The meeting was called to order at 11:20 am by President Dusty Timmons.

Texas Wine and Grape Growers Association Board of Directors Meeting Saturday, November 4, 2017 Tasche House - Lady Bird Johnson Park - Fredericksburg, TX Call to Order Dusty Timmons The meeting was called to order at 11:20 am by President Dusty Timmons. Roll Call Dana Pool Officers Present Dusty Timmons, President; Bob Landon, Past President; Mike McHenry, President-Elect; Dana Pool, Secretary; and Fredrik Osterberg, Treasurer. Board Members Present Brenda Canada, Susan Steger, Gabe Parker, Jon Bowden, Stephen Morgan, Penny Adams, Pat Brennan, Carlton Turner and Paul M. Bonarrigo. Officers and Board Members Not Present Dusty Evans (proxy to Gabe Parker), Mark Tyler (proxy to Brenda Canada) Chace Hill (no proxy given) and Patrick Whitehead (proxy to Fredrik Osterberg). Staff present Debbie Reynolds, Executive Director; Kyle Frazier, Legislative. Attendees for Board Meeting Reports/Presentations: Tucker Frazier, Dr. Ed Hellman, Dr. Justin Scheiner, Dan Lineberger and Jim Kamas. Approval of Minutes Dana Pool The June 13, 2017 Board meeting minutes were distributed by email. There were no corrections. A motion was made by Stephen Morgan to dispense with the reading of the minutes and accept as distributed. The motion was seconded by Jon Bowden. Motion Passed. Treasurer s Report Fredrik Osterberg As of October 31, 2017 TWGGA Bank Accounts: Wells Fargo Operating = $100,640.38 ($500 uncleared for October) Wells Fargo Savings = $141,089.80 Frost Bank Association Reserve = $5,004.03 1

Profit and Loss: - Income Focus - Membership: Ensure annual budget projection is met. While membership is ahead of plan, the gap is only $1,375. - Sponsorship: Ensure annual budget projection is met. Currently below plan with $14,250 due for payment by year end and $5,000 to be paid in March 2018. Unless new sponsors step up by December 31, sponsorship will fall below plan in 2017. - Expense Focus - All Labor appears to have taken a significant upward trend in August: Decrease in Executive Director net salary and increase in 401K deposit. This move affects the Profit and Loss statement but not the Cash Flow. Correction of direct deposit payment to Kyle Frazier Consulting. In the past the direct deposit was processed on the first day of the month for payment the next day. However, several months that payment is not actually available to the payee for up to 5 days (weekends, holidays). In October, two payments were made to correct the way direct deposits are made to Kyle Frazier Consulting. - Professional Fees have unbudgeted items that have caused an overage in that line item. If you back out the two unbudgeted items, this line item is only $22.00 over budget: RSAH20 = $9,835.06 Trademark work for the Association logo and Portejas name/logo = $3,152.00 - All Food and Beverage over budget: 50% prepayment of 2018 Annual Conference complete. Next payment of $15,000 due in November. This move will show the Association at a loss for the year. This may be the way to go forward with Annual Conference expenses. - Market Research is reflecting 2016 invoice that was not paid until 2017. Cash Flow: Continues to be strong and steady over the entire year. Looking forward: Grape Camp registration at the same level as 2016 Annual Conference attendee registration slightly below as compared year over year The annual budget is created the after the first of December to be sent to the Board for approval by December 10. Usually the budget is a flatline from the previous year unless the Board makes some changes. The only capital expenditure in 2018 will be replacing old laptops and new QuickBooks software. In even number years the Professional Fees are less because there is no legislative session. In 2018, because of the Sunset process, the Professional Fees will not be reduced. The cash flow is strong all year because the staff strategically releases event registration on a planned schedule all year. 2

For the Texas Wine Foundation: As of October 31, 2017: TWF Bank Accounts: Frost Bank Scholarship Program = $11,595.07 Frost Bank Foundation Operating = $500.10 Expected income for the remainder of 2017 Donations from Grape Camp Expenses since June: Officers and Directors Liability Insurance = $943.00 Percentage of Uber Conference annual fee = $56.03 TWF Board meeting = $573.20 (paid in May and July) Percentage of Constant Contact bi-annual fee = $35.97 Trademark declaration to finalize approval of TWF name and logo = $550.00 A motion was made by Paul M. Bonarrigo to approve the Treasurer s Report. Dusty Timmons seconded the motion. Motion Passed. President s Report Dusty Timmons Dusty stated that while harvest was long (about 10-11 weeks), it is finally over and appears to be one of the best Texas has ever experienced. There is a large amount of bulk wine being produced. Dusty urged everyone to get as much space as possible for grapes now and what will come. Dusty shared the quality of the harvest and tonnage numbers. There are downward pricing pressures on bulk juice. We are seeing quality separation in the vineyards that has not been seen in over 10 years. Contact is coming in from other states asking for Texas grapes. There are gallon pricing pressures, and pricing may fall some but you will probably not see Texas prices fall as low as California. Andy Timmons has built a custom crush facility in Meadow and he is full. He could put in more and probably still be full. Some growers are looking into the G Permit as the way to move forward with their vineyard business. This will give growers a way to process their grapes and store themselves. Legislative Report/State Kyle Frazier Kyle introduced Tucker Frazier who came to work at Kyle Frazier Consulting after his graduation from Texas Tech University in June. Kyle reviewed the presentation packet that will be presented at the Region 5 Town Hall on November 7. Other Town Halls will be scheduled with the respective regions. Regions 1 3

and 3 have not selected a date or location. Region 2 will be on March 19, 2018 at Landon Winery in Greenville. This is the 3 rd Sunset Process for TABC. It is an extensive management audit of the agency, not the code. The process for TABC began with a self-evaluation report which came out in September. Their self-evaluation included addressing policy (Non-licensed DTC Delivery Services and Private Labeling) and non-policy (Case Management) issues. The next step is evaluation and a report issued by the Sunset Commission Staff. After that, public hearings which will lead up to the 2019 Legislative Session where the bill will be filed to extend the date of the agency. If the bill does not pass, the agency ceases to exist. We expect the bill will be more about the mechanics of the agency instead of any code changes. The Lt. Governor appoints five senators and one public member; the Speaker of the House appoints five representatives and one public member. The Lt. Governor has made his appointments. Kyle expects the Speaker will finalize his appointments in early December. Kyle outlined possible Sunset issues that may be discussed during the process: 35K gallon sales barrier Limit the ability to sell out of state packaged wine Limit sales on-premise and off-premise Creation of a Satellite Permit Sale of malt beverages on a winery premise Extended hours of sale Limit wine club participation Definition of a winery Alter use of Shared Premises Remove 75% restriction on dry areas Alter dry area regulations Alter ability to ship Limit the ability to aggregate permits Creation of a Growers Permit Limit the ability to sell wine not produced by the winery Definition of Texas wine Kyle, Brian Heath, Mark Hyman and Paul M. Bonarrigo met with Alan Steen, Southern Glazer s. The issues they have: Opposed to shipping into the state from out of state wineries Opposed to the Lionstone business model (any G Permit holder that does not produce wine) Opposed to the misuse of the G Permit Support a clear definition of who can hold a G Permit Hesitant to appear they are attacking the wine industry. Rather they want TABC to clearly enforce the Alcoholic Beverage Code. 4

The distributors and package stores oppose private labeling, something that some Texas wineries have with stores. Future meetings will occur with Texas Package Stores, Republic, Distillers Association and Texas Entertainment Association. Any issues that come up, the Board members should contact Kyle. Other comments from Kyle: Speaker Joe Strauss is retiring. At this time there is no information who may be the new Speaker. Kyle had a meeting with TABC leadership Bentley Nettles (Executive Director), Thomas Graham (Director of Excise Tax and Marketing Practices and Jared Staples (Director of External Affairs). General Nettles shows genuine concern and interest in working together with the Texas wine industry. Kyle and Kimberly Frost will meet in late November with Dennis Beal, Executive Director of Business and Revenue Operations at TABC. Kyle Frazier Consulting contract expires February 28, 2018. The contract discussion will be on the February 21, 2018 Board meeting agenda. Kyle has offered to take on more responsibility on the federal level. Legislative Report/Federal Debbie Reynolds 1. Craft Beverage Modernization and Tax Reform Bill - Senators Wyden and Blunt have reintroduced the excise tax reform bill that would reform wine excise taxes for wineries of all sizes including expanding the applicability of the small producer credit, increasing the alcohol by volume from 14% to 16% at a lower excise tax rate and reforming the carbonated wine tax rate to align with hard cider. A bipartisan companion bill has been introduced by Congressmen Paulson and Kind. As of October 11, there are 50 Senate co-sponsors (no Texas Senator) and 281 House co-sponsors (21 Texas Representatives). This bill amends the Internal Revenue Code, with respect to the tax treatment of certain alcoholic beverages, to: exclude the aging period from the production period for beer, wine, or distilled spirits for purposes of determining whether a taxpayer can expense, rather than capitalize, interest costs paid or incurred during the production period; reduce excise tax rates on beer and distilled spirits; modify the small wine producer tax credit to increase the amount of the credit, expand the producers that are covered, and specify an adjustment for hard cider; modify the alcohol content limitations that apply to certain wines for tax purposes; specify definitions for "mead" and "low alcohol by volume wine;" modify requirements for records, statements, and returns for certain breweries; and permit the transfer of beer between bonded facilities without payment of tax. Actions: Weekly strategy calls with alcohol trade association partners. 5

Meetings with Senate Finance and House Ways & Means Committees asking to have excise tax reform included in the comprehensive tax reform package. Letters to the Senate Finance Committee members. Personal letter to Senators Cruz and Cornyn from TWGGA urging their cosponsorship of the bill. 2. Music Licensing - The Transparency in Music Licensing and Ownership Act (Representatives Sensenbrenner, DelBene, Chabot, Farenthold) is a major step forward in creating a music licensing system that is open and accessible to those who both own and license music. The proposed legislation would create for the first time a public database that provides stakeholders in the music marketplace with access to authoritative and fully searchable records of music ownership and licensing information, free of charge to users and updated in real time. Actions: Personal letters to Texas Congress members and Senators urging their cosponsorship of the bill. 3. Funding Priorities TTB is funded until December 8, 2017. It is expected that future funding will be combined into an omnibus bill. FY 2018 Agricultural Appropriations bills have passed successfully out of Committee. Beginning hearings on the Farm Bill. This administration is requesting the elimination of the Market Access Program, Specialty Crop Block Grants and Value- Added Producer Grants. 4. TWGGA and WineAmerica - We serve on the Membership, Marketing and Government Affairs Committees as well as Regional Director (Midwest) for the State and Regional Associations Advisory Council. In March, 2018, Debbie will move into the role of Chair of the State and Regional Associations Advisory Council and will sit on the WineAmerica Board. 5. Economic Impact The 2017 Economic Impact was funded by WineAmerica, which they will commission every 5 years. This impact report was more comprehensive than what has been looked at since 2005. It actually goes back to the original data looked at by Dr. Tim Dodd s group in 1996. This is different than the grape report issued by the USDA NASS which comes from the annual grape survey. The next survey comes out in early December. Dr. Dodd s group is looking at an economic impact at the city/county level of a winery. They have contacted about 10-12 wineries asking for data. 6

Education and Research Committee Dr. Justin Scheiner Grape Camp has a new venue which has allowed for more exhibitors (23 have signed up) and more open space to have an eating area. The program includes more panels that encourage audience interaction and a Sustainable Workshop. Six CEUs are offered for selected presentations. The program is set up to encourage 2-day attendance instead of breaking it up to New Grower and Advanced Grower. The Annual Conference has a new venue, a stand-alone convention center. Highlights of the program/speakers include: Varietal Focus on Roussanne and Aglianico TABC Executive Director Bentley Nettles Vineyard Mechanization with Keith Strigler (E&J Gallo) and a panel of Texas growers (Ron Yates, Neal Newsom and Dusty Timmons) Build and Strength Your Tasting Room Dream Team: Hiring and Managing Teams with Susie Tucker at VingDirect Wine in a Can with David Randall from Ball Corporation Lessons Learned from Winery Owners and Grape Growers These are just a few of the breakout sessions. The Annual Conference Exhibit Hall registration 157 booths/130 reserved/125 paid Executive Director Report Debbie Reynolds Classification 2017 2016 Friend $9,100 $8,625 Professional $19,550 $18,750 Small Commercial Vineyard $19,700 $21,000 Small Commercial Winery $16,500 $14,000 Medium Commercial Vineyard $3,150 $3,850 Medium Commercial Winery $9,800 $8,750 Large Commercial Vineyard $1,800 $1,800 Large Commercial Winery $3,600 $5,850 Actual $83,200 $82,625 Budgeted Plan $81,825 $69,825 *Comparison of 10/31/2016 to 10/31/2017 Membership is coming in slower. The biggest opportunity is the Medium Commercial level. TWGGA has about 50% of the wineries who are truly production wineries as members of the Association; 60% of the growers. Members receive a 20% - 25% discount on event registration. WineAmerica Fall Conference Napa November 9 & 10. TWGGA will attend and present Texas wine to Napa wineries visited. 7

Specialty Crop Block Grant Program December 1, 2017 December 31, 2018. Have received tentative approval for $18,000. However, until the federal government passes their budget, the funds are in limbo. The grant will fund a grape acreage and varietal survey. TWGGA will participate in the Fort Worth Stock Show and Rodeo by leading a wine tasting session on January 31, 2018. The FWSSR wants more focus on Texas agriculture and Texas wine. There may be opportunities for Texas wineries to be involved in the show in some way. Fredrik Osterberg made a motion to accept the Committee Reports and Executive Director Report. Pat Brennan seconded the motion. Motion Passed. Open Forum Dan Lineberger, Texas A&M Agrilife Extension, announced that the outside firm conducting the search for the Vice Chancellor and Dean for Agriculture and Life Sciences, has selected five outstanding candidates. They are holding sessions where the candidates will make a presentation and host an open forum. TWGGA has been invited to these sessions. Follow this link to view/listen to the presentations https://agrilife.org/vc-candidate-schedules/. Dan provided an update on programs and funding progress as a result of SB 881 appropriations: Personnel Changes - Dr. Andreea Botezatu, Extension Enologist, joined the team in February, 2017. - Andrew Labay resigned from the Hill Country program specialist position in March and interviews are underway for his replacement. - Dr. Ed Hellman resigned from his Texas A&M Agrilife Extension Service position on August 31 to assume the Texas Tech sustainable fruit crops system position in Fredericksburg. - Dr. Pierre Helwi moved into the Extension Specialist position at Lubbock. A replacement for Dr. Helwi must be approved by Doug Steele. At this time there is no approval to search for a candidate. Extension and program specialists are aggressively conducting educational and outreach events for new and experienced growers including grower site visits, organized meetings, variety evaluations and tailgate educational sessions. Specialists make presentations at Grape Camp, the Advanced Growers Workshops, the TWGGA Annual Conference and other workshops and meetings in their regions. A certificate in enology representing a defined set of required and recommended courses to enhance the Texas A&M University Bachelor s degree was opened to all majors in the fall of 2017. Twelve students have enrolled. HORT 421, Enology, has been updated and renovations to the enology teaching lab are underway. The Extension enology program is well underway. The viticulture and enology section of the Aggie Horticulture Website has been revised, an Enology Webinar Series has launched and three webinars have been conducted and archived on a dedicated 8

YouTube channel entitled Texas Agrilife Extension Enology. Several applied research projects in enology have been started. Extension plant pathologists in collaboration with viticulture program specialists have continued their comprehensive grapevine virus survey by analyzing 173 samples from 36 vineyards and have identified the most frequently occurring viruses. Future plans are to determine the effects of virus infection on fruit quality attributes that may affect wine quality. A new 1.5-acre vineyard was planted at the Horticulture Teaching, Research and Education Center and the existing vineyard in proximity to campus is being retained. Both vineyards are used to support variety trials, phytopathological studies and to provide samples for teaching viticulture and enology courses. Planning is underway for remodeling and equipment installation in the enology research lab and for major expansion and equipment installation in the enology teaching lab. Both labs will be used to support Extension educational programs as well as TAMU academic programs. A special supplement of the Texas Winegrower, the quarterly newsletter written by members of the Texas A&M Agrilife Extension Viticulture and Enology team, with a focus on sustainable practices in the vineyard and winery was released in October, 2017. This supplement is available from the Viticulture and Enology section of the Aggie Horticulture website. TWGGA provides a link to these supplements and newsletters in the Off the Vine news released once every two weeks. Old Business TCEQ Update Mike McHenry Mike McHenry and Debbie Reynolds met with Richard Hyde, TCEQ Executive Director, and his leadership team on November 2. It was a positive meeting with full support of the Texas wine industry. They committed to doing all possible to getting a winery fully certified and through this process. The water rules they enforce come down from the EPA. Out of the 103 water rules, only 3 rules are controlled by TCEQ. Mr. Hyde committed to hosting a series of forums around the state to meet with Texas wineries and TCEQ regional staff. He encouraged Texas wineries to contact regional TCEQ offices and meet with their staff. TWGGA has a copy of the TCEQ regional offices and their counties each office covers. This will be posted on the TWGGA website. Brian Christian, TCEQ, will review and update RG 532 which is the guidance document prepared for Texas wineries. Susan Jablonski, TCEQ, agreed to provide a checklist to give to wineries to prepare for an inspection or compliance/certification process. This checklist would be the same used by inspectors. TCEQ will attend the TWGGA Annual Conference as an exhibitor in the Trade Show. 9

At this time there is no indication that TCEQ is moving toward enforcement procedures. They are currently working with approximately 26 locations who are in the certification process. They are more focused on Public Water Systems than Wastewater. Creating a PAC Kyle Frazier Kyle submitted a proposal to create and manage a PAC for the Association/Industry. A PAC is a general-purpose committee. The way it would work: 1. Create a PAC Committee 2. Create a suggested contribution amount 3. Host fundraising events 4. Donate money to favored political campaigns a. Legislators carrying the industry s agenda b. Speaker of the House c. Supportive Legislators A decision should be made quickly to impact the next election cycle. To be effective, the target goal to raise should be $200K a year. PAC donations are not tax deductible. There are various ways of raising funds for the PAC. The money donated is for the PAC to use as they choose. No action was taken by the Board on creating a PAC. TWGGA Staff Update Mike McHenry The Search Committee met today before the Board meeting to discuss the TWGGA staff. A job description will be created for the position that will follow Debbie Reynolds. The committee members are Dusty Timmons, Fredrik Osterberg, Paul M. Bonarrigo, Bob Landon, Mike McHenry and Elizabeth Hill. The committee promised to complete the job description, determine the search universe and identify candidates by December 1. New Business Board of Directors Election Timeline and Tasks Debbie Reynolds The next Board election will have nominees for President Elect, Secretary, Treasurer and two Director-At-Large positions. In Regions 1, 3, and 5, Winery and Vineyard Director nominees will be on the ballot. The election timeline is: November 15-17, 2017 Nominating Committee from each region will be appointed and names submitted to the corporate office. Each regional Nominating Committee will consist of three voting TWGGA members. A current director whose term is not expiring may serve on their regional Nominating Committee. A current director whose term is expiring and is not seeking reelection may serve on their regional Nominating Committee. The Nominating Committees must be confirmed and in place by Friday, November 17, 2017. 10

November 30, 2017 Send an email to all voting members announcing the election dates and ballot distribution method. December 11, 2017 Deadline for regional Nominating Committees to submit ballot to the corporate office. All regions will submit nominations for President Elect, Secretary, Treasurer, and two (2) Director-At-Large positions (Paul M. Bonarrigo and Carleton Turner). Regions 1, 3 & 5 will submit nominations for their region s Vineyard and Winery Directors. December 18-22, 2017 Ballots distributed online or by mail based on requests from members. If no notice of preferring a mailed ballot, online distribution will be used. Annual award nominations will be included with the election ballot. The ballots must be distributed to all voting members by Saturday, December 23, 2017. January 23, 2018 Ballots due in the corporate office. The election process ends on this day. No ballots can be counted if received after this date. January 24, 2018 Ballots counted by the Past President or their designated representative and the TWGGA staff. January 25, 2018 Elections results announced to Board of Directors. January 26, 2018 Election results announced to TWGGA membership. February 22, 2018 Board of Directors Induction. The Board discussed making it a rule that the President Elect always serves on the Legislative Committee as a member of the committee or the Chair. Committee appointments are made by the President of TWGGA. The Board is encouraged to contact people in their region, both members and nonmembers, to join TWGGA and definitely vote. There is opportunity in each region for new members. 11

High School Viticulture Programs Debbie Reynolds In 2015, the Mason Independent School District successfully launched a high school viticulture program at Mason High School the first of its kind in the state. This small community west of Fredericksburg is known for its geographic beauty, its small-town charm, and, in more recent years, for its unique soils and water table well suited for growing grapes. The first high school-level agricultural science class began with about twenty students ranging from ninth to twelfth grade. The program owes much of its creation to local grape grower, Dan McLaughlin of Robert Clay Vineyards. McLaughlin brought his family to the 51- acre vineyard in Mason in 2012 following a Tech career that was wearing them thin. Though he still does a bit of consulting in the tech industry, his main passion has become his vineyard, and he s pretty intent on teaching others about doing the same. Farm Credit sponsored the students at Grape Camp 2015 providing them with meals. TWGGA gave the students and teachers complimentary registration. The program has expanded into other high schools with little to no input from TWGGA or Texas grape growers. Dan McLaughlin, busy with his vineyard and winery, does not have the time for advocacy of the students and the programs. It was his plan that the industry and TWGGA would become their advocate and/or liaison. Dan proposes the following for TWGGA Board of Directors consideration: TWGGA contact the schools to discuss the programs and get more involved in following the programs. Create or dedicate one Board position (perhaps a Director At Large) to take ownership of the high school programs serving as a liaison between the schools and the TWGGA Board. This Board member could work with the TWGGA staff in creating specific events catered to the students overall education of growing grapes and hold these events close to TWGGA events (Annual Conference and Grape Camp). - Half-day event - Fun, hands-on, science based - Equipment on display - Discussions are agriculture based avoiding discussion of grapes for alcohol products Host an annual Career Fair with growers and students for future jobs/internships Offer one annual scholarship to students in the high school programs The Board has no opposition for the TWGGA staff to pursue this initiative and report to the Board at the February 21, 2018 meeting. 12

Texas Regions Board Discussion The Board discussed the five Texas regions and how they were drawn many years ago. There is a big difference in size and membership numbers from region to region. The Board established a committee to review the State, counties, current regions and decide if changes should be made. This committee will make a report/recommendation at the February 21, 2018 Board meeting. The committee members are Fredrik Osterberg, Bob Landon, Pat Brennan, Paul M. Bonarrigo, Gabe Parker, Brenda Canada and Jon Bowden. Announcements/Miscellaneous The next Board meeting is Wednesday, February 21, 2018 at the Irving Convention Center 3 rd Floor Meeting Room 6. Lunch will be served at 11:00 a.m. with the meeting beginning around 11:30 a.m. This meeting will include all Board members both incoming and outgoing. Bob Landon made a motion to adjourn the meeting. Stephen Morgan seconded the motion. Motion Passed. The meeting adjourned at 2:33 pm. Respectfully Submitted by Debbie Reynolds, Executive Director Approved by Dana Pool, Secretary 13