1. Key Terms for Wine and Distilled Spirits
Supply Agreements
Donna H. Hartman, Esq.

2. Donna H. Hartman Speaker Pic OlenderFeldman LLP
Beverage Alcohol/Corporate Attorney
Key Terms for Wine and Distilled Spirits Supply Agreements
Speaker
Pic

3. Creating a Brand Without a Winery or Distillery
© 2017 Donna H. Hartman, Esq.

4. Producer Licenses / Permits
Federal - Basic Permits:
State:
Bonded Winery
Bonded Wine Cellar
Taxpaid Wine Bottling House
Distilled Spirits Plant
Wholesaler
Winery License
Farm Winery License
Winegrape Grower’s Permit
Distillery License
Distilled Spirits Manufacturer
Craft Distillery License
(Note: Types vary depending upon operation and state.)
© 2017 Donna H. Hartman, Esq.

5. Sourced Product Benefits
For Supplier / Manufacturer:
For Purchaser / Brand Owner:
No Additional Cost for Plant, Labor, and Equipment
Utilize Extra Production Capacity
Opportunity to Sell Excess or Finished Product in Bulk
Additional Income
Greater Profit Margin
Increased demand for Product / Services
Lower Cost to Entry
Faster to Market
Valuable Branding
Exclusivity
Increased Profit
Lower Production Minimums
Programming Opportunities
© 2017 Donna H. Hartman, Esq.

6. Options for Creating a Brand
Private Label
Supply Agreement
Custom Crush
Bulk Purchase
© 2017 Donna H. Hartman, Esq.

7. Various Service Companies / Titles
Wine / Distilled Spirits Supply
Bulk Purchase
Custom Crush
Grape Purchase
Co-Packing
Contract Bottling
Private Labeling
© 2017 Donna H. Hartman, Esq.

8. Are Agreements Really Necessary?
YES!
© 2017 Donna H. Hartman, Esq.

9. Why? Outline Key Business Terms;
Define Parties’ Roles and Responsibilities;
Identify Timing for Certain Actions;
Manage Parties’ Expectations as to Products and Performance; and
Sets Forth Process for Remedies / Resolution.
© 2017 Donna H. Hartman, Esq.

10. Key Agreement Terms
© 2017 Donna H. Hartman, Esq.

11. 1. Define Parties
Seller / Producer / Supplier /Bottler / Grower/ Vineyard / Distiller
Purchaser / Brand Owner
© 2017 Donna H. Hartman, Esq.

12. 2.1 Define Product Type Style Characteristics Quality Organic Quantity
Mash Bill / Blend
Distillery Photo Courtesy of Millstone Spirits Group LLC
© 2017 Donna H. Hartman, Esq.

13. 2.2 Define Product - Grape Specifications
Grape Varietal / Varieties
Vineyard
Location (e.g., certain block, row)
Quality Standards (e.g., brix, acidity)
Organic
Viticultural Practices (e.g., pruning, irrigation, pest/disease control)
Quantity
© 2017 Donna H. Hartman, Esq.

14. 3. Production and Planning
Supply Agreements
Forecast / Production Estimate
Product Removal Schedule
Bottling Agreements
Annual bottling requirements
Related bulk purchase shipments
Grape Purchase
Harvest Method (Hand or Machine)
Grape Maturity and Harvest Delivery Date(s)
Prior Notice Timing
© 2017 Donna H. Hartman, Esq.

15. 4.1 Pricing Schedule / List Type of Service Forecast Variance (+/-)
Additional Charges
Supply of Bottles /Packaging Materials
Warehousing
Frequency of Price Changes
© 2017 Donna H. Hartman, Esq.

16. 4.2 Pricing - Grapes Options: Variables:
Tonnage (Number of tons at a set price per ton).
Acreage (Specific amount or area at a set price, regardless of final weight or volume).
Combination (Acreage defaults to tonnage if amount of fruit produced is < specified amount).
Variables:
Excess Fruit
Quality, Defect, Rot, etc.
© 2017 Donna H. Hartman, Esq.

17. 5. Payment Terms How / Where Payments are Made When Payments are Made
Specific Date
Upon Delivery
“X” days after Harvest
Paid as a Percentage (i.e.,- 50% within 30-days of harvest; 50% prior to December 31st of Harvest year).
© 2017 Donna H. Hartman, Esq.

18. 6. Roles and Responsibilities
Providing Standards and Specifications for Products
Sourcing Grapes / Identifying Growers
Overseeing and approving Winemaking or Distilling Process
Obtaining / Filing Regulatory Approvals and Reports
Arranging for Product Transportation and Delivery
Conducting Testing /Analysis
Designing Labels / Packaging
Filing for Intellectual Property Protection
© 2017 Donna H. Hartman, Esq.

19. 7. Testing / Analysis Define Sampling Procedures and Testing Methods
Appoint Party Responsible to Conduct Tests / Analysis
Define Timing Intervals or Schedule
Identify Basis for Acceptance, Rejection, or Correction
© 2017 Donna H. Hartman, Esq.

20. 8. Transportation and Delivery
Identify Party Responsible for Delivery
Define Method of Handling, Packaging and Form (e.g., bulk or bottles)
Set Delivery Date (or Window) and Location
Identify Documents needed for Delivery / Filling of Tanks
Define when Title / Risk of Loss Passes
Determine Insurance Requirements
© 2017 Donna H. Hartman, Esq.

21. 9. Term Length of Agreement Annual; 1 Harvest Multi-Year Renewal Terms
None
Extension – Notice Given
Evergreen – Automatic if Parties do not give notice of termination.
© 2017 Donna H. Hartman, Esq.

22. 10. Termination (Exit Strategy)
Set Expiration
Evergreen – Proper Notice Given
Early Termination
Breach
Financial
Change In Control
Loss of License
Convenience (Upon proper notice)
© 2017 Donna H. Hartman, Esq.

23. 11. Confidentiality / Intellectual Property
Prevents disclosure of trade secrets, formulas, Product composition, marketing plans, etc.
Liquidated Damages for Breach
Intellectual Property
Limited, Non-exclusive, Royalty-free License
Permission to Use Trade Name
Cannot benefit or trade upon goodwill (e.g., Vineyard name, Winemaker’s name)
© 2017 Donna H. Hartman, Esq.

24. 12. Federal / State Remedies Available for Non-Payment
File a Lien
Priority over other secured creditors if properly / timely filed
Types Vary By State (e.g., Producer’s, Grower’s, Agricultural)
File a Uniform Commercial Code (UCC) Financing Statement
Creates a security interest that attaches to Product
File a Personal Property Security Interest (where credit extended)
File a Claim under the Perishable Agricultural Commodities Act (PACA)
Protects produce industry against unfair and fraudulent practices
Statutory Trust for Payment
© 2017 Donna H. Hartman, Esq.

25. 13. Limitation of Damages / Waiver of Warranties
Disclaim certain types of damages (e.g., special, incidental and consequential)
Contract price
Insurance Limit
Money Damages
Waiver of Implied Warranties
Need to expressly and explicitly disclaim (e.g., merchantability, fitness for a particular purpose)
© 2017 Donna H. Hartman, Esq.

26. 14. Dispute Resolution Mediation Arbitration Litigation
© 2017 Donna H. Hartman, Esq.

27. Thank You!

28. Founding Partners

29. Media Partners

30. Sponsors and Partners