EXHIBIT 10.1
CERTAIN PORTIONS OF THIS DOCUMENT FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED HAVE BEEN REDACTED. REDACTIONS ARE INDICATED BY A DOUBLE PAIR OF
EMPTY BRACKETS ("[[ ]]").
GRAPE PURCHASE AGREEMENT
BETWEEN
XXXXXX VINEYARDS CALIFORNIA INC.
AND
INTERNATIONAL DISTILLERS AND VINTNERS
NORTH AMERICA, INC.
DATED APRIL 15, 1998
TABLE OF CONTENTS
PAGE
1. SALE AND PURCHASE. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. PAYMENT TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. FARMING PRACTICES AND DEVELOPMENT PLAN . . . . . . . . . . . . . . . . 5
6. ANNUAL PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. ANNUAL REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. XXXXXX TO CONSULT WITH IDV; RESPONSES TO EMERGENCIES . . . . . . . . . 9
9. FROST PROTECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. HARVEST, DELIVERY AND ACCEPTANCE OF GRAPES . . . . . . . . . . . . . . 11
11. BULK TANK AND GONDOLA STANDARDS. . . . . . . . . . . . . . . . . . . . 12
12. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF XXXXXX . . . . . . . . . 12
13. INSPECTION AND WEIGHING. . . . . . . . . . . . . . . . . . . . . . . . 13
14. GRAPE QUALITY TARGETS AND STANDARDS. . . . . . . . . . . . . . . . . . 14
15. QUALITY PROBLEMS RELATED TO XXXXXX PERFORMANCE . . . . . . . . . . . . 16
16. MECHANICAL GRAPE HARVESTING. . . . . . . . . . . . . . . . . . . . . . 16
17. PESTICIDES, HERBICIDES, NEMATOCIDES, ETC.. . . . . . . . . . . . . . . 17
18. AGRICULTURAL EMPLOYER. . . . . . . . . . . . . . . . . . . . . . . . . 17
19. ENTRY TO XXXXXX'X PROPERTY . . . . . . . . . . . . . . . . . . . . . . 18
20. NON-ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
21. MATTERS BEYOND XXXXXX'X CONTROL. . . . . . . . . . . . . . . . . . . . 19
22. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
23. AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
24. WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
25. CONFLICT OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 20
26. ARTICLE HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
27. CUMULATIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
28. RECORDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
29. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
30. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
31. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
32. MEDIATION OF DISPUTES; ARBITRATION . . . . . . . . . . . . . . . . . . 23
33. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
34. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
35. ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
36. DISCLAIMERS BY XXXXXX. . . . . . . . . . . . . . . . . . . . . . . . . 25
37. CHANGES IN CRUSH REPORT. . . . . . . . . . . . . . . . . . . . . . . . 25
38. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
39. BREACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBITS
A Property Description - {Omitted-See Exhibit 99.1}
B Lease - {Omitted-See Exhibit 99.1}
C-1 Development Plan
-i-
C-2 Vineyard Layout Map - {Omitted-See Exhibit 99.1}
D-1 Examples of Purchase Price Adjustments
D-2 Direct Labor Rate Calculation
E Operational Cost Categories
-ii-
GRAPE PURCHASE AGREEMENT
This Agreement is made as of the 15th day of April, 1998, by and
between XXXXXX VINEYARDS CALIFORNIA INC., a California corporation
(hereinafter "Scheid"), and INTERNATIONAL DISTILLERS AND VINTNERS NORTH
AMERICA, INC., a Connecticut corporation (hereinafter "IDV"), for the sale
and purchase of the varieties of grapes as listed in Section 1 below
(hereinafter "Grapes"), part of which were planted by Xxxxxx in the Summer of
1997 and the balance of which are to be planted in the Spring of 1998 on the
real property commonly known as Terra Vita Vineyard in the Xxxxx Valley area
near King City in Monterey County, California, State Pricing District No. 7,
legally described as set forth on EXHIBIT A attached hereto (hereinafter, the
"Property"):
For the purpose of this Agreement, even though a portion of the
Property was planted in the Summer of 1997, the vineyard planting and
development period ("Development Period") shall be defined as calendar years
1998, 1999 and 2000.
The nature of Xxxxxx'x interest in the Property and the basis of
Xxxxxx'x ownership and control of the Grapes to be delivered is a lease (the
"Lease") dated January 1, 1997, between Xxxxxx and Xxx Xxxxx and Xxxxxxxx X.
Xxxxx, as trustees under declaration of trust dated August 16, 1989, and
Xxxxxxxx X. Xxxxx and Xxxxxxx Xxxxxxxx (also known as Xxxxxxx Xxxxxxxx),
successor co-trustees of the testamentary trust of Xxxxxx Laberere, deceased,
and Xxx Xxxxx, also known as Xxxxxx X. Xxxxx, Xx., and Xxxxxxxx X. Xxxxx,
husband and wife (collectively, the "Lessor"), a copy of which Lease is
attached hereto as EXHIBIT B.
The parties are entering into this Agreement with the mutual
understanding and intention to provide a long-term source of supply of grapes
for IDV at stable prices per ton, subject to certain minimum and maximum
prices per acre, and to provide Xxxxxx with a long-term customer for the
entire output of Grapes from the Property and thereby provide Xxxxxx with an
opportunity to recoup and profit from the substantial investment required to
develop and operate the Property as a vineyard. Xxxxxx'x willingness to
agree to the maximum prices per acre set forth in this Agreement is premised,
in part, on the parties' mutual expectations with respect to the development
and operational plans for the Property and Xxxxxx'x assessment of the
anticipated costs of such development and operation. IDV's willingness to
enter into a long-term purchase agreement is premised on the fulfillment by
Xxxxxx of certain performance standards in connection with the development
and operation of the Property and the farming, harvesting and delivery of
Grapes on and from the Property, and on Xxxxxx'x supplying grapes of quality
that can be used in IDV's premium wine
1
program. The foregoing paragraph is subject to, and is not intended to
modify, the rights and obligations of the parties as set forth below in this
Agreement.
AGREEMENT
1. SALE AND PURCHASE. Subject to the terms and conditions of
this Agreement, Xxxxxx agrees to sell and deliver to IDV and IDV agrees to
purchase from Xxxxxx the total crop of Grapes grown on the following vineyard
acreage on the Property at the per-ton or per-acre purchase price (the
"Purchase Price") set forth in Section 3 hereof:
BLOCK NET VINE YEAR
VARIETY NUMBERS* ACRES PLANTED
------- -------- ------- -------
Cabernet Xxxxxxxxx X-0, X-0, X-0, X-0, E-2 116.87 1997
Cabernet Sauvignon X-0, X-0, X-0, X-0, C-3, 161.40 1998
X-0
Xxxxxxxxx Xxxxx X-0, X-0 46.86 1997
--------
TOTAL 325.13
--------
--------
* As designated on EXHIBIT C-2.
The estimated tons that will be delivered by Xxxxxx to IDV under
this Agreement for the Crop Years shown, as projected by the parties,
are as follows ("Estimated Yield"):
[[ ]]
So long as Xxxxxx complies with the Farming Standards (as defined
herein) and so long as the same is not proximately caused by Xxxxxx'x
intentional misconduct or failure to comply with the other provisions of this
Agreement, (i) Xxxxxx shall not be responsible for any failure to achieve the
production levels set forth above, and (ii) the failure, in and of itself, to
achieve any particular yield of Grapes shall not affect the respective rights
and obligations of the parties under this Agreement; provided, however, that
nothing contained in this Section 1 shall affect IDV's termination rights as
set forth in Section 30 herein.
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2. TERM OF AGREEMENT. Unless earlier terminated, this Agreement
shall become effective on the date first written above and shall continue for
a period ending on December 31, 2014 (the "Initial Term"). If during the
period from January 1, 2013, through March 31, 2013, neither party to this
Agreement has given the other written notice of its decision to terminate
this Agreement at the conclusion of the Initial Term, this Agreement shall be
extended automatically beyond the Initial Term as set forth below. For
purposes of this Agreement, a "Crop Year" shall mean a calendar year.
If this Agreement has not terminated before or at the end of the
Initial Term, this Agreement may be terminated thereafter by either of the
parties upon written notice to the other, such notice to be delivered only
during the period from January 1 through March 31 of any Crop Year. If such
notice is timely given by either party, this Agreement shall terminate
effective as of the December 31 next following delivery to IDV by Xxxxxx of
the second harvest of Grapes after such notice is given. For example, if
notice of termination were to be given by one party to the other on January
15, 2017, this Agreement would terminate on December 31, 2018.
3. PURCHASE PRICE. The purchase price ("Purchase Price") for
Grapes delivered pursuant to the terms and conditions of this Agreement will
be as follows:
[[ ]]
With respect to Grapes delivered pursuant to the terms of this
Agreement in the Crop Year 2002 from vines planted in 1997, in the event the
yield per acre for such Grapes for the Crop Year 2002 equals or exceeds
[[ ]] tons, the price per acre shall instead be [[ ]] per acre. If,
in any Crop Year, the yield for a particular variety of Grapes grown and
delivered in accordance with the terms of this Agreement and not properly
rejected by IDV exceeds [[ ]] tons per acre, IDV shall pay Xxxxxx a
bonus (the "Bonus") equal to [[ ]], such Bonus to be paid to Xxxxxx
within 30 days of completion of harvest of the variety exceeding such goal.
In addition to the Purchase Price, IDV shall be obligated to pay to Xxxxxx
the harvest and delivery costs for the Grapes subject to the provisions of
Section 10 below.
The Purchase Price per acre as set forth above shall be adjusted in
the manner set forth below based on the Operational Costs (as defined below)
in each odd-
3
numbered Crop Year commencing with Crop Year 2003 (each, an "Adjustment Crop
Year"). The Purchase Price, as so adjusted, shall become effective with
respect to the immediately succeeding Crop Year (e.g., the Crop Year 2004 in
the case of the adjustment made based on the 2003 Adjustment Crop Year) and
shall remain in effect until the end of the next Adjustment Crop Year with
respect to which an adjustment is required to be made (e.g., the adjustment
based on the 2003 Adjustment Crop Year shall remain effective for the 2004
and 2005 Crop Years). [[ ]] The Annual Report described in Section
7 below shall contain a detailed analysis of Xxxxxx'x Operational Costs and
Direct Labor Rate (as defined below) for each Crop Year.
If a Purchase Price adjustment is required to be made pursuant to
the provisions of the immediately preceding paragraph, the percentage
increase in the Purchase Price based on the Adjustment Crop Year 2003 shall
equal [[ ]]. If a Purchase Price adjustment is required to be made
pursuant to the provisions of the immediately preceding paragraph, the
percentage increase based on each Adjustment Crop Year thereafter shall equal
[[ ]]. Notwithstanding anything to the contrary herein, the percentage
increase in the Purchase Price for any two year period following an
Adjustment Crop Year shall not exceed [[ ]]. As used herein, the term
"Xxxxxx'x Direct Labor Rate" shall mean the average hourly rate required to
be paid by Xxxxxx for labor directly involved in developing, farming or
operating the Vineyard, taking into account both wages and benefits in the
case of employees and taking into account hourly contract rates paid by
Xxxxxx for labor performed by third party contractors. In no event shall
compensation and benefits paid to persons included as a part of Xxxxxx'x
corporate overhead be included in calculating Xxxxxx'x Direct Labor Rate.
Examples of the manner in which the Purchase Price adjustments described in
this Section 3 are to be made are set forth in EXHIBIT D-1 attached hereto,
and a calculation of Xxxxxx'x Direct Labor Rate as of the date of this
Agreement is set forth in EXHIBIT D-2 attached hereto.
Xxxxxx'x Operational Costs and Direct Labor Rate shall be
calculated in accordance with generally accepted accounting principles
applied on a basis consistent with the manner in which the same are being
calculated as of the date of this Agreement, and the categories of the direct
costs to be included in Xxxxxx'x Operational Costs shall be only those
categories set forth on EXHIBIT E hereto.
IDV shall have the right at reasonable times and on reasonable
notice to Xxxxxx to examine Xxxxxx'x books and records relating to the
calculation of Xxxxxx'x Operational Costs and Xxxxxx'x Direct Labor Rate
hereunder. Xxxxxx agrees to cooperate with IDV and its agents and
representatives in connection with any such examination.
4
For purposes of this Agreement, and in particular for purposes of
determining the Purchase Price hereunder, the term "acre" shall mean net vine
acres, as described in the Development Plan (as defined herein).
4. PAYMENT TERMS. The Purchase Price for each variety of Grapes
shall be payable as follows: on or before [[ ]] of each Crop Year,
IDV shall make a payment to Xxxxxx equal to [[ ]] of the reasonably
estimated Purchase Price (excluding Bonus) (i) per ton (in the case of the
Crop Years 1998, 1999 and 2000), and (ii) per acre (in the case of the Crop
Year 2001 and thereafter) multiplied by the number of acres of each such
variety under cultivation during the applicable Crop Year; and the balance of
the Purchase Price for each variety of Grapes shall be payable on or before
the later of [[ ]]. Harvest and delivery costs owing by IDV to Xxxxxx
pursuant to the terms of this Agreement shall be paid by IDV to Xxxxxx 30
days after the final delivery to IDV of each such variety of Grapes in
accordance with the terms of this Agreement or on October 10 of the then
current Crop Year, whichever is later.
Scheid directs IDV to send such payments and make such checks
payable to Scheid as follows:
Xxxxxx Vineyards California Inc.
00000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx xxx Xxx, XX 00000
Scheid may change such payment directions upon prior written notice to IDV
pursuant to Section 29 hereof.
5. FARMING PRACTICES AND DEVELOPMENT PLAN.
a. In developing, farming, operating and managing the vineyards
(the "Vineyards") now or hereafter located on the Property, Xxxxxx shall
(and shall cause its agents, contractors and representatives (collectively,
"Representatives") to) follow and comply with (x) the farming and
development plan (the "Development Plan") attached hereto as EXHIBIT C-1,
(y) each of the Annual Plans (as defined here), and (z) such other
instructions, directions and guidance as IDV may give to Xxxxxx from time
to time in good faith (including without limitation those generated from
IDV's Grower Feedback Loop program and IDV's Winegrowing Department.) To
the extent not specifically otherwise provided in the Development Plan, an
applicable Annual Plan or the instructions, direction and guidance
described in clause (z) above, Xxxxxx shall (and shall cause its
Representatives to) perform such planting, preparation,
5
tilling, cultivating, fertilizing, irrigating, pruning, spraying, weed
and pest control, thinning of fruit and other farming and viticultural
practices and acts in a manner considered at such time as customary in
the district where the Grapes are grown for the production of high
quality Grapes to be used in the production of wine of a quality being
produced as of the date of this Agreement under IDV's varietal wine
brands and for the attainment of the yields projected by the parties as
set forth in Section 1 of this Agreement. Without limiting the
foregoing and to the extent not specifically otherwise provided in the
Development Plan, an applicable Annual Plan or the instructions,
directions and guidance described in clause (z) above, Xxxxxx'x duties
and responsibilities in developing, farming, operating and managing the
Vineyards shall include the following:
(1) caring for and maintaining xxxxx, pumps, pipelines,
irrigation systems and other improvements on the Vineyard;
(2) ongoing general vineyard maintenance and repairs at
the Vineyard;
(3) operating in a timely manner all frost protection and
cooling systems now or hereafter located on the Vineyard;
(4) farming and harvesting the Grapes in a manner designed
to meet all the provisions of Sections 14 and 15, hereof;
(5) harvesting the Grapes by hand or machine (as designated
by IDV) and delivering them to such point of delivery as IDV shall
designate;
(6) implementing and using viticultural practices,
equipment and technology that are not customary on the date of this
Agreement but which become customary in the future, subject, in the
case of those items involving Specified Capital Costs (as defined
below), to Section 5(c); and
(7) otherwise farming and managing the Vineyard with at
least the same degree of care as is used by Xxxxxx at other premium
wine grape vineyards which are owned, leased or otherwise controlled
by Xxxxxx (excluding those managed by Xxxxxx for the account of an
unaffiliated third party) in the same district.
6
All of the foregoing requirements and responsibilities of Xxxxxx and its
Representatives set forth in this Section 5.a. and in Section 5.b. are
referred to herein as the "Farming Standards."
x. Xxxxxx hereby agrees to develop the Property pursuant to
the block-by-block vineyard layout map, including roads and vine row
patterns, attached hereto as EXHIBIT C-2. To the extent not otherwise
specified on EXHIBIT C-1 or EXHIBIT C-2 hereto, Xxxxxx and IDV shall
mutually agree on the type of rootstock to be planted on the Property. At
no time shall Xxxxxx change the variety of Grapes grown on the Property or
deviate in any significant respect from the plan, practices or guidelines
attached hereto as EXHIBIT C-1 or EXHIBIT C-2 without the prior written
consent of IDV.
c. Except for harvesting and delivery costs and expenses and
Specified Capital Costs as set forth below, Xxxxxx shall be responsible for
and pay when due any and all costs and expenses for the development,
farming, maintenance, repair, care, operations and improvement of the
Property during the term of this Agreement, including without
limitation all costs and expenses incurred pursuant to or in connection
with (i) implementing the Development Plan and each Annual Plan, (ii)
equipment purchases, upgrades, replacements, maintenance and repair, and
(iii) normal vineyard maintenance, repair and farming which a reasonably
prudent vineyard owner and operator in the same district would make in the
normal course. To the extent that new viticultural practices, equipment,
or technology are introduced during the term of this Agreement which, if
implemented, would in IDV's reasonable judgment improve the quality or
quantity of Grapes being delivered by Xxxxxx hereunder, or are instituted
at other vineyards in which Xxxxxx or its affiliates have an interest and
which are comparable in terms of vineyard layout and design, Xxxxxx, upon
IDV's written request, shall reasonably implement such new practices,
equipment, or technology at Xxxxxx'x sole cost, unless the same constitute
Specified Capital Costs, in which event IDV shall pay or reimburse Xxxxxx
for all such Specified Capital Costs promptly after receiving detailed
invoices therefor, unless another payment or recoupment method shall be
agreed upon in writing.
As used herein, the term "Specified Capital Costs" shall mean all
capital costs and expenses directly attributable to capital improvements
hereafter made to the Vineyard by Xxxxxx at the written request of IDV or
at the suggestion of Xxxxxx if, but only if, agreed to in writing by IDV,
which (i) are not included in or contemplated by the Development Plan, (ii)
will not be offset by decreases in Xxxxxx'x overall costs and expenses
during the remaining
7
portion of the Initial Term (or any two-year period thereafter) of this
Agreement which are attributable to such capital improvements, or (iii)
are not customarily considered to be a part of normal vineyard
maintenance, repair, farming, equipment replacements and purchases which
a reasonably prudent vineyard owner and operator in the same district
would make in the normal course. In the event of a dispute between the
parties as to whether a particular cost or expense is a Specified
Capital Cost, the matter shall be referred to dispute resolution as
provided in Section 32 herein.
6. ANNUAL PLAN. Before December 31 of each Crop Year commencing with
the Crop Year 1999, Xxxxxx shall submit to IDV a proposed written plan
regarding the farming and viticultural practices to be used on the Property
during the next succeeding Crop Year (the "Proposed Annual Plan"). The
Proposed Annual Plan shall include the projected crop tonnage and harvest
brix levels by variety, and, at a minimum, shall also set forth in detail the
following information:
a. The approximate amount and timing of irrigation which Xxxxxx
expects to undertake under normal conditions;
b. The approximate amount and types of nitrogen-containing
fertilizers and other nutrients which Xxxxxx expects to apply, and the
expected times of application;
c. Any significant change from pruning and vine training
techniques followed by Xxxxxx in the Vineyard during the previous Crop
Year, and any specific plans for thinning and leaf pulling;
d. Any significant changes in farming or viticultural practices
from the prior Crop Year intended to be adopted for the Crop Year covered
by the Annual Plan, including such changes to be adopted that would involve
Specified Capital Costs, it being understood that notwithstanding anything
in this Agreement to the contrary, IDV need not pay or reimburse Xxxxxx for
any Specified Capital Costs unless IDV has first requested or approved the
same in writing; and
e. Such other information as IDV reasonably may request
concerning viticultural practices which may be followed by Xxxxxx.
Xxxxxx and IDV will meet to review and discuss the Proposed Annual Plan
within 15 days following its submission to IDV at a mutually agreeable place
and time. In connection with such review and discussion, Xxxxxx will provide
to IDV such
8
additional information in its possession as may be reasonably requested by
IDV. IDV may in good faith suggest revisions to the Proposed Annual Plan,
which Xxxxxx shall incorporate unless such proposed revision will materially
deviate from the Development Plan, raise the Farming Standards in any
material respect, or cause Xxxxxx to incur Specified Capital Costs, unless,
in the latter case, a mutually acceptable amendment to this Agreement is
entered into by the parties which provides for the manner in which IDV is to
bear and pay for such Specified Capital Costs. The Proposed Annual Plan
shall be subject to the prior written approval of IDV, which shall not be
unreasonably withheld or delayed. In the event that IDV does not approve a
Proposed Annual Plan, it shall provide specific written notice to Xxxxxx of
those provisions of the Proposed Annual Plan to which it objects. Xxxxxx
shall thereupon implement the provisions of the Proposed Annual Plan not
affected by IDV's objections, and in lieu of the provisions to which IDV has
objected and until such time as the matter may be resolved by the parties in
the manner provided in Section 32 or otherwise, such comparable provisions
included in the Annual Plan in effect for the immediately prior Crop Year,
with such changes as may be necessary or appropriate in light of the
development of the Property. The Proposed Annual Plan or portions thereof as
approved by IDV, together with such portions of the prior Crop Year's Annual
Plan contemplated by the preceding sentence, is herein referred to as the
"Annual Plan." Upon written approval by IDV, Xxxxxx will implement the
Annual Plan and not deviate from it in any significant respect without IDV's
prior written consent.
7. ANNUAL REPORT. Xxxxxx shall supply to IDV on or before the
31st day of December a written Annual Report covering the Crop Year being
completed, detailing the performance against the Annual Plan for such Crop
Year, including crop tonnage and brix levels by variety, the viticultural
practices used and the general quality of the Grapes delivered to IDV from
the Property.
8. XXXXXX TO CONSULT WITH IDV; RESPONSES TO EMERGENCIES.
x. Xxxxxx agrees to keep IDV or IDV's designated agents or
representatives promptly and fully advised on at least a monthly basis,
and in any event at such time as the circumstances reasonably require,
of the progress of the Vineyard and of all significant actions taken or
to be taken, by Xxxxxx during each Crop Year that are not specifically
contemplated by the Development Plan or the Annual Plan for such Crop
Year. Xxxxxx specifically agrees to advise IDV or IDV's designated
agents or representatives of all events which materially adversely
affect the growth and development of the Vineyard and/or the quality of
the grapes produced and harvested therefrom. Xxxxxx agrees to consult
with IDV or IDV's designated agents or representatives as to
9
any major decisions which are not specifically included in the
applicable Annual Plan and which may arise with respect to the Vineyard,
and to obtain the written consent of IDV or IDV's designated agents or
representatives prior to making and implementing any such decision.
b. Notwithstanding any other provision of this Agreement that
otherwise requires Xxxxxx to obtain the prior consent or approval of IDV or
its designated agents or representatives before taking certain actions or
omitting to take certain actions, in the event emergency circumstances
arise with respect to the Property that would require prompt action on the
part of a reasonably prudent vineyard xxxxxx, and time does not reasonably
permit the obtaining of any required consent or approval or such consent or
approval is not reasonably obtainable, Xxxxxx shall take all actions that
under the circumstances would be taken by a reasonably prudent vineyard
xxxxxx to prevent or mitigate damage and/or to promote the quality and
quantity of Grape production and that otherwise are in accordance with the
Farming Standards and other provisions set forth in this Agreement. Xxxxxx
will give prompt written notice to IDV of any such emergency conditions and
the response thereto undertaken by Xxxxxx.
9. FROST PROTECTION. Xxxxxx agrees to install a frost protection
system at the Property in accordance with the Development Plan set forth in
EXHIBIT C-1 hereto. Following such installation, in the event that all or
any significant part of the Grapes on the Property are lost due to frost
damage, IDV shall have the right to request an investigation of the situation
and Xxxxxx shall provide IDV with complete access, upon reasonable notice, to
the Vineyard and all related records.
If frost damage to the Grapes is due to a failure on the part of
Xxxxxx or its Representatives to comply with the Farming Standards or to the
negligence or intentional misconduct of Xxxxxx or its Representatives in the
design or operation of the frost protection system, then IDV will, at its
option, either [[ ]]. IDV shall give prompt written notice to Xxxxxx
of its election of an option under this paragraph and in any event not later
than June 1 of the applicable Crop Year. [[ ]]
If frost damage occurred due to conditions other than as described
in the immediately preceding paragraph, then IDV will accept delivery of the
Grapes from such portion of the Vineyard where frost damage occurred and pay
to Xxxxxx the Purchase Price therefor.
If the parties are unable to agree, within 60 days of the date IDV
is notified by Xxxxxx of the frost damage, as to the cause of such frost
damage under this
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Section 9, then the issue will be referred for resolution pursuant to Section
32 herein.
10. HARVEST, DELIVERY AND ACCEPTANCE OF GRAPES. Harvest and
delivery of Grapes grown in accordance with the terms and conditions of this
Agreement shall not commence until the sugar content and pH of the Grapes
have reached a point acceptable to IDV as described in Section 14.a. and
Xxxxxx has so notified a duly authorized representative of IDV orally or in
writing. After such notice, IDV shall supply Xxxxxx with daily schedules of
the quantity and variety of Grapes to be harvested and delivered and the
destination for such delivery, and Xxxxxx shall comply therewith. All loads
of Grapes must be scheduled prior to delivery by IDV and be accompanied by a
signed original Grower Delivery Tag. If, after Grapes to be harvested have
exceeded the Brix Optimum Range Maximum level contemplated by Section 14.a.
of this Agreement (based upon samples taken by Xxxxxx and reported to IDV
unless reasonably disapproved by IDV within 24 hours after such report is
provided to IDV), (i) Xxxxxx notifies IDV or its duly authorized
representative orally or in writing of the same, and (ii) IDV unreasonably
delays the time for delivery of such Grapes, and (iii) such delay results in
a failure on the part of Xxxxxx to meet one or more of the quality standards,
targets or requirements set forth in Section 14 or Section 15 herein, then
Xxxxxx shall be relieved of the obligation to comply with (and the
consequences of a failure to comply with) those standards, targets or
requirements Xxxxxx failed to so meet as a result of such unreasonable delay.
Grapes covered by this Agreement will be harvested and delivered at
IDV's expense to a California winery as designated by IDV; provided however,
the harvesting and delivery cost per ton and/or per acre must be approved in
writing in advance by IDV, which approval shall not be unreasonably withheld
or delayed (it being agreed that IDV's withholding of consent shall be deemed
reasonable in all cases if such harvest and delivery costs exceed the costs
thereof generally prevailing in the same district). If such approval is not
properly obtained or such costs are in excess of the IDV approved costs, such
additional costs shall be the sole responsibility of Xxxxxx unless such
additional costs are incurred in responding to an emergency condition, such
as unanticipated changes in weather or other conditions beyond the reasonable
control of Xxxxxx, pursuant to Section 8.b., in which case the reasonable
additional costs incurred in connection with the harvesting and delivery of
the Grapes shall be the responsibility of IDV to the extent the same do not
exceed costs thereof generally prevailing in the same district, taking into
account such emergency or other conditions and taking into account the
quality of the services provided. After proper approval by IDV, Xxxxxx shall
arrange and manage the harvesting and trucking of the Grapes. All third
party trucking charges shall be audited and paid by Xxxxxx and then submitted
to IDV for its review. IDV may, at its option, obtain bids for such elements
of labor, equipment or services of equivalent quality (having due regard for
the quality and the
11
quantity of the Grapes harvested, the safety of personnel and the
minimization of damage to the vines and other improvements at the Vineyard)
as IDV may desire to satisfy itself of the appropriateness of the amounts of
the harvest and delivery costs. If IDV identifies elements of the harvest and
delivery costs lower than those proposed by Xxxxxx, IDV shall consult with
Xxxxxx regarding the use of such providers and Xxxxxx shall, in its
reasonable business judgment, decide whether or not to use such providers or
whether to reduce its charge to an equivalent amount.
11. BULK TANK AND GONDOLA STANDARDS. Grapes will be delivered in
equipment suitable to protect the quality of the fruit and equipped for side
dumping into crushers or hoppers. All bulk tanks and gondolas used by Xxxxxx
will not leak and such bulk tanks and gondolas made of iron must have
satisfactory food-grade interior surfaces to ensure that no bare iron will
come in contact with Grapes. Any bulk tanks or gondolas that do not meet
this requirement must receive an application of lead-free, food-grade paint
before they can be used for delivery of Grapes to IDV. Xxxxxx will at all
times during the harvest of the Grapes maintain all harvesters and bulk
containers used for the harvesting and delivery of the Grapes in a clean and
sanitary condition. In the event that IDV directs Xxxxxx to use a particular
provider of bulk tanks and gondolas, then Xxxxxx shall not be required to
comply with the bulk tank and gondola standards contained in this Section 11
with respect to the bulk tanks and gondolas used by such provider, but Xxxxxx
shall notify IDV in the event Xxxxxx or its Representatives become aware that
such bulk tanks or gondolas do not meet such standards.
12. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF XXXXXX. Xxxxxx
hereby expressly covenants, represents and warrants the following:
x. Xxxxxx either owns or has full rights and authority to sell,
deliver and otherwise dispose of the Grapes to be conveyed hereunder.
b. At the time and place of delivery, all of the Grapes shall
be free and clear of all liens, encumbrances, options, contract rights and
other rights of third parties ("Liens").
x. Xxxxxx is not presently a party nor shall it become a party
to any other contract or agreement providing for the sale or delivery of or
the granting of any Lien with respect to the Grapes which would in any way
limit the obligations of Xxxxxx pursuant to this Agreement or limit IDV's
rights to the Grapes.
x. Xxxxxx shall indemnify and hold IDV and its affiliates
harmless from and against any losses, damages, liabilities, costs and
expenses
12
including without limitation reasonable attorney's fees and costs
of IDV as a result of or in connection with (i) any actual or alleged
contract or agreement for the sale or delivery of the Grapes or any Lien on
the Grapes at the time of delivery hereunder, or (ii) any breach of this
Agreement by Xxxxxx or any of its Representatives.
e. Each load of Grapes shall at the time and place of delivery
be 100% of the variety declared on the Delivery Tag and Weight
Certificate.
f. The Grapes delivered hereunder to IDV on the date and place
of delivery shall not be adulterated or misbranded within the meaning of
the Federal Food, Drug and Cosmetic Act, as amended, and shall not be an
article that may not, under the provisions of Sections 301(d), 404 or 405
of that Act, be introduced into interstate commerce.
g. All Grapes delivered to IDV will, in all respects, conform
to the requirements of the Xxxxxxx Food, Drug, and Cosmetic Law of
California, and the regulations of the California State Department of
Public Health and all other state and federal laws pertaining to the Grapes
sold under this Agreement.
h. The Lease attached hereto as EXHIBIT B is a true and
complete copy of the lease covering the Property and such Lease has not
been amended and is in full force and effect as of the date of this
Agreement. Concurrently with the execution and delivery of this Agreement,
Xxxxxx shall deliver to IDV a consent and non-disturbance agreement in
recordable form and in a form otherwise acceptable to IDV, executed by
Lessor, pursuant to which Lessor shall consent to this Agreement and shall
agree, among other things, to enter into a new lease with IDV on terms
comparable to those in the Lease if the Lease shall terminate for any
reason. Xxxxxx shall concurrently give to IDV a copy of any notice given
by Xxxxxx to Lessor under such agreement.
13. INSPECTION AND WEIGHING. All Grapes must be weighed on public
scales at IDV's receiving winery before unloading. Appropriate measurements
including Brix, acid, Defects, and M.O.G. will be determined by an inspector
of the Department of Food and Agriculture, Fruit and Vegetable Quality
Control, State of California ("State Inspector"), if the facility to which
Grapes are delivered has a State Inspector located at such facility. Sugar
will be determined by refractometer or other device by the State Inspector.
IDV and Xxxxxx agree to accept and be bound by the findings of the State
Inspector. State Inspectors may of their own volition, or at the request of a
representative of either IDV or Xxxxxx, make a second inspection if
13
reasonably necessary based on the inspection results of previous deliveries.
14. GRAPE QUALITY TARGETS AND STANDARDS. Xxxxxx will and will
cause its Representatives to implement the Farming Standards with the goal
that all Grapes delivered to IDV shall, on a load by load basis, meet each of
the following Grape Quality Targets and Standards:
a. Sugar (Brix) and pH Standards.
BRIX BRIX BRIX BRIX pH pH
DELIVERY DELIVERY OPTIMUM OPTIMUM DESIRED DESIRED
RANGE RANGE RANGE RANGE RANGE RANGE
VARIETY MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM
[[ ]]
For the purpose of scheduling the harvest and delivery of Grapes,
IDV will be guided by the Optimum brix and Desired pH ranges set forth
above. Xxxxxx and IDV agree to work together to attempt to harvest Grapes
at Optimum brix and Desired pH levels. Without limiting the effect of the
fourth sentence of Section 10, to the extent that IDV requests Xxxxxx to
harvest and deliver the Grapes at brix levels in excess of or less than the
Optimum range, Xxxxxx shall comply with such request.
b. Grape Defects. 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 be considered defective grapes if they evidence mold, rot, or
mildew resulting in decomposition ("Defects").
To the extent that material Defects are discovered by Xxxxxx
in any portion of the Vineyard prior to harvest, Xxxxxx shall immediately
inform IDV in writing and, if requested to do so by IDV, Xxxxxx shall use
all reasonable efforts to drop defective Grapes on the ground and harvest
the non-defective fruit separately so as to minimize or eliminate the
delivery of defective Grapes to the delivery location.
c. 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, without limitation,
leaves, leaf stems, canes,
14
and any other foreign materials. Xxxxxx agrees to use all reasonable
efforts to minimize the amount of M.O.G. in each load of Grapes.
Any load of Grapes having [[ ]] M.O.G. or more by
weight may be rejected by IDV. In the event of such rejection, IDV shall
receive a credit or refund calculated in the manner provided in Section 15.
Any load of Grapes delivered by Xxxxxx having at least [[ ]] M.O.G.
but less than [[ ]] M.O.G. by weight, or which has [[ ]] or
more M.O.G. by weight but is not rejected by IDV, shall be subject to a
penalty to be charged by IDV to Xxxxxx equal to the full percentage of
M.O.G. in the load as determined by the State Inspector, multiplied by the
weight in tons of the load, multiplied by [[ ]]. The penalty will be
deducted by IDV from the Purchase Price of the Grapes. In the event that
IDV desires to reject such Grapes or to assess such penalty in accordance
with the foregoing provisions of this paragraph, Xxxxxx will be given one
opportunity to remove such M.O.G. so long as the same will not adversely
affect wine quality, and the load shall be re-tested by the State
Inspector. If a re-test reflects M.O.G. of less than [[ ]] by
weight, IDV shall accept such Grapes, and if a re-test reflects M.O.G. of
less than [[ ]] M.O.G. by weight, Xxxxxx shall not be subject to the
penalty provided for in this paragraph. In the event any M.O.G. is present
in the Grapes, it shall be rebuttably presumed that such M.O.G. originated
with Xxxxxx and Xxxxxx shall be responsible for all direct and
consequential damages caused by such M.O.G. unless such presumption is
rebutted by Xxxxxx and Xxxxxx proves that such M.O.G. did not originate
with Xxxxxx or its Representatives.
d. Procedures Regarding Brix, pH and Defects. In the event
that Xxxxxx shall deliver any load of Grapes which (a) does not fall within
the Brix Delivery Range Minimum and Maximum and/or the pH Desired Range
Minimum and Maximum, or (b) has more than [[ ]] Defects by weight,
then the following procedures shall govern:
(1) if the problem referred to in clause (a) and/or
clause (b), as applicable, is proximately caused by a failure on the
part of Xxxxxx or its Representatives to comply with the Farming
Standards, then IDV, at its option, may either accept such load of
Grapes and pay a reduced Purchase Price therefor in an amount
negotiated by Xxxxxx and IDV or reject such load of Grapes and receive
a credit from Xxxxxx determined in the manner provided in Section 15,
which credit shall be deducted from the Purchase Price of such Grapes;
or
15
(2) if such problem is caused other than as described in
Section 14d(1) above, then IDV shall accept such load of Grapes and
pay the Purchase Price therefor.
15. QUALITY PROBLEMS RELATED TO XXXXXX PERFORMANCE. If any of the
problems or issues set forth in this Section 15 occur and to the extent provided
in Section 14(d) above, IDV may, at its option, reject the affected load of
Grapes and, except as provided in the next following sentence, receive
[[ ]]. The foregoing right of rejection shall be applicable to the
circumstances described in Section 14d(1) and to any of the following:
a. Any amount of black grapes in a load of white grapes.
b. Mixed variety loads.
c. Over night loads (loads picked earlier than 10:00 P.M. of
the day prior to delivery, without IDV's prior oral or written permission).
d. Loads delivered contrary to IDV's scheduling and delivery
rules known in advance by Xxxxxx and not necessitated by unanticipated
changes in weather or other conditions beyond the reasonable control of
Xxxxxx.
e. Wild fermentation, to the extent within the reasonable
control of Xxxxxx.
f. Ethyl alcohol above 0.08 percent by volume, to the extent
within the reasonable control of Xxxxxx.
g. Loads contaminated with caterpillars, tomato worms, or other
insects or rodents, motor fuel, hydraulic fluid, other oil-base products,
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.
h. Loads delivered in tanks or gondolas which were cited after
not passing IDV inspection as provided for herein and which were not
properly resurfaced or repaired before being used again for delivery of
grapes to IDV.
16. MECHANICAL GRAPE HARVESTING. Grape quality problems in the
Vineyard, including but not limited to Defects, may result in Xxxxxx, at the
direction of IDV, being required to either harvest the Grapes by hand or to
remove all defective
16
Grapes prior to mechanical harvesting. IDV shall be responsible for the
costs of dropping any such Grapes unless a failure by Xxxxxx or its
Representatives to comply with the Farming Standards is a proximate cause of
the Grape quality problem involved, in which case such costs shall be borne
solely by Xxxxxx. The costs of hand picking any such Grapes shall be
considered part of the harvesting and delivery costs to be paid by IDV and
shall be subject to the provisions of Section 10.
Mechanical harvesting of grapes under this Agreement may not be
started prior to 10:00 P.M. on the day prior to delivery, unless approved in
advance by the IDV field representative.
17. PESTICIDES, HERBICIDES, NEMATOCIDES, ETC. Xxxxxx shall become
knowledgeable of the requirements of California Proposition 65 (Safe Drinking
Water and Toxic Enforcement Act of 1986), including the continually updated
list of chemicals and substances which pose a significant risk of cancer or
reproductive toxicity via ground water, food, environment, occupational or
other contamination. The use of any such prohibited substance shall be an
immediate and material breach of this Agreement by Xxxxxx and IDV may, in
addition to any other available remedies, collect direct and consequential
damages from Xxxxxx resulting from such breach. XXXXXX IS CAUTIONED TO SEEK
LEGAL ADVICE FROM ITS COUNSEL OR THE STATE HEALTH AGENCY REGARDING SUCH LAWS.
Each year Xxxxxx will submit to IDV its County Agricultural Permit
Number. IDV will have access to the agricultural chemical use information of
Xxxxxx through permit number and Xxxxxx records.
18. AGRICULTURAL EMPLOYER. Xxxxxx shall be solely responsible for
selecting and hiring its own employees and for their supervision, direction
and control. Moreover, Xxxxxx shall be solely responsible for setting wages,
benefits, hours and working conditions for such employees, for furnishing,
during the entire period of this Agreement, workers' compensation insurance
coverage, for paying wages and social security, for paying unemployment
insurance and disability insurance contributions, and for withholding taxes
and any other taxes with respect to such employees.
Xxxxxx acknowledges and agrees that Xxxxxx is the sole agricultural
employer of persons or contractors engaged to perform agricultural services
pursuant to this Agreement. In performing its duties and obligations under
this Agreement, Xxxxxx shall direct the operation of its labor and equipment
in all respects. It is specifically agreed that IDV shall not be responsible
for any of the Agricultural Employer responsibilities relative to Xxxxxx'x
employees hereunder, and Scheid shall indemnify and hold IDV and its
affiliates harmless with respect thereto.
17
Scheid covenants that Xxxx Xxxxxxxx has senior management
responsibility for the development and operation of the Vineyard as Vice
President Vineyard Operations for Scheid, his present position. In the event
that he is replaced, Xxxxxx shall reasonably consult with IDV as to his
replacement, but the final decision as to his replacement shall be Xxxxxx'x.
19. ENTRY TO XXXXXX'X PROPERTY. Throughout the term hereof, IDV's
representatives may enter upon the Property at any reasonable times, without
notice, and in a reasonable manner for the purpose of inspecting the Vineyard
and the vines and Grapes thereon, observing the viticultural practices being
followed, and observing grape quality and grape maturity. Such inspections
may include, without limitation, taking samples of Grapes in reasonable
quantities and taking pictures of and otherwise recording data with respect
to the Property and the Grapes and vines thereon. IDV will abide by any
Phylloxera and similar precautions that have been reasonably implemented by
Xxxxxx for the purpose of maintaining the health and condition of the
Vineyard; however, such precautions will not limit IDV's access to the
Property.
The parties agree that IDV shall have no duty to inspect and
monitor Xxxxxx'x farming and viticultural practices on the Property, and that
IDV shall not incur any liability or relieve Xxxxxx of any of its obligations
as a result of any inspection or monitoring related to farming or
viticultural practices on the Property.
20. NON-ASSIGNMENT.
x. Xxxxxx shall not directly or indirectly, transfer or assign
any of its rights, interests or obligations under or relating to this
Agreement or the Lease without the prior written consent of IDV, which will
not be unreasonably withheld or delayed; provided, however, that no consent
of IDV shall be required for any assignment to any person or entity that is
an affiliate of Xxxxxx that has an equivalent net worth and that assumes in
writing Xxxxxx'x obligations under this Agreement or the Lease, as the case
may be. Xxxxxx will not agree to any modification of the Lease with
respect to the Property that would have a material adverse effect on
Xxxxxx'x ability to perform its obligations under this Agreement without
the prior written consent of IDV, which consent will not be unreasonably
withheld or delayed.
b. IDV shall not directly or indirectly, transfer or assign any
of its rights, interests or obligations under or relating to this Agreement
without the prior written consent of Xxxxxx, which will not be unreasonably
withheld or delayed; provided, however, that no consent of Xxxxxx shall be
required for any
18
assignment to any entity that (i) is an affiliate of IDV that has an
equivalent net worth and that assumes in writing IDV's obligations under
this Agreement or (ii) has a net worth of at least $50,000,000,
determined in accordance with generally accepted accounting principles,
as demonstrated by evidence reasonably acceptable to Xxxxxx, and that
assumes in writing IDV's obligations under this Agreement.
c. For purposes of this Section 20, any sale, reorganization or
other transaction which results directly or indirectly in a change in
control of Xxxxxx or IDV shall be deemed to be an assignment and transfer
by Xxxxxx or IDV, as applicable, of this Agreement which shall require the
prior written consent of the other party to the extent provided in
Sections 20.a. and 20.b. above. Notwithstanding the foregoing, any change
in control of Scheid, if any, that may result from the implementation of
the estate plan of any stockholder of Xxxxxx Vineyards Inc. (of which
Scheid is a wholly owned subsidiary) shall not require any approval or
consent of IDV unless the implementation of such estate plan involves a
change in control resulting from the transfer of stock of Xxxxxx Vineyards
Inc. directly or indirectly to one or more third parties unrelated to the
deceased stockholder.
21. MATTERS BEYOND XXXXXX'X CONTROL. In the event Xxxxxx is
compelled to modify, reduce or suspend operations or cease or modify performance
of its obligations hereunder because of the passage hereafter of any laws or
regulations, or because of any legal or administrative proceedings of any
government or governmental agency, court or administrative agency order,
strikes, boycotts, lockouts, other labor disturbances, fire, explosion,
earthquake, catastrophe, or crop failure or shortage as a result of
uncontrollable actions of the elements, then if the same is not caused by a
failure on the part of Xxxxxx or its Representatives to comply with the Farming
Standards or by negligence or intentional misconduct on the part of Xxxxxx or
its Representatives, Xxxxxx may, at its option and while so affected, be
relieved to the extent thus prevented from performing its obligations hereunder,
provided, that Xxxxxx shall use all reasonable efforts to remove the disability
and resume full performance hereunder at the earliest possible time.
22. BINDING EFFECT. This Agreement and the covenants herein
contained shall run with and bind Xxxxxx'x interest in the Property and shall
bind the parties hereto, their heirs, executors, administrators, grantees,
vendees, transferees, assignees, legatees, devisees and other successors in
interest, whether partial or entire. Each party agrees to cause any such
successor in interest to sign an agreement with the other party to assume and be
bound by this Agreement in form suitable for recording, to the other party's
reasonable satisfaction.
19
23. AUTHORITY. Each corporate party and/or partnership and the
agents executing this Agreement on their behalf hereby warrant that each
entity is a corporation or partnership in good standing and is fully
authorized to execute this Agreement and the other documents called for
hereunder and that the agent is properly authorized to act for the
corporation or partnership.
24. WAIVERS. No failure or omission by IDV or Xxxxxx to insist
upon or enforce any of the terms hereof shall be deemed a waiver of such
terms unless the same shall be in writing and signed by the waiving party.
Waiver of a term or default at any time shall not be deemed a waiver of any
other term or default or of the same term or default at another time.
25. CONFLICT OF PROVISIONS. In the event there is a conflict between
the terms of this Agreement and those in any Attachment or Exhibit (other than
EXHIBIT B), the terms in such Attachment or Exhibit shall prevail over this
Agreement.
26. ARTICLE HEADINGS. The titles contained in the article headings
of this Agreement are merely for convenience and are not intended to give
meaning to the matter in the articles following such titles. Said titles do not
constitute any part of this Agreement and are not to be considered in its
interpretation.
27. CUMULATIVE RIGHTS. Except as may otherwise be specifically
provided herein, all rights and remedies specified in this Agreement are
cumulative.
28. RECORDING. Xxxxxx agrees and covenants that upon request of
IDV, Xxxxxx will execute and otherwise assist IDV in recording with the
Recorder of the County in which the Property is located one or more Memoranda
of Contract or other appropriate documents, in form mutually acceptable to
both parties, suitable for providing a record of this Agreement in the real
property records of that county and shall obtain all necessary consents from
the Lessor to fulfill the obligations hereunder and obtain the necessary
consent and non-disturbance agreement required by Section 12.h.
29. NOTICES. Any notice, advice, demand or communication required
or to be given under the terms of this Agreement shall be given in writing by
certified, return receipt requested mail or by personal delivery, and if
mailed shall be deemed delivered five (5) days after mailing, directed as
follows, provided that either Xxxxxx or IDV may change its address by so
serving written notice of such change on the other party hereto, directed as
follows:
20
FOR IDV:
IDV Wines
President
00000 Xxxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
with a copy to:
General Counsel
IDV North America Vineyards Inc.
000 Xxxxxxxx Xxxx.
P. O. Xxx 000
Xxxxxxxx, XX 00000-0000
FOR XXXXXX:
Xxxxxx X. Xxxxxx or Xxxxx X. Xxxxxx
Xxxxxx Vineyards California Inc.
00000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx xxx Xxx, XX 00000
with a copy to:
Xxxx Xxxxxxxx
Xxxxxx Vineyards California Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
30. TERMINATION. This Agreement may be terminated at any time:
a. by the mutual consent of the parties;
b. by the non-breaching party, in the event of a breach by the
other of any representation, warranty, covenant or agreement contained
herein or in any amendment of this Agreement or any document executed
pursuant to or in connection with this Agreement, which is not cured or
cannot be cured in all material respects within twenty (20) business days
after written notice thereof has been given to the other party, or if any
such breach shall not reasonably be susceptible of cure within such twenty
(20) business day period, then the other party shall fail to take steps
reasonably designed to cure such breach and such breach is not cured as
expeditiously as reasonably possible and in any event no later than ninety
(90) calendar days after such notice is given;
21
c. by a party in the event that (i) a petition shall be filed
by or against the other party under any chapter of the United States
Bankruptcy Code or under any similar laws or regulations of any
jurisdiction relating to the relief of debtors, or for the relief or
readjustment of any indebtedness of said other party, either through
reorganization, composition or otherwise, (ii) there is an appointment of a
receiver of any material portion of the assets of said other party, (iii)
said other party makes any general assignment for the benefit of creditors,
(iv) there is a foreclosure upon all or substantially all of the property
of said other party, or the condemnation, seizure, attachment or
appropriation thereof, or (v) said other party otherwise becomes insolvent,
provided that if any of the foregoing occurrences are not the voluntary act
of the affected party, the affected party will have ninety (90) days after
the commencement thereof to vacate such proceeding or appointments;
d. by IDV during January through March of any year after 2005
in the event that [[ ]] for such respective Crop Years as set
forth in Section 1, unless Xxxxxx can demonstrate to the reasonable
satisfaction of IDV that the failure [[ ]] is the result of either (i)
compliance by Xxxxxx with instructions given to it by IDV under this
Agreement (whether or not set forth in the Development Plan or any Annual
Plan) or (ii) weather conditions, disease or other causes beyond the
reasonable control of Xxxxxx; and in each case is not proximately caused by
failure of Xxxxxx or its Representatives to comply with the Farming
Standards;
e. by IDV in the event of a breach by Xxxxxx under the Lease
which is not cured within any applicable cure periods provided for therein
or in the event that foreclosure proceedings are commenced by any financial
institution or other lender with respect to Xxxxxx'x rights and interests
in or to the Lease or the Vineyards;
f. by IDV, upon giving at least twelve (12) months' notice to
Xxxxxx, in the event that as a result of the application of the Purchase
Price adjustment provisions set forth in Section 3, the maximum price per
acre to be paid pursuant to Section 3 (exclusive of any Bonus) would exceed
[[ ]]; provided, however, that such termination shall not be
effective in the event that Xxxxxx shall agree, in a writing reasonably
satisfactory to IDV and delivered to IDV not later than thirty (30) days
after the giving by IDV of such termination notice, that said maximum price
shall remain at [[ ]] for the balance of the term of this Agreement
and that the other prices shown in the table in Section 3 shall not exceed
[[ ]] of such prices for the balance of
22
such term; or
g. by Xxxxxx, upon giving at least twelve (12) months' notice
to IDV, in the event that during any four consecutive Crop Years
(commencing with Crop Year 2003 so that the first four-Crop-Year period
shall begin January 1, 2003 and end December 31, 2006), Xxxxxx'x
Operational Costs have increased cumulatively by more than [[ ]];
provided, however, that such termination shall not be effective in the
event that IDV shall agree, in a writing reasonably satisfactory to Xxxxxx
and delivered to Xxxxxx not later than thirty (30) days after the later of
(i) the date such termination notice was given by Xxxxxx, or (ii) the date
IDV completes an examination of the books and records of Xxxxxx with
respect to such Operational Costs (the date in clause (ii) shall in any
event be not later than sixty (60) days after the date in clause (i)), that
IDV will agree to a purchase price increase or other form of reimbursement
to Xxxxxx in such amount as may be mutually agreed upon by the parties,
applicable for all Crop Years following such four-year period. If IDV
desires to negotiate such economic terms rather than suffer a termination
of this Agreement, both Xxxxxx and IDV agree to negotiate in good faith
with respect thereto for such thirty (30)-day period.
In the event of a breach by Xxxxxx of its obligations under Sections 5
or 6 of this Agreement that is not cured following written notice from IDV
within the time period contemplated by Section 30.b. above, IDV, in addition to
all of its other rights and remedies, may elect, by written notice to Xxxxxx, to
purchase Grapes at the Alternative Purchase Price set forth below during each
Crop Year until such noticed breach or breaches have been cured. Such breach or
breaches shall be deemed to have been cured for a Crop Year only if they have
been cured prior to July 15 of such Crop Year. In the event of any such
election, IDV may continue to exercise its right of termination under
Section 30.b. above, unless the noticed breach or breaches have been previously
cured, during the month of December of any Crop Year. The term "Alternative
Purchase Price" shall mean whichever of the following shall result in the lowest
total cost per ton of each variety of Grapes: [[ ]].
31. GOVERNING LAW. THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF CALIFORNIA.
32. MEDIATION OF DISPUTES; ARBITRATION. In the event any
disagreement or dispute between the parties arising out of this Agreement cannot
be settled by negotiations between the parties hereto within thirty (30) days
from the inception of such disagreement or dispute, such disagreement or dispute
shall be
23
submitted by either party to the San Xxxxxxxxx xxxxxx of Judicial Arbitration
and Mediation Services, Inc., a professional mediating service consisting of
retired Federal and State judges ("JAMS"), or another mutually acceptable
third party. No party shall commence any civil action for claims under this
Agreement until 30 days after the date the matter is submitted to mediation;
however, either party may seek injunctive relief prior to the submission or
during such mediation. The mediation shall be conducted in accordance with
the rules of JAMS (or such other mutually acceptable third party) and shall
be held in San Francisco, California. The parties shall share equally all
costs of mediation other than representation by counsel, which shall be at
each party's own expense.
Any disagreement or dispute which is not settled by mediation as
provided above within 30 days of its submission to such mediation shall be
determined by arbitration in San Francisco, California before a single
arbitrator and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The choice of arbitrator
and the arbitration shall be governed by the Commercial Arbitration Rules of
the American Arbitration Association except as modified in this paragraph.
IDV and Xxxxxx agree as follows with respect to any arbitration initiated
hereunder:
a. There shall be no enforced or ordered discovery prior to the
arbitration proceeding except that each party may take not more than two
depositions and may serve the other party with a single set of not more
than 20 interrogatories without subparts.
b. Oral presentation to the arbitration shall be limited to a
total of three hours for IDV and three hours for Xxxxxx.
c. Any opening and/or closing briefs or legal memoranda
submitted to the arbitrator shall not exceed twenty-five (25) pages in
length and shall be delivered to the opposing party at least 48 hours in
advance with permission to file a five (5) page rebuttal paper with the
arbitrator.
d. The arbitrator may not award punitive damages.
e. The arbitrator shall agree to enter his/her written decision
within seven (7) days of the completion of oral presentations.
f. The parties shall cooperate to expedite the arbitration
proceeding and complete it as soon as reasonably practicable.
24
g. The decision of the arbitrator will be conclusive and
binding on the parties.
h. Nothing in this Section 32 will prevent IDV from resorting
to judicial proceedings under Section 39 or if interim resort to a court
otherwise is necessary to prevent serious and irreparable harm or injury to
IDV.
33. ENTIRE AGREEMENT. The parties expressly agree that this
Agreement, including the Exhibits attached hereto, and the documents executed
by them pursuant to this Agreement, constitute the entire Agreement between
them pertaining to the subject matter hereof and supersedes all prior
agreements and understandings of the parties with respect to the subject
matter hereof.
34. CONFIDENTIALITY. Unless consented to in writing by both
parties and except to the extent required by applicable law, both parties
shall keep the terms of this Agreement strictly confidential and may not make
any disclosure of the economic terms of this Agreement to any person;
provided, however, that each party shall have the right to disclose the
existence of this Agreement (but not its economic terms) to any third party
and the right to provide a copy of and disclose the terms of this Agreement
to any regulatory authority having jurisdiction over such party.
35. ATTORNEYS' FEES. If any arbitration, litigation or other
proceeding between the parties (other than a mediation pursuant to Section
32) is commenced in connection with or related to this Agreement, the losing
party shall pay the court costs or arbitration costs, as applicable, the
reasonable attorneys' fees and costs and expenses and the reasonable costs
and expenses of investigation of the prevailing party incurred in connection
therewith.
36. DISCLAIMERS BY XXXXXX. THE WARRANTIES BY XXXXXX EXPRESSLY
MADE IN THIS AGREEMENT OR THE EXHIBITS HERETO OR IN ANY OF THE DOCUMENTS
EXECUTED BY XXXXXX PURSUANT HERETO OR IN CONNECTION HEREWITH ARE IN LIEU OF
ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
37. CHANGES IN CRUSH REPORT. As used in this Agreement, the term
"Final Crush Report" means the Final Grape Crush Report published by the
California Department of Food and Agriculture (the "Department") on or about
March 10 of each year, as it may be supplemented or corrected by the
Department through the succeeding first day of August. If the Final Crush
Report shall no longer be published, then an
25
appropriate substitute for the Final Crush Report shall be mutually agreed
upon in good faith and used by the parties, and all computations provided for
herein based on the Final Crush Report shall be appropriately adjusted. If
the Department changes the format of the Final Crush Report from the format
of the Final Crush Report dated March 10, 1998, the source of data (from
within the applicable Final Crush Report) for determining any price for any
variety of Grapes shall be the table that reports the weighted average price
per ton, delivered basis, of all tonnage purchased from non-related sources
for wine, concentrate, juice, vinegar, and beverage xxxxxx (currently, Table
10) for such Grapes from the smallest geographic district(s) or area(s) that
includes all of what is currently defined as California Reporting District 7.
If the reporting rules of the Department are changed to include related and
non-related party transactions on a combined basis in the Final Crush Report,
and the Final Crush Report does not separately reflect non-related party
transactions, the parties shall negotiate in good faith an alternative
pricing method. For purposes of this Agreement, a "non-related party
transaction" has the meaning specified in the Final Crush Report dated March
10, 1998.
38. SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
39. BREACH. If Xxxxxx breaches any of its obligations under
Sections 1, 10, or 28 of this Agreement, IDV, in addition to all of its other
rights and remedies, shall be entitled to equitable relief to protect its
interests, including but not limited to injunctive relief, as well as money
damages.
IN WITNESS WHEREOF, the parties here executed this Agreement to be
effective as of the date first above written.
XXXXXX: IDV:
XXXXXX VINEYARDS INTERNATIONAL DISTILLERS
CALIFORNIA INC., AND VINTNERS NORTH
a California corporation AMERICA, INC., a Connecticut
corporation
By: /S/ XXXXX X. XXXXXX By: /S/ XXXXX X. XXXXXXX
-------------------------- ----------------------------
Its: Vice President Finance Its: Vice President Operations
26
EXHIBIT C-1
DEVELOPMENT PLAN
[[ ]]
X-0-0
XXXXXXX X-0
EXAMPLES OF PURCHASE PRICE ADJUSTMENTS
[[ ]]
X-0-0
XXXXXXX X-0
DIRECT LABOR RATE CALCULATION
[[ ]]
D-2-1
EXHIBIT E
OPERATIONAL COST CATEGORIES
[[ ]]
E-1
