Event, and Grower will be excused from its obligation to
sell such Grapes to Winery and may sell such Grapes to any third party.
Similarly, upon the occurrence of a Force Majeure Event beyond the control of
Grower whereby Grower determines it is unable to deliver Grapes covered by this
Agreement to Winery, Grower shall give prompt Notice of such event to Winery. If
after discussions between Winery and Grower, Grower still is unable to
-5-
commit to deliver Grapes covered by this Agreement, Grower will be excused
from delivery of any loads of Grapes affected by the Force Majeure Event and
Winery will be excused from its obligation to purchase such Grapes from
Grower.
12. TITLE. Grower guarantees that Grapes delivered to Winery will be
Winery's sole and absolute property, free from any liens, encumbrances,
restrictions, options, claims, contract rights and other rights of third parties
(collectively, "LIENS") at the time and place of delivery. Grower will promptly
notify Winery of the existence of any security interest granted in the Grapes
for crop financing purposes, and of the party to whom payments with respect to
the Grapes will be made, but at the time and place of delivery and subject only
to Winery's obligation to make such payments, such Grapes shall be free from all
Liens as provided above and such crop financing shall not otherwise interfere
with Winery's rights to receive delivery of the grapes hereunder. Grower agrees
to indemnify, defend, protect, and hold harmless Winery from any loss, expense,
cost or liability relating to the claim of any person or entity having or
alleging a security interest or other Lien in the Grapes or otherwise relating
to Grower's breach of this Section 12.
13. GENERAL TERMINATION UPON BREACH. A party will have the right to
terminate this Agreement upon the occurrence of a certain breach by the other
party of this Agreement, by giving Notice to the other party describing the
breach. If the breach asserted is Winery's failure to pay charges payable
hereunder when due, the Notice will state the amount past due, and Winery will
have ten (10) business days after receipt of such Notice within which to pay the
amount owed as calculated pursuant to this Agreement. If the breach remains
uncured at the expiration of such period of time, Grower may exercise any and
all remedies for nonpayment, including termination of the Agreement at its
election on thirty (30) days' Notice to Winery unless a bona fide dispute with
respect to such nonpayment exists which has been submitted to arbitration
pursuant to Section 17.10. For any other asserted breach, (i) the party
receiving the Notice of breach will have thirty (30) days after receipt of such
Notice within which to cure the breach, or (ii) if the breach cannot be cured
within thirty (30) days through reasonable commercial efforts, the period may be
extended for such reasonable period of time as may be required to cure the
breach employing all expeditious efforts that may be required to cure such
breach, provided that the party receiving the Notice of breach presents a plan
for curing the breach within five (5) business days of the Notice and diligently
proceeds with the cure. If the breach remains uncured at the expiration of such
period of time, the non-breaching party at its election may terminate the
Agreement on thirty (30) days' Notice unless a bona fide dispute with respect to
such breach exists which has been submitted to arbitration pursuant to Section
17.10. It is specifically acknowledged by the parties that the failure of loads
of Grapes to comply with the Quality Standards contained in this Agreement, on
an isolated basis for reasons beyond the control of Grower, shall not be a
breach for which Winery has the right to terminate this Agreement. The remedies
provided in this Section 13 are cumulative, and are in addition to any remedies
now or later allowed by law or under contract.
-6-
14. ASSIGNMENT AND RIGHT OF FIRST OFFER.
14.1 ASSIGNMENT. This Agreement is not assignable by either party
without the prior written consent of the other party, and the assignee; except
that, (i) without limiting the obligations of Grower set forth in Section 12,
Grower may create a security interest in the Property and the Grapes for
purposes of obtaining financing in the ordinary course of its business, with
respect to which financing Grower agrees to use its best efforts to obtain from
the lender a commercially reasonable non-disturbance and attornment agreement in
favor of Winery; (ii) without limiting Winery's termination right set forth in
the next following sentence, Grower may assign this Agreement to any transferee
of the Property which transfer is in accordance with the terms of this
Agreement; and (iii) Winery and Grower may each assign this Agreement to its
wholly-owned subsidiary, parent company or other affiliated company; provided,
however, that any such assignment shall not release Winery or Grower, as
applicable, of its obligations under this Agreement. In the event Grower should
sell, lease or otherwise transfer all or a portion of the Property or any
interest therein (either voluntarily or involuntarily), Grower shall promptly
notify Winery in writing and Winery, after 10 days Notice to Grower, shall have
the right at Winery's option to terminate this Agreement by written Notice to
Grower if Winery reasonably concludes it is likely that the quality of Grapes to
be sold hereunder may be detrimentally affected or that the transferee otherwise
may not be able (financially or otherwise) to properly maintain the vineyards on
the Property or otherwise perform the obligations of the Grower hereunder;
provided, that if Grower shall dispute the reasonableness of Winery's conclusion
and initiate arbitration under Section 17.10 within such 10 day period, no such
termination shall become effective during the pendency of that arbitration. If
Winery does not terminate this Agreement, it shall (i) remain in full force and
effect with respect to the Property and the Grapes, (ii) run with the land, and
(iii) be binding on each of the heirs, executors, administrators, grantees,
transferees, assignees and other successors in interest of Grower. Grower agrees
upon request of Winery to cause any such successor to sign an assumption
agreement with Winery (in form satisfactory to Winery) to assume and be bound by
this Agreement in form suitable for recording. Once the Property has been
approved by Winery and acquired by Grower, this Agreement shall cover and apply
to only such Property, and no other.
14.2 RIGHT OF FIRST OFFER.
(a) RIGHT OF FIRST OFFER. If Grower proposes to offer to
sell or transfer the Property, or any portion thereof, to an unrelated third
party, other than to any member of the Xxxxxxxx family or trust for the benefit
of any member of the Xxxxxxxx family, or any entity which any such person
controls, Grower shall first offer the Property, or the applicable portion
thereof (the "OFFERED PROPERTY"), to Winery in accordance with the provisions of
this Section 14.2.
-7-
(b) OFFER NOTICE. Grower shall deliver a Notice ("OFFER
NOTICE") to Winery stating its bona fide intention to offer the Offered Property
and the price and terms upon which it proposes to offer the Offered Property.
(c) PERIOD AND MANNER OF EXERCISE. Winery shall have
thirty (30) calendar days after receipt of the Offer Notice to deliver Notice to
Grower of its intention to purchase all of the Offered Property upon the terms
and conditions set forth in the Offer Notice. If Winery gives Notice to Grower
of its intention to purchase the Offered Property, the effect is an automatic
and binding agreement on behalf of Grower to sell, and Winery to purchase the
Offered Property upon the terms and conditions set forth in the Offer Notice,
with the closing of such purchase of the Offered Property to occur no later than
sixty (60) days of Winery's Notice to Grower.
(d) FAILURE TO EXERCISE RIGHT OF FIRST OFFER. If Winery
fails to exercise its right of first offer within such 30-day period, Grower may
thereafter sell the Offered Property to other prospective buyers; provided,
however, that if Grower proposes to sell the Offered Property at a price lower
than or on terms more favorable than originally set forth in the Offer Notice to
a prospective buyer, Grower shall first re-offer the Offered Property to Winery
at such lower price and/or more favorable terms in accordance with the
provisions of this Section 14.2.
(e) CONFIRMATION OF WAIVER. If Winery has not exercised
its right of first offer to purchase the Offered Property upon the terms and
conditions set forth in the Offer Notice within the 30-day period set forth in
Section 14.2(c), Winery shall supply such confirmation, reasonably requested by
a prospective buyer or Grower, that Winery has waived its rights under this
Section 14.2.
15. CONDITIONS TO WINERY'S OBLIGATIONS. The obligations of Winery to
purchase the Grapes and otherwise perform its obligations hereunder shall be
subject to satisfaction of each of the following conditions:
15.1 IDENTIFICATION OF PROPERTY. Grower shall have identified the
Property on or before the date eighteen (18) months from the date of this
Agreement and afforded Winery the opportunity to inspect the Property and review
soils tests, water reports, environmental reports, title reports, and other
reports as Winery may reasonably request, and such Property and each such parcel
thereof, and such inspection reports and tests, shall be reasonably satisfactory
to Winery.
15.2 PURCHASE OR LEASE OF PROPERTY. After satisfaction of the
condition in Section 15.1, Grower, on or before the date twenty-four (24) months
from the date of this Agreement, shall have either (i) purchased fee title to
the Property or (ii) acquired a valid leasehold interest in the Property,
pursuant to a lease having, among other provisions, a term of at least
twenty-five (25) years, with respect to which lease Grower agrees to use its
best efforts to include a provision whereby Winery shall have the right to cure
any
-8-
breach of Grower and to become the lessee under the lease failing Grower's
cure of such breach. Winery acknowledges that Grower may acquire fee title or a
leasehold interest in the Property at different times, so long as Grower
acquires an interest in all of the Property on or before the date twenty-four
(24) months from the date of this Agreement.
15.3 VINEYARD DEVELOPMENT PLAN. Within sixty (60) days after
satisfaction of the condition in Section 15.1 with respect to a parcel of the
Property, Grower shall develop, in concert with and after discussions with
Winery, a detailed vineyard development plan for the Property, or the applicable
parcel thereof, which plan shall contain, among other things, a detailed
description of the Designated Varieties to be planted, a planting schedule,
clones and rootstock to be used, vine spacing, trellis system, cultivation
methods to be used, frost protection systems, proposed pesticide and herbicide
applications, and general viticultural practices to be followed ("VINEYARD
DEVELOPMENT PLAN"). After the Vineyard Development Plan has been finalized,
Grower shall deliver the Vineyard Development Plan to Winery to be approved by
Winery (which approval will not be unreasonably withheld, conditioned or
delayed) within 60 days after such plan has been provided to Winery. If Winery
fails to advise Grower that Winery disapproves of the Vineyard Development Plan
within such 60 day period, Winery shall be deemed to have approved the Vineyard
Development Plan without further notice or documentation from Winery. Grower
acknowledges and agrees that in granting or withholding such approval, Winery
shall have the right to take into account Winery's objective of producing super
premium and ultra premium wines from the Grapes, and Winery's anticipated wine
production and sales of particular wines and its need for certain varieties of
Grapes to be grown on the Property, and that such plan will likely require that
the Property be planted in stages over time.
16. CONDITIONS TO GROWER'S OBLIGATIONS. The obligations of Grower to sell
the Grapes and otherwise perform its obligations hereunder shall be subject to
satisfaction of the following condition:
16.1 PURCHASE OR LEASE OF PROPERTY. Grower shall have purchased or
leased the Property, on terms reasonably satisfactory to Grower, on or before
the date twenty-four (24) months from the date of this Agreement. Grower shall
use its best efforts to cause this condition to be satisfied in a timely manner.
16.2 VINEYARD DEVELOPMENT PLAN. Winery shall have approved the
Vineyard Development Plan within the time period required as provided in Section
15.3.
17. MISCELLANEOUS.
17.1 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
-9-
17.2 NOTICE. "NOTICE" means notice as set forth in this Section.
All notices, demands, requests, or other communications that may be or are
required to be given, served, or sent by any party to any other party pursuant
to this Agreement shall be in writing and shall be delivered in person, mailed
by registered or certified mail, return receipt requested, or delivered by a
commercial courier guaranteeing delivery, addressed and delivered to the parties
at the addresses set forth below their respective signatures on this Agreement.
If a party has furnished a facsimile and/or e-mail address, a nonbinding
confirming copy of the notice shall also be sent by facsimile transmission or
e-mail. Delivery shall be effective upon delivery or refusal of delivery, with
the receipt or affidavit of the U.S. Postal Service or overnight delivery
service deemed conclusive evidence of such delivery or refusal. Each party may
designate by notice in writing a new address to which any notice, demand,
request, or communication may thereafter be so given, served, or sent.
17.3 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section
14, this Agreement and the rights, interests, and obligations hereunder shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
17.4 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of California without giving effect to
principles of conflicts of laws.
17.5 WAIVER AND OTHER ACTION. This Agreement may be amended,
modified, or supplemented only by a written instrument executed by the party
against which enforcement of the amendment, modification, or supplement is
sought.
17.6 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision were never a part hereof, the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance (except to the
extent such remaining provisions constitute obligations of another party to this
Agreement corresponding to the unenforceable provision); and in lieu of such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Agreement, a provision as similar in its terms to such illegal,
invalid, or unenforceable provision as may be possible and be legal, valid, and
enforceable.
17.7 INTERPRETATION. This Agreement shall be construed according to
the fair meaning of its language. The rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be employed
in interpreting this Agreement. Whenever the term "including" is used in this
Agreement, it shall be interpreted as meaning "including, but not limited to"
the matter or matters thereafter enumerated.
-10-
Section and other headings are for reference purposes only and shall not
affect the interpretation or construction of this Agreement.
17.8 THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended to confer upon any person other than the parties hereto and their
successors and permitted assigns any rights or remedies under or by reason of
this Agreement.
17.9 ATTORNEYS' FEES. In the event of any dispute or controversy
between the parties relating to the interpretation of or arising out of or in
connection with, this Agreement, any exhibit hereto, or the transactions
contemplated hereby, the prevailing party shall be entitled to recover from the
other party reasonable attorneys' fees and expenses incurred by the prevailing
party. Such award shall include post-judgment attorney's fees and costs and
attorney fees on appeal or any petition for review therefrom.
17.10 ARBITRATION AND DISPUTE RESOLUTION. The parties waive their
right to seek remedies in court, including any right to a jury trial, with
respect to any claim or dispute arising out of or related to this Agreement. The
parties agree that in the event the parties are unable to resolve a claim or
dispute arising out of or related to this Agreement, including without
limitation (i) a dispute as to the purchase price of Grapes purchased and sold
hereunder, and (ii) a dispute as to whether Winery's requests regarding yield
levels under Section 7.2 are reasonable, such claim or dispute shall be resolved
exclusively by arbitration to be conducted in San Francisco, California in
accordance with the rules of the Judicial Arbitration and Mediation Service
("JAMS") applying the laws of California. The parties agree that such
arbitration shall be conducted by a retired judge who is experienced in dispute
resolution regarding the disputed matter, that discovery shall not be permitted
except as required by the rules of JAMS or as otherwise permitted by California
Civil Code of Procedure Section 1283.05, that the arbitration award shall not
include factual findings or conclusions of law, and that no punitive damages
shall be awarded. The parties understand that any party's right to appeal or to
seek modification of any ruling or award of the arbitrator is severely limited.
Any award rendered by the arbitrator shall be final and binding on the parties,
and judgment may be entered on it in any court of competent jurisdiction or as
otherwise provided by law.
17.11 RECORDING. Upon request of Winery, Grower will execute and
assist Winery in recording with the recorder of the county or counties in which
the Property is located a memorandum of contract or other appropriate document,
in form reasonably acceptable to Winery, suitable for providing a record of this
Agreement in the real property records of such county or counties.
17.12 SPECIFIC PERFORMANCE AND INJUNCTION. Grower agrees that it
would be difficult to measure damages to Winery from any breach by Grower of
Section 3 hereof or any breach of Grower's delivery obligations under this
Agreement, that injury to Winery from any such breach would be incalculable
and irremediable, and that money damages therefore would be an inadequate
remedy. Accordingly, Grower agrees that,
-11-
anything to the contrary herein notwithstanding, in lieu of the arbitration
provided for in Section 17.10, if Grower shall breach Section 3 or Grower's
delivery obligations under this Agreement, Winery shall be entitled, in
addition to all other remedies it may have hereunder or at law, to specific
performance of the breached terms hereof and/or to a preliminary and
permanent injunction to restrain violation thereof by Grower, without showing
or proving any actual damage sustained by Winery and without Winery's posting
of any bond.
17.13 APPROVAL BY WINERY. In any case under or relating to this
Agreement where the consent or approval of Winery is required or is otherwise
sought by Grower (including without limitation any proposed amendment of this
Agreement), such consent or approval shall only be effective if specifically
authorized by the Chief Executive Officer of Vincor International, Inc. or
his designee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"WINERY" "GROWER"
X.X. XXXXXXXX, INC., JK VINEYARDS, LLC
a California corporation a California limited liability company
By: By:
------------------------------- ------------------------------
Its: Its:
------------------------------ -----------------------------
Notice address: Notice address:
Vincor International Inc. 00000 Xxxxxxx Xxxx 12A
000 Xxxxxxxxxxxx Xxxxx Xxxx Xxxxxxx, XX 00000
Xxxxxxxxxxx, Xxxxxxx Xxxxxx X0X 0X0
Attention: Xxxxxxxx Xxxxxxxxx Attention: Xxxx Xxxxxxxx
Fax No.: 000 000-0000 Fax No.: 000 000-0000
E-Mail Address: E-Mail Address: xxxx@xxxxxxxxxx.xxx
xxxxxxxx.xxxxxxxxx@xxxxxx.xxx
-12-
EXHIBIT A
GRAPE PRICE
1. PRICE. Grower will provide Winery with the "Price" for the
current year crop by May 1st of each calendar year, with that price applicable
to the harvest of that calendar year. The Price shall consist of the Base Price
per ton and the Price Adjustment.
1.1 BASE PRICE.
(a) XXXXXXXX HILLS AREA. For those Grapes grown
in the Xxxxxxxx Hills area, the "BASE PRICE" of each variety will be the
weighted average of the previous harvest year's weighted average grower returns
per ton for non-related purchases for such variety for District 1 (Mendocino
County), District 7 (Monterey and San Xxxxxx Counties) and District 8 (San Xxxx
Obispo, Santa Xxxxxxx and Ventura Counties) (the "DESIGNATED DISTRICTS") as
reported in Table 10 of the California Department of Food and Agriculture's
Final Grape Crush Report (the "CRUSH REPORT") for such previous year's harvest,
or if the Crush Report is no longer being published, or any of the Designated
Districts are modified, then by the most comparable similar report or district
then available. The 1999 weighted average grower return per ton for non-related
purchases for District 1, District 7 and District 8 for each of the Designated
Varieties, as shown on Table 10 of the Crush Report, are set forth in Schedule 1
(Grape Price) to this EXHIBIT A.
(b) OTHER AREAS. For those Grapes grown in any
of the Designated Districts, the "BASE PRICE" of each variety will be the
previous harvest year's weighted average grower return per ton for non-related
purchases for such variety for the Designated District in which the Grapes are
grown, as reported in Table 10 of the Crush Report for such previous year's
harvest.
(c) FLOOR AND CEILING PRICE. Notwithstanding the
foregoing, during the "Specified Period" only, under no circumstances shall the
Base Price of any variety grown on any vineyard block on the Property for any
year during such period be less than the Floor Price or greater than the Ceiling
Price for such variety. The "FLOOR PRICE" and "CEILING PRICE" are set forth in
Schedule 1 (Grape Price) of this EXHIBIT A. As used herein, the "Specified
Period" shall be calculated for each vineyard block developed on the Property
and shall run for a period commencing with the planting of such vineyard block
and ending at the completion of harvest during the eighth year thereafter. After
the Specified Period with respect to a vineyard block, no Floor Price or Ceiling
Price shall apply to Grapes delivered from that block.
A-1
1.2 PRICE ADJUSTMENT. The "PRICE ADJUSTMENT" shall be the
difference calculated by taking the greater or lesser amount that Winery would
have paid to Grower for the immediately prior year's harvest, if the applicable
prices listed in the Crush Report for such prior year were in fact paid, less
the amount actually paid for the prior year's harvest as calculated based upon
the Base Price, excluding the Price Adjustment paid in such prior year but
taking into account and applying the Floor Price and Ceiling Price (to the
extent applicable) for the prior year. The Price Adjustment may be either a
positive or negative amount.
1.3 TERMINATION FEE. Within thirty (30) days after
publication of the Crush Report for the final harvest year under this Agreement,
(i) Winery shall pay to Grower a termination fee in an amount equal to the Price
Adjustment as calculated with respect to the amount paid for the final year's
harvest if the amount of Price Adjustment is positive, and (ii) Grower shall pay
to Winery a termination fee in an amount equal to the Price Adjustment as
calculated with respect to the amount paid for the final year's harvest if the
amount of the Price Adjustment is negative.
2. EXAMPLE. The following example is with respect to Chardonnay
grapes grown in Mendocino County.
2.1 Assuming the weighed average grower return for
non-related purchases for Chardonnay grapes for the 1999 harvest is $1,563 per
ton per Table 10 of the 1999 Crush Report, the Base Price for Chardonnay grapes
grown in Mendocino County for the 2000 harvest shall be $1,563 per ton. Assume
200 tons are sold from the 2000 harvest under the terms of this Agreement.
2.2 Assuming the weighted average grower return for
non-related purchases of Chardonnay grapes for the 2000 harvest is $1,663 per
ton per Table 10 of the 2000 Crush Report, the Base Price for Chardonnay grapes
grown in Mendocino County for the 2000 harvest shall be $1,663 per ton.
2.3 The Price Adjustment for the 2001 harvest shall be
$20,000, calculated by taking the Base Price amount Winery would have paid for
the 2000 harvest ($1,663 per ton multiplied by 200 tons) less the Base Price
amount Winery actually paid for the 2000 harvest ($1,563 per ton multiplied by
200 tons). Said Price Adjustment amount of $20,000 shall be part of the Price
for Chardonnay grapes from Mendocino County paid by Winery for the 2001 harvest
and shall be paid at the times provided in Section 10 of the Agreement. If the
Price Adjustment results in a negative amount, such amount shall be deducted by
Winery from the Price otherwise payable by Winery for such harvest year.
2.4 The Floor Price and Ceiling Price shall be taken into
account in determining the Price Adjustment amount for each year during the
Specified Period. In the example above, if the Ceiling Price for Chardonnay
grapes for the 2000 harvest had been $1,613 per ton, and assuming the 2000
harvest was during the Specified Period,
A-2
then the Price Adjustment for the 2001 harvest would have been $10,000,
rather than $20,000.
3. FINAL PRICE. The parties acknowledge and agree that the Price
payable by Winery for each harvest year (consisting of the Base Price and the
Price Adjustment, if any, as provided above) shall be calculated and set by May
1st of that harvest year as provided above and that such Price, absent
mathematical error, is a final price that shall be reported to the California
Department of Food and Agriculture under applicable laws and regulations and is
not subject to change or adjustment.
A-3
SCHEDULE 1
GRAPE PRICE
-------------------- ------------- -------------- ---------------------------------------------------------- -------------------
GRAPE VARIETY FLOOR CEILING GROWER RETURN WEIGHTED
AVERAGE
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
DISTRICT 1 DISTRICT 7 DISTRICT 8
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
Chardonnay $900 $1,800 $1,563.93 $1,488.99 $1,487.20 $1,509.86
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
Syrah $1,200 $2,100 $1,827.60 $1,296.08 $1,531.47 $1,525.64
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
Merlot $1,100 $2,000 $1,782.92 $1,340.36 $1,374.83 $1,451.34
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
Petite Verdot $1,000 $1,900 $2,092.61 $0.00 $1,036.72 $1,321.07
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
Viognier $900 $1,800 $1,752.62 $1,610.81 $1,695.72 $1,697.74
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
Cabernet Sauvignon $1,100 $2,000 $1,811.15 $1,299.35 $1,273.47 $1,364.54
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
Malbec $1,000 $1,900 $0.00 $1,000.00 $1,223.45 $1,191.53
-------------------- ------------- -------------- ------------------- ------------------ ------------------- -------------------
(1) Prices are per ton
(2) Grower Return is the 1999 weighted average grower return per ton for
non-related purchases for such variety for District 1 (Mendocino County),
District 7 (Monterey and San Xxxxxx Counties) and District 8 (San Xxxx Obispo,
Santa Xxxxxxx and Xxxxxxx Counties).
(3) The WEIGHTED AVERAGE of the weighted average grower returns for Districts 1,
7 and 8 for 1999, as shown above, is calculated by using the weighted average
grower returns set forth above and the tonnage amounts for each such variety and
each such district as reported on Table 4 of the Crush Report for 1999.
A-4
EXHIBIT B
GRAPE QUALITY STANDARDS
All Grapes shall meet the Grape Quality Standards listed below (the
"Quality Standards").
1. SUGAR STANDARDS
Winery, in consultation with Grower, shall reasonably establish
"Minimum Brix" (sugar) levels and "Maximum Brix" levels for each
Designated Variety, and such levels will represent the lowest and
highest Brix, respectively, at which Winery will be obligated to accept
Grapes.
BRIX PENALTY. Subject to the provisions of subparagraph (b) of EXHIBIT
D, any load of Grapes delivered to Buyer at a Brix level below the
Minimum Brix which Buyer elects to accept will be subject to a purchase
price reduction of ten percent per degree Brix, or fraction thereof,
below the Minimum Brix.
2. GRAPE DEFECT LEVELS
"Defects" are defined in accordance with the custom of the grape
industry and the practice of the Grape Inspection Service provided by
the California Department of Food and Agriculture. Defects shall
include, but not be limited to, Grapes which evidence mold, rot or
mildew resulting in decomposition. Any otherwise satisfactory load of
Grapes delivered to Winery having 2.0 percent Defects or less shall be
considered acceptable. Winery and Grower agree to work together to
consistently deliver Grapes with Defect levels below 2.0 percent.
DEFECTS PENALTY. Any load of Grapes delivered to Winery having a level
of Defects in excess of 2.0 percent will receive a weight deduction of
the total weight of defects in the load. Any load of grapes delivered
to Winery that tests 3.0 percent Defects or more may be rejected, at
Winery's option.
3. MATERIAL OTHER THAN GRAPES (M.O.G.)
M.O.G. is defined in accordance with the custom of the California grape
industry and the practice of the Grape Inspection Service provided by
the California Department of Food and Agriculture and shall include,
but not be limited to, leaves, leaf stems, canes, and any other foreign
materials of any nature. Any otherwise satisfactory load of Grapes
delivered to Winery having 1.0 percent M.O.G. or less shall be
considered acceptable. Winery and Buyer agree to work together to
consistently deliver Grapes with M.O.G. levels below 1.0 percent. In
the event any M.O.G. is present in any load of Grapes, it shall be
conclusively presumed that said M.O.G. originated with Grower.
B-1
M.O.G. PENALTY. Any load of Grapes delivered to Winery having in excess
of 1.0 percent M.O.G. will receive a weight deduction of the total
weight of M.O.G. in the load. Any load of Grapes delivered to Winery
that tests 2.0 percent M.O.G. or more may be rejected, at Winery's
option.
4. MIXED LOADS, ETC.
Winery shall have the right to reject any load of Grapes for any of the
following reasons: (i) any load of white grapes having in excess of 1.0
percent of black grapes, (ii) mixed variety loads, (iii) overnight
loads (loads picked earlier than such time as agreed to between
Winery's field representative and Grower of the day prior to delivery),
(iv) wild fermentation in the load, (v) volatile acidity above 0.015
gms/100 ml, (vi) ethyl alcohol above 0.08 percent by volume, (vii)
loads contaminated with caterpillars, tomato worms or other insects or
rodents, motor fuel, hydraulic fluid, or any other oil base product,
exceeding levels acceptable to the Bureau inspector, or (viii) loads
contaminated with agricultural chemicals residue in excess of legal
limits, or with an agricultural chemical either not registered for use
in vineyards or not applied according to label instructions.
5. PESTICIDES, ETC.
Grower agrees that all Grapes to be sold to Winery hereunder shall not
be adultered, mislabeled or misbranded within the meaning of the
Federal Food, Drug and Cosmetic Act, together with any and all
amendments and regulations pertaining thereto, and shall be in
compliance with the California Pure Food Act and California Safe
Drinking Water and Toxic Enforcement Act of 1986. Winery shall not be
required to accept Grapes which have been treated with any pesticide or
chemical, the application of which does not conform to local, state or
federal laws and regulations, and with the use data and product
information accompanying or pertaining to the pesticide or chemical.
Grower shall maintain full, complete and accurate written records with
respect to every pesticide, fertilizer, nutrient or other chemical
application and if requested, shall furnish the same to Winery prior to
harvesting Grapes for delivery. As used herein, "Pesticide" includes,
without limitation, herbicides, fungicides (including sulfur and
sulfur-based compounds), rodenticides, insecticides and miticides.
6. GENERAL STANDARDS
All Grapes sold and delivered to Winery under this Agreement shall, at
the time and place of delivery, be whole, sound grapes in good and
merchantable condition, and shall be grapes having all properties
necessary to make them suitable for making into super and ultra premium
wines of a quality at least equivalent to the quality of super and
ultra premium wines then being produced by Winery. Such Grapes must
fully comply with the requirements of this Agreement and with all
applicable federal, state and local laws, rules, regulations and
orders, whether now or hereafter in effect, including but not limited
to all regulations and standards of the U.S. Food and Drug
Administration and the California Department of Public
B-2
Health. The parties recognize that viticultural quality standards for
super premium and ultra premium grapes may differ in some respects in
the future from the quality standards set forth in this EXHIBIT B and
that new quality standards may be prevalent in the industry for such
grapes from time to time. In this regard Grower agrees to comply with
such additional or different quality standards.
B-3
EXHIBIT C
FARMING AND VITICULTURAL PRACTICES
Grower shall perform such tilling, cultivating, fertilizing,
irrigating, pruning, spraying, leaf-pulling, thinning of fruit and other
farming and viticultural practices and acts in the manner considered at such
time customary in the district where the Grapes are grown and best suited to
the production of quality Grapes in each variety of Grapes and to be used to
make super premium and ultra premium wine of the quality and type then being
produced by Winery, and Grower shall otherwise cultivate and mature the
Grapes in accordance with good viticultural practices and avoid excessive
cropping and excessive use of pesticides and employ yield management
practices and be guided by reasonable requests regarding yield levels, as
described in Section 6.4 and Section 7.2. Grower shall also comply with other
reasonable requests made by Winery with respect to Grower's farming and
viticultural practices. To the extent new farming or viticultural practices
or equipment or technology are developed during the term of this Agreement
which, if implemented, would not materially increase Grower's costs but would
substantially improve the quality and quantity of Grapes being delivered by
Grower hereunder, Grower shall, upon request by Winery, institute such
practices or acquire such equipment or technology. Grower shall also use such
care in harvesting and delivering Grapes as is advisable and necessary in the
exercise of good farming and viticultural practice.
Grower shall not make or permit to be made material changes to the
vineyard on the Property or changes in the viticultural practices employed by
Grower, where such changes might reasonably be expected to affect the quality or
quantity of Grapes delivered hereunder, without Winery's prior written consent.
In addition, except as otherwise permitted herein, Grower shall not graft to
change the varieties of Grapes specified in this Agreement or remove healthy
vines producing Grapes to be sold under this Agreement without Winery's prior
written consent.
C-1
EXHIBIT D
HARVESTING AND DELIVERY
(a) PICKING DECISION. For each harvest year, Winery shall
either elect to determine in its sole discretion the date on which each variety
of Grape from each vineyard shall be picked or delegate to Grower the decision
of when to harvest the Grapes, and in such case, Winery shall make a good faith
effort to schedule delivery such that Grower's crop may be harvested at its
optimal maturity.
(b) WINERY DETERMINATION AND EFFECT ON QUALITY STANDARDS.
If Winery elects to make the harvest decision, Grower shall commence harvesting
all Grapes designated to be picked within twenty-four (24) hours after Winery's
determination. Winery shall schedule delivery of the Grapes based on Winery's
determination of when the Grapes are to be picked. If Winery makes the
determination of harvest, Winery acknowledges that, notwithstanding the other
provisions of this Agreement, neither the sugar standards nor any other Quality
Standards, where the failure to meet such Quality Standards reasonably resulted
from a delay in harvest of the Grapes, shall be applicable, for example, Defects
of rot and mildew in excess of 3.0% resulting from excessive wet and cold
weather during the harvest season. The provisions of this subsection (b) shall
not apply to any Grapes where Winery and Grower mutually determine when to
harvest such Grapes.
(c) DELIVERY SCHEDULE. During harvesting of the Grapes,
when Winery has delegated to Grower the decision of when to harvest the Grapes,
Winery shall supply Grower with daily schedules of the quantity and variety of
Grapes to be delivered and the destination for such delivery. All loads of
Grapes must be scheduled by Winery prior to delivery and must be accompanied by
a signed original Grower Delivery Tag.
(d) MECHANICAL GRAPE HARVESTING. Grower may mechanically
harvest Grapes. Winery may request from time to time that Grower hand pick
Grapes, in which case the parties shall discuss in good faith the procedures
therefore and the incremental costs associated with hand picking to be
reimbursed to Grower by Winery. Mechanical harvesting of Grapes under this
Agreement may not be started prior to such time on the day prior to delivery as
Winery's field representative and Grower agree. Grower shall maintain all
harvesters and bulk containers used for the Grapes in a clean and sanitary
condition at all times. Grower shall ensure that all hand and mechanically
harvested grapes shall be free of extraneous materials, such as short canes,
stumps, vine arms, sprinklers, harvester parts, etc., that may damage winery
equipment. The cost of any such damage shall be borne by Grower.
(e) RISK OF LOSS. All risk of loss of damage to Grapes to
be delivered and sold to Winery shall be borne by Grower until such Grapes are
delivered to and accepted by Winery.
D-1
