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WHITNEY A. DAVIS, SBN 149523 MARIA S. ROSENFELD, SBN 186116 CHARTER DAVIS, LLP 1730 I Street, Ste. 240 Sacramento, CA 95814 (916) 448-9000 (916) 448-9009 ATTORNEYS FOR PLAINTIFF RENWOOD WINERY, INC.
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UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
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RENWOOD WINERY INC.
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DECLARATION OF WHITNEY A. DAVI IN SUPPORT OF OPPOSITION ON Plaintiff, BEHALF OF PLAINTIFF RENWOOD
WINERY, INC. TO MOTION TO
vs. DISMISS/COMPEL ARBITRATION
FILED ON BEHALF OF W.J. DEUTSCH W.J. DEUTSCH & SONS LTD., a New York) & SONS LTD. Corporation, and DOES 1-50 inclusive, )
) Date: July 23, 2008 ) Time: 9:00 a.m.
) Defendants. )
The Honorable Phyllis J. Hamilton
I, WHITNEY A. DAVIS, upon oath, declare as follows:
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Case No.: CV-08-02848 PJH
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1.
I am an attorney, licensed to practice law in the State of California and before
this Court, and a shareholder in the firm Charter Davis LLP, attorneys of record for plaintiff RENWOOD WINERY INC. in the above captioned matter. I have personal knowledge of the facts stated in this declaration and could and would, if called upon, testify competently to the same. I am familiar with this file, its history, and the issues at hand in this motion.
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DECLARATION OF WHITNEY A. DAVIS IN SUPPORT OF OPPOSITION ON BEHALF OF
PLAINTIFF RENWOOD WINERY INC. TO DEFENDANT WID'S MOTION TO DISMISS/COMPEL
ARBITRATION
CASE NO. C-08-02848 PIH
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Attached as Exhibit A hereto is a true and correct copy of the March 2006
Services Agreement entered into in or around March 2006 by plaintiff and defendant herein.
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Attached as Exhibit B hereto is a true and correct copy of Renwood's June 2008
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Demand for Arbitration in this matter submitted to JAMS on or about June 9,2008. 4. Attached as Exhibit C hereto, is a true and correct copy of the declaration of
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Robert Smerling. The compendium of exhibits to which Mr. Smerling's declaration refers are on file in conjunction with RENWOOD' s writ of possession/TRO/injunctive request papers.
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Attached as Exhibit D hereto is a true and correct copy of the JAMS Arbitration Rules as downloaded from the JAMS website at
Comprehensive
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www.JAMSadr.com/rules/comprehensive/asp.
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Attached hereto as Exhibit E is a true and correct copy of WJD counsel's June
18,2008 letter to JAMS. 7. Attached hereto as Exhibit F is a true and correct copy of the June 10, 2008
electronic mail message from WJD CEO Peter Deutsch to Robert Smerling. I declare, under penalty of perjury, under the a s of the State of California, that the foregoing is true and correct and that this declar Sacramento, California. as signed on June
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2008 in
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Y A. DAVIS
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DECLARATION OF WHITNEY A. DAVIS IN SUPPORT OF OPPOSITION ON BEHALF OF
PLAINTIFF RENWOOD WINERY INC. TO DEFENDANT WJD'S MOTION TO DISMISS/COMPEL
ARBITRATION
CASE NO. C-08-02848 PJR
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EXHIBIT A
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SERV1CES AGREEJ\lENT
l.
THE PARTIES
A. Renwood Winery, Inc., ("Renwood"), a California corporation, maintains its principal place of business at 8795 Folsom Bou]e\'ard, Sacramento, Calif(lmia, 95816,
W.J. Deutsch & Sons, Ltd ("Deutsch"), a New York corporation, maintains its principal place of business at 108 Corporate Park Drive, White Plains, New York, 10604. II.
B.
RECITAL
A. Renwood produces distinctive brands ofpremiurn wines which it sells in the United States of America, Canada, the Caribbean Islands. EUfClpe, and various Jocations worldwide through a broker and distributor network. These products bear the "Renwood®" name. Renwood possesses the required federal, state and local licenses 10 do so, B. Deutsch purchases, markets and sells premium wmes at wholesale on behalf of wine producers through its own international and domestic distributor network. and possesses the required federal, state and local licenses to do so.
C. By this agreement, Renwood hires Deutsch as its exclusive sen'ice pro\-ider to purchase, market, promote. sell and deplete Renwood:F products on the tenns and conditions set fi)fth below. Except as set forth bela\\'. Deutsch accepts Renwo(\d~ as its exclusive Zinfandel brand and ex.c1usive wine suppJier from the regions designated below.
III.
DEfINITIONS A.
B,
C.
D.
E.
Anni\'ersan'Date: July 1, :007, J..'1d each succeeding first of July during the term of this agreement. Authorized Execution: the execution of this contract pursuant to resolution by the governing body of each Party. Condition of Breacb: a defined event that vests in the ag!,rzieved Party a right to tenninate performance on this agreement. Contracted Products: the Renwood® brand wine products that Deutsch acquires the exclusive right to market and sell, subject to the terms and limitations set forth below. Deplete: shall mean the sale of wine by a distributor to merchants that sell the wine to the final consumer.
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G.
H. 1.
J. K.
L.
M. N.
Effective Date: April 1,2006, so long as Authorized Execution of this agreement by alJ signatories, in counterpart or otherwise, facsimile or original, takes place by that date. Renwood Distribution Facilities: the facilities, ofRenwood's choosin£, at whi ch title of Contracted Products transfers to Deutsch. ReDwood RetaiJ facilities: Any merchant operation from which Renwood or its affiliates sell wine products directly to the final consumer. ReDwood Tastin2. Room(s}: Any merchant operation that offers tasting sen'ices and/or sells Renwood® products directly to the final consumer. Retail: a sale to a merchant that re-sells the product to the final consumer. Territo!]": the geographic area in which Deutsch shall enjoy the exclusive right to sell Contracted Products to licensed wholesalers, which area included the United States of America, its territories and possessions, the District of Columbia, Puerto Rico, the Virgin Islands and the Caribbean Islands. subject to those rights that Renwood retains as set forth below. Transition Period: The time period bet'",'een the Effective Date and July 1,2006. Wholesale: all sales by Deutsch other than Retail sales. Deutsch Portfolio: the group of wine brands Deutsch successfully developed, the brand control of which Deutsch will use as leverage with distributors to sell Ren\\'()od~ wines. IV.
TERM OF AGREEMP....T
The agreement te:m is ten ye:rrs from July 1. 2006. Ab~ent termination. this a~'Teemenl
will automatically renew for up to two successive five year periods.
V.
CONTRACTED PRODUCTS AND SERVICES
A.
Products:
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The Renwood products included in this agreement ("Contiacted Products"') faU into the following Tiers:
a. Tier 1: Proprietary brands: Grandpere® Grandmere®. b. Tier 2: Amador County: Old Vine Zinfandel Amador Barbera
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Fiddletown Zinfandel Jack Rabbit Fla~ Zinfandel Amador Syrah c. Tier 3: Sierra Series/Select Series/Red Label:
Pinot Grigio Viognier Dry Rose Syrah Zinfandel Barbera
d. Tier 4: Dessert:
Port Orange Muscat Amador lee Zinfandel
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Renwood will sell Contracted Products available within the Territory to Deutsch. Products may be added to this provision, transferred to other Tiers, or deleted from this pro\'ision only by wrinen consent of all Parties.
iii. Products outside the scope of this agreement incl ude: a. All Renwood products that are not wine: b. All Renwood products that are not Contracted Products; c. All Renwood products sold from a Renwood Tasting Room, Renwood Retail Facility or Yia electronic, telephonic or internet means io the final consumers; d. Incidental auction sales andlor donated wine; e. Bulk wine products; f. All Renwood products sold via any means to any person or entity outside of the Territory; g. All Renwood products, wherever delivered, that are sold for resale on any conunon carrier, airline, or cruise ship; h. All Santino brands, except, by agreement of the parties, Deutsch may assist Renwood in certain circumstances; 1. All Renwood wine products that do not exist on the Effective Date.
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B.
Services:
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Renwood abandoned its distributor network on the representation by Deutsch that Deutsch will exert its portfolio brand control to ensure priority distributor effort to meet or exceed Renwood Tier Sales Standards. Accordingly, Deutsch will provide wine marketing, sales, promotion and reporting services including, but not limited 10: a. With the prior advice and consent of Renwood. the retention of a talented and well-experienced brand manager; b. The promotion ofRenwood products at wine industry meetings, conventions, trade shows and press events; c. With the prior advice and consent ofRenwood, the composition ofmaterials promoting Renwood products; d. The sale ofRenwood products in compliance with Tier Sales Standards; e. Commercially reasonable cooperation and coordination with Renwood's lenders and vendors to the extent required by Renwood:
f. Upon commercially reasonable request by Renwood, Deutsch will arrange sales meetings, ride-alongs and inspections of selected distributors.
g. Arranging for the transportation and storage of Contracted Products, pursuant to industry SiaIldards applicable to premium wines, and similar to those employed for other Deutsch premium wine brands; h. Deutsch will provide contact reports, order reports, marketing contribution usage reports and shipment summary reports to Renwood within 30 days of the end of the target month.
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Deutsch will deli ver sales, depletion, inventoT)' and accounts sold reports to Renwood by the
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20 th day following the month for which the categories were measured;
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Deliver to Renwood final, adjusted annual 1 versions of all reports by the 30 1> day after July 1. 2007 and every year on that date thereafter;
k. Within 90 days of July 1 of every year during
the tenn of this agreement, Deutsch will deliver to Renwood [Deutsch's] audited Balance Sheets and ProfitJLoss Statements;
1. Deutsch will ensure that depletions of
Contracted Products do not fall below 80% of the Tier Sales Standards. n. The failure of Deutsch to perform the sen'ices above constitutes a Condition of Breach.
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Transition Period:
I. During this period, the Parties will begin to transition the distribution network, make announcements regarding the DeutschIRen\\,()()d relationship. and commence performance of the obligations under this agreement.
During this period, the Parties will be hound hy the terms of this agreement. 3. Further, all Tier Sales Standards and cure obligations! guarantees will apply during the transition period, except that: a. Deutsch will guarantee, through cure procedure, 100% of the prior year's sales for the months of April, May and June, 1005 as set forth in Schedule A. b. Deutsch shall not be responsible for collecting accounts receivable from Renwood's distributor network that existed prior to the Effective Date.
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c. In states where Deutsch is unable to pOSl prices and register the brand by April I, 2006, Renwood shall invoice the distributor. Within 30 days of collection by Renwood of the invoice amount from the distributor, Renwood Sh'll! forv;ard Deutsch a copy of the invoice, paymenT to Deutsch of its services fee of 15%, and payment to Deutsch of the sample allowance of 1.5%.
VI.
MARKETING CONTRlBUTION
A. Renwood will remit to Deutsch a marketing contribution as set forth in
Schedule B for verified sales of Contracted Products. The marketing contribution shall
be the sale pa)rnent to Deutsch to defray the costs ofal! Special Price Allowances, Distribution Allowances, sales person incentives, printing (neck-hangars, shelf-talkers. case cards, coupons and redemption thereof, and other point-of-sale materia]), promotional expenses, and trade-show/wine show expenses.
8. Costs or allowances borne by Renwood due to special circumstances will be deducted from the next marketing contribution payment from Renwood to Deutsch. However, Renwood shall be responsible for the expenses its representati\'es incur to attend trade-shows or other industry functions. Deutsch \I-ill mail its marketing 1h contribution claim and supponing documentation on thelS day following each qU:l.r1er to Renwood, on 30 day terms. Marketing contributions not exhausled by the end of the contract year shall be credited against Renwood's marketing contribution obligation for following year. Marketing contribution le\els are subjecllO review at the end of the fifth year of this Service Agreement. .
In addition, a5 a monthly sample allowance, from July I, 2006 to July I, 2007,
Deutsch may take an additional 1.5% deduction from each sales invoice issued by
Renwood. The Parties may extend or modify this provision after July 1,2007.
As a sample allowance, Deutsch will also be entitied to a payment from Renwood equaling 1.5% of existing distributor inventory taken by Deutsch as of March 31, 2006. Deutsch assumes responsibility for all distributor samples used thereafter. For purposes of offset, Renwood will forward 10 Deutsch those sample allowance invoices applicable to samples used after April 1,2006, but received by Renwood after that date.
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Exe::ution Copy VII. PRICING AND PAYMENT A. Pricin~:
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On 90 days notice to Deutsch, Renwood will set the price of the Contracted Products, FOB Renwood Winery or Renwood Distribution Facility, at the option of Renwood. Renwood covenants not to change the price of Sierra/Select Series/Red Label, Old Vine ZinfandeJ, Amador Syrah, Jack Rabbit Flat Zinfandel, Fiddletown Zinfandel for a period of two years from the Effective Date. Sales invoices from Renwood to Deutsch will reflect only the FOB list price, with instructions to Deutsch to deduct 15%, therefrom. Deutsch will confer with Renwood to coordinate pricing of Contracted Products and use of corresponding marketing contributions. Pricing disputes shall be handled pursuant to the terms of the Dispute Resolution Procedure, set forth below, subject to the following agreed limitations: a. Price changes programmed prior to March 1, 2006 are not subject to di spute by Deutsch: b. Unless otherwise agreed to by the panie:s. pri.:es shall never fall below those of the prior year; c. Deutsch cannot dispute price increases below 5% in any given year for any single product; d. Deutsch cannot contest the pricing of any new or different Renwood® product for a period of two years from its inclusion by modification to this agreement.
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Ill.
B. Pa;ment:
Payment to Renwood by Deutsch wlll be made in U.S. dollars and will be wired or electronically transferred to Renwood's account as follows:
Wells Fargo Bank 5700 Folsom Blvd Sacramento, CA 95829
ABA Routing Number. F or Account:
ACCl
Number.
121042882 Renwood Winery 0087662904
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Payment by Deutsch shall be made within 35 days of the date of invoice, which invoice date will not be earlier than the shipping date. a. Balances not paid by the 35-day deadline are deemed late, and will be charged interest at the rate of 18% per aIUlum. RenwoodTM will nol pay service fees or marketing contributions whi} e the account is past due, unless all of the past due balance is attributed to a bona fide dispute between the parties, and the panies have submitted the dispute for resolution as set forth below.
b. A Condition of Breach is triggered upon a 60 day past due balance, at which time all recei\'ables for Contracted Products re\'en to Renwood, and at which time Deutsch consents to the filing and satisfaction of stipulated Writs of Attachment and/or Execution against all Contracted Product inventory owned by Deutsch.
c. TIlis agreement shall se;;"e
~s a security agreement for all Renwood products delivered 10, or for the benefit of, Deutsch. The Panies agree that Ren .....ood is a secured creditor of Deutsch. Deutsch wiIl prepare, execute and deliver to Renwood, for the benefit of Renwood or its lenders/designees, appropriate documents necessary to perfect a security mterest in all Contracted Products in Deutsch's possession. Deutsch also agrees to prm'ide all commercially reasonable and necessary financial documentation as requested by Renwood, its lenders or their respective designees.
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VIII.
PERFORMANCE STANDARDS
A. On a best efforts basis, Deutsch will promote, market, distribute, sell and deplete Contracted Products in the Territory in a manner in keeping with Renwoodl's reputation in the marketplace.
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B _ Delltsch and its distributors will annually schedule reasonable sales and marketing time, including visits to accounts for Renwood personnel, and will arrmge for general, regional and team manager sales meetings and annual taslings ofRenwood Contracted Products w1th Renwood personnel in attendance.
c. Deutsch shall
be responsible for all distributors they utilize as of April J, 2006. Deutsch shall have the discretion to use channels of distribution of its choice, subject to: \. ex.isting contractual obligations Renwood owes to certain disclosed distributors, and subject to state and federal franchise laws;
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Deutsch may not c::nter into any nev.' agreements regarding Contracted Products until after April 1, 1006. Renwood's deterr:lnation that Deutsch's selection of distribution chanrcJs is traditional and appropriate for Renwood product: . After the end of th..: Transition Period, Renwood shall be notified 60 days bt·fore the effective date of any proposed change in Deutsch s distributor network. Deutsch shall indemnify and ho;,:: Renwood completely harmless from any liability, fines or 1. ss of any kind due 10 any change in Deutsch's distribL Jr network,
Ill.
IV.
D. Tier Sales Standards:
I.
Deutsch will sell '~nwood products On a nine (9) liter case equivalent, by Tie" , pursuant to the five-year performance guarantees set fOli:l on Schedule C. Faiiure of Deutscr, 10 meei each Ticr Sales Sta.r:dard is a Condition of Breach. Within 15 dnys of notice by Renwood of a Condition of Breach ofTier Sales Standards, Deutsch must cure the Condition of Breach by purchasing sufficient Renwood products at the scheduled price on its own account, by tier. To cure sales deficits for Tier I Contracted Products (Proprietary), and Tier 4 (Dessert) Deutsch must purchase up to a level of 100% of the standard then applicable. To cure sales deficits for all other Tiers of Contracted Products, Deutsch must purchase up 10 a level of85% of the standard then applicable. Deutsch shall be
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responsible for all storage costs incurred by Renwood so lonl; as the products Deutsch purchased for purposes of cure remam at the Renwood Distribution Facility.
IX.
AGREEMENT TERMlNATJON
A. Termination by Mutual Agreement:
1. No provision of this agreement prevents the Parties from tenninating this agreement by mutual agreement at any time on terms to be determined at the time of such agreement. The Parties agree that no stranger to this agreement has any interest In this agreement as a third party beneficia.'")', and warrants that no such rig.hts or interests in the continued operation of this agreement have been, aT will be transferred. 3. In the event any third party claims any interest in this agreement, the Parties' mutually agree that their obligations of performance on this agreement are mutually terminated, absent the execution of a separate, mutual written agreement to the contrary. 4. lIpan the mutual te-rmination of this agre::ment: a. l!nless othe"""ise agreed, Deutsch will immediately discontinue the use of Renwood trade names, trade labels, copyrights and other advertising media and shall remove all signs and displays relating thereto; b. At Renwood's discretion, Renwood will repurchase from Deutsch those of its products that are in saleable condition on terms agreed to by the Parties, and offset by any amounts due and owing from Deutsch to Renwood; c. Deutsch will cooperate in a commercially reasonable manner with Renwood to ensure an orderly transition of all contracted service functions to Renwood or its designee; d. Deutsch wil1 continue to deliver Renwood products to customers during all transition periods, and will take no detrimental action whatsoever to interfere with Renwood's
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ExecUlion Copy establishment of a substitute distributor network.
e. Deutsch agrees that under any termination
scenario (i.e. mutual, unilateral wIthout breach. or unilateral with breach) Deutsch shall not increase its distributors' inventories beyond that required to meet the current Tier Sales StandaTd. [ Deutsch will satisfy all balances due, and will take no detrimental action whatsoever to interfere with Renwood's reputation, solvency, or cash flow, and will make all payments promptly required pursuant to this agreement which pa:Jment covenants shall survive the mutual tennination of this agreement
B. Unilateral Termination without Breach by the Other Party: 1. TIle Parties acknowledge that this agreement will fundamenta1Jy change the distribution network that Renwood has developed over many years. Further, the Panies acknowledge that, in the event Deutsch terminates this agreement, Renwood will suffer damage to its dis:tribution network and cash flow that is not reasonabl y subject to calculation.
2. The Parties acknowledge that unilateral termination will dismpt Renwood and Deutsch business operations to an extent not reasonably subject to calculation.
3_ Therefore, the Parties agree as [o]]ows:
a. In the event Deutsch unilaterally terminates this agreement in the absence o[ a Condition of Breach by Renwood, Deutsch shall pay to Renwood Liquidated Damages in the amount of $4 million if termination takes place before July 1, 2007, and that amount will increase by 20% annually on a compounded basis for the tenn of this agreement, except that the Liquidated Damages amount cannot exceed Renwood's gross sales for t he prior 12 month period. All such damages amounts shall be offset by amounts Renwood owes to Deutsch under this agreement. Renwood has no obligation, in that event, to repurchase Renwood produds in the
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Execution Copy inventory of Deuts~ . or its distributors, Payment shall be m.'de no more than 60 days from the date ofma;ing written notice of tennination, b. In the event Renwo, Jd unilaterally terminates this agreement in th·: absence of a Condition of Breach, Renwood s ~laIl pay to Deutsch Liquidated Damages in the amount equivalent to twelve (12) months 'Jf service fee as measured by the prior 12 mor.:h; sales history, less any amounts Deutsch owes to Renwood. Renwood shall also have the obligation to re-purchase Renwood products in Deutsch' s inventory at Deutsch's laid-in cost. Payment shall be made no more than 60 days from the date of mailing written notice of termination. C. U ni1ateral Tennination with Breach by the Other Party: 1. Either party may terminate this Agreement hy written notice for the following reasons. in the absence of cure. with such termination to he effective sixt), (60) days after receipt of m'tice of breach (unless pm\'ided otherwise below):
a)
The filing of a voluntary or im oluntary petition in bankruptcy, reorganization or a similar proceeding concerning either party ifnot cismissed or vacated within ninety (90) days from the dateJf filing; The appointment of a receiver or trustee for all or a substantial part of the other parry's propeny, provided such appointment is not \'acated within ninety (90) days from the date of such appointment; The ex.ecution by the other par: v of an assignment for the benefit of credilOrs; The suspension of business, liL.uidation, dissolution, or termination of existence of the .ther party; the condemnation, attachment or ;.::'propriation of all or a material portion of the propen Athe other party; The failure of the other party ~ , ~aintain, at all times, all federal licenses, permits, appTc '
b)
c)
d)
e)
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Exe:::ution Copy cause or reason for such failure, except that suspension of federal licenses or permits ior period of]ess than ninety (90) days shall not be construed as a Condition of Breach;
f)
Misrepresentation of a material fact, or commission of a misdemeanor or felony in manufacturing, wine-making, selling, or related activities; The failure to fulfill any of the obligations in this Agreement;
g)
h)
All Conditions of Breach othenvise provided for in the
agreement;
i)
The failure to meet the Tier Sales Standards or cure through purchase within 15 days of notice;
A substantial change in ownership and/or control of Deutsch:
j)
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During the period in which the breaching party may cure the breach, if it can be cured, the SlaW5 quo antc shall be presen'ed hy the Panies, except for commercially reasonable measures taken to cure the breach. If the breaching part)' fails to timely cure the breach, then the other party may immediately tenninate this agreement without consequence, and may recoyer damages for the breach in addition to reasonable costs of suit, attorney fees and 'or mediator/arbitrator fees. If the defaulting party cures the breach within the cure period, then the agreement remains in force.
X.
ADDITIONAL TERMS, WARRANTIES AND COVENANTS
A. Deutsch agrees to sell, promote, merchandise, and advertise Contracted Products 10 enhance the Renwood® brand and expand the markets for Contracted Products in the Territory in accordance with the Tier Saies Standards. Deutsch shal1 prominently display the Contracted Products at the major annual trade and wine shows in a manner consistent with Renwood's past practices.
B. Within 30 days after the end of each month, Deutsch will supply to Renwood a report setting forth by product, vintage, Tier, state and distributor, on premises, off-premises: I) the accounts sold; 2) the quantities sold; 3) products depleted during the prior month; and 4) the prior month's ending inventories for each distributor and for Deutsch. In addition, the report shall contain the name of each retail account, as well as the total number of retail
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Execution Copy accounts, in which the products were sold during the prior month against the number of retail accounts that the products were sold in for monthly, quarterly and annuai periods on a running three (3) year basis. All such reports shall be in a mutually agreeable computerized form such that the data may be utilized for market analysis purposes.
C. Deutsch will not distribute or sell Contracted Products outside of the Territory or within the Territory for resale outside of the Territory, and shall take commercially reasonable measures to prevent extra-Territorial distribution or sale of Contracted Products by its distributors.
D. Deutsch will defend, hold Renwood harmless from, and indemnify Renwood from any liability in connection with: 1. Any claim, loss or expense (including reasonable attorneys fees and costs) arising from a Third Pany claim alleging will ful or negligent conduct, breach of an agreement, or breach of obligations arising from this agreement; and
1
Any and all fines, levies, damages, and costs (including reasonable anomey fees) of judgments that Renwood suffers as a result of Deutsch's failure to comply with applicable laws in the Territory including, but not limited to, the payment of any sales taxes, license taxes and fees. Deutsch will pay allle\'ies, excise taxes (except federal excise taxes imposed directly on Renwood), occupational taxes, and bonds, and shall maintain all appropriate licenses and permits in connection with shipments of Contracted Products to all portions of the Territory. Deutsch will not be responsible for judgments resulting from Renwood's failure to comply with applicable laws or pay applicable taxes with regard to Renwood Tasting Facilities or Retail Facilities.
E. Under no circumstances will Deutsch ship or store Contracted Products, or allDw its direct delivery customers to ship the products, in a manner likely to deteriorate product quality. F. Renwood may at any time (upon reasonable notice) inspect the products as sold and stored by Deutsch and distributors. Further, Renwood may contact any distributor, visit any retail account and will enjoy unfettered access to any Rmwood product data furnished by distributors or retail accounts to Deutsch.
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Execution Copy G. Renwood warrants that all Contracted Products it makes available to Deutsch under this agreement will be of good quality, are suitahle for heve;-age consumption, and are properly packaged by Renwood in conformity with applicable laws, regulations, and requirements in force in the Territory. Renwood will hold Deutsch harmless from any and all fines, le"ies, damages, and costs ofjudgments that Deutsch may suffer as a result of Renwood' s failure to comply with the provisions of this section.
H. Deutsch wilJ inform Renwood within seven days of notice of quality complaints and fully and completely cooperate with Renwood and the customer in complaint resolution.
1. Renwood shall enjoy reasonable access to the Deutsch sales force, which is expected to taste the Contracted Products;
J. Deutsch will present to Renwood on or before January 30 of each year the marketing plan and promotional schedule by which Deutsch plans to sell each COlltracted Product, vintage and Tier for the next fiscal year commencing July 1.
th
K. Deutsch currently sells Zinfandel wines made by three other suppliers (Kunde,
Anesa, and Esser). Deutsch warrants that it will not sell the Zinfandel wines of those three other suppliers, beyond 10% of 2006 levels. With the abo\'e exception, Deutsch will no! represent a"y other Zinfandel wine products, o! an)' wines produced by wineries located in Amador. Alameda, Sacramento and the Delta Region, Stanislaus, San Joaquin, II Dorado, Tuolumne or Calaveras County.
L.
De~tsch will appoint a brand manager responsible for administering the Renwood wine program, subject to the approval of Renwood.
M. Deutsch shall require the distributors it engages to do the following at all times:
i. Maintain an inventory level of the Renwood products sufficient to satisfy projected sales within the particular distributor's territory for a minimum DO-day period based upon Deutsch's forecast for the following quarter; and
2. Deutsch will notify Renwood within a reasonable period of any event within the distributor's territory that could result in projections for that territory varying more than 25% during any calendar quarter.
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Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 17 of 43
Exe::ution Copy
1". Renwood will not ship or sell Contracted Products in the Territory, except as othcrv..:ise pro\'ided in this a~eement.
O. Renwood will refer to Deutsch any and all orders and inquiries for Contracted
Products that it may receive for shipment from distributors, retailers or other persons in the business of buying wine for resale in the normal course of trade for sale within the Territory. Deutsch and its distributors must respond to all inquiries in a prompt manner and will report the results to Renwood. P. Unless the transfer of right will cause the breach of ex isting contracts or obligations, Renwood grants to Deutsch the first right of refusal (which right shall expin: within 90 days ofwrinen notice) to accept and merge into this agreement wine products acquired or developed by Renwood Winery after the Effective Date that will bear the Renwoodlg· brand and be depleted within the Territory;
Q. That during the tenn of this agreement, Renwood shall maintain product
liability coverage concerning the sale of Contracted Products in the Territory in an amount of not less than five million ($5,000,000) dollars per occurren~e naming Dt:utsch as an additional named insured.
R. All un-merchantable products suffering from quality deficiencies, packaging
problems or errors found to be the fault of Renwood may be returned to Renwood for full credit (less marketing contributions and service fees) provided that notice of such defIciency, problem or error has been given to Rel1wood within 10 days of disco\'ery of the deficiency. S. Renwood owes no obligation to provide any credit for products rendered un· merchantable while in the possession and/or control of Deutsch or its customers. Deutsch is not entitled to claim any marketing contribution from Renwood for such products. Notice of the discovery of an un-merchantable product condition will be provided immediately to all parties. In addition to other conditions, a product shall be deemed un-merchantable in the event the cOl1tainer.i or labels become unsightly or ofless than first class condition. Deutsch will not sell un-merchantable products or otherwise dispose of such products or permit them to become the property of any insurer, carrier or salvage company in the absence of prior writlen consent of Renwood. Renwood reserves the right to have such un-merchantable products destroyed on site at Deutsch or the applicable storage facility, and obtain destruction records from Deutsch.
T. Within 30 days following the end of each contact year, Deutsch will provide Renwood with a "Final Contract Year Perfonnance Statistics" report.
U. The Parties will meet and confer on the anticipated quantity and quality ofiliat year's harvest and meaningfuIJy discuss and consider the portion of that year's
VERSION RWI-S
16
Case 3:08-cv-02848-PJH
Exe:::utior. Copy
Document 16-2
Filed 06/30/2008
Page 18 of 43
harvest, by varieTy, which should be made into wines produced and marketed under the Renwood~' brand name. Tne parties will also mutually agree at thal time on the methods and allocation of costs of promotion and selling by Deutsch. V. Deutsch will obtain Renwood's permission before committing acts that could adversely affect Renwood with respect to existing contracts or the import, licensing or territorial registration requirements of any state, territory or political subdivision in the Territory. ln the event that Deutsch takes action without obtaining Renwood prior written approval in any of these areas, Deutsch shall be responsible for all financial and other liability incurred by Renwood, including all recoverable damages (including attorney's fees and costs or the payments of fines to regulatory agencies or judgments in favor of distributors) in connection with the consequences of such action.
Xl. ll'TELLECruAL PROPERn'
A. Renwood grants to Deutsch for the term of this Agreement a right to use the RenwooM trademarks solely within the Territory in connection with and for the purpose of promoting, advertising and selling the products pursuant to the tenns of this Agreement. The use of Renwood@ trademarks or other intellectual property shall be consistent with and supportive of the current brand image. This provision does not constitute an ~ssignment of Renwood! tr3demJ~ks or i~telle:::tual pwpert;'.
B.
Deutsch further agrees: 1. 2. To use the Renwood:t Brand Identity Package as described in the attached CD-rom; Not to remove the trademarks from the Products; Not to alter the trademarks in any marmer; Not to use any trademark, trade name, or designation of origin other than the Renwood® trademarks and Deutsch's trade name in connection with the promotion, advertising, or sale of Contracted Products; and Not to use the Trademarks in connection with any products. goods, business or services other than Renwood® products.
3.
4.
5.
C.
Renwood warrants that, to the best of its knowledge, it is the sole and exclusive owner of the Renwood® trademarks and intellectual property and has not assigned or licensed in the Territory any right or interest therein that would interfere or conflict with Deutsch's use thereof. Renwood also warrants that there are no known claims or demands in the Territory per1aining to such trademarks and intellectual property, and that
D.
VERSION RWl-5
17
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 19 of 43
Execution Copy no proceeding is pending or threatened against Renwood challenging Renwood's rights in respect thereof. E, In the event Deutsch becomes aware of any infringement of the trademarks, or any claim that the trademarks infringe the proprietaT)' rights of a third party, Deutsch will immediately notify Renwood thereof in v..'Titing.
XII.
MISCELLANEOUS TERMS
A. FORCE MAJEURE
The Parties willnot be 'liable in any way for any Condition of Breach caused by events beyond their co~mercially reasonable control including, but not limited to, fire, flood, pests, riots, wars, terrorism, sabotage, strikes, lockouts, anomalous and unfavorable climate course, or any other unavoidable events or contingencies. including a national financial clisi5 of catastrophic proportions. B. NOTICE All notices or other "'TiMen communications required or referred to in this agreement shall be in writing an sent to the address of the recipient as it appears in the introductory paragraph to this Agreement (or such other address as such party sha11 hal'e notified to the sender) by (in order of descending preferences (i) e-mail or facsimile transmission, (ii) DHL, Federal Express, or other reputable commercial carrier, or (iii) registered mail, return receipt requested, with all costs of delivery or transmission prepaid and shall be deemed given when actually recei\'ed. Copies of all such notices shall be sent by email 10 the f:mail addresses listed in the introductory paragraphs. C. SEVERABILlIT In the event any term or pro\'ision hereof is in violation of, or prohibited by the law of the State of California., such term or provision shall be deemed to be amended or deleted to conform to such law or regulation without invalidating or amending or deleting any other term of this agreement.
D, WAIVER
The failure or omission by either party to insist upon or enforce any of the tenns of this agreement shall not be deemed a waiver of such term unless the wai\'er is in writing by the party against whom the waiver is sought to be enforced. Waiver of one term will not be deemed a waiver of any other term. Waiver of a term on one occasion shall not be deemed a waiver of the same tenn at any other time. E. GOVERNING LAW AND DISPUTE RESOLUTION
VERSION RWI-5
18
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 20 of 43
Execution Cop)' This agrer:ment shall at all times be intr:rpreted pursuant to California law. ,'\ny dispute regarding the tenus and operation of this agreement, and any controversy or claim arising from of this agreement, shall first be submitted to mediatiorl in the City and Coun~y of Sacramento by a mutually agreeable mediator. All settlements are deemed to have taken place pursuant to California Code of Civil Procedure section 664.6. The prevailing party in any action to enforce any such settlement shall be entitled to reasonable attorney fees and costs of enforcement. In the event mediation does not resoh'e the claim or controversy, the p'-lni;:s wi\! submit the matter to binding arbitration in the City and County of Sacramento, by a mutually-agreeable arbitrator, or in the event 3greement cannot be reached, then to an arbi trator appointed by the Superior Court in and for the County of Sacramento. Attendant to such a proceeding, the parties sh311 enjoy rights of discovery per the California Code of Civil Procedure. The arbitration proceedings shall take ~'lace pursuant to Comprehensive Rules and Procedures ofJAMS or its successor then in e~Tect, and judgment upon the award rendered by the arbitrator may be entered in ,,:1)' court of competent jurisdiction. The decision of the arbitrator shall be final and bi:ding on the parties. The aibitrators are not empowered to award damages in excess of cc --:lpensatory damages, but shall include in the final award an allocation of attorneys' fee. costs and expenses incurred in the arbitration to t~e pre\'ailing party, whether or -'ot such fees, costs and expenses would other\~..ise be recO\'erable under applicable sta·;tes and rules of court. The arbitrator shall render the award ii, writing. explaining the factual and legal basis for decision as to each of the principal c,mtroyerted is~ues. The panies and each of them expressly agree that any petition to conLm, modify or enforce the arbitral award. shall be resolved in the Sacramento County S,-,penor Court 10 which jurisdiction the pani es hereby submit. F. CONFlDENTIALITY/PROTECTON OF INFORMATION EXCHA~GED
Renwood and Deutsch agree that each leeds accurate and timely
infonnation from the other on a regular basis;) satisfy their obli gations under this
- ' agreement. Each will protect and safeguard rc~eived from the other will not share it with any person or entity outside ofRenwood's or Jeutsch's organization unless prior written consent of alI panies is obtained, disclosure is compelled by authorities or disclosure is necessary to enforce the terms of this Agreement. Both parties acknou'ledge that information received from the other would be useful to competitors, and if furnished to such competitors, would cause irreparable harm to the Panies in the marketplace.
-
G. NATURE OF AGREEMENT The Parties acknowledge that they are dealing as independent contractors only. Neither party is grant(~d any right or authority to act or hold itself out as the legal agen10f
VERSION RWI-S
19
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 21 of 43
Exe:::ution Copy the other, or to assume or create any obligations or responsibi1ilies, express or implied.on behalf of or in the name of the other or any person or enti I)' affiliated with the other or 10 bind the other in any manner whatsoever except as may other.l'i"e be expressly agreed upon by the panies in writing for purposes of compliance ""'it'; applicable state or fedcr3! laws or requirements.
H.
ENTIRE AGREEMENT
TIlis Agreement shall constitute the entire understand:,g by and between the parties as to the subject mat1er hereof, replacing and superseo;:1g all previous agreements and understandings between the parties hereto or their predecessors concerning such subject mat1er. No modification of this Agreement shall be efjective unless set forth in writing and sipled by both parties. All notices required by this Agreement shall be in writing and shall be deemed given on the date of delivery.
1.
BINDING AGREEMENT AND EXECUT10N D' COUNTERPARTS
This Agreement shall bind and inure to the benefit of the panies hereto and their respective successors and assigns, provided that it may not be assigned by either party without the prior writlen consent of the other. This Agreement may be executed in counterparts, and if so executed, shall be fully effective and enforceable in accordance with its terms.
Robert 1. Srnerling Chairman and Chief Executive Officer Renwood Group, Inc Date: William Deutsch Chairman W.J. Deutsch & Sons, Ltd.
Date:
--------Peter DeLi5ch President W.J. Deu:'jch & Sons, Ltd.
VERSION RWl·5
20
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 22 of 43
Exe~utjon
Copy
SCHEDULE A
TRA~SITION
PERlOD SALES STANDARDS
(Attached)
SCHEDULE B t-.1A.RKETING CONTRIBUTION
(Applies to Sales through June 30,2011)
SIERRA SERIES/RED LABEL ZINF..... l.JDEL AND SYRAH
$11 PER CASE DISTRIBUTOR ALLO\\'ANCE
S tERR.A.. SERrES/SELECT SERIES 'RED LABEL (other):
S5 PER CASE DISTRlBlJTOR
AlLO\\'A~CE
OLD VP\'E
Zf",;FA~DEL:
$20 PER CASE DISiRIBCTOR ALlO\\'ANCE
FlDDLETO\\'l"J ZINFANDEL:
$20 PER CASE DISTRIBUTOR ALLOWANCE
SCHEDULE C
FIVE-YEAR TIER SALES SIANDARDS
(Attached, to reflect 15% increase over prior year' 5 sales, compounded)
VERS10N RWI-5
21
Case 3:08-cv-02848-PJH
---
Document 16-2
~J'L~=~
Filed 06/30/2008
P.~_L
Page 23 of 43
0~/J9/06 ~.~~~
IMI\.
\'1. ZODt"'\2: 2JPtY,lCl~'''''.
J.
Df~TSCh
914-,51-C,83
J:Ol!o
~o 95~20llCl F,
3
21'2
t.lU. t 7. jD!lt 2: 54'"
.&ccutloll Copy
Wl. J. cruncH ~'4-25 H?B3
Ifll 944
p, 21
DD:
~
~:_-----
S~A
l'RAN5I11()loj PD.lOD 8AIZS S1'ANOA..lWS
(J..IIubod) .
$11 PE1l CASE DlSTJUBUTOlt AILOW.A)O
'.
10
Case 3:08-cv-02848-PJH
I~. /UUh
Document 16-2
Filed 06/30/2008
~,~~l
Page 24 of 43
U
7b~,'"
03,19/06 ~'4~
,Iil), 9,~
E.xecut.ion Copy
counterparts, U1d if so OCllUlod. :ihall be fWly lOffoctivc and rnfo~llble ift ael:Ofdazlec with i~ tennis.
r>.uc:
_
Dlte:
_~!vi'----F-p-fl..;;.o...;;t~_
~I
William
ChairmaD
Zueb
W.J. Deutttb a: Sons., Ltd. Date:
~_
Perer~llCb
Proidcnt
W.J, DeUlScb &. Sons, Ltd.
SCHEDULE A
TRANSmON PWOO SALES SThNDAWS
(Attached)
SCK£DULEB
MA.JlKEllNG CONTIUBUDON
(Applies to Depldions lh.~ JUDe 301 2011)
SIERRA SEBJI,SIRED LABEL ZD--'F ANP£1.
AW' SyP,AH
$11 PER CASE DlS'1"R.mtITORALLOWA."'iCE
S!EltRA. SEEmS/SELECT SEPJES!R.ED LABEL (otbex):
VERS10N RWI-S
20
Case 3:08-cv-02848-PJH Document 16-2 Filed 06/30/2008 Page 25 of 43 Sales & Cose~; April I May I June 2005 b, roduct and family (9L Equivalent)
Product
June 2005 June 2005
Schedule,
April 2005
Sales
$7,275
May 2005
Cases
67.5
May 2005
Sales
$10,125
April 2005 Co us
46.5
Cases
Sales
Grondmere Z Grondpere
30,0
$4,500
$17,760 $22,260
($Il.J)
92,5
122.5 413.0 3520 600.0 656.0 2,584.0 4,605.0 60.0 11.5 3.0 195 21.0 438.0 40,5 80.0 2,583.7 27.5 3,284.7 105.5 27,0 3.0 1355
lila
178.5 404.0 697.0 739.0 496.0 2,7280 5,064,0 112.0 1.5 5.0 12.5 18.0 J7.0 J,340.0" 2.5 51.0 1,931.3 63.5 3,554.3" · 57.5 23.0
$21,312
$31,437
$0
62,0
110.5 72.0 246.0 394.0 318.0 2,019.0 3,049.0 52.0 2.0 22.0
$11,904
$19,179
$0
I
3
Total Proprietary
Select Pin"t Crigj"
I
4 5 6 7 8
Select Syrah Rose Select Viognier Sierra Barbero Sierra Syroh Sierra Zitlfatldel Total Sierra / Select
$25,508 $25,344 $43,240 $43,496 $186,048 $323,474 $7,200 $1,388 $360 $2,925 $3,150 $0 $65,700 $6,075 $14,400 $314,160 $3,300 $418,658 $37,980 $5,256 $270 $43,506 $807,898
$22,624 $50,J84 $53,2J6 $35,712 $196,416 $358,152 $J3,440 $180 $600 $1,875 $2,700
$4.032 $17,7J2 $28,368 $22,896 $145,368 $218,376 $6,240 $240 $0 $3.300 $0 $0 $7,350 $0 $4,140 $140,172 $4,680 $166,122 $0 $3,456 $1,530 $4,986
I
9 10 11 12 13 14 15 16 17 18 19
I
Amador Barbero Amador Barbera 375 Amador Satlgiovese Amador Syrah Amador Viognier D'Agostini Bros. Fiddletown Fiddletown 375 Jack Rabbit Flat Old VIne Old Vine 375 Total Amador County
$3,060
$201.000 $375 $9,180 $235,020 $7,620 $475,050 $0 $11,040 $2,070 $13,110 $877,74911
49.0 230 1,154.0 39.0 1,341.0 180 17.0 35
I
I
20 Ice Wltle 21 Muscat 22 Port
I
Total Dessert Grand Total [
8,147.7
II
Q
80.5 8,8773·
a
I
4,535.5
$406,66~J
· Includes BevMo sole of 1,100 coses. WJDeutsch will receive
credit of 1,100 Fiddletown Zinfondel cases 090jnsl
TranSition Period Standards if it does not recl!ive a comparable order from BevMo
Sales Apr May J un2OQ5F 11101.><1 S
·· Sales ByProdu<
ILobel
Page 1
0' I
311712006326 PM
,---
Case 3:08-cv-02848-PJH
~ Jul·05
produrl CO.. 1
J~
5ales & Cases J ul 2005 to June 2006 l
--
Document 16-2
roduct and Tier (9L Equivalent)
Ocl·05 COHI Dollars $5,325
Filed 06/30/2008
Page 26 of 43
Schedule C
Dtc·05 Cll.ltS 55 ~ 615 119.0 950 360
3070
Stp 05
(c~t~
Nov·05 COlH Dollorl H800 $ 7.680 $1l.480 $12.744 $5.328
SIO.OOO
$3~416
Dollor. 0
Dollar! $8./75 $6,734 $ 14.909
$15.~]J
Dollors SB,J25 S/2.000 $20,325 Sb.840 S2.520
J21.AU
I I;;rondmtrt 2 Grondptrt
Tolol Propr.ttory
$5.250
$6.048
$11.298 S47.016
SI7 .· 2'
33.5 45.0 78.5
$5025 $8.640
SI3.665 '23.986 $8.002 S26.2 80 $13,29/ $ 11.249 $63.674 $153.478 SIU20 $660 $0 $1.215 $0 SZ.340 $163.500 5525 510.724 $125.512
$4.~60
545
35.5
112.5 1480
no
40.0
31.5 66.5 653.0
2420
J48
R9.3 2160 1080 3960 477 0 4360 1.9860 3.6190 46.0 10 2.5 70
HI.600
$26.925 S32.5s4 $3,384
S36.93~
no
177.0 74.0
l
4 5 6 1 8
Select Plnot 'ri9lc
5elect 5yroh
Rou~
Select Vlcgnlu
232.0 252.0 IBeO 1.126.0 2,6910 4'.0
$16.704
$18.14~
5'trro 80rbtro
51erra Sr' fih 5tHro l,n/ood.l
$13.392
$81.072 $193,752 $5,040 $0 $0 $600 $1.950 $0 $2.550 $675 $J.364 $67,920 $1.560 $81.659 $8,460 $7.920 $1,530 $17,910
3350 1280 365.0 185.0 IR80 8850
2,0860 1060 5.5 8.5 130 1.0900 35 585 1,045.7 35.5 2.3662 875 345 110 Ino
P776 $28.512 $34.593 $3U92 $142.992 $260.698 S5.184 $120 $0 $375 $1,050 fO $43.050 5900 $11.224 $139.560 $ 1.800 $203.263 $17.100 $0 $450 $1/ ,550 $496,4<0
452.0 47.0
SilO
687.0 508.0
3.1700 5,3770 1550
no.o
478.0 611.0 2.9890 0790 75.0
$49.46~
]210 519.0 ;.973 0 3.2510 540 20 25 9.0 580 330 1,425 a 19 a 1.602 !l 17.5 50 240 46.5
$23.112 $37.296
St~Z.CO~
$36.576 $228.240 $387,144 $18.600 $0 $0 $5.025 $150 $20,/60 $183.600 $4.350 $12.052 $251,340 $9,600 $504.877 $35,100 $0 $1,260 $ 36 ,360 $955.306
$0.992 HiS,208 $329.688 S9000 $0 $0 $375 $0 SO $63<7 $0 $5Me $292,260 $ 3.900 $317.750
TOlof S,trro 1 Stlocl 9 Amador Barbero 10 "modor Borboro 375 II Amador Sans'ovtse 12 13 14 15 16 Amador Syron Amador Y'asn'rr
D' AgoJtlrlJ 9rot
SZ33.660 $6.360 $240 $0 $375
$U5o SO
$8,700
4.0 130 170 45 75 5403 130 641.3 23.5 413
])5 10 1/2.0 1,7 J 70 ,90 65.5 2.0707 800 4,'637 915 14.0 111.5
2.5
f oddltl ...n flddltla ..n 375
17 Jockllcbbllflcl 18 Old Y'ne 19 Old Y,n. 375 Tolal Amador Caunly
2870 6.0 610 1./397 150
1.5652 475 50 52.5
5,32bO
42.0 32.0 2.418.7 32 5 2.602 7 640
$0 $6.072 $173.700 $2.280 $199.077 $5939 $960 $2.160 $9.059 $462.121
$321.516 $31.500 $b.b}4 $ I.OUl $39.126
$52/,76~
20 1..:.r. \"I,,.,e 21 MUJool 22 Port
Total Duurt
25
430 109,5
,ro
81B 3.4806
Total.
$23,040 $·180 $3.870
527,390 $687,308
I
~-----_._-]--
$304.619~,66l7
~9002
I
7.3632
I
5.019.0
Sol·· 5rolr,h
stondard. By Yaor Yo.r End.d June 2007 Ytar Ended Junt 2008 Yoor Endtd June 2009
V.Or'"
4,003.0 4.603.0 5.2930 6.0870
7,000 0
$350.312 $402.859 $463.288 1532.781
S6 ... 690
5,3630
$606,953 $697.996 $802.695 59<3.099
tl.06l,~b'"
6,1250 7,044.0 8.IU10 9.3160
IOJU 0
$ 570.883 $656515 $754.992 $868.241
$998.'77
I J.385
a
$1.098,602 $1.2b3,392 $1.452.901 H670.836
Sl,9Z 1,"'bl
8.~68.0
$790,404
5,7720 66360 7,6340 8,779.0
10.0960
$531.439
H11.15~
6,167 0
7,0920 8,1560
9 . .3 79 0
13.0930 15,0570 17.3160 19.9130
9,7 38.0 11,199.0 12.8790 ''',ell.o
$90B.965
$1,045.310 $1.202,107
iol.:Ull.1Z3
$702.828 $808.252
io'il'l9,-490
f ... dui JU"" 2010
Year Enctltct JLJne ia 11
Nat.:
5landllrds are calculated at 15% increase year over year. For simplicity sake only monlhly talal~ art shown on the schedule, but il i~ impliCit thol the Standards are applied product by product and tiu by titr
Pngolo/2 ]117I2006102311M
Sal·· JuI05 J un06F'nol .· I. -·SolullyPradu, 'lab.1
---~_.
[
Product 1 6rondmoro
Case 3:08-cv-02848-PJH 2005 to June 20t )1 Product and Tier (9L Equivalent) 27 of 43 Document 16-2 Filed 06/30/2008 Page Schedule C Salts & Cases J ul
·· N
COH5
~
Torol bollor s
F.0·06
CO!U
Mar 05 ··
CO!lS
~
pr·05 ·· Dollor, $7.275
May·O~
.. Dollors lIO,IZ5 $lU12
Jun·O~
·· Dollar, 14500
$17
Dollor5 $8,214
Dallors
~5,124
Dollar!
$l.850
$J7.~32
COJt5
C.. t! 67.5 1110
CO
(05t! 4920 8838
505 71.5
1220 387.0
<10
30.5 235 54.0 lJ8.0
38_0
19 a
H5
6l.0
300 9Z 5
P4988
$172,182
$l4 7,IT0
Z &ro"dperr
Total Propl'lotory 3 4 Soloct P,.... t 'rig"
~tllr.c1 ~'Yrah
S14.528
$6,344 $ 11,468 $ 11.952
"2,016
SlZ
t
742
a 215 a
196
ff~n
$ 11.904
no
$40,482
110.5
710 2460 3940 JIB a 2.019.0 3,0490 520 2.0 22.0
$19,179
$0 J4032 i17,71Z $28)68
$22.e9~
1785
4040 697.0 7390 ~9f! {) 2.7 280 5,064 0 1Il.0 1.5 50 12.5 180 17.0 1.340.0 Z.5 51.0 1,93 I 3 63.5 J ,5543 57.5 2J 0 80.5 8,877.3
$31,07
$0
$n 624 150,184
illS
413 a 3520
600.0
SZZ,Z&O
1.3 75
8
I
$2T.864
I.~"~
$0
t6
~9~
($ 1(3)
~Z5.508
$2~.H~
2,4530 1.699.0 4.3510 5,4570 5,495 0 25,4800 44,935.0 927.0 34 5 150 100 1190 1420 '1,7960 1015 5575 19.1478 05.0 27.4183 4725 288.8 236.5 9978 7",7269
$178.217
A:cn
!l 6 7 II
Seled Vlogn.or Sierra BlYboro S,erro Syroh 5,erro Zinlond,' Total 51_rro I S.lftt
1&50 3360 3HO 1.9960 3,2790 960 6.0 14.0 ) 4.0 3JI.0 3,0 36.5 1.8170 29.0 2,346.5 10.5 290 230 62.5
111.880 124,192 $26.928 $143,710! $236,088 111,520 $720 $0 12,100 12,100 $0 $ 49.b50 S450 $6)16 $218.1180 13,'180 1295,716 $ U80 $5,568 $2.070 $11,4/8
3iJ 0 303.0
SUUl
$21,Ol4 $22,608
$37,080
$14~,296
5150 6850
7020
$37,080 J49.320
''50,~~~
'J
~107,612
II,~""
$53.216 , 3~.712 $196,416 $358.152 11]440 1180
$600
$I,B'~
2,060.0 3,353.0 44.0 5.0 1.5 UO 1080 2.0 22.5 1.399.1 41.0 1,655.1 3.0 28.5 16.0 47,5 5,1102
1.9640 3,9820 850 70 200 4.0 3190 105 87.0 1,622 0 400 2,1945 160 45 5 10.5 1020 6.49J.5
$141,408 1284.848 110.200 $MO i3000 $600 $47 ,850 $1,575 '15.660 $ 194.640 14,800 1279.165
$ 145 ,368 $(18)76
$6,Z40 $240
656 a 2,5840 4,6050 600 11.5 30 19.5 21.0 4380 405 800 2.5837 27.5 3.2M7 1055 270 3.0 135.5
$43,240 $43,496 $186,048 $323,414 17,200 HJ88 $3W $2.92'1
$J,J~O
$393,970
$396,553
$I,831,4J8
13.219,3J4
$1I0,1@4 $4.l48 $1,800 I 21,4~0 113,650 125.560 1196.527 115.n'l $102.664 12,322.104 15Z,26O $3.466.172 1169)39 $56,)]6 PU24 $2H,439
$<'39,976 $5,280
I
"'modor V109"''' b' Bro, I~ f'ddl",o ...n 16 f.ddleto..n 375
9 10 II 12 13 14
""mador ""mador "'modor "'modor
Barb!'o Barb_ro J7~ Son9'oyUO Syron
$boo
10 $2Z5 $600 $0 5>17,250 $300 $5,244 $168.840 $4,980 $203,319 11.080 $6,336 $1.440 '8,856 $463,619 [
"9"1"'"
490 230 1,1540 390 U4l.0 180
IT.O
17 Jock "abb,. FI.t 18 Old \/In_ 19 Old V,n_ 375 To'a' "mador County
20
$0 13,300 $0 $0 $7 ,350 10 $4,140 $/40,172
S4.~80
$2,700 SJ ,060 $201.000 $375 '9,180 1235.020 $7,620 $475.050 10 $ 11.040 $2.070 113,110
$0 $65,700 $6.075 $14,400 1314,\60 $ J )00 $418,658 $)],980 $5256 $270 $ 43 .506 IB07.898!
$166,\22 $0 SJ,456 i 1,530 14,986 $408,663 [
Ic.~ Wlnlr.
SS.7bO
IR)36 13,672 118.168
21
MUHol T0101 Dunr I
22 Por'
35.0 4,535.5
I
Toto'.
I
5,8100
B65,'~
$650,859 $748 ..'88 $860,761
~9A9.~7~
$1.1 38, J~6
'6u3
$877,749 [!,I47 7
S7,18~
U.l57,13t $9.495}00 110,920,054 $12,558,063 '1<.441.772
5el.. GN,,'h
5teMeNlt .~ Vur
Y_or End_d June 2007 Y.ar E"d,d Jun. 2008 6,682.0 7,684.0 8,837.0 10.16].0
11,687.0
5.8770 6.7590 7.7730 8939 0
la.zeo 0
$533.162 1613,/36 $705,106 $610872
$9.J~,~OJ
7.4680 8.5880 9.8760 1/3570
1],061,0"
$710,062
$Bn,HI $94h,992
5.2160 5,9980 6,898 0 7.933
$469,962
$540,~56
10.2090 11,7400 13,5010 15,5160
1l',f15! 0
$\.009411 $1.160,82 3 $1.334,946 $1.535.188
J
I.r6~.4f,6
9,3700
$929,082
85,9380 98.11780 II 3,65JO 130)020
J~O.)07
10,1'60 11,068.444 12,"2.0 14 ..'510
'6._l~9
Y.... EMd.d JU"' 2009
Y!t(Jl"" E"dilfd
]U,",E
$621,524 $714,753
""?I.f'U,~
iI,U8}1I 11,413,018
11.~2 ·. 9'"
~OIO
$1.089.041
$I,15.l,J91
Year E...,d~d Ju",~ ~Oll
a
q,I;'J 0
0
0
No,.:
Standards are calculated at shown on
15'l.
increase year over year, For Simplicity soke only monthly 101015 ore
the
schf.du/e, but it i~ implicit fhat the Standards are applied product by product and tifT by tier
Sol_sJuI05Jun06F,"ol kl5 -·Sal.sByProduellob.r
Poq. 2 01 2
3/1712006 10:23 11M
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 28 of 43
EXHIBITB
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 29 of 43
1
Whitney A. Davis, SBN 149523
CHARTER DAVIS, LLP
2
1730 I Street, Suite 240
Sacramento, California 95814
3
Telephone: 916.448.9000
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5
6
7
Attorneys for Petitioner Renwood Winery, Inc.
JUDICIAL ARBITRATION AND MEDIATION SERVICE
8
9
RENWOOD WINERY, INC 10
11
v.
Case No. 1130003656
DEMAND FOR ARBITRATION
Petitioner,
12
W.J. DEUTSCH & SONS, LTD., 13
Respondent. 14
15
16
17
I.
18
19
20
21
22
23
1.
GENERAL ALLEGATIONS
Renwood Winery, Inc., (hereinafter "Renwood") owns and operates a winery Renwood has produced several varieties of award
located in Amador County, California.
winning premium wines for more than a decade. In 2005, Renwood's in-house sales and marketing staff sold approximately 100,000 cases of wine domestically. Although, Renwood is a small winery by industry standards, it controls many of the old vine Zinfandel grapes in
24
California, and dominates the Premium Zinfandel wine categories. The hand-crafted wines are 25
26
27
produced in small lots, which distinguishes the brand from other producers. For this reason, Renwood received overtures from wine marketing and sales firms wishing to represent the winery and thereby add a premium producer to their product line.
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1
ARBITRATION DEMAND OF RENWOOD WINERY, INC.
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 30 of 43
1
2 3 4 5 6 7 8 9 10
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2.
In like fashion, in the Spring of 2006, industry-leading wine marketeer W.J.
Deutsch & Sons, Ltd. ("Deutsch"), approached Renwood and proposed that Deutsch obtain the exclusive right to sell Renwood products domestically, thereby obviating the need for Renwood to employ its own sales force. Deutsch cited its great success with other major brands, as
achieved through its 120 person sales force, and promised to provide Renwood with greatly increased sales and positive exposure for this premium brand. Deutsch wanted to take this
already-successful brand to unprecedented on-premise and off-premise sales levels through Deutsch's distribution channels. 3.
1
Deutsch reported to Renwood that it had taken an obscure winery in Australia
(Yellow Tail) from 200,000 cases per year in sales to almost 8 million cases per year in 5 years. According to Deutsch, this achievement was unprecedented in the wine industry, and provided Deutsch with the credibility and marketing leverage to place Renwood's premium products on more wine lists and selling establishments than ever before. Renwood selected Deutsch in light of its success with Yellow Tail, its industry expertise, its reportedly formidable marketing and sales staff, its extensive and well-established distributor network, and its proven ability to leverage its market strength and contacts to place Renwood wine in diverse distribution channels throughout the country. 4. Renwood's pre-contract distributor network took more than a decade to build.
12 13 14 15 16 17 18 19 20 21 22
Renwood's coveted "by-the-glass" marketing efforts likewise took years to become effective. Because of this, Renwood was concerned about the risks posed by transfening sales, marketing and distribution duties to salesmen and distributors unfamiliar with the brand. Renwood made this concern explicit in the Services Agreement with Deutsch: "Renwood abandoned its
23
24 25 26 27
distrihutor network on the representation hy Deutsch that Deutsch will exert its por~folio brand
28
1 "On-Premise" sales are those made predominantly to restaurants, where the wine is consumed on the premises. Increases in these sales are primarily achieved through placement of products into restaurants to be sold "by the glass," and by convincing the establishment to place more of the product line on their wine list. "Off-Premise" sales are those made to liquor stores, grocery stores, etc., where the customer purchases the bottles of wine and consumes them elsewhere. or
"off-premise."
2
ARBITRATION DEMAND OF RENWOOD WINERY, INC.
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 31 of 43
1
2
control to ensure priority distributor effort to meet or exceed Renwood Tier Sales Standards." See Agreement at V.B(i).
3
4 5 6 7 8
5.
In addition to Deutsch's "priority distributor effort" promise, the parties agreed
in writing that Deutsch would perform very defined marketing tasks and use its best efforts to promote, market, and distribute Renwood's wines "in a manner in keeping with Renwood's reputation in the marketplace." [d. at VIlLA. This provision, along with the tier-specific
performance goals set by the parties, reflected the requirement that Deutsch "enhance" the distinctive and high-quality Renwood brand. /d. at X.A.
9
10
6.
Renwood reposed trust and confidence in Deutsch by granting to Deutsch the
exclusive right to perform the business-critical tasks of protecting, promoting, and enhancing
lithe Renwood brand. 12 13 14 15 16 17 18 19 20 21 22 23 24 7. The parties expressly eliminated Renwood's risk of loss by including a sales A monthly performance standard was
guarantee in the Services Agreement. /d. at VIILD.
established for the four "tiers" of wine that Renwood produced. Id. at Schedule C. Deutsch guaranteed 15% year-over-year growth in monthly sales for a period of five years. If Deutsch's sales did not meet the standard, it promised to "cure" by purchasing the deficit from Renwood, by tier. Id. 8. The parties executed the Services Agreement in March, 2006. Deutsch took over
the marketing, selling, and distribution of Renwood's wines in April of 2006, and took credit for a 1,100 case sale booked in March. Since that time, with only one exception, Deutsch failed to achieve the required tier sales performance in any of the subsequent months. In fact, Deutsch's sales have fallen short by many thousands of cases. Months after the transition to Deutsch, some distributors had not even received introductory sales meeting from Deutsch, forcing Renwood to conduct these meetings at its own expense.
25
26 27
9.
Due to these lost sales, Renwood suffered a loss in shareholder value; a loss in its
ratings and a loss of brand awareness and recognition in the marketplace. Deutsch's failure to meet the performance standards is the consequence of Deutsch ignoring many of the marketing
28
obligations it agreed to perform. Making matters worse, some of the marketing efforts that
3
ARBITRATION DEMAND OF RENWOOD WINERY, INC.
Case 3:08-cv-02848-PJH
Document 16-2
Filed 06/30/2008
Page 32 of 43
1 2 3 4 5 6 7 8 9
Deutsch managed to exert served to actually harm Renwood's reputation. In this regard, Renwood's damages greatly exceed the monetary amount of the untimely cure payments Deutsch made to Renwood.
10.
Prior to the execution of the Services Agreement, Deutsch requested and was
provided Renwood's financial statements. Deutsch hired a financial analyst to scrutinize the cash flow, operating debt, and other detailed financial information. This information clearly illustrated this small winery's monthly dependence on cash flow from wine sales.
11.
Deutsch drafted the first iteration of the Services Agreement, employed a wine
and spirits expert attorney to revise the later drafts, and was the party most experienced in the drafting and performance of marketing and distribution agreements for wine. 12. The resulting Services Agreement clearly states that Renwood's transmittal of a
10
11
12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Notice of Breach of the tier sales standards starts a 15-day period in which Deutsch must cure the breach. There is no provision in the Services Agreement that in any manner limits
Renwood's breach notice to only an annual basis. 13. Due to Deutsch's dismal sales performance, the time for Deutsch to cure came
quickly. The first cure demand was met with arguments about the base-year sales upon which the guarantee was based. Then, the cure payments were delayed beyond the IS-day period
because Deutsch contended that a 35-day period applied after presentment of the cure invoice. In a particularly malicious act, Deutsch then cured a disastrous month's sales perfonnance by purchasing wine not by tier, but by buying only one or two products. They did so because Deutsch receives a significant marketing contribution from Renwood for the sales of some wines, and no contribution from others. Deutsch cured by buying wines with the greatest
marketing contribution, while the other products (affording no contribution) were left to remain in Renwood's inventory. The result of this tactic was to throw Renwood's vintage of the over bought product gravely out of balance, portending the exhaustion of the supply before the new vintage becomes
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