1. Winery/Grower Relationships: Grower Liens and Payment Strategies Washington Association of Wine Grape Growers February 6, 2009

2. Tools for Revenue Protection Business Relationship  Trust  Financial Capacity  Cash Flow Legal Relationship  Common Law  Written Agreement  State Statutory Liens  PACA

3. Assessing the Business Relationship  History  References  Diligence  Payment Assurances  Business Realities  Communication

4. Common Reasons for Slow Pay/No Pay to Growers…  Revenue Problems  Credit Problems  Dispute about Performance  Misunderstanding about Payment Terms

5. Grape Purchase/Sale Agreements  Payment Terms -- pricing, timing, and adjustments  Penalties/Interest  Attorney’s Fees  Cross Defaults  Liens and Security Interests  Delivery Receipts and Invoices

6. Liens and Security Interests  How and when does it “attach”?  What debt is “secured”?  What is the “collateral”?  How is it “perfected”?  Enforcement timeframes

7. Uniform Commercial Code Security Interests  Mutual Agreement about: -- Debt secured -- Collateral identified (juice, wine, A/R?)  Perfected by filing UCC Financing Statement  Effective for 5 years

8. Statutory Grower Liens (WA) Processor’s Lien (RCW 60.13.020)  Inventory and A/R  File within 20 days after default (use UCC-1) http://www.dol.wa.gov/business/UCC/uccforms.html  Priority over other secured creditors  Expires after 12 months

9. Statutory Grower Liens (OR) Agricultural Produce Lien (ORS 87.700)  Inventory and proceeds  File APL-1 within 45 days after final due date http://filinginoregon.com/forms/pdf/ucc/430.pdf  Priority if secured creditors notified within 20 days.  Expires after within 225 days

10. Statutory Grower Liens (CA) Producer’s Lien (Food & Ag Code 55631) Inventory and A/R  No filing required for priority  Expires in 2 years if no written contract

11. Perishable Agricultural Commodities Act (PACA)  Produce Buyer and Seller Licensing (optional for grower-only sellers)  Fair Trading Regulations  Prompt Payment Default -- 10 days; longer must in writing  Statutory Trust for Payment

12. PACA’s Statutory Trust  Agreed payment terms not >30 days  Preserve rights by notice within 30 days or invoice language (if licensed seller)  Trust beneficiaries have priority in trust assets: grapes, wine, and A/R.

13. PACA Invoice Language “The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by Section 5c of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of these commodities retains a trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received.”

14. Using Liens and PACA Trust Strategically 1. Contract 2. Calls 3. Letter 4. Lawyer Letter 5. Perfect Lien/Trust Rights 6. Enforcement

15. Take Home Points… 1. Build good relationships. 2. Establish good contract rights. 3. Maintain PACA license and invoice language. 4. Act promptly; file liens timely. 5. Use statutory rights to lever payment. 6. Be prepared to fight banks if there isn’t enough to go around.

16. Grower Liens and Payment Strategies Questions? Jess Lyon (503)778-5268 jesselyon@dwt.com