AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MARCH ____, 1999.
REGISTRATION NO. ____-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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NATIONAL WINE & SPIRITS, INC.
- -----------------------------
(Exact name of Registrant as
specified in its charter)
INDIANA 5182 35-2064429
- ----------------------- ---------------------------- -------------------
(State of Incorporation) (Primary S.I.C. Code Number) (I. R. S. Employer
Identification No.)
P.O. Box 1602
700 W. Morris Street
Indianapolis, Indiana 46206
(317) 636-6092
- ------------------------------------
(Address, including zip code,
and telephone number, including
area code, of registrant's principal
executive office)
James E. LaCrosse
Chairman, President and
Chief Executive Officer
P.O. Box 1602
700 W. Morris Street
Indianapolis, Indiana 46206
(317) 636-6092
- -----------------------------------
(Name, address, including zip code,
and telephone number, including
area code, of agent of service)
Copies To:
Joseph E. DeGroff
Ice Miller Donadio & Ryan
One American Square, Box 82001
Indianapolis, Indiana 46282-0002
(312) 236-2100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
<PAGE>
<PAGE>
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box: / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective registration
statement for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: / /
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Offering Price Aggregate
Title Of Each Class Of Securities Amount To Be Per Exchange Note Offering Price Amount of Registration
To Be Registered Registered Fee(1)
- ------------------------------------ ------------------ ------------------ ------------------ ------------------------
10 1/8 % Senior Exchange Notes due $110,000,000 100% $110,000,000 $30,580
2009
Guarantees(2) (3) (3) (3) (3)
- ------------------------------------ ------------------ ------------------ ------------------ ------------------------
<FN>
(1) Fee calculated pursuant to Rule 457(f)(2) based on the par value of the
10.125% Series A Senior Exchange Notes of National Wine & Spirits, Inc.
to be exchanged for the securities being registered.
(2) Guarantees of the Exchange Notes by National Wine & Spirits
Corporation, NWS, Inc., NWS Michigan, Inc. and NWS-Illinois, LLC.
(3) No additional value is attributed to the Guarantees, which are
inseparable from the Series B Exchange Notes. Pursuant to Rule 457(a),
no registration fee is required with respect to the Guarantees.
</FN>
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The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the company shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8 (a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8 (a),
may determine.
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CROSS REFERENCE SHEET
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FORM S-4 ITEM LOCATION
A. INFORMATION ABOUT THE TRANSACTION
Item 1: Forepart of Registration Statement and Outside
Front cover page of Prospectus Outside Front Cover Page
Item 2: Inside Front and Outside Back Cover Pages of
Prospectus Inside Front Cover Page and Outside
Back Cover Page
Item 3: Risk Factors, Ratio of Earnings to Fixed Charges,
And Other Information Risk Factors; Selected Combined
Financial and Other Data; Prospectus
Summary
Item 4: Terms of the Transaction Prospectus Summary; Certain U.S.
Federal Income Tax Considerations,
Description of the Exchange Notes; The
Exchange Offer
Item 5: Pro Forma Financial Information Not Applicable
Item 6: Material Contacts with the Company Being
Acquired Not Applicable
Item 7: Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters Not Applicable
Item 8: Interests of Named Experts and Counsel Not Applicable
Item 9: Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
Item 10: Information With Respect to S-3 Registrants Not Applicable
Item 11: Incorporation of Certain Information by
Reference Not Applicable
Item 12: Information With Respect to S-2 or S-3
Registrants Not Applicable
Item 13: Incorporation of Certain Information by
Reference Not Applicable
Item 14: Information With Respect to Registrants Other than
S-3 or S-2 Registrants Business; Combined Financial
Statements; Selected Combined
Financial and Other Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations
and Valuation and Qualifying
Accounts Schedule
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
Item 15: Information with Respect to S-3 Companies Not Applicable
Item 16: Information with Respect to S-2 or S-3
Companies Not Applicable
Item 17: Information With Respect to Companies Other Than
S-3 or S-2 Companies Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
Item 18: Information if Proxies, Consents or authorizations
Are to be Solicited Not Applicable
Item 19: Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer Management; Principal Stockholders;
Certain Transactions
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<PAGE>
<PAGE>
Subject to Completion Dated March ___, 1999
PROSPECTUS
___________, 1999
[NWS LOGO]
NATIONAL WINE & SPIRITS, INC.
Exchange Offer for
$110,000,000
10 1/8 % Senior Notes
Due 2009
Terms of the Exchange Offer
- Outstanding 10 1/8% Senior Notes due 2009 will be exchanged for
10 1/8% Senior Exchange Notes due 2009.
- Expires 5:00 p.m. New York City time, __________, 1999, unless
extended.
- All Outstanding Notes that are validly tendered and not validly
withdrawn will be exchanged.
- Tenders of the Outstanding Notes may be withdrawn any time prior
to the expiration of the Exchange Offer.
- Not subject to any condition, other than that the Exchange Offer
does not violate applicable law or any applicable interpretation
of the staff of the Securities and Exchange Commission.
- The Company will not receive any proceeds from the Exchange
Offer.
- The exchange of notes will not be a taxable exchange for U.S.
federal income tax purposes.
- The Exchange Notes are unsecured but are guaranteed by the
Company's principal subsidiaries.
- The terms of the Exchange Notes and the Outstanding Notes are
substantially identical, except for certain transfer restrictions
and registration rights relating to the Outstanding Notes.
- There is no existing market for the Exchange Notes, and the
Company does not intend to apply for their listing on any
securities exchange.
This investment involves risk. See the Risk Factors section beginning on page
16.
Neither the Securities and Exchange Commission nor any state securities
commission have approved or disapproved of the notes or passed upon the adequacy
or accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
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[INSIDE COVER PAGE]
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
This Prospectus includes "forward looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
including, in particular, the statements about the Company's plans, strategies,
and prospects under the heading "Prospectus Summary," "Management's Discussion
and Analysis of Financial Conditions and Results of Operations," and "Business."
Although we believe that our plans, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, we can give no
assurances that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from the
forward looking statements we make in this Prospectus are set forth below and
elsewhere in this Prospectus. All forward-looking statements attributable to the
Company or persons acting on our behalf are expressly qualified in their
entirety by the following cautionary statements.
This Prospectus incorporates important business and financial
information about the Company that is not included or delivered with this
Prospectus. This information is available to you without change upon written or
oral request. Please contact the Company at P.O. Box 1602, Indianapolis, Indiana
46206, attention J. Smoke Wallin (317) 636-6092. To obtain timely delivery,
please request the information no later than five business days in advance of
any investment decision.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights selected information from this
Prospectus and may not contain all of the information that is important to you.
This Prospectus includes the terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this Prospectus in its entirety. References in this Prospectus to "we,"
"us," "our" or the "Company" refer to the combined business of National Wine &
Spirits, Inc. ("NWS") and its subsidiaries. References in this Prospectus to the
"Initial Offering" refer to our private placement of $110.0 million of 10 1/8%
Senior Notes due 2009. The term "NWS-Indiana" refers to National Wine & Spirits
Corporation. The term "NWS-Illinois" refers to NWS, Inc. The term "NWS-Michigan"
refers to NWS Michigan, Inc. The term "NWS-LLC" refers to NWS-Illinois, LLC. The
term "you" refers to prospective investors in the Exchange Notes. The term
"Securities Act" refers to the Securities Act of 1933, as amended.
The Company
Our Company is one of the largest distributors of wine and spirits in
the United States. We are the largest spirits distributor in Indiana (54% market
share) and Michigan (59% market share) and one of the largest in Illinois (32%
market share). Our markets include Chicago and Detroit, which are the largest
and the sixth largest United States metropolitan markets for spirits,
respectively.
The Exchange Offer
In January, 1999 we offered and sold $110.0 million of 10 1/8% Senior
Notes due 2009. The Outstanding Notes are, and the Exchange Notes will be,
guaranteed by our principal subsidiaries.
The subsidiary guarantors and the Company have entered into a
Registration Rights Agreement with the initial purchasers of the Outstanding
Notes. Under the Registration Rights Agreement, we must, among other things,
complete the Exchange Offer no later than July 25, 1999. If the Exchange Offer
does not take place by July 25, 1999, we must pay liquidated damages to the
holders of the Outstanding Notes until the Exchange Offer is completed. You may
exchange your Outstanding Notes for Exchange Notes with substantially the same
terms in this Exchange Offer. You should read the discussion under the heading
"Summary of Terms of the Exchange Notes" and "Description of the Exchange Notes"
for further information regarding the Exchange Notes.
Company Overview
Our Products. We are the exclusive distributor in two or more of our
markets for many of the world's leading suppliers of brand name spirits,
including Diageo-UDV, Fortune Brands and Seagram, featuring brands such as
Absolut, Chivas Regal, Crown Royal, DeKuyper, Jim Beam, Jose Cuervo and
Smirnoff. We are also the exclusive distributor in Indiana and Illinois for many
of the world's leading wineries, including Banfi Vintners, Canandaigua, Seagram
and Sebastiani.
Distribution to our Customers. We operate 12 strategically located
distribution facilities and a fleet of approximately 350 delivery vehicles to
provide overnight or second-day delivery to over 36,000 retail locations,
including package liquor stores, drug and grocery stores, mass merchandisers,
hotels and restaurants and bars. Our customers include both local and regional
businesses as well as national chains such as American Stores (Osco), Walgreens,
CVS, Sam's Club, Meijer, Chili's, Ruby Tuesday, T.G.I. Friday's and Hyatt.
Financial Performance. From 1994 to 1998, our total revenue increased
from $396.4 million to $521.4 million, representing a compound annual growth
rate of 7.1%. Our EBITDA (income from operations plus depreciation and
amortization) increased from $6.6 million to $17.7 million, representing a
compound annual growth rate of 28.0%. We have improved our performance by:
- - successfully integrating several strategic acquisitions since 1992;
- - actively developing new geographic market areas;
- - pursuing new supplier and brand relationships;
- - implementing advanced product handling technology and proprietary
information systems; and
- - providing high levels of supplier and customer service.
Regulatory Overview. Suppliers of alcohol-based beverages are generally
prohibited by law from selling their products directly to retail outlets or
consumers. This regulatory framework requires suppliers to use distributors to
distribute their products to their end customers. In addition, this regulatory
framework effectively insulates distributors such as our Company from vertical
competition from suppliers or retail customers. In certain states, including
Michigan, state law has historically mandated the state to act as the exclusive
wholesale distributor and/or retailer of alcohol-based beverages ("control
states"). In 1996, Michigan became the first control state to privatize certain
aspects of the wholesale distribution of spirits, and we have become the leading
distributor of spirits in that state.
Competitive Strengths
Market Leadership. As previously mentioned, we are the largest
distributor of spirits in Indiana and Michigan and one of the largest in
Illinois. Our market leadership is largely due to our strong relationships with
both suppliers and customers. These strong relationships provide us with
numerous advantages over smaller distributors, including significant economies
of scale and increased purchasing power. Our Company maintains and seeks to
enhance its market leadership by providing high levels of service to suppliers
and customers and through investments in technology and information systems.
Strong Supplier Relationships. We believe that our success is due in
part to our long-standing relationships with major wine and spirits suppliers,
many of which extend back more than 20 years. The confidence shown by our
suppliers supports this belief. For example, in 1997 each of our three largest
suppliers (Seagram, Fortune Brands and Diageo-UDV) selected our Company over
numerous competitors to be its exclusive distributor of spirits in Michigan. In
Indiana and Michigan, we are the exclusive distributor of seven out of the top
ten brands of spirits sold in the United States, including Absolut, Jim Beam,
Jose Cuervo, Popov, Seagram's Gin, Seagram's 7 Crown and Smirnoff. In Illinois,
we are the exclusive distributor of four out of the top ten U.S. brands. We also
represent a significant share of each of our major suppliers' total United
States business. In 1997, we distributed approximately 16% of all cases of
spirits sold in the United States by Seagram, and approximately 11% of all cases
of spirits sold by Fortune Brands.
Stable Industry and Diversified Customer Base. Total revenues in the
wine and spirits industry have increased steadily over the past 25 years. Our
Company offers products to over 36,000 retail locations and no single customer
or chain represented more than 6.3% of our 1998 total revenue. Moreover, the
regulatory framework established by federal and state law, which generally
prohibits vertical integration by suppliers and retailers, improves the
stability our industry. We believe that the nature of the wine and spirits
distribution industry and our diverse customer base provides us with increased
stability and predictability of cash flow relative to distributors in many other
industries.
Customer Service Focus. Our commitment to highly effective customer
service has also been a major factor in our success. Management emphasizes
on-time delivery (next or second day), product availability, the ability to
accept last-minute orders and special orders for low volume or unusual items,
and reliability on a long-term basis. We provide numerous value-added services
to our customers, including category management, customized advertising and
point-of-sale materials, customized packaging and on-line electronic ordering.
Our management believes that highly effective customer service strengthens
customer relationships which improves product positioning and sell-through to
the consumer.
Advanced Infrastructure, Distribution Network and Information Systems.
Our Company maintains an extensive distribution network consisting of master
warehouses, hyper-terminals and cross-docking facilities strategically located
across Indiana, Illinois and Michigan. Our distribution system generates
significant operating leverage by enabling us to deliver hundreds of suppliers'
products from each master warehouse and optimize delivery routes by maximizing
the density of customer locations served from each facility. In addition, over
the past five years, we have made significant investments to improve our
logistics, sales and marketing operations, including approximately $32.1 million
in material handling systems and $7.9 million in information systems. We also
recently implemented supplier and customer ordering via electronic data
interchange ("EDI") and on-line reporting systems used by certain suppliers to
track sales. In addition to enhancing supplier and customer relationships, these
new systems have improved our efficiency and enabled us to remain a low cost
provider.
Experienced Management Team. We are led by an experienced management
team. Our top seven senior executives average over 23 years of alcohol-based
beverage industry experience and 12 years with the Company. In addition, our
senior management team has successfully integrated six acquisitions since 1992.
Management's experience and expertise have enabled us to establish and maintain
long-term relationships with both suppliers and customers and take advantage of
consolidation and privatization opportunities.
Operating Strategy
Continue to Maximize Operating Leverage. As the largest or one of the
largest wine and spirits distributors in each of our markets, we continuously
seek to minimize our operating costs by leveraging resources in the areas of
warehousing, transportation, general and administrative functions and
information systems to create economies of scale. The fixed nature of many of
these costs enables us to generate a higher level of profitability on
incremental increases in volume and price. In addition, our facilities in
Illinois and Michigan have additional capacity, which positions us to take
advantage of future expansion opportunities in these markets with relatively low
capital expenditures.
Growth Through Addition of New Brands. Long-term relationships are
critical to maintaining supplier and brand continuity with distributors.
Although brand movements among distributors are relatively rare as the result of
these relationships, consolidation of distributors or suppliers can affect
existing relationships and present us with opportunities to add brands affected
by the consolidation. For example, we believe that Diageo-UDV may eventually
consolidate its brands with a single distributor in Illinois. If this were to
happen, we may have opportunities to acquire additional brands from other
suppliers adversely affected by the consolidation, or otherwise gain increased
market share. Management believes that if these or similar opportunities arise,
our strong regional presence and established supplier and customer relationships
give us a competitive advantage in winning additional brand representation.
Selectively Pursue Strategic Acquisitions and Joint Ventures. We plan
to continue to strengthen our competitive position by selectively acquiring
other distributors and entering into strategic joint ventures both in our
current markets and in contiguous markets. These strategic opportunities may
arise for several reasons. First, suppliers sometimes encourage the
consolidation of distributors in order to reduce costs and improve efficiency.
Second, most distributors are family businesses, and acquisition opportunities
can develop as owners approach retirement age without a definite succession
plan. Third, many distributors lack the resources and supplier support to meet
the demands of large suppliers, including expanding outside of their brand lines
or geographic markets. We believe that our reputation with suppliers and
customers, as well as our financial position, market share and established
infrastructure, make us an attractive buyer of, or strategic partner for, other
distributors.
Continue to Invest in Logistics Technology and Information Systems. The
wine and spirits distribution industry is a relatively mature industry which is
not extensively automated. Many of our competitors continue to rely primarily on
manual processes and limited technology. We plan to expand on our recent
investments in sales and logistics technology and sales and marketing
information systems to further reduce costs and improve service to our customers
and suppliers.
Capitalize on Further Privatizations. Our established reputation and
relationships with our major suppliers enabled us to become the leading spirits
distributor in Michigan, the first control state to privatize certain aspects of
its wholesale spirits distribution business. We believe that other control
states may choose to privatize all or part of their wholesale distribution
business, which may allow us to expand our geographic markets without acquiring
or merging with existing distributors. If any privatization opportunities arise,
particularly in the central United States, we plan to selectively pursue
opportunities by leveraging our experience in Michigan, our strong relationships
with suppliers and our distribution expertise.
Our headquarters are located at 700 West Morris Street, Indianapolis,
Indiana 46225, telephone number (317) 636-6092.
Recent Developments
Company Reorganization. Historically, our operations in Indiana,
Illinois and Michigan were conducted through NWS-Indiana, NWS-Illinois and
NWS-Michigan respectively. Prior to the Reorganization, James E. LaCrosse (or a
trust for the benefit of his family) and Norma M. Johnston owned substantially
all of the common stock of NWS-Indiana. Mr. LaCrosse and Mrs. Johnston, together
with Martin H. Bart, also owned all of the common stock of NWS-Illinois.
NWS-Indiana owned all of the common stock of NW-Michigan. In December, 1998, Mr.
LaCrosse (or a trust for the benefit of his family) and Mrs. Johnston exchanged
all of their shares of capital stock in NWS-Indiana and NWS-Illinois for shares
of a newly formed holding company (NWS). In addition, NWS-Indiana distributed
all of its shares in NWS-Michigan to NWS. Finally, substantially all of the
Company's Illinois operations were transferred to a newly formed limited
liability company, NWS-LLC. The net result of these transactions is that
NWS-Indiana, NWS-Illinois and NWS-Michigan each became a wholly-owned subsidiary
of NWS. U.S. Beverage, a specialty and craft beer distribution business, will
remain a 50% subsidiary of NWS-Illinois. These transactions are referred to as
the "Reorganization" in this Prospectus. You should read the discussion under
the heading "Reorganization of the Company" for more information regarding our
corporate restructuring.
The primary purpose of the Reorganization was to establish a holding
company structure for us and our affiliated companies. This allows for the
financial results of NWS-Indiana, NWS-Illinois and NWS-Michigan to be reported
on a consolidated basis, with Mr. Bart's non-voting minority interest in NWS-LLC
reflected as a minority interest in the consolidated financial statements of
NWS. NWS-Indiana, NWS-Illinois, NWS-Michigan, and NWS-LLC are all guarantors of
the Exchange Notes.
Indiana Price Increase. We announced an average $3.65 per case
across-the-board price increase on all spirits in Indiana effective January 1,
1999 for the products of most suppliers, and February 1, 1999 for the balance of
spirits suppliers. Our single spirits competitor in Indiana, Olinger
Distributing, followed by announcing its own set of across-the-board price
increases. The last across-the-board price increase we announced was in 1995 and
was effective. Although we can give you no assurance, we believe this price
increase will also be effective in the marketplace. If and to the extent the
increase is effective, we believe that it will have a positive effect on the
financial performance of our Indiana operation. We sold approximately 1.5
million cases of spirits in Indiana in 1998. Assuming constant volume, we
believe that the across-the-board price increase would have generated an
estimated $5.5 million of additional revenues in 1998, a significant portion of
which would represent an improvement in gross margin. Management believes that
there will be no material incremental operating expenses associated with these
revenues.
Illinois Franchise Law. In December, 1998 legislation was introduced
into the Illinois general assembly which, if adopted, would limit the ability of
suppliers to terminate distributors and transfer their product lines to new
distributors. Other states have adopted similar franchise legislation which has
generally resulted in price stabilization. We can give you no assurance that the
legislation will become law.
Kentucky Distributorship. In December, 1998, we formed a new Kentucky
distributorship, Commonwealth Wine & Spirits, LLC, in partnership with two
existing Kentucky-based distributors, The Vertner Smith Company and Kentucky
Wine & Spirits. We will invest $7.5 million ($4.5 million in cash and a $3.0
million cash franchise fee), in exchange for 25% of the new company. Vertner and
Kentucky W&S equally own the remaining 75%. At December 31, 1998, we had
invested $6.0 million in this new venture. We believe that Commonwealth Wine &
Spirits, Inc. is the largest distributor of wine and spirits in Kentucky.
Although we can give you no assurance, we do not presently anticipate any
further capital requirements related to this investment.
Brand Representation. We have recently obtained additional brands in
Illinois and Michigan. In March, 1998, Sebastiani named us as its exclusive
distributor in Illinois. In 1997, Sebastiani reported total wine sales in
Illinois of 250,000 cases. In June, 1998, McCormick Distilling appointed us as
its exclusive distributor for Grand Macnish Scotch whiskey. In July, 1998,
Austin Nichols Company appointed us as its exclusive distributor in Michigan.
Austin Nichols supplies Royal Canadian and Jameson Irish whiskey, among other
brands, in Michigan. Grand Macnish and Austin Nichols had combined sales of
approximately 130,000 cases of spirits in 1997 in Michigan. In December, 1998,
we were also named the exclusive distributor by Laird & Co. in Michigan. During
1997, Laird sold approximately 200,000 cases of spirits in Michigan.
As of November, 1998, we no longer distribute J&B Scotch in Michigan.
The brand realignment was the result of certain required divestitures by
suppliers related to the formation of Diageo.
In March, 1999, one of our suppliers, Diageo-UDV, announced the sale of
several non-core brands, including certain brands we currently distribute such
as Black Velvet Whiskey, Christian Brothers Brandy and Arrow Cordials. We do not
expect that Diageo's sale of these brands will have a material effect on our
Company.
U.S. Beverage. In September, 1998, U.S. Beverage, a 50% subsidiary of
NWS-Illinois, entered into a 15-year agreement with Bass, PLC granting U.S.
Beverage the exclusive U.S. distribution rights for Hooper's Hooch flavored malt
beverage. We believe that our Company has the potential for a significant
increase in case sales in 1999 over the sales levels achieved by Bass and that
the Hooper's Hooch business should provide U.S. Beverage with the critical mass
to support its nationwide sales and marketing force.
Risk Factors
See the section entitled "Risk Factors" beginning on page 16 for a
discussion of certain factors that you should consider in connection with your
investment in the Exchange Notes.
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Summary of the Exchange Offer
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Registration Rights Agreement We sold the Outstanding Notes in January, 1999 to the initial
purchasers - Donaldson Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc. and First Chicago Capital Markets, Inc. The
initial purchasers then sold the Outstanding Notes to institutional
investors. Simultaneously with the initial sale of the Outstanding
Notes, we entered into a Registration Rights Agreement which provides
for the Exchange Offer.
You may exchange your Outstanding Notes for Exchange Notes, which have
substantially identical terms. After the Exchange Offer is over, you
will not be entitled to any exchange or registration rights with
respect to your Outstanding Notes.
The Exchange Offer We are offering to exchange $110.0 million total principal amount of
10 1/8% Senior Exchange Notes due 2009 of the Company, which have
been registered under the Securities Act, for your 10 1/8%
Outstanding Senior Notes due 2009 sold in the January, 1999 offering.
To exchange your Outstanding Notes, you must properly tender them,
and we must accept them. We will exchange all Outstanding Notes that
you validly tender and do not validly withdraw. We will issue
registered Exchange Notes at the end of the Exchange Offer.
Resales We believe that you can offer for resale, resell and otherwise
transfer the Exchange Notes without complying with the registration
and prospectus delivery requirements of the Securities Act if:
- you acquire the Exchange Notes in the ordinary course of your
business;
- you are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in
the distribution of the Exchange Notes; and
- you are not an "affiliate" of ours, as defined in Rule 405 of the
Securities Act.
If any of these conditions is not satisfied and you transfer any
Exchange Note without delivering a proper prospectus or without
qualifying for a registration exemption, you may incur liability
under the Securities Act. We do not assume or indemnify you against
such liability.
Each broker-dealer acquiring Exchange Notes for its own account in
exchange for Outstanding Notes, which it acquired through market-making
or other trading activities, must acknowledge that it will deliver a
proper prospectus when any Exchange Notes are transferred. A broker-
dealer may use this Prospectus for an offer to resell, a resale or
other retransfer of the Exchange Notes.
Expiration Date The Exchange Offer expires at 5:00 p.m., New York Central time,
______________, 1999, unless we extend the expiration date.
Conditions to the Exchange Offer The Exchange Offer is subject to customary conditions, some of which
we may waive.
Procedures for Tendering Outstanding
Exchange Notes National Wine & Spirits, Inc. issued the Outstanding Notes as global
securities. When the Outstanding Notes were issued, we deposited
them with Norwest Bank Minnesota, N.A. as book-entry depositary
Norwest Bank issued a certificateless depositary interest in each
note, which represents a 100% interest in the notes, to The
Depository Trust Company ("DTC"). Beneficial interest in the
Outstanding Notes, which are held by direct or indirect participants
in DTC through the certificateless depositary interest, are shown on
records maintained in book-entry form by DTC
You may tender your Outstanding Notes through book-entry transfer in
accordance with DTC's Automated Tender Offer Program. To tender your
Outstanding Notes by a means other than book-entry transfer, a Letter
of Transmittal must be completed and signed according to the
instructions contained in the letter. The Letter of Transmittal and any
other documents required by the Letter of Transmittal must be delivered
to the Exchange Agent by mail, facsimile, hand delivery or overnight
carrier .
In addition, you must deliver the Outstanding Notes to the Exchange
Agent or comply with the procedures for guaranteed delivery. You should
review "The Exchange -- Offer Procedures for Tendering Outstanding
Notes" for more information.
Special Procedures for Beneficial
Owners If you are a beneficial owner whose Outstanding Notes are registered
in the name of a broker, dealer, commercial bank, trust company or
other nominee and wish to tender your Outstanding Notes in the
Exchange Offer, please contact the registered holder as soon as
possible and instruct it to tender on your behalf and comply with our
instructions set forth elsewhere in this Prospectus.
Withdrawal Rights You may withdraw the tender of your Outstanding Notes at any time
before 5:00 p.m. New York City time on ________, 1999, unless we extend
the date.
Appraisal or Dissenters' Rights Holders of Outstanding Notes do not have any appraisal or dissenters'
rights in the Exchange Offer. If you do not tender your Outstanding
Notes or the Company rejects your tender, you will not be entitled to
any further registration rights under the Registration Rights
Agreement, except under limited circumstances. However, your notes
will remain outstanding and entitled to the benefits of the
Indenture. You should read the discussion under the heading "Risk
Factors - Consequences of a Failure to Exchange Outstanding Notes"
for further information.
Federal Income Tax Considerations The exchange of notes is not a taxable exchange for United States
federal income tax purposes. You will not recognize any taxable gain
or loss or any interest income as a result of the exchange. For
additional information regarding federal income tax considerations,
you should read the discussion under the heading "Certain United
States Federal Income Tax Consequences."
Use of Proceeds We will not receive any proceeds from the issuance of the Exchange
Notes, and we will pay the expenses of the Exchange Offer.
Exchange Agent Norwest Bank Minnesota, N.A. is serving as the Exchange Agent in the
Exchange Offer. The Exchange Agent's address, and telephone and
facsimile numbers are listed in the section of this Prospectus
entitled "The Exchange Offer - Exchange Agent" and in the Letter of
Transmittal
</TABLE>
You should consider carefully the information set forth under the
caption "Risk Factors" beginning on page 16 and all other information set
forth in this Prospectus before deciding whether to participate in the
Exchange Offer.
<PAGE>
<PAGE>
Summary of Terms of the Exchange Notes
The form and terms of the Exchange Notes are the same as the form and
terms of the Outstanding Notes, except that the Exchange Notes will be
registered under the Securities Act. As a result, the Exchange Notes will not
bear legends restricting their transfer and will not contain the registration
rights and liquidated damage provisions contained in the Outstanding Notes. The
Exchange Notes represent the same debt as the Outstanding Notes. Both the
Outstanding Notes and the Exchange Notes are governed by the same Indenture.
<TABLE>
<CAPTION>
Total Amount of Exchange Notes
<S> <C>
Offered................. $110,000,000 aggregate principal amount of 10 1/8%
Senior Exchange Notes due 2009.
Maturity Date........... January 15, 2009.
Interest Rate........... 10 1/8 % per year
Interest Payment Dates.. January 15 and July 15, beginning on July 15, 1999
Ranking................. The Exchange Notes and the subsidiary guarantees:
- are unsecured obligations of the Company;
- rank senior in right of payment to all
subordinated indebtedness of the Company;
- rank equally in right of payment with all
existing and future unsubordinated
indebtedness; and
- rank junior in right of payment with all
existing and future secured indebtedness.
Optional Redemption..... On or after January 15, 2004, we may redeem
some or all of the Exchange Notes at any time at
the redemption prices listed in the section
"Description of the Exchange Notes--Optional
Redemption."
Before January 15, 2002, we may redeem up to
33 1/3% of the total initial amount of the Exchange
Notes with the proceeds of certain public offerings
of equity in our Company, at the prices listed in
the section "Description of the Exchange Notes"
under the heading "Optional Redemption."
Guarantees.............. Certain of our wholly owned direct and indirect
subsidiaries unconditionally guaranteed the Exchange
Notes on a senior unsecured basis. If we cannot make
payments on the Exchange Notes when they are due, the
guarantor subsidiaries must make them instead.
Change of Control....... Upon a change of control of the Company, you will have
the right to require us to repurchase the Exchange
Notes at a purchase price equal to 101% of their
total principal amount on the date of purchase, plus
accrued and unpaid interest to the date of repurchase.
For more information, please review "Description of
the Exchange Notes -- Certain Covenants."
Certain Covenants....... We will issue the Exchange Notes under an indenture
with Norwest Bank Minnesota, N.A. The indenture will,
among other things, restrict ourability and the
ability of our subsidiaries to:
- borrow additional money;
- pay dividends or make certain other restricted payments or investments;
- create liens;
- sell certain assets;
- enter into transactions with affiliates;
- merge or consolidate with any other person;
- sell all or substantially all of our assets; and
- engage in certain lines of business.
These covenants are subject to important exceptions and
qualifications. See "Description of the Exchange Notes -- Certain
Covenants."
Form and Denomination.. The Exchange Notes will be represented by one or more permanent
global securities in bearer form deposited with Norwest Bank
Minnesota, N.A., as book-entry depositary, for the benefit of DTC.
You will not receive Exchange Notes in registered form unless one of
the events set forth under the heading "Description of the Exchange
Notes - Book-Entry; Delivery and Form" occurs. Instead, beneficial
interests in the Exchange Notes will be shown on, and transfers of
these interests will be effected only through, records maintained in
book-entry form by DTC with respect to its participants.
Use of Proceeds......... The Company will not receive any cash proceeds in the Exchange Offer.
Absence of a Public
Market for the Exchange
Notes................... While the Outstanding Notes are presently eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages
market of the National Association of Securities Dealers, Inc. by
qualified institutional buyers, there is no existing market for the
Exchange Notes. The initial purchasers of the Outstanding Notes,
Donaldson, Lufkin & Jenrette Securities Corporation, Bear, Stearns &
Co. Inc. and First Chicago Capital Markets, Inc., have advised us
that they currently intend to make a market in the Exchange Notes
following the Exchange Offer, but they are not obligated to do so,
and any market-making may be stopped at any time without notice. We
do not intend to apply for a listing of the Exchange Notes on any
securities exchange. We do not know if an active public market for
the notes will develop or, if developed, will continue. If an active
public market does not develop or is not maintained, the market price
and liquidity of the notes may be adversely affected. We cannot make
any assurances regarding the liquidity of their Exchange Notes or the
price at which holders may sell their Exchange Notes.
</TABLE>
For additional information regarding the Exchange Notes, you should review
"Description of the Exchange Notes."
<PAGE>
<PAGE>
SUMMARY COMBINED FINANCIAL AND OTHER DATA
The following summary historical financial information should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the combined financial statements and notes
thereto included elsewhere in this Prospectus. The pro forma income statement
data and other data for the twelve months ended December 31, 1998 give effect to
the Offering and the New Credit Facility as if they had occurred at the
beginning of the period presented.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Twelve Months
Ended Ended
Years Ended March 31, December 31, December 31,
---------------------------------------------------------- ---------------------- ---------------
1994 1995 1996 1997 1998 1997 1998 1998
(Dollars and cases in thousands, except per case amount)
Statement of Income Data:
Net product sales....... $ 396,360 $ 427,218 $443,257 $488,071 $ 505,141 $ 401,927 $ 423,367 $ 526,581
Distribution fees (1)... -- -- 2,729 16,270 13,121 14,010 17,159
---------- ---------- ---------- --------- ---------- ---------- ---------- -------------
Total revenue........... 415,048 437,377 543,740
396,360 427,218 443,257 490,800 521,411
Cost of products sold... 330,698 354,478 364,792 402,072 411,734 329,566 346,516 428,684
---------- ---------- ---------- --------- ---------- ---------- ---------- -------------
Gross profit............ 65,662 72,740 78,465 88,728 109,677 85,482 90,861 115,056
Selling, general and
administrative expenses 62,884 64,431 68,925 80,299 99,118 75,044 78,690 102,764
---------- ---------- ---------- --------- ---------- ---------- ---------- -------------
Income from operations.. 2,778 8,309 9,540 8,429 10,559 10,438 12,171 12,292
Interest expense........ (4,907) (7,341) (7,935) (8,486) (9,672) (7,325) (8,018) (10,365)
Gain on sale of assets.. 176 89 172 41 4,139 4,225 97 11
Other income............ 672 1,122 1,247 1,619 2,085 938 1,336 2,483
---------- ---------- ---------- --------- ---------- ---------- ---------- -------------
Net income (loss) (2)... $ (1,281) $ 2,179 $ 3,024 $ 1,603 $ 7,111 $ 8,276 $ 5,586 $ 4,421
========== ========== ========== ========= ========== ========== ========== =============
Other Financial Data:
EBITDA (3).............. $ 6,578 $ 12,870 $ 14,442 $ 14,186 $ 17,674 $ 15,490 $ 18,245 $ 20,429
EBITDA margin........... 1.7% 3.0% 3.3% 2.9% 3.4% 3.7% 4.2% 3.8%
Depreciation and $ 3,800 $ 4,561 $ 4,902 $ 5,757 $ 7,115 $ 5,052 $ 6,074 $ 8,137
amortization.........
Capital expenditures (4) 12,002 6,503 3,609 10,447 13,952 12,069 6,518 8,401
Ratio of earnings to fixed
charges (5) ......... N/A 1.3x 1.4x 1.2x 1.6x 2.0x 1.6x 1.4x
Operating Statistics:
Product Sales Operations
Cases shipped (spirits N/A 6,006 6,109 6,099 6,343 5,039 5,035 6,339
and wine)... ..........
Net product price per case N/A $ 61.07 $ 62.87 $ 69.95 $ 72.86 $ 73.23 $ 74.62 $ 73.96
Gross profit margin..... 16.6% 17.0% 17.7% 17.6% 18.5% 18.0% 18.2% 18.6%
Fee Operations
Cases shipped (spirits). -- -- -- 396 2,545 1,990 2,124 2,679
Distribution fee per case -- -- -- $ 6.50 $ 6.50 $ 6.50 $ 6.50 $ 6.50
Pro Forma Information:
Adjusted EBITDA (3)..... -- -- -- -- -- -- -- 21,332
Interest expense (6).... -- -- -- -- -- -- -- 11,299
Adjusted EBITDA/Interest -- -- -- -- -- -- --
Expense.............. 1.9x
Net Debt/Adjusted -- -- -- -- -- -- -- 5.8x
EBITDA (7)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
As of December 31, 1998 As of December 31, 1998
----------------------- -----------------------
Actual As Adjusted
(In thousands) (In thousands)
Balance Sheet Data:
Cash........................... $ 3,217 $ 100
Total assets................... 202,136 202,570
Total debt..................... 120,945 123,338
Stockholders' equity (8)....... 25,119 23,160
<PAGE>
<PAGE>
<FN>
(1) Distribution fees include the Company's per case distribution fee
for cases of spirits delivered in and on behalf of the State of Michigan by the
Company. The Company does not take title to or finance any inventory in
Michigan.
(2) The Company has elected S corporation status under the Internal
Revenue Code of 1986, as amended (the "Code") and, consequently, the Company
does not incur liability for federal and certain state income taxes.
(3) EBITDA is defined as income from operations plus depreciation and
amortization. Adjusted EBITDA is defined as EBITDA plus non-cash LIFO charges
plus start-up expenses (includes organizational costs, brand registration costs,
temporary employee costs, and costs for temporary warehouse facilities and
special product delivery costs for the Michigan operations and all U.S. Beverage
costs net of U.S. Beverage revenues through fiscal 1998), as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Twelve Months
Ended Ended
Years Ended March 31, December 31, December 31,
---------------------------------------------------- ------------------- --------------
1994 1995 1996 1997 1998 1997 1998 1998
(In thousands)
EBITDA................. $ 6,578 $ 12,870 $ 14,442 $ 14,186 $ 17,674 $ 15,490 $ 18,245 $ 20,429
LIFO charge............ 65 145 545 1,455 570 429 605 746
Start-up expenses...... 992 -- -- 1,157 3,320 3,163 -- 157
========= ========= ========= ========= ========= ========= ========= ===========
Adjusted EBITDA..... $ 7,635 $ 13,015 $ 14,987 $ 16,798 $ 21,564 $ 19,082 $ 18,850 $ 21,332
========= ========= ========= ========= ========= ========= ========= ===========
</TABLE>
EBITDA is presented because it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies on the basis of
debt service capability. Adjusted EBITDA is presented because management
believes it may assist in evaluating the Company's ability to service its
indebtedness, including the Exchange Notes. In particular, by March 31, 1998,
the Company had incurred substantially all start-up expenses associated with its
operations in Michigan and its U.S. Beverage operations. EBITDA and Adjusted
EBITDA are not intended to represent cash flows for the periods presented, nor
have they been presented as an alternative to operating income as an indicator
of operating performance and should not be considered in isolation or as a
substitute for measures of performance and cash flow prepared in accordance with
generally accepted accounting principles. See the historical financial
statements of the Company included elsewhere herein.
(4) The breakdown of capital expenditures for the Company by significant
project is set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Twelve Months
Ended Ended
Years Ended March 31, December 31, December 31,
------------------------------------------------- ------------------ --------------
1994 1995 1996 1997 1998 1997 1998 1998
(In thousands)
Business expansion.... $10,733 $3,930 $ 786 $ 5,855 $10,758 $ 9,740 $ 4,033 $ 5,051
Information systems... 403 1,743 1,553 2,446 1,781 1,225 921 1,447
Maintenance........... 866 830 1,270 2,146 1,413 1,104 1,564 1,873
========= ========= ========= ========== ========= ========= ========= =============
$12,002 $6,503 $3,609 $10,447 $13,952 $12,069 $6,518 $ 8,401
========= ========= ========= ========== ========= ========= ========= =============
<FN>
(5) For purposes of calculating earnings to fixed charges, earnings
consist of net income plus fixed charges. Fixed charges consist of interest
expense, amortization of debt expense and discount or premium relating to
Indebtedness and the portion of rental expense on operating leases which the
Company estimates to be representative of the interest factor attributable to
rental expense. For 1994, earnings were inadequate to cover fixed charges by
$1,281,000.
<PAGE>
<PAGE>
(6) For pro forma interest expense, the effective interest rate on the
New Credit Facility is assumed to be 7.75%. Pro forma interest expense has been
reduced by $454,000 which represents interest expense on the shareholder notes
payable which will be set off against the interest income on the shareholder
notes receivable pursuant to the amended terms of the shareholder notes. See
"Certain Transactions."
(7) Net debt represents total debt less cash. The Company's
indebtedness fluctuates with its seasonal working capital requirements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "--Quarterly Results of
Operations; Seasonality."
(8) See Note 4 to "Capitalization" for the pro forma adjustments to
stockholders' equity.
</TABLE>
<PAGE>
<PAGE>
RISK FACTORS
You should consider the following risk factors, as well as the other
information contained in this Prospectus, before exchanging for the Exchange
Notes.
DEBT FINANCING RISKS
Substantial Leverage
We have now and, after the Exchange Offer, will continue to have a
significant amount of indebtedness. Our substantial indebtedness could adversely
affect the financial health of the Company and prevent us from fulfilling our
obligations under the Exchange Notes. The following chart shows certain
important information and is presented assuming we received the proceeds from
the sale of the Outstanding Notes and our new credit facility as of December 31,
1998:
<TABLE>
<CAPTION>
<S> <C>
At December 31, 1998
-----------------------
Total unsubordinated debt.............. $ 122.4 million
Ratio of unsubordinated debt
to total capitalization.............. 83.5%
For the Twelve Months
Ended December 31, 1998
-----------------------
Ratio of earnings to fixed charges..... 1.3x
</TABLE>
Our substantial debt could have the important consequences to you. For example,
it could:
- make it more difficult for us to satisfy our obligations with respect
to the Exchange Notes;
- limit our ability to obtain additional financing in the future;
- commit a substantial portion of our cash flow to debt service making
it unavailable for other purposes;
- place our Company at a competitive disadvantage;
- restrict our financial and operating flexibility under the
agreements governing our long-term debt and bank loans (including the
indenture and our new credit facility);
- have a material adverse effect on our Company if we default under the
financial and operating covenants contained in the agreements
our long term debt and bank loans;
- make us vulnerable to increases in interest rates through certain
borrowings which are at floating rates of interest, including all
borrowings under our new credit facility;
- make us more vulnerable to a downturn in general economic conditions.
Our ability to fund operations, to make scheduled debt payments,
including principal and interest on the Exchange Notes, and to remain in
compliance with all of the financial covenants under our debt agreements,
depends on our future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors beyond our control. We can give no assurance that our current level of
operating results and cash flow will continue or improve. We believe that we
will need to access the capital markets in the future in order to provide the
funds necessary to repay a significant portion of our Indebtedness at maturity.
We can give no assurance that we will be able to obtain additional financing on
terms and conditions acceptable to us, if at all, particularly in view of our
anticipated high levels of debt and the restrictive covenants under our existing
debt agreements. If we are unable to obtain additional financing, we could
default on our debt obligations. In such case, virtually all of our other debt,
including payments under the Exchange Notes, could be immediately due and
payable.
See "Description of Exchange Notes" and "Description of New Credit Facility and
Other Indebtedness."
Subordination
The Exchange Notes will be senior unsecured obligations of our Company
and our subsidiary guarantors. Your right to receive payments on the Exchange
Notes is junior to our and our subsidiary guarantors' existing and future
secured indebtedness, including any borrowings under our credit facility.
Further, the guarantees of the Exchange Notes are junior to our guarantors'
existing and future secured indebtedness. The Exchange Notes and the subsidiary
guarantees rank equal to all of our and our subsidiary guarantors' existing
unsecured indebtedness and all of our and their future unsecured borrowings,
except any future indebtedness that expressly provides that it is subordinated
in right of payment to the Exchange Notes and the guarantees. As a result, upon
any distribution to our creditors or the creditors of the guarantors in a
bankruptcy, liquidation or reorganization or similar proceeding relating to us
or the guarantors or our or their property, the holders of secured debt of our
Company and the guarantors will be entitled to be paid in full in cash before
any payment may be made with respect to the Exchange Notes or the subsidiary
guarantees. We and the subsidiary guarantors may not have sufficient funds to
pay all of our creditors and holders of the Exchange Notes may receive less,
ratably, than the holders of secured debt. In addition, the amount of each
guarantee of the Exchange Notes will be limited by its terms so as not to
constitute a fraudulent conveyance. See "Fraudulent Conveyance Matters." We can
give no assurance that there would be sufficient assets remaining to pay amounts
due on any or all of the Exchange Notes and related guarantees.
Restrictive Covenants
The Indenture contains a number of significant covenants. These
covenants limit our ability to, among other things:
- borrow additional money;
- pay dividends or make certain other restricted payments or investments;
- sell subsidiary stock;
- enter into transactions with affiliates;
- participate in sale-leaseback transactions;
- create liens;
- establish new lines of business;
- merge or consolidate with any other person, and
- sell all or substantially all of the Company's assets.
In addition, the Indenture prohibits certain restrictions on distributions from
our guarantors, as well as requires a guarantee from our future subsidiaries.
Our credit facility contains covenants similar to those described
above. In addition, the credit facility requires us to meet certain financial
tests. If we are unable to pay our debts or to comply with these covenants, we
would default under our existing debt agreements. If our creditors did not waive
this default, the default could accelerate payments on our debt. We can not
ensure you that our assets would be sufficient to repay such debt, including the
Exchange Notes, on an accelerated basis.
You should read the discussions under the headings "Description of the Exchange
Notes" and "Description of New Credit Facility and Other Indebtedness" for more
information.
Financing Change of Control Offer
Upon the occurrence of certain specific kinds of change of control
events, we will be required to offer to repurchase all outstanding notes. Our
new credit facility prohibits us from repurchasing any notes, with limited
exceptions, and also provides that certain change of control events constitute a
default. Any future credit agreements or other agreements relating to our debt
may contain similar restrictions and provisions. In the event a change of
control occurs at a time when we are prohibited from purchasing the notes, we
could seek the consent of our lenders to purchase the notes or could attempt to
refinance the borrowings that contain such a prohibition. If we cannot obtain
such a consent or refinance such borrowings, we would remain prohibited from
purchasing the notes. In such case, our failure to purchase tendered notes would
constitute a default under the Indenture, which, in turn, could result in
amounts outstanding under our new credit facility being declared due and
payable. Any such declaration could have materials adverse consequences to us
and the holders of the Exchange Notes. In the event of a change of control,
there can be no assurance that we would have sufficient assets to satisfy all of
its obligations under the new credit facility and the Exchange Notes. The
provisions relating to a change of control included in the Indenture may
increase the difficulty for a potential acquirer to obtain control of the
Company. See "Description of Exchange Notes -- Repurchase at the Option of
Holders."
Fraudulent Conveyance Matters
The obligations of any of our subsidiary guarantors under its guarantee
could be voided under federal bankruptcy or state fraudulent transfer law. A
court could void a guarantor's obligation under its guarantee or subordinate the
guarantee to the guarantor's other debt obligations if the court determined that
one of our subsidiary guarantors:
- - received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee, and was insolvent or rendered insolvent
by reason of such incurrence;
- - was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- - intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by one of our guarantors under its guarantee could be
voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if the sum of its debts, including contingent liabilities,
were greater than the fair saleable value of all of its assets, or if the
present fair saleable value of its assets were less than the amount that would
be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature.
Although we believe that after giving effect to the Exchange Notes and our
credit facility, each of our subsidiary guarantors is solvent, we can give no
assurance as to what standard a court would apply in making such determinations
or that a court would agree with our conclusions in this regard.
RISKS ASSOCIATED WITH THE OPERATION OF THE BUSINESS
Dependence on Key Suppliers
Although we distribute numerous suppliers' products, the majority of our
revenue comes from a few major suppliers. The following table illustrates 1998
total revenue from the sales of our major suppliers' products:
<TABLE>
<CAPTION>
<S> <C>
Percent of 1998
Supplier total revenue
-------- -------------
Seagram..................................... 32.6%
Fortune Brands.............................. 17.7
Diagco-UDV.................................. 7.7
Canandaigua................................. 7.4
</TABLE>
We have entered into written distribution agreements with several of
our principal suppliers which may be extended year by year but are terminable by
the suppliers upon 30 days or 60 days written notice to us. In addition, we have
informal arrangements with many of our suppliers to distribute their products by
means of purchase orders without written distribution agreements. In Indiana,
Illinois and Michigan, we are currently the exclusive distributor for virtually
all of the products we distribute in those states. Although the terms of the
written distribution agreements are rarely exercised in this industry, they give
the suppliers the contractual right to transfer or terminate distributorship
rights on short notice to us, and other suppliers can change their arrangements
at any time. For example, as part of our Reorganization, substantially all of
our Illinois operations were transferred from NWS-Illinois to NWS-LLC. Although
we have notified all of our Illinois suppliers of this transfer of operations,
and while we believe that these suppliers will have no objection, we can give no
assurance that they will not terminate their agreements.
From time to time, we and other distributors pay franchise fees to
suppliers in order to add key brands or enter new markets (for example, our
investment in a Kentucky distributorship). Our suppliers are large companies
with substantial negotiating leverage over their distributors. We can give no
assurance that we will not pay additional franchise fees to our key suppliers in
the future, or that such fees will not be material. We can also give no
assurance that future acquisitions or mergers of suppliers will not affect our
relationships with our existing suppliers. For example, the acquisition or
merger of one of our suppliers in Illinois, Indiana or Michigan by a supplier
that has a relationship with one or more of our competitors could result in the
loss of that account in one or more of our markets. Competitors in other markets
could also enter our markets through acquisition of one or more distributors
with the expectation that suppliers would terminate their relationship with us
in order to further consolidate distributors or for other reasons. Because we
depend on relatively few major suppliers, our financial condition and results of
operations could be adversely affected by the termination of our written or
informal distribution agreements or an adverse change in the terms of these
distribution agreements.
Dependence on Key Management Personnel
Our success depends on the continued services of our senior management,
particularly our Chairman, President and Chief Executive Officer, James E.
LaCrosse and our Senior Vice President, Martin H. Bart. Mr. LaCrosse, Mr. Bart
and other senior management personnel have long and well-established
relationships with key suppliers and customers. Mr. Bart worked at Seagram for
37 years prior to joining our organization, and maintains a strong relationship
with Seagram, which is our largest supplier of distilled spirits. Neither Mr.
LaCrosse nor Mr. Bart has an employment agreement or non-compete agreement with
the Company. Our financial condition and results of operations could be
adversely affected by the loss of the services of Mr. LaCrosse, Mr. Bart, or any
other member of senior management. We maintain key person life insurance on Mr.
LaCrosse in the amount of $9.1 million, some of which is currently pledged to
support our indebtedness.
Regulation
The distribution of alcohol-based beverages is subject to extensive
regulation. We are required to comply with various laws and regulations and
maintain certain permits and licenses to import, warehouse, transport,
distribute and sell wine and spirits. We believe that we are operating in
compliance with all federal and state laws, regulations and policy in all
material respects. Consistent with industry practice, the sales and marketing
activities permitted by distributors for the benefit of Tier One suppliers are
generally regulated by state licensing authorities. Many of these authorities
regularly advise distributor representatives of activities that would not result
in enforcement action. We rely on such enforcement guidance, which is subject to
change at the discretion of the regulatory authorities, to determine the scope
of our permitted sales and marketing activities.
We can give no assurance that the various governmental regulations
applicable to the alcohol-based beverage industry will not change and become
more stringent. If we fail to comply with applicable governmental regulations or
the conditions of our licenses or permits, our licenses and permits could be
revoked or suspended.
The distribution of alcohol-based beverages is also subject to
extensive federal and state taxation. Our operations may be subject to increased
taxation as compared with those of non-alcohol related businesses. In such case,
we may have to raise prices on our products in order to maintain profit margins.
The effect of such an increase could negatively impact our sales or
profitability.
The alcohol-based beverage industry has become the subject of
considerable societal and political attention in recent years due to increasing
public concern over alcohol-related societal problems, including driving while
intoxicated, underage drinking, alcoholism and health consequences from the
abuse of alcohol. Illinois has established .08% or above as the blood alcohol
level for driving under the influence of alcohol. Indiana and Michigan remain at
.10%, but several other states have recently lowered the blood alcohol levels
for driving under the influence of alcohol, and legislation has been introduced
in the United States Congress to adopt .08% as the national standard. This
federal legislation was not enacted but could be in the future. Similar measures
are likely to be introduced in Indiana and Michigan in the future. There has
also been discussion at the federal and state levels about restricting or
prohibiting print or electronic advertising or other promotional activities,
including billboard advertising and other promotions which allegedly target
youth as potential consumers of alcohol-based beverages. In certain
jurisdictions, including certain precincts in Chicago, Illinois, recent ballot
initiatives have been passed which limit the sale of alcohol at specified
locations or in specified areas. If these or other regulatory developments or
societal trends could result in further regulation of the alcohol-based beverage
industry or a decrease in alcohol consumption.
In recent years, there has been growth in direct shipment by suppliers
(for example: "wine-of-the-month," Internet-based or 1-800 direct ordering
systems, or other direct marketing promotions or programs by wine or craft beer
producers). These direct sales programs threaten the three tier regulatory
structure currently in place by allowing suppliers or third party shippers to
deal directly with consumers. Although many states, such as Indiana, have
adopted legislation either prohibiting or more closely regulating direct
shipments of alcohol-based beverages into those states, we can give no assurance
that these direct marketing programs will not result in reduced purchases by our
customers.
The alcohol-based beverage industry also faces the possibility of class
action or other similar litigation alleging that the continued excessive use or
abuse of alcohol-based beverages has caused death or serious health problems. It
is also possible that federal or state governments could assert that the use of
alcohol-based beverages has significantly increased that portion of health care
costs paid for by the government. Litigation or assertions of this type have
adversely affected companies in the tobacco industry. Although we bottle and
blend our own private-label spirits for resale, we are not generally engaged in
the manufacture of alcohol-based beverages. It is possible, however, that our
suppliers could be named in litigation of this type which could have a material
adverse effect on their business and, in turn, could also have a material
adverse effect on our business.
Acquisition Strategy
Part of our business strategy is to grow through strategic
acquisitions. We can give no assurance that we will be able to identify
attractive acquisition candidates or that we will be able to successfully
integrate the operations of any company we acquire. Successful acquisitions will
require substantial attention from the Company's senior management in order to
properly integrate operational, administrative, financial, sales and marketing
organizations. In addition, we can give no assurance that any acquired companies
would perform as well as expected or operate profitably or that we will not
encounter unanticipated problems or liabilities, or that we will be able to
obtain adequate financing for any acquisition on acceptable terms. If we invest
in an entity without acquiring a controlling interest (such as the Kentucky
investment), there is also increased risk that we could be adversely affected if
our relationship with other investors or the management of such entity does not
meet our expectations. Our credit facility requires the consent of our lenders
prior to the consummation of certain acquisitions. We can give no assurance such
consents will be granted or that we will be able to successfully implement our
acquisition strategy.
Geographic Concentration; Regional Economic Conditions
Our business is conducted primarily in the states of Indiana, Illinois,
Michigan and Kentucky, and we are accordingly affected by the general economic
conditions in these states. We can give no assurance that these states will not
experience economic downturns in the future which could have a material adverse
effect on our results of operations and financial condition. Economic downturns
in the region could also adversely affect the industry trend toward sales of
higher priced brands, which has materially benefitted the industry in recent
years.
Competition
Competition within the wine and spirits wholesale distribution industry
is intense. The principal competitive factors in our business are service,
selection and availability of products, and price. Some of our competitors have
greater financial and other resources. For example, one of the larger
distributors in the United States has joined with another distributor to
purchase a controlling interest in our principal competitor in Indiana. We can
give no assurance that the entry into Indiana by this competitor will not
adversely affect our relationship with our suppliers or our Indiana market
share. We can also give no assurance that we will be able to compete
successfully against current and future sources of competition. You should read
the discussion under the heading "Business--Competition" for more information
regarding our competition.
Seasonal Variations
Our quarterly results are subject to the changing seasons. Because
consumption of alcohol-based beverages increases during the last quarter of the
calendar year, particularly during the Christmas season, our revenues tend to be
substantially higher during our fiscal third quarter and lower during our fiscal
fourth quarter, when we routinely experience operating losses. We also
experience seasonally high working capital requirements and indebtedness in our
third quarter. You should read the discussions under the headings "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations--Quarterly Results; Seasonality" and "--Liquidity and Capital
Resources" for more information regarding the seasonality of our operations.
Controlling Stockholder
Mr. LaCrosse, the Chairman, President and Chief Executive Officer of
the Company, owns approximately 83% of the Company's outstanding voting common
stock. As a result, Mr. LaCrosse is able to:
- elect our Board of Directors;
- approve or disapprove other matters requiring stockholder approval; and
- exercise control over our policies and management.
The Company and Mr. LaCrosse intend to nominate and elect up to four
independent directors to our Board of Directors prior to July 31, 1999. Mr.
LaCrosse's interests as our controlling equity stock holder may differ from your
interests.
S Corporation Status
We have elected to be treated as an S corporation and for each of our
subsidiaries to be qualified subchapter S subsidiaries or other similar
pass-through entities for tax purposes. Accordingly, our shareholders are
directly subject to tax on their respective proportionate shares of our and our
subsidiaries' taxable income for federal and certain state income tax purposes.
We believe that we qualify and will continue to qualify as an S
corporation and that our subsidiaries have qualified and will continue to
qualify as subchapter S subsidiaries or other pass-through entities for federal
and state income tax purposes. However, if this were successfully challenged, we
could be required to pay federal and certain state income taxes (plus interest
and possibly penalties) on our past and future taxable income. While our
shareholders have agreed to indemnify us if our tax status is successfully
challenged, we can give no assurance that the resulting payment of taxes,
interest and penalties would not have a material adverse effect on our financial
condition.
Unionized Work Force
As of December 31, 1998, 32.7% of our non-supervisory work force was
covered under collective bargaining agreements, and that number could increase
in the future. Although we believe that our relations with the unions are
generally good, a prolonged work stoppage or strike by our unionized employees
would cause a significant disruption of operations and higher labor costs.
Year 2000 Issues
Many computer systems and other equipment with embedded chips or
processors use only two digits to represent the year and, as a result, they may
be unable to process accurately certain data before, during or after the year
2000. As a result, business and governmental entities are at risk for possible
miscalculations or system failures causing disruptions in their operations. This
is commonly known as the Year 2000 issue and can arise at any point in the
Company's supply, processing, distribution and financial chains.
We are currently assessing our exposure to potential Year 2000 issues.
Although we have not completed our assessment and remediation of our information
technology (IT) and non-IT systems, we do not expect, based on the limited
information now available, that Year 2000 issues will have a material adverse
effect on our business. We are also surveying our key customers and suppliers
regarding their preparation for the Year 2000. Although we are not presently
aware of any significant customer or supplier with a Year 2000 issue that would
materially impact our operations, we have no means of ensuring that our
customers or suppliers will be Year 2000 ready. Our failure to properly assess,
remediate and plan for potential Year 2000 problems could result in disruptions
of our normal business operations.
Due to the general uncertainty inherent in the Year 2000 issue,
resulting in part from the uncertainty of the Year 2000 readiness of our
third-party suppliers and customers, the consequences of Year 2000 failures
could have a material impact on our results of operations, liquidity or
financial conditions. You should read the discussion under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000" for more information regarding the status of our Year
2000 compliance.
RISKS ASSOCIATED WITH THE EXCHANGE OFFERING
Consequences of a Failure to Exchange Outstanding Notes
The Company did not register the Outstanding Notes under the Securities
Act or any state securities laws, nor does it intend to after the Exchange
Offer. As a result, the Outstanding Notes may only be transferred in limited
circumstances under the securities laws. If the holders of the Outstanding Notes
do not exchange their notes in the Exchange Offer, they lose their right to have
the Outstanding Notes registered under the Securities Act, subject to certain
limitations. A holder of Outstanding Notes after the Exchange Offer may be
unable to sell the notes.
To exchange the Outstanding Notes for the Exchange Notes, the Exchange
Agent must receive the following:
- - certificates for the Outstanding Notes or a book-entry
confirmation of the transfer of the Outstanding Notes into the
Exchange Agent's account at DTC,
- - a completed and signed Letter of Transmittal with any required
signature guarantees, or the Exchange Agents' message in the
case of a book-entry transfer, and
- - any other documents required by the Letter of Transmittal.
Holders of Outstanding Notes after the Exchange Offer who want to exchange their
notes should allow enough time to guarantee delivery. The Company is under no
duty to give notice of defective exchanges.
Lack of Public Market for Exchange Notes
While the Outstanding Notes are presently eligible for trading in the
PORTAL market of the NASD by qualified institutional buyers, there is no
existing market for the Exchange Notes. The initial purchasers of the
Outstanding Notes have advised the Company that they currently intend to make a
market in the Exchange Notes following the Exchange Offer, but they are not
obligated to do so, and any market-making may be stopped at any time without
notice. The Company does not intend to apply for a listing of the Exchange Notes
on any securities exchange. We do not know if an active public market for the
Exchange Notes will develop or, if developed, will continue. If an active public
market does not develop or is not maintained, the market price and liquidity of
the Exchange Notes may be adversely affected. The Company cannot make any
assurances regarding the liquidity of the market for the Exchange Notes, the
ability of holders to sell their Exchange Notes or the price at which holders
may sell their Exchange Notes.
Procedures for Tender of Outstanding Notes
The Exchange Notes will be issued in exchange for the Outstanding Notes
only after timely receipt by the Exchange Agent of the Outstanding Notes, a
properly completed and executed Letter of Transmittal and all other required
documentation. If you want to tender your Outstanding Notes in exchange for
Exchange Notes, you should allow sufficient time to ensure timely delivery.
Neither the Exchange Agent nor the Company is under any duty to give you
notification of defects or irregularities with respect to tenders of Outstanding
Notes for exchange. Outstanding Notes that are not tendered or are tendered but
not accepted will, following the Exchange Offer, continue to be subject to the
existing transfer restrictions. In addition, if you tender the Outstanding Notes
in the Exchange Offer to participate in a distribution of the Exchange Notes,
you will be required to comply with the registration and prospectus delivery
requirement of the Securities Act in connection with any resale transaction. For
additional information, please refer to the sections entitled "The Exchange
Offer" and "Plan of Distribution" later in this Prospectus.
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THE EXCHANGE OFFER
The following discussion sets forth or summarizes what the Company
believes to be the material terms of the Exchange Offer. This summary is
qualified in its entirety by reference to the full text of the documents
underlying the Exchange Offer, copies of which are filed or incorporated by
reference as exhibits to the Registration Statement of which this Prospectus is
a part. The term "Holder" with respect to the Exchange Offer means any person in
whose name the Exchange Notes are registered on the books of the Company, any
other person who has obtained a properly completed bond power from the
registered holder or any person whose Outstanding Notes are held of record by
DTC and who wants to deliver such Outstanding Notes by book-entry transfer at
DTC. For purposes of this section, the term "Company" refers only to National
Wine & Spirits, Inc., and not to any of its subsidiaries.
Purpose of the Exchange Offer
Simultaneously with the sale of the Outstanding Notes, we entered into
a Registration Rights Agreement with the initial purchasers of the Outstanding
Notes -- Donaldson, Lufkin & Jenrette Securities Corporation, Bear, Stearns
& Co. Inc. and First Chicago Capital Markets, Inc. Under the Registration Rights
Agreement, we agreed to file a registration statement regarding the exchange of
the Outstanding Notes for notes with terms identical in all material respects.
We also agreed to use our reasonable best efforts to cause that registration
statement to become effective with the Securities and Exchange Commission (the
"Commission" or "SEC").
The Company is conducting the Exchange Offer to satisfy its contractual
obligations under the Registration Rights Agreement. The form and terms of the
Exchange Notes are the same as the form and terms of the Outstanding Notes,
except that the Exchange Notes will be registered under the Securities Act, and
holders of the Exchange Notes will not be entitled to liquidated damages. The
Outstanding Notes provide that, if a registration statement relating to the
Exchange Offer has not been filed by March 25, 1999 and declared effective by
July 25, 1999, the Company will pay liquidated damages on the Outstanding Notes.
Upon the completion of the Exchange Offer, holders of Outstanding Notes will not
be entitled to any liquidated damages on the Outstanding Notes or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors -- Consequences of a Failure to
Exchange Outstanding Notes" and "Description of the Exchange Notes" for further
information regarding the rights of Outstanding Note holders after the
Exchange Offer. The Exchange Offer is not extended to Outstanding Note
holders in any jurisdiction where the Exchange Offer does not comply with the
securities or blue sky laws of that jurisdiction.
In the event that applicable interpretations of the staff of the SEC do
not permit the Company to conduct the Exchange Offer, or if certain holders of
the Outstanding Notes notify the Company that they are not eligible to
participate in, or would not receive freely tradable Exchange Notes in exchange
for tendered Outstanding Notes in, the Exchange Offer, the Company will use its
best efforts to cause to become effective a shelf registration statement with
respect to the resale of the Outstanding Notes. The Company also agreed to use
its best efforts to keep the shelf registration statement effective at least two
years after its date of effectiveness.
Terms of the Exchange Offer
The Company is offering to exchange up to $110,000,000 total principal
amount of Exchange Notes for a like total principal amount of Outstanding Notes.
The Outstanding Notes must be tendered properly on or before 5:00 p.m. New York
City time on ____________, 1999 (the "Expiration Date") and not withdrawn. In
exchange for Outstanding Notes properly tendered and accepted, the Company will
issue, a like total principal amount of up to $110,000,000 in Exchange Notes.
The Exchange Offer is not conditioned upon holders tendering minimum
principal amount of Outstanding Notes. As of the date of this Prospectus,
$110,000,000 aggregate principal amount of Senior Exchange Notes are
outstanding. The Outstanding Notes may be tendered only in integral multiples of
$1,000.
Holders of the Outstanding Notes do not have any appraisal or dissenters'
rights in the Exchange Offer. If holders do not tender Outstanding Notes or
tender Outstanding Notes that the Company does not accept, their Outstanding
Notes will remain outstanding. Any Outstanding Notes will be entitled to the
benefits of the Indenture but will not be entitled to any further registration
rights under the Registration Rights Agreement, except under limited
circumstances. See "Risk Factors--Consequences of a Failure to Exchange
Outstanding Notes" for more information regarding notes outstanding after the
Exchange Offer.
After the Expiration Date, the Company will return to the holder any
tendered Outstanding Notes that the Company did not accept for exchange.
Holders exchanging Outstanding Notes will not have to pay brokerage
commissions or fees or transfer taxes if they follow the instructions in the
Letter of Transmittal. The Company will pay the charges and expenses, other than
certain taxes described below, in the Exchange Offer. See "-- Fees and Expenses"
for further information regarding fees and expenses.
Neither the Company nor the Company's board of directors recommends you
to tender or not tender Outstanding Notes in the Exchange Offer. In addition,
the Company has not authorized anyone to make any recommendation. You must
decide whether to tender in the Exchange Offer and, if so, the aggregate amount
of Outstanding Notes to tender.
Expiration Date; Extensions; Amendments
The Expiration Date is 5:00 p.m., New York City time, on __________,
1999 unless we extend the Exchange Offer.
The Company has the right, in accordance with applicable law, at any
time to:
- delay the acceptance of the Outstanding Notes;
- terminate the Exchange Offer if the Company determines that any
of the conditions to the Exchange Offer have not occurred or have
not been satisfied;
- extend the Expiration Date of the Exchange Offer and keep all
Outstanding Notes tendered other than those notes properly
withdrawn; and
- waive any condition or amend the terms of the Exchange Offer.
If the Company materially changes the Exchange Offer, or if the Company
waives a material condition of the Exchange Offer, the Company will promptly
distribute a prospectus supplement to the holders of the Outstanding Notes
disclosing the change or waiver. The Company also will extend the Exchange Offer
as required by Rule l4e-1 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
If the Company exercises any of the rights listed above, it will
promptly give oral or written notice of the action to the Exchange Agent and
will issue a release to an appropriate news agency. In the case of an extension,
an announcement will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
Interest on Exchange Notes
The Exchange Notes will bear interest from the Issue Date (or the most
recent interest payment date to which interest on the Exchange Notes has been
paid). Accordingly, holders of Exchange Notes that are accepted for exchange
will not receive interest that is accrued but unpaid on the Exchange Notes at
the time of tender, but such interest will be payable on the first interest
payment date after the Expiration Date. Interest on the Exchange Notes will be
payable semiannually on each January 15 and July 15, commencing on July 15,
1999.
Acceptance for Exchange and Issuance of Exchange Notes
The Company will issue to the Exchange Agent Exchange Notes for
Outstanding Notes tendered and accepted and not withdrawn promptly after the
Expiration Date. The Exchange Agent might not deliver the Exchange Notes to all
tendering holders at the same time. The timing of delivery depends upon when the
Exchange Agent receives and processes the required documents.
The Company will be deemed to have exchanged Outstanding Notes validly
tendered and not withdrawn when the Company gives oral or written notice to the
Exchange Agent of their acceptance. The Exchange Agent is an agent for the
Company for receiving tenders of Outstanding Notes, Letters of Transmittal and
related documents. The Exchange Agent is also an agent for tendering holders for
receiving Outstanding Notes, Letters of Transmittal and related documents and
transmitting Exchange Notes to validly tendering holders. If for any reason, the
Company (1) delays the acceptance or exchange of any Outstanding Notes (2)
extends the Exchange Offer; or (3) is unable to accept or exchange notes, then
the Exchange Agent may, on behalf of the Company and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered notes. Exchange Notes retained by the
Exchange Agent may not be withdrawn, except according to the withdrawal
procedures outlined in the section entitled "--Withdrawal Rights" below.
In tendering Outstanding Notes, you must warrant in the Letter of
Transmittal or in an Agent's Message (described below) that (1) you have full
power and authority to tender, exchange, sell, assign and transfer Outstanding
Notes, (2) the Company will acquire good, marketable and unencumbered title to
the tendered Outstanding Notes, free and clear of all liens, restrictions,
charges and other encumbrances, and (3) the Outstanding Notes tendered for
exchange are not subject to any adverse claims or proxies. You also must warrant
and agree that you will, upon request, execute and deliver any additional
documents requested by the Company or the Exchange Agent to complete the
exchange, sale, assignment, and transfer of the Outstanding Notes.
Procedures for Tendering Outstanding Notes
Valid Tender
Only a Holder of Exchange Notes (or, in the case of Global Exchange
Notes held by DTC, a DTC participant listed in an official DTC proxy) may tender
such Exchange Notes in the Exchange Offer. To tender in the Exchange Offer, a
Holder or DTC participant must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal and mail or otherwise deliver such Letter
of Transmittal or such facsimile, together with the Exchange Notes and any other
required documents, to the Exchange Agent so as to be received by the Exchange
Agent at the address set forth below prior to 5:00 p.m., New York City time, on
the Expiration Date. Delivery of the Exchange Notes may be made by book-entry
transfer in accordance with the procedures described below. Confirmation of such
book-entry transfer must be received by the Exchange Agent prior to the
Expiration Date.
By executing the Letter of Transmittal, each Holder or DTC participant
will make to the Company and Subsidiary Guarantors the representation set forth
below in the second paragraph under the heading "--Resales of Exchange Notes."
The tender by a Holder or DTC participant and the acceptance thereof by
the Company will constitute an agreement between such Holder or DTC participant
and the Company in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER OR DTC PARTICIPANT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS AND DTC PARTICIPANTS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE
SENT TO THE COMPANY. BENEFICIAL OWNERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH BENEFICIAL OWNERS.
Any beneficial owner whose Exchange Notes are held through a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contract such nominee promptly and instruct such nominee to tender on
such beneficial owner's behalf. Such instructions should be given in sufficient
time to ensure that the nominee will be able to take the necessary steps to
tender such Exchange Notes before the Expiration Date.
Signature Guarantees
Signatures on the Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined later
in this paragraph) unless the Exchange Notes tendered pursuant thereto are
tendered (i) by a registered Holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantee must be by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an
"Eligible Institution").
In the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by the Company, evidence satisfactory
to the Company of their authority to so act must be submitted with the Letter of
Transmittal.
Book-Entry Transfer; ATOP
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish an account with respect
to the Exchange Notes at DTC for the purpose of facilitating the Exchange Offer,
and subject to the establishment thereof, any financial institution that is a
participant in DTC may make book-entry delivery of the Exchange Notes by causing
DTC to transfer such Exchange Notes into the Exchange Agent's account with
respect to the Exchange Notes in accordance with DTC's procedures for such
transfer.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the Book-Entry Facility Automated Tender Offer Program ("ATOP").
Accordingly, DTC participants listed on an official DTC proxy may electronically
transmit their acceptance of the Exchange Offer by causing DTC to transfer
Exchange Notes to the Exchange Agent in accordance with DTC's ATOP procedures
for transfer. DTC will then send an Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC, received
by the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgement from the
participant in DTC tendering Exchange Notes which are the subject of such
book-entry confirmation, that such participant has received and agrees to be
bound by terms of the Letter of Transmittal and that the Company and Subsidiary
Guarantors may enforce such agreement against the participant In the case of an
Agent's Message relating to guaranteed delivery, the term means a message
transmitted by DTC and received by the Exchange Agent which states that DTC has
received an express acknowledgement from the participant in DTC tendering
Exchange Notes that such participant has received and agrees to be bound by the
Notice of Guaranteed Delivery.
Each DTC participant transmitting an acceptance of the Exchange Offer
through the ATOP procedures will be deemed to have agreed to be bound by the
terms of the Letter of Transmittal.
Guaranteed Delivery
If a holder wants to tender Outstanding Notes in the Exchange Offer and
(1) the certificates for the Outstanding Notes are not immediately available or
all required documents are unlikely to reach the Exchange Agent on or before the
Expiration Date, or (2) a book-entry transfer cannot be completed in time, the
Outstanding Notes may be tendered if the holder complies with the following
guaranteed delivery procedures:
(a) the tender is made by or through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery setting forth the name and address of the Holder, the
certificate number(s) of such Exchange Notes and the principal amount of
Exchange Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof),
together with the certificate(s) representing the Exchange Notes (or a
confirmation of book-entry transfer of such Exchange Notes into the
Exchange Agent's account at DTC) and any other documents required by the
Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Exchange
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Exchange Notes into the Exchange Agent's account at DTC) and all
other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
The Company's acceptance of properly tendered Outstanding Notes is a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions of the Exchange Offer.
Determination of Validity
The Company will resolve all questions regarding the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Outstanding Notes. The Company's resolution of these questions as
well as the Company's interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal) is final and binding on all parties.
A tender of Outstanding Notes is invalid until all irregularities have been
cured or waived. Neither the Company, any affiliates or assigns of the Company,
the Exchange Agent nor any other person is under any obligation to give notice
of any irregularities in tenders nor will they be liable for failing to give any
such notice. The Company reserves the absolute right, in its sole and absolute
discretion, to reject any tenders determined to be in improper form or unlawful.
The Company also reserves the absolute right to waive any of the conditions of
the Exchange Offer or any condition or irregularity in the tender of Outstanding
Notes by any holder. The Company need not waive similar conditions or
irregularities in the case of other holders.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
that person must indicate that capacity when signing. In addition, unless waived
by the Company, the person must submit proper evidence satisfactory to the
Company, in its sole discretion, of his or her authority to so act.
A beneficial owner of Outstanding Notes that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian should contact that entity promptly if the holder wants to
participate in the Exchange Offer.
Resales of Exchange Notes
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes
may be offered for resale, resold and otherwise transferred by any owner of such
Exchange Notes (other than any such owner which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
owner's business and such owner does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of such Exchange Notes. Any owner of Exchange Notes who tenders in the Exchange
Offer with the intention to participate, or for the purpose of participating, in
a distribution of the Exchange Notes may not rely on the position of the staff
of the Commission enunciated in Exxon Capital Holdings Corporation (April 13,
1988) and Morgan Stanley & Co., Incorporated (June 5, 1991) or similar no-action
letters but rather must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K under the Securities Act. Each
broker-dealer that receives Exchange Notes for its own broker-dealer as a result
of market-making activities or other trading activities, may be a statutory
underwriter and must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes.
By tendering in the Exchange Offer, each Holder (or DTC participant, in
the case of tenders of interests in the Global Exchange Notes held by DTC) will
represent to the Company and Subsidiary Guarantors that, among other things, (i)
the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the registered Holder or DTC participant, (ii)
neither the Holder or DTC participant nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and (iii) the Holder or DTC participant and such other
person acknowledge that if they participant in the Exchange Offer for the
purpose of distributing the Exchange Notes (a) they must, in the absence of an
exemption therefrom, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Exchange
Notes and cannot rely on the no-action letters referenced above and (b) failure
to comply with such requirements in such instance could result in such Holder or
DTC participant or such other person incurring liability under the Securities
Act for which such Holder or DTC participant or such other person is not
indemnified by the Company or any Subsidiary Guarantor. Further, by tendering in
the Exchange Offer, each Holder or DTC participant and such other person that
may be deemed an "affiliate" (as defined under Rule 405 of the Securities Act)
of the Company will represent to the Company and Subsidiary Guarantors that such
Holder or DTC participant and such other person understand and acknowledge that
the Exchange Notes may not be offered for resale, resold or otherwise
transferred by that Holder or DTC participant or such other person without
registration under the Securities Act or an exemption therefrom.
Withdrawal Rights
You can withdraw tenders of Outstanding Notes at any time on or before
the Expiration Date.
For a withdrawal to be effective, you must deliver a written,
telegraphic, telex or facsimile transmission of a Notice of Withdrawal to the
Exchange Agent on or before the Expiration Date. The Notice of Withdrawal must
specify the name of the person tendering the Outstanding Notes to be withdrawn,
the total principal amount of Outstanding Notes withdrawn, and the name of the
registered holder of the Outstanding Notes if different from the person
tendering the Outstanding Notes. If you delivered Outstanding Notes to the
Exchange Agent, you must submit the serial numbers of the Outstanding Notes to
be withdrawn and the signature on the Notice of Withdrawal must be guaranteed by
an Eligible Institution, except in the case of Outstanding Notes tendered for
the account of an Eligible Institution. If you tendered Outstanding Notes as a
book-entry transfer, the Notice of Withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawal of Outstanding Notes
and you must deliver the Notice of Withdrawal to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. You may not rescind withdrawals of
tender. Outstanding Notes properly withdrawn may again be tendered at any time
on or before the Expiration Date.
We will determine all questions regarding the validity, form and
eligibility of withdrawal notices. Our determination will be final and binding
on all parties. Neither the Company, any affiliate or assign of the Company, the
Exchange Agent nor any other person is under any obligation to give notice of
any irregularities in any Notice of Withdrawal, nor will they be liable for
failing to give any such notice. Withdrawn Outstanding Notes will be returned to
the holder after withdrawal.
Interest on Exchange Notes
The Exchange Notes will bear interest at a rate of 10 1/8% per annum,
payable semi-annually, on January 15 and July 15 of each year, commencing July
15, 1999. Holders of Exchange Notes will receive interest on July 15, 1999 from
the date of initial issuance of the Exchange Notes, plus an amount equal to the
accrued interest on the Outstanding Notes. Interest on the Outstanding Notes
accepted for exchange will cease to accrue upon issuance of the Exchange Notes.
Conditions to the Exchange Offer
The Company need not exchange any Outstanding Notes, may terminate the
Exchange Offer or may waive any conditions to the Exchange Offer or amend the
Exchange Offer, if any of the following conditions have occurred:
(a) the Staff no longer allows the Exchange Notes to be offered for resale,
resold and otherwise transferred by certain holders without compliance
with the registration and prospectus delivery provisions of the
Securities Act; or
(b) a governmental body passes any law, statute, rule or regulation which,
in the Company's opinion, prohibits or prevents the Exchange Offer; or
(c) the Securities and Exchange Commission or any state securities
authority issues a stop order suspending the effectiveness of the
registration statement or initiates or threatens to initiate a
proceeding to suspend the effectiveness of the registration statement;
or
(d) the Company is unable to obtain any governmental approval that the
Company believes is necessary to complete the Exchange Offer.
If the Company reasonably believes that any of the above conditions has
occurred, it may (1) terminate the Exchange Offer, whether or not any
Outstanding Notes have been accepted for exchange, (2) waive any condition to
the Exchange Offer or (3) amend the terms of the Exchange Offer in any respect.
If the Company's waiver or amendment materially changes the Exchange Offer, the
Company will promptly disclose the waiver or amendment through a prospectus
supplement, distributed to the registered holders of the Outstanding Notes. The
prospectus supplement also will extend the Exchange Offer as required by Rule
14e-1 of the Exchange Act.
Exchange Agent
The Company appointed Norwest Bank Minnesota, N. A. as Exchange Agent
for the Exchange Offer. Holders should direct questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notice of Guaranteed Delivery to the Exchange
Agent addressed as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
By Registered or Certified Mail: Confirm By Telephone: By Hand or Overnight Delivery:
Norwest Bank Minnesota, N.A. (612) 667-9764 Northwest Bank Minnesota, N.A.
Corporate Trust Facsimile Transmissions: Corporate Trust
Northwest Center (612) 667-9825 Northwest Center
6th & Marquette Attention: Corporate Trust Services 6th & Marquette
Minneapolis, Minnesota 55479 Minneapolis, Minnesota 55479
Attention: Corporate Trust Services Attention: Corporate Trust Services
</TABLE>
If you deliver Letters of Transmittal and any other required documents
to an address or facsimile number other than those listed above, your tender is
invalid.
Fees and Expenses
The Company will pay all costs incidental to the Exchange Offer
including the reasonable and customary fees of the Exchange Agent for its
services and reasonable out-of-pocket expenses. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries their reasonable
out-of-pocket expenses for sending copies of this Prospectus and related
documents to holders of Outstanding Notes, and in handling or tendering for
their customers.
The Company will pay the transfer taxes for the exchange of the
Outstanding Notes in the Exchange Offer. If, however, Exchange Notes are
delivered to or issued in the name of a person other than the registered holder,
or if a transfer tax is imposed for any reason other than for the exchange of
Outstanding Notes in the Exchange Offer, then the tendering holder will pay the
transfer taxes. If a tendering holder does not submit satisfactory evidence of
payment of taxes or exemption from taxes with the Letter of Transmittal, the
taxes will be billed directly to the tendering holder.
The Company will not make any payment to brokers, dealers or other
nominees soliciting acceptances in the Exchange Offer.
Accounting Treatment
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes. Accordingly, the Company will not recognize any gain or loss
for accounting purposes. The Company intends to amortize the expenses of the
Exchange Offer and issuance of the Outstanding Notes over the term of the
Exchange Notes.
<PAGE>
<PAGE>
REORGANIZATION OF THE COMPANY
Historically, the Company's operations in Indiana, Michigan and
Illinois have been conducted through wholly-owned subsidiaries for Indiana
("NWS-Indiana") and Michigan ("NWS-Michigan") and through an affiliate for
Illinois ("NWS-Illinois"). Prior to the Reorganization, James E. LaCrosse (or a
trust for the benefit of his family) and Norma M. Johnston owned substantially
all of the voting and non-voting shares of common stock of NWS-Indiana and,
together with Martin H. Bart, owned all of the voting and non-voting shares of
common stock of NWS-Illinois.
In December, 1998, a reorganization took place which created a new
holding company ("NWS") into which all of the shares of capital stock in
NWS-Indiana and NWS-Illinois owned by Mr. LaCrosse (or a trust for the benefit
of his family) or Mrs. Johnston were contributed in exchange for shares of NWS.
In addition, NWS-Indiana subsequently distributed all of its shares in
NWS-Michigan to NWS. Finally, a new limited liability company subsidiary of
NWS-Illinois was created into which substantially all of the Company's Illinois
operations were transferred ("NWS-LLC"). Currently, NWS-LLC is owned 75% by
NWS-Illinois and 25% by Mr. Bart. Allocations of profits and losses are
different (currently 96% for NWS-Illinois and 4% for Mr. Bart) given the capital
investment disparity between NWS-Illinois and Mr. Bart. The profit and loss
allocations would be subject to change in the future depending on the relative
capital accounts of the members, which in turn would affect the amount of Mr.
Bart's minority interest reflected in the Company's consolidated financial
statements. NWS is substantially wholly-owned by Mr. LaCrosse (or a trust for
the benefit of his family) and Mrs. Johnston. Each of NWS-Indiana, NWS-Illinois,
NWS-Michigan and NWS-LLC is a Guarantor of the Exchange Notes.
The primary purpose of the Reorganization was to establish a holding
company structure for NWS-Indiana and all of its significant affiliated
companies. This allows for the financial results of NWS-Indiana, NWS-Illinois
and NWS-Michigan to be reported on a consolidated basis in the future with Mr.
Bart's non-voting interest in NWS-LLC reflected as a minority interest in the
consolidated financial statements of NWS.
USE OF PROCEEDS
The Exchange Offer will not generate cash proceeds for the Company. The
Company used the net proceeds from the sale of the Outstanding Notes to repay
the Company's existing credit facility, a $15.0 million short-term bank
facility, of which $7.5 million was outstanding as of December 31, 1998, and
certain other outstanding indebtedness of the Company.
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1998 (i) the actual
capitalization of the Company, and (ii) the capitalization of the Company as
adjusted to give effect to the Offering, the application of the estimated net
proceeds from the Offering and the New Credit Facility. This table should be
read in conjunction with "Use of Proceeds," "Selected Combined Financial and
Other Data," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and notes thereto included
elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
<S> <C> <C>
As of December 31, 1998
----------------------------
As Adjusted
Actual
(In thousands)
Cash................................................. $ 3,217 $ 100
============ ============
Total debt:
Existing Credit Facility.......................... $ 87,390 $ --
Other existing unsubordinated indebtedness (1).... 32,605 296
New Credit Facility (2)........................... -- 12,092
Notes............................................. -- 110,000
Subordinated indebtedness (3)..................... 950 950
------------ ------------
Total debt .................................... 120,945 123,338
Stockholders' equity (4)............................. 25,119 23,160
------------ ------------
Total capitalization................................. $ 146,064 $ 146,498
============ ============
<FN>
- -----------
(1) This amount includes borrowings of $7.5 million under a short-term bank
facility which was repaid with the proceeds of the January, 1999 offering.
A portion of this Indebtedness is term Indebtedness which carries
prepayment penalties of approximately $0.2 million. This amount, together
with unamortized deferred financing costs of approximately $0.3 million,
will be recorded as a loss on extinguishment of debt at the time of
repayment.
(2) Total borrowings of up to $60.0 million will be available on a revolving
basis under the New Credit Facility. See "Description of New Credit
Facility and Other Indebtedness." Undrawn amounts will be available for
working capital and general corporate purposes. The Company's actual
borrowings at the closing of the Exchange Offer will depend on the
Company's seasonal working capital requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(3) Includes a subordinated note payable to a former employee in the amount of
$350,000, and a $600,000 note payable to a former stockholder pursuant to a
five-year non-compete agreement and does not include any obligations under
notes due stockholders, $1.8 million of which were converted into equity
prior to December 31, 1998. See "Certain Transactions."
(4) The adjustments to stockholders' equity are shown in the table below (in
thousands):
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Stockholders' equity at December 31, 1998...................... $ 25,119
Dividends paid prior to the initial offering................... (1,800)
Stockholder contributions made prior to the initial offering... 300
Unamortized deferred financing costs written off............... (279)
Prepayment penalties........................................... (180)
-------------
Stockholders' equity at December 31, 1998, as adjusted......... $ 23,160
-------------
<FN>
</TABLE>
<PAGE>
<PAGE>
SELECTED COMBINED FINANCIAL AND OTHER DATA
The following summary historical financial information should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the combined financial statements and notes
thereto included elsewhere herein. The pro forma income statement data and other
data for the twelve months ended December 31, 1998 give effect to the Initial
Offering and the New Credit Facility as if they had occurred at the beginning of
the period presented.
<TABLE>
<CAPTION>
(Dollars and cases in thousands, except per case amount)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Twelve
Ended Months Ended
Years Ended March 31, December 31, December 31,
---------------------------------------------------------- ---------------------- --------------
1994 1995 1996 1997 1998 1997 1998 1998
Statement of Income Data:
Net product sales....... $ 396,360 $427,218 $443,257 $488,071 $505,141 $401,927 $423,367 $ 526,581
Distribution fees (1)... -- -- -- 2,729 16,270 13,121 14,010 17,159
---------- ---------- ---------- ---------- ---------- ---------- --------- --------------
Total revenue........... 396,360 427,218 443,257 490,800 521,411 415,048 437,377 543,740
Cost of products sold... 330,698 354,478 364,792 402,072 411,734 329,566 346,516 428,684
---------- ---------- ---------- ---------- ---------- ---------- --------- --------------
Gross profit............ 65,662 72,740 78,465 88,728 109,677 85,482 90,861 115,056
Selling, general and
administrative expenses 62,884 64,431 68,925 80,299 99,118 75,044 78,690 102,764
---------- ---------- ---------- ---------- ---------- ---------- --------- --------------
Income from operations.. 2,778 8,309 9,540 8,429 10,559 10,438 12,171 12,292
Interest expense........ (4,907) (7,341) (7,935) (8,486) (9,672) (7,325) (8,018) (10,365)
Gain on sale of assets.. 176 89 172 41 4,139 4,225 97 11
Other income............ 672 1,122 1,247 1,619 2,085 938 1,336 2,483
---------- ---------- ---------- ---------- ---------- ---------- --------- --------------
Net income (loss) (2)... $ (1,281) $ 2,179 $ 3,024 $ 1,603 $ 7,111 $ 8,276 $ 5,586 $ 4,421
========== ========== ========== ========== ========== ========== ========= ==============
Other Financial Data:
EBITDA (3).............. $ 6,578 $12,870 $14,442 $14,186 $ 17,674 $ 15,490 $ 18,245 $ 20,429
EBITDA margin........... 1.7% 3.0% 3.3% 2.9% 3.4% 3.7% 4.2% 3.8%
Depreciation
and amortization..... $ 3,800 $ 4,561 $ 4,902 $ 5,757 $ 7,115 $ 5,052 $ 6,074 $ 8,137
Capital expenditures (4) 12,002 6,503 3,609 10,447 13,952 12,069 6,518 8,401
Ratio of earnings to fixed
charges (5).......... N/A 1.3x 1.4x 1.2x 1.6x 2.0x 1.6x 1.4x
Operating Statistics:
Product Sales Operations
Cases shipped (spirits and
wine)................ N/A 6,006 6,109 6,099 6,343 5,039 5,035 6,339
Net product price per case N/A $ 61.07 $ 62.87 $ 69.95 $ 72.86 $ 73.23 $ 74.62 $ 73.96
Gross profit margin..... 16.6% 17.0% 17.7% 17.6% 18.5% 18.0% 18.2% 18.6%
Fee Operations
Cases shipped (spirits). -- -- -- 396 2,545 1,990 2,124 2,679
Distribution fee per case -- -- -- $6.50 $ 6.50 $ 6.50 $ 6.50 $ 6.50
Pro Forma Information:
Adjusted EBITDA (3)..... -- -- -- -- -- -- -- 21,322
Interest expense (6).... -- -- -- -- -- -- -- 11,299
Adjusted EBITDA/Interest
Expense.............. -- -- -- -- -- -- -- 1.9x
Net Debt/Adjusted
EBITDA (7)........... -- -- -- -- -- -- -- 5.8x
</TABLE>
<TABLE>
<CAPTION>
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of March 31, As of December 31,
------------------------------------------------------------ -------------------
Balance Sheet Data: 1994 1995 1996 1997 1998 1997 1998
Cash........................ $ 1,244 $ 1,489 $ 1,475 $ 3,395 $ 1,370 $ 2,924 $ 3,217
Total assets................ 120,824 122,189 143,316 160,366 169,102 88,383 202,136
Total debt.................. 70,373 71,072 86,908 99,545 102,434 26,504 120,945
Stockholders' equity........ 12,909 15,363 14,209 10,470 14,582 17,253 25,119
</TABLE>
NOTES TO SELECTED COMBINED FINANCIAL AND OTHER DATA
(1) Distribution fees include the Company's per case distribution fee for
cases of spirits delivered in and on behalf of the State of Michigan by the
Company. The Company does not take title to or finance any inventory in
Michigan.
(2) The Company has elected "S" corporation status under the Internal
Revenue Code of 1986, as amended (the "Code") and, consequently, the Company
does not incur liability for federal and certain state income taxes.
(3) EBITDA is defined as income from operations plus depreciation and
amortization. Adjusted EBITDA is defined as EBITDA plus non-cash LIFO charges
plus start-up expenses (includes organizational costs, brand registration costs,
temporary employee costs, and costs for temporary warehouse facilities and
special product delivery costs for the Michigan operations and all U.S. Beverage
costs net of U.S. Beverage revenues through fiscal 1998), as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Twelve Months
Ended Ended
Years Ended March 31, December 31, December 31,
-------------------------------------------------- ------------------ --------------
1994 1995 1996 1997 1998 1997 1998 1998
EBITDA.................... $ 6,578 $ 12,870 $ 14,442 $ 14,186 $ 17,674 $15,490 $18,245 $ 20,429
LIFO charge............... 65 145 545 1,455 570 429 605 746
Start-up expenses......... 992 -- -- 1,157 3,320 3,163 -- 157
-------- --------- --------- --------- --------- --------- -------- -----------
Adjusted EBITDA........ $ 7,635 $ 13,015 $ 14,987 $ 16,798 $ 21,564 $ 19,082 $18,850 $ 21,332
======== ========= ========= ========= ========= ========= ======== ===========
</TABLE>
EBITDA is presented because it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies on the basis of
debt service capability. Adjusted EBITDA is presented because management
believes it may assist in evaluating the Company's ability to service its
Indebtedness, including the Exchange Notes. In particular, by March 31, 1998,
the Company had incurred substantially all start-up expenses associated with its
operations in Michigan and its U.S. Beverage operations. EBITDA and Adjusted
EBITDA are not intended to represent cash flows for the periods presented, nor
have they been presented as an alternative to operating income as an indicator
of operating performance and should not be considered in isolation or as a
substitute for measures of performance and cash flow prepared in accordance with
generally accepted accounting principles. See the historical financial
statements of the Company included elsewhere herein.
(4) The breakdown of capital expenditures for the Company by significant
project is set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Twelve Months
Ended Ended
Years Ended March 31, December 31, December 31,
-------------------------------------------------- ------------------- --------------
1994 1995 1996 1997 1998 1997 1998 1998
(In thousands)
Business expansion........ $ 10,733 $3,930 $ 786 $ 5,855 $ 10,758 $ 9,740 $ 4,033 $ 5,051
Information systems....... 403 1,743 1,553 2,446 1,781 1,225 921 1,447
Maintenance............... 866 830 1,270 2,146 1,413 1,104 1,564 1,873
-------- ------- --------- --------- --------- --------- --------- ------------
$ 12,002 $6,503 $ 3,609 $ 10,447 $ 13,952 $ 12,069 $ 6,518 $ 8,401
======== ======= ========= ========= ========= ========= ========= ============
</TABLE>
(5) For purposes of calculating earnings to fixed charges, earnings consist
of net income plus fixed charges. Fixed charges consist of interest expense,
amortization of debt expense and discount or premium relating to Indebtedness
and the portion of rental expense on operating leases which the Company
estimates to be representative of the interest factor attributable to rental
expense. For 1994, earnings were inadequate to cover fixed charges by
$1,281,000.
(6) For pro forma interest expense, the effective interest rate on the New
Credit Facility is assumed to be 7.75%. Pro forma interest expense has been
reduced by $454,000 which represents interest expense on the shareholder notes
payable which will be set off against the interest income on the shareholder
notes receivable pursuant to the amended terms of the shareholder notes. See
"Certain Transactions."
(7) Net debt represents total debt less cash. The Company's indebtedness
fluctuates with its seasonal working capital requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "--Quarterly Results of
Operations; Seasonality."
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Combined Financial and Other Data" and the Company's historical combined
financial statements and the accompanying notes included elsewhere in this
Offering Memorandum. Unless otherwise indicated, all references to years are to
the Company's fiscal year ended March 31.
Overview
The Company is one of the largest distributors of wine and spirits in
the United States. Substantially all of the Company's current operations are in
Illinois, Indiana and Michigan. The Company's reported revenues include net
product sales in Indiana and Illinois, and distribution fees in Michigan. In
Indiana and Illinois, the Company's net product sales are comprised of sales to
retail customers of wine and spirits products and, to a much lesser extent,
beer, water and other related products. The Company purchases these products
from suppliers and resells them to customers at more than 24,000 retail
locations in Indiana and Illinois through the Company's approximately 600 person
sales organization. In Michigan, which privatized certain aspects of the
wholesale distribution of spirits in 1997, the Company serves as an "authorized
distribution agent" for the state and collects a flat $6.50 per case delivery
fee set by the state and paid by suppliers for each case of spirits delivered to
approximately 12,000 locations throughout Michigan. The Company does not take
title to or finance any inventory in Michigan and operates with a relatively
small sales force.
For 1998, net product sales in Indiana and Illinois were $505.1 million
compared to $488.1 million in 1997. Distribution fees for 1998, which was the
Company's first full year of operations in Michigan, were $16.3 million compared
to $2.7 million during 1997. For purposes of illustrating the scale of the
Company's operations in Michigan, the total wholesale prices of products
delivered by the Company in Michigan in 1997 and 1998 were $42.9 million and
$280.5 million, respectively, based on the fixed wholesale prices of the spirits
delivered by the Company. The Company's gross profit includes the gross margin
on product sales in Indiana and Illinois and 100% of the Company's distribution
fees in Michigan since the Company does not take title to inventory in Michigan.
The Company's selling, general and administrative expenses reflect
administrative expenses and the costs of logistics and warehousing in all
markets, and selling expenses that relate almost exclusively to product sales in
Illinois, Indiana or through U.S. Beverage.
During 1997 and 1998, selling, general and administrative expenses
included certain start-up expenses related to the Company's new operations in
Michigan and its specialty and craft beer marketing business (U.S. Beverage).
Management believes that these start-up expenses are one-time costs directly
related to the commencement of these business operations that will not impact
operating performance or cash flow on an ongoing basis. The Company anticipates
no additional start-up costs in Michigan and expects that business to be solidly
profitable for the first time in 1999. Management believes U.S. Beverage should
achieve operating profitability in 2000 as a result of the addition of exclusive
U.S. distribution rights to the Hooper's Hooch flavored malt beverage acquired
in September, 1998 from Bass, PLC. See "Offering Memorandum Summary--Recent
Developments."
With the inclusion of the Company's distribution fees in Michigan,
comparisons of combined sales, gross profit and selling, general and
administrative expenses between years are difficult. For example, because 100%
of the distribution fees are included in gross profit, increases in distribution
fees as a percentage of total sales tend to increase overall gross margin. By
contrast, logistical and warehousing expenses are a far higher percentage of
distribution fee business in Michigan than they are of the product sales in
Illinois and Indiana so that increases in the distribution fee business have
increased selling, general and administrative expenses as a percentage of
revenue and decreased operating margins. Now that the Company's business in
Michigan has completed its start-up phase and fee revenue is becoming more
consistent as a percentage of total revenue, there should be less impact on
period to period margin comparisons in the future. The Company has been able to
expand its business through distribution fees in Michigan without the need for
corresponding growth in, or financing of, working capital and sales force.
The Company's results of operations are typically highly seasonal as
the result of a number of factors, particularly the Christmas season. The third
quarter ending December 31, for example, represents the largest portion of the
Company's annual net income. The fourth quarter is usually not profitable, and
the first and second quarters are typically marginally profitable or slightly
unprofitable after interest expense. See "--Quarterly Results of Operations;
Seasonality."
The Company has historically reported its financial statements on a
combined basis, and began reporting on a consolidated basis following the
completion of the Reorganization in December, 1998. On a consolidated basis, Mr.
Bart's interest in NWS-Illinois will be reflected as a minority interest. As a
result of the nature of this interest, management does not expect the
differences between combined and consolidated results to be material.
The Company announced an average $3.65 per case across-the-board price
increase on all spirits in Indiana to become effective January 1, 1999 for the
products of most suppliers, and February 1, 1999 for the balance of spirits
suppliers. This increase caused retail customers to purchase additional case
volume in December, 1998 before the increase took effect; therefore, the Company
shipped more volume in December, 1998 relative to previous years, with potential
reductions in volume in the quarter ending March 31, 1999. The Company's single
spirits competitor in Indiana, Olinger Distributing, followed by announcing its
own set of across-the-board price increases. The last across-the-board price
increase announced by the Company was in 1995 and was effective. Although there
can be no assurance, the Company believes this price increase will also be
effective in the marketplace. If and to the extent the increase is effective,
management believes that it will have a positive effect on the financial
performance of the Company's Indiana operation. The Company sold approximately
1.5 million cases of spirits in Indiana in fiscal 1998. Assuming constant
volume, management believes that the across-the-board price increase would have
generated an estimated $5.5 million of additional revenues in fiscal 1998, a
significant portion of which would represent an improvement in gross margin.
Management believes that there will be no material incremental operating
expenses associated with these revenues.
See "Offering Memorandum Summary--Recent Developments--Indiana Price Increase."
Results of Operations
The following table includes information regarding total cases shipped
by the Company in 1996, 1997, 1998 and for the nine months ended December 31,
1997 compared with the nine months ended December 31, 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Ended
Years ended March 31, December 31,
------------------------------------------ --------------------------------
1996 1997 1998 1997 1998
-------- --------- ------- --------- ---------
Percent Percent Percent
Cases Cases Change Cases Change Cases Cases Change
(Cases in thousands)
Wine (product sales operations)...... 2,775 2,838 2.3% 2,981 5.0% 2,340 2,419 3.4%
Spirits (product sales operations)... 3,334 3,261 (2.2) 3,362 3.1 2,699 2,616 (3.1)
Spirits (distribution fee operations) -- 396 -- 2,545 542.7 1,990 2,124 6.7
-------- -------- -------- --------- ---------
Total wine and spirits......... 6,109 6,495 6.3 8,888 36.8 7,029 7,159 1.8
Other................................ 1,480 1,691 14.3 1,971 16.6 1,557 1,704 9.4
-------- -------- -------- --------- ---------
Total.......................... 7,589 8,186 7.9% 10,859 32.7% 8,586 8,863 3.2%
======== ======== ======== ========= =========
</TABLE>
Nine Months Ended December 31, 1998 Compared with Nine Months Ended December 31,
1997
Revenue. The Company reported product sales in the nine months ended
December 31, 1998 of $423.4 million, an increase of $21.4 million, or 5.3%, over
the comparable prior year period. This increase resulted primarily from the
continued shift by consumers to more premium brands, and the addition of
Sebastiani Wines in the Chicago market, which more than offset a slight decline
in total spirits cases sold. Contributing to the decline in the sale of spirits
cases was the additional customer purchases of spirits cases in the fourth
quarter of fiscal 1998 in advance of an announced price increase on certain key
brands. This increased case sales in fiscal 1998 and decreased case sales in the
nine months ended December 31, 1998. In addition, U.S. Beverage contributed $5.7
million of revenue, all of which was incremental compared to the prior year.
Distribution fees increased 6.8% for the nine month period to $14.0 million on
increased volume of existing brands and the addition of new suppliers. The
Company's recent addition of certain new supplier brands in Michigan (McCormick
and Austin-Nichols) did not occur until the middle of the second quarter of 1999
and, therefore, is only partially reflected in the Company's 1999 nine month
results. The recent loss of the J&B brand in Michigan (due to supplier
realignment) did not occur until November, but management does not expect it to
have a material impact on the distribution fee operations of the Company.
Gross Profit. Gross profit on the Company's total revenue increased to
$90.9 million in the nine months ended December 31, 1998 from $85.5 million in
the comparable prior year period. This represented a 6.3% increase, due to
improving gross margins on the Company's product sales for the nine months from
18.0% to 18.2% and the additional volume in Michigan with no corresponding cost
of products sold. Gross margins on product sales continued to benefit slightly
from the continuing shift in product mix to higher profit premium brands and
from gradual reductions in trade discounts in the competitive Chicago market.
Additionally, the U.S. Beverage business contributed slightly with margins of
18.1% for the nine months ended December 31, 1998. As a result of this
improvement and since gross profit in Michigan is 100% of fee revenues, the
Company's overall gross profit margin grew from 20.6% in the nine months ended
December 31, 1997 to 20.8% for the nine-month period ended December 31, 1998.
Cost of products sold included a non-cash LIFO charge of $0.6 million in the
nine months ended December 31, 1998 compared with $0.5 million for the
comparable prior year period. Interim LIFO calculations are based on
management's estimates of expected year-end inventory levels and costs. Over the
past five years, LIFO adjustments have ranged between $0.1 and $1.5 million per
year.
Selling, General and Administrative Expenses. Overall, operating
expenses increased $3.6 million to $78.7 million for the nine months ended
December 31, 1998 from $75.0 million for the comparable period ended December
31, 1997. As a percent of total revenue, selling, general and administrative
expenses decreased from 18.1% for the nine-month period ended December 31, 1997
to 18.0% for the comparable current year period.
Selling expenses for product markets increased $4.7 million, or from
6.1% to 6.9% of total revenues, for the nine-month period ended December 31,
1998, primarily as a result of increased manpower to support the Illinois and
Indiana product markets, including additional sales staff in Illinois to support
the newly acquired Sebastiani brand line. Additionally, U.S. Beverage
contributed $2.6 million to overall selling, warehouse and delivery expenses
during the current nine-month period compared to no selling, warehouse and
delivery expenses in the prior year. Finally, in order to acquire additional
lines in Michigan, the Company created a sales team for the first time in that
market. This increased selling expenses by $0.2 million for the nine-month
period ended December 31, 1998. While small, selling expenses are expected to
grow slightly as the Company continues to increase its sales force in Michigan.
Total administrative expenses increased slightly by $0.6 million or
2.6% over the Company's nine-month period ended December 31, 1997, which is down
as a percentage of total revenue from 5.2% to 5.1%. The increase in
administrative expenses was primarily a result of the installation of new
computer systems in Indiana and from general employee benefit cost increases
across the Company.
Start-up expenses decreased 100%, or $3.2 million for the nine months
ended December 31, 1998, as U.S. Beverage moved out of its start-up phase and
incurred ongoing operating expenses, and NWS-Michigan completed its start-up in
fiscal 1998.
Income from Operations. Operating income increased 16.6% or $1.7
million for the nine months ended December 31, 1998. As a percent of total
revenue, income from operations improved from 2.5% for the nine month period
ended December 31, 1997 to 2.8% for the current year period. The increased
revenues for the nine month period ended December 31, 1998 and improved gross
margins more than offset the increase in operating expenses, and the increase in
LIFO reserve during the period.
Interest Expense. Interest expense increased 9.5% to $8.0 million
during the nine months ended December 31, 1998. The increase was attributable to
additional borrowings to finance the capital expenditures needed for the
Company's Michigan operations as well as an upgrade to the Chicago material
handling system and to finance the Company's Kentucky acquisition. This more
than offset a decrease in the Company's cost of borrowing as a result of the
Federal Reserve's interest rate cuts which directly impact the Company's
interest expenses under its bank loans during the third quarter.
Other Income. Other income decreased by $3.7 million in the nine-month
period ended December 31, 1998, compared to the prior year period, due to a $4.1
million gain on the sale of certain licensed brands, trademarks, and tradenames
in Illinois in fiscal 1998. Excluding the one-time gain, other income increased
due to the Company's share of income in Commonwealth Wine & Spirits, LLC.
Net Income. For its nine-month period ended December 31, 1998, the
Company reported $5.6 million in net income compared to $8.3 million for the
nine months ended December 31, 1997 primarily due to the $4.1 million gain on
the sale of certain assets during the fiscal 1998 nine month period. Without the
one-time gain, net income for the Company was up 33.8% or $1.4 million for the
nine months ended December 31, 1997.
Fiscal 1998 Compared with Fiscal 1997
Revenue. The Company reported product sales in 1998 of $505.1 million,
an increase of $17.1 million, or 3.5%, from 1997 product sales of $488.1
million, primarily from volume gains on existing brands. Product sales also
benefited from consumer shifts to higher priced brands. Cases of spirits and
wine delivered increased 3.1% and 5.0%, respectively, from 1997 to 1998.
Distribution fees in Michigan increased from $2.7 million in 1997 to $16.3
million in 1998, as the Company completed its first full year of operations in
Michigan. The complete year of Michigan business was the leading contributor to
growth in total case volume for the Company from 8.2 million cases in 1997 to
10.9 million cases in 1998, an increase of 32.7%. The Company's beer, water and
other products have experienced significant shipment growth but have not yet
represented a material portion of the Company's revenues or materially impacted
operating performance.
Gross Profit. Gross profit on the Company's total revenue increased to
$109.7 million in 1998 from $88.7 million in 1997, a 23.6% increase, due to an
improvement in gross margins on product sales from 17.6% to 18.5% and the
increase in Michigan distribution fees which have no corresponding cost of
products sold. The gross margin improvement on product sales was primarily due
to reduced trade discounts and the continuation of a shift towards premium,
higher-margin wine and spirits brands. As a result of this improvement, and
because gross profit in Michigan is 100% of fee revenues, the Company's overall
gross profit margin grew from 18.1% to 21.0%. Cost of products sold included a
non-cash LIFO charge of $0.6 million in 1998 and $1.5 million in 1997.
Selling, General and Administrative Expenses. Between 1997 and 1998
total selling, general and administrative expenses, including start-up expenses
related to the Company's Michigan and U.S. Beverage operations, increased to
$99.1 million, or 19.0% of total revenue, from $80.3 million, or 16.4% of total
revenue, primarily because of increased warehouse and delivery expenses relating
to the growth of the Michigan business, increased administrative expenses and
the start-up expenses. Management does not believe that a year to year
comparison of selling, general and administrative expenses as a percentage of
revenue is particularly meaningful due to the impact on the comparison of the
Michigan operation, which generates relatively low distribution fee revenues as
discussed above, resulting in proportionately higher warehouse, delivery and
administrative expenses. Warehouse and delivery expenses for Indiana and
Illinois remained fairly constant from 1997 to 1998. Warehouse and delivery
expenses were $11.2 million in Michigan in 1998 compared to $2.1 million in
1997.
Selling expenses increased $1.4 million or 4.6%, which is flat as a
percentage of total revenue compared to 1997. The increase in selling expenses
was primarily related to higher commission expenses on higher revenues in
Indiana.
Administrative expenses increased by $5.3 million, or 21.4%, primarily
as a result of approximately $4.0 million in additional administrative costs
related to a full year of operations in Michigan, including accounting and
computer services, customer support personnel and miscellaneous administrative
costs.
For 1998, the Company also incurred start-up costs of $3.3 million, a
$2.2 million increase from 1997. The $3.3 million of start-up costs consisted of
$1.2 million related to the Company's Michigan operations and $2.1 million
related to U.S. Beverage. The Michigan start-up expenses included temporary
employees, temporary warehouse facilities and special product delivery costs
incurred while the Company's new Michigan distribution network was being put
into place. U.S. Beverage's start-up expenses in 1998 of $2.1 million included
brand registration costs and other expenses, net of revenue, related to the
establishment of the 32-state U.S. Beverage distribution network. Start-up
expenses in Michigan and U.S. Beverage were substantially completed in 1998.
Income from Operations. Operating income increased $2.1 million, or
25.3%, to $10.6 million in 1998 over 1997. The Company's increases in selling,
general and administrative expenses, start-up expenses, a small operating loss
in Michigan's first full year and the U.S. Beverage losses were more than offset
by increased revenues and improved gross margins in wine and spirits product
sales. As a percent of total revenue, income from operations improved from 1.7%
in 1997 to 2.0% in 1998. Without start-up expenses, the Company's 1998 operating
income would have been $13.9 million, or 2.7% of total revenue, compared to $9.6
million in 1997, or 2.0% of total revenue.
Interest Expense. Interest expense in 1998 was $9.7 million, an
increase of $1.2 million over 1997. The increase was primarily due to additional
debt incurred to finance capital expenditures for the Company's Michigan
operations. Interest expense included $0.5 million related to subordinated
stockholder notes of which $0.3 million was accrued and not paid in cash.
Other Income. Other income included a $4.1 million gain on the sale of
certain non-core private label brands in Illinois in 1998. Of the total sale
price, $3.0 million was paid in cash to the Company in 1998, with the balance of
$2.2 million being due in monthly installments through 2004. Interest, rental
and other income primarily includes rental income on surplus property currently
for sale in Illinois and interest income from Mr. LaCrosse and Mrs. Johnston on
their notes payable to the Company, a portion of which was accrued and not
received in cash.
Net Income. Net income was $7.1 million in 1998, compared to $1.6
million in 1997. Net income for 1998 without start-up expenses and the gain on
sale of assets would have been $6.4 million. As an S corporation, the Company
does not pay corporate level income tax.
Fiscal 1997 Compared with Fiscal 1996
Revenue. The Company's net product sales in 1997 increased to $488.1
million, an increase of $44.8 million, or 10.1% from 1996 product sales of
$443.3 million, primarily as a result of (i) wine and spirits products sales
which benefited from price increases and the continued shift to higher priced
brands by consumers which resulted in an 11.3% increase in the average price per
case delivered; and (ii) a significant increase in product sales in Illinois
where wine cases increased 6.9% over 1996, which more than offset a volume
decline in Indiana. The Company began its Michigan operations in 1997, which
contributed $2.7 million of distribution fees during two months of sales.
Primarily due to the Michigan start-up and the Illinois operations, total case
volume increased from 7.6 million to 8.2 million, or by 7.9%.
Gross Profit. Gross profit on product sales increased from $78.5
million in 1996 to $88.7 million in 1997, a $10.3 million or 13.1% increase. The
increase was primarily the result of management in Illinois focusing on reducing
customer discounting in the competitive Chicago market. Michigan distribution
fees contributed $2.7 million in gross profit from its first two months of
operation since these fees have no corresponding cost of goods sold. Cost of
products sold included a non-cash LIFO charge of $1.5 million in 1997 and $0.5
million in 1996.
Selling, General and Administrative Expenses. Between 1996 and 1997,
total selling, general and administrative expenses increased to $80.3 million,
or 16.4% of total revenue from $68.9 million, or 15.6% of total revenue.
Warehouse and delivery expenses increased 18.8% to $23.5 million in
1997 from $19.8 million in 1996. This increase was primarily the result of the
new operations in Michigan which accounted for $2.1 million of the increase,
approximately $1.0 million of which was start-up expense.
Selling expenses increased 17.9% to $30.9 million from 1996 to 1997.
This increase was driven primarily by expansion of the wine sales force in
Illinois to accommodate new suppliers and by additional expenses incurred as
suppliers continued to seek more distributor support for sales and service
functions previously performed by the suppliers.
Administrative expenses increased by 7.9%, or $1.8 million, primarily
due to commencement of operations in Michigan in 1997.
Income from Operations. Operating income decreased from $9.5 million in
1996 to $8.4 million in 1997 as the increase in gross profit was offset by the
increase in selling, general and administrative expenses, including start-up
expenses for Michigan. Without start-up expenses, the Company's 1997 operating
income would have been $9.6 million.
Interest Expense. Interest expense increased from $7.9 million in 1996
to $8.5 million in 1997 as the Company had increased borrowings to support the
additional working capital requirements associated with the increase in product
sales in Indiana and Illinois and capital expenditures associated with the
Company's Michigan start-up.
Net Income. Net income decreased to $1.6 million in 1997 compared to
$3.0 million in 1996 primarily due to the significant non-cash LIFO charge and
start-up costs associated with the Company's Michigan operations.
Quarterly Results of Operations; Seasonality
The Company's revenues are influenced by a number of factors,
particularly the Christmas holiday season, which tend to result in seasonally
high levels of volume and profitability in the Company's fiscal third quarter
with seasonal losses in the Company's fiscal fourth quarter.
The following table presents unaudited quarterly financial information
for each of the eleven quarters in the period ended December 31, 1998. In the
opinion of the Company's management, this information has been prepared on the
same basis as the combined historical financial statements appearing elsewhere
in this Prospectus and includes all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial results set forth
herein. Results of operations for any quarter are not necessarily indicative
of the results of any future period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years ended March 31,
1997 1998 1999
------------------------------------- --------------------------------------- ---------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Revenues........... $ 119,093 $ 111,164 $ 157,056 $ 103,487 $ 130,387 $ 115,493 $ 169,168 $ 106,363 $ 135,899 $ 122,005 $ 79,473
Operating income 1,892 950 6,544 (957) 2,714 1,008 6,716 121 3,908 503 7,760
(loss)..........
EBITDA (1)......... 3,293 2,350 7,944 599 4,273 2,567 8,650 2,184 5,912 2,544 9,789
Operating working
capital 74,435 74,602 88,247 75,579 76,594 78,717 100,243 74,326 76,963 78,491 91,381
(end of period)(2)
<FN>
- -----------
(1) See Note 3 to "Selected Combined Financial and Other Data" for a definition
of EBITDA and other information regarding EBITDA.
(2) Operating working capital is defined as the sum of accounts receivable and
inventory less accounts payable.
</FN>
</TABLE>
Liquidity and Capital Resources
The Company's primary cash requirements have been to fund accounts
receivable and inventories in Indiana and Illinois and to fund capital
expenditures and acquisitions. The Company has historically satisfied its cash
requirements principally through cash flow from operations, trade terms and bank
borrowings.
As indicated above, the Company's business is highly seasonal. The
Company's operating working capital fluctuates with seasonal trends as
illustrated in the quarterly table above. As a result, the Company's working
capital requirements and borrowings under the Company's credit facility have
fluctuated significantly over the course of each year. In 1998, the minimum and
maximum amount of borrowings under the existing credit facility at any one time
were $66.7 million (in March, 1998), and $94.4 million (in November, 1997). The
average month-end borrowings in 1998 were $78.2 million. Working capital also
fluctuates with some suppliers' desired shipping patterns, which tend to produce
increased orders and inventory at the end of such suppliers' fiscal periods.
Effective January 25, 1999, the Company completed an offering of $110.0
million of senior notes due 2009. Concurrently with the offering of the senior
notes, the Company entered into a new $60.0 million credit facility secured by
the accounts receivable and inventory of the Companies. With proceeds from the
senior notes offering and borrowings under the new credit facility, the Company
retired substantially all of its bank revolving and term indebtedness.
Consistent with historical seasonality, for the nine months ended
December 31, 1998, the Company used $6.6 million in net cash from operating
activities, primarily to finance increased account receivables.
Net cash used for investing activities during the first nine months of
1999 was $15.0 million, primarily for the Company's Kentucky investment and for
an upgrade and expansion of the Chicago material handling system and for
converting the Indiana operation to a new corporate-wide management information
system.
Total assets increased to $202.1 million at December 31, 1998, a $33.0
million increase from March 31, 1998 as a result of additional property and
equipment supporting the Michigan operation and the seasonal increase in
inventories as well as the equity investment in Kentucky. At the same time, debt
increased from $96.3 million at March 31, 1998 to $120.9 million at December 31,
primarily to help fund the Kentucky investment and growth in inventory and
capital expenditures for the first nine months of 1999.
Net cash provided by operating activities was $9.8 million for 1998 as
compared to $6.9 million for 1997. The 1998 increase was primarily the result of
significant improvement in net income, increased depreciation expense, an
increase in accounts payable and a decrease in accounts receivable.
Net cash used by investing activities was $9.9 million in both 1998 and
1997 primarily as a result of capital expenditures in Michigan. Total 1999
capital expenditures are expected to be approximately $7.5 million, including
approximately $4.0 million to upgrade and expand the material handling system in
the Chicago warehouse, $3.5 million of which is already committed. Consistent
with management's strategy of focusing on core logistics and value added
services, the Company sold non-core private label brands during 1998 for $4.1
million (after disposal costs), of which $3.0 million was cash.
At March 31, 1998, total assets were $169.1 million compared to $160.4
million, a $8.7 million increase from March 31, 1997, primarily due to increases
in inventories and additional property and equipment. The Company's debt also
increased from $94.1 million at March 31, 1997 to $96.3 million, a $2.2 million
increase, at March 31, 1998 as a result of increased investments in inventory,
property and equipment.
The Company believes that the net proceeds received from the offering
of the senior notes, together with cash flow from operations and existing
capital resources, including cash and borrowings available under the Company's
new credit facility, will be sufficient to satisfy the Company's anticipated
working capital and debt service requirements and expansion plans.
Inflation
Inflation has not had a significant impact on the Company's operations
but there can be no assurance that inflation will not have a material adverse
effect on the Company's financial condition, results of operations or debt
service capabilities in the future.
Year 2000
The Company is currently assessing its exposure to potential Year 2000
issues within its businesses. Phases within the process include assessment,
remediation and contingency planning. The Company has established its assessment
phase to include information technology (IT), non-information technology
(non-IT), and--to the extent reasonably practicable--customer and supplier
readiness. The Company has completed a majority of the assessment work on its
internal IT and non-IT systems, and plans to complete all assessment and
remediation of its IT and non-IT systems by April, 1999. Through the assessment
process, the Company has identified certain financial systems that are not Year
2000 ready. The Company plans to replace these systems with the new Year 2000
compliant systems by April, 1999. Certain contingency plans are in place and
others will be developed if implementation of these new financial systems is
delayed or additional new systems are required following the identification of
any material Year 2000 risks or uncertainties. The failure of the Company to
properly assess, remediate and plan for potential Year 2000 problems could
result in disruptions of normal business operations. Such failures could have a
material adverse effect upon the financial condition, results of operations or
debt service capabilities of the Company.
The Company only expects to be able to assess the Year 2000 readiness
of a minority of its customers and suppliers. This assessment, including the
Company's assessment of its electronic data interchange (EDI) and electronic
funds transfer (EFT) providers, is scheduled to be completed by June, 1999. At
this stage of its inquiry, the Company currently is not aware of any significant
customer or supplier with a Year 2000 issue that would materially impact the
Company's financial condition, results of operations or debt service
capabilities. However, the Company is necessarily relying on the accuracy of
information from customers and suppliers, does not expect to receive information
from many of them, and has no means of ensuring that customers or suppliers will
be Year 2000 ready. The inability of one or more of these entities to be
prepared could have a material adverse effect on the Company.
At December, 1998, the Company has incurred less than $25,000 in costs
directly associated with the remediation of its systems, and an additional
$70,000 remains in the fiscal 1999 budget for Year 2000 issues. The Company does
not track internal costs incurred by its IT group in connection with the Year
2000 project because they are primarily payroll costs that are not allocated
among Year 2000 and other projects. Management does not believe that future Year
2000 assessment and remediation costs will be material, and intends to fund any
necessary assessment and remediation costs from its existing resources as
budgeted. These costs do not include the cost of upgrading or replacing systems
for other business reasons. Such actions usually provide the additional benefit
of making the system Year 2000 compliant.
While the Company has not yet completed its assessment process,
management does not presently expect, based on the limited information now
available, that the direct impact of Year 2000 issues will have a material
adverse effect on the Company. The Company will be in a better position to
estimate total Year 2000 anticipated costs once its assessment process of its IT
and non-IT systems, customers and suppliers has been completed. In addition to
any direct effects from the Year 2000 issue, it is possible that, for example,
disruptions in the economy in general or in the U.S. banking system because of
Year 2000 problems could adversely affect the Company's financial condition,
results of operations or debt service capabilities.
Environmental Matters
The Company currently owns and leases a number of properties, and
historically it has owned and/or leased others. Under applicable environmental
laws, the Company may be responsible for remediation of environmental conditions
relating to the presence of certain hazardous substances on such properties. The
liability imposed by such laws is often joint and several without regard for
whether the property owner or operator knew of, or was responsible for, the
presence of such hazardous substances. In addition, the presence of such
hazardous substances, or the failure to properly remediate such substances, may
adversely affect the property owner's ability to borrow using the real estate as
collateral and to transfer its interest in the real estate. Although the Company
is not aware of the presence of hazardous substances requiring remediation,
there can be no assurance that releases unknown to the Company have not
occurred. Except for blending and bottling of a few of the Company's private
label brands, the Company does not manufacture any of the wine or spirit
products it sells and believes that it has conducted its business in substantial
compliance with applicable environmental laws and regulations.
<PAGE>
<PAGE>
BUSINESS
General
The Company is one of the largest distributors of wine and spirits in
the United States, and is the largest distributor of spirits in Indiana (54%
market share) and Michigan (59% market share) and one of the largest in Illinois
(32% market share). The Company's markets include Chicago and Detroit, which are
the largest and the sixth largest metropolitan markets for spirits in the United
States, respectively.
The Company is the exclusive distributor in two or more of its markets
for many of the world's leading suppliers of brand name domestic and imported
spirits, including Diageo-UDV (formed through the merger of United Distillers
(Guinness) and International Distillers and Vintners (Grand Metropolitan)),
Fortune Brands and Seagram, featuring brands such as Absolut, Chivas Regal,
Crown Royal, DeKuyper, Jim Beam, Jose Cuervo and Smirnoff. The Company also is
the exclusive distributor in Indiana and Illinois for many of the world's
leading wineries, including Banfi Vintners (Riunite and other Italian and
Chilean wines), Canandaigua (Inglenook and Almaden wines), Seagram (premium
European and California wines) and Sebastiani. The Company operates 12
strategically located distribution facilities and a fleet of approximately 350
delivery vehicles to provide overnight or second-day delivery to over 36,000
retail locations, including package liquor stores, drug and grocery stores, mass
merchandisers, hotels and restaurants and bars. The Company's customers include
both local and regional businesses as well as national chains such as American
Stores (Osco), Walgreens, CVS, Sam's Club, Meijer, Chili's, Ruby Tuesday, T.G.I.
Friday's and Hyatt. In select locations, the Company also distributes premium
domestic and imported beer and other products.
From 1994 to 1998, the Company's total revenue increased steadily from
$396.4 million to $521.4 million, representing a compound annual growth rate
("CAGR") of 7.1%, while the Company's EBITDA increased from $6.6 million to
$17.7 million, representing a CAGR of 28.0%. The Company achieved this
performance by successfully integrating several strategic acquisitions since
1992, actively developing new geographic market areas, pursuing new supplier and
brand relationships, implementing advanced product handling technology and
proprietary information systems, and providing high levels of supplier and
customer service.
Under the three-tier regulatory framework established by federal and
state law, suppliers of alcohol-based beverages (Tier One) are generally
prohibited from selling their products directly to retail outlets or consumers
(Tier Three), effectively requiring suppliers to use distributors such as the
Company (Tier Two). This regulatory framework effectively insulates distributors
from vertical competition from suppliers or retail customers. In certain states
(including Michigan), state law has historically mandated the state to act as
the exclusive wholesale distributor and/or retailer of alcohol-based beverages
("control states"). In 1996, Michigan became the first control state to
privatize certain aspects of the wholesale distribution of spirits, and the
Company has become the leading distributor of spirits in that state.
Industry Overview
The United States alcohol-based beverage industry generated total
annual retail sales of more than $104.0 billion in 1997. Sales of wine and
spirits, in which the Company primarily competes, accounted for approximately
13% and 32%, respectively, or an estimated $47.1 billion of total retail sales
in 1997. In the United States spirits market, total revenues on a per case basis
have increased since 1994, more than offsetting a general decline in the volume
of spirits sold. Over the past five years, the dollar amount reported from the
sale of spirits has increased from $29.9 billion to $33.6 billion. These
increases are attributable to brand name price increases which have generally
been passed on to retail consumers, and the general trend in consumer taste to
higher quality and higher priced products. Wine consumption has increased
nationally and in Indiana, Illinois and Michigan since 1993 and management
believes the demand for high quality wine will continue to grow. Similar to the
trend in the spirits industry, consumers have been purchasing higher quality and
more expensive wines.
Since the repeal of Prohibition in 1933, the sale of spirits, wine and
beer has been regulated by the federal and state governments. State regulatory
frameworks fall into three types: control, open and open-franchise. In nearly
all circumstances, suppliers may not legally sell directly to retailers. In the
18 control states, the state controls either the distribution, the retail sale
or both. Michigan remains a control state, but privatized certain aspects of its
wholesale distribution of spirits in 1996. In open states (including Indiana and
Illinois), the distributors and retailers are privately owned businesses. In the
open-franchise states, there are laws and regulations which restrict the
suppliers' ability to change distributors. See "--Regulatory Considerations."
Given the three tier regulatory structure, the wine and spirits
distribution industry varies greatly from distribution businesses serving other
industries such as food, drugs, non-alcohol-based beverages and paper products.
Margins in these other industries are often much lower, as suppliers can compete
with or bypass distributors. Some distributors in other industries are also more
sensitive to economic cycles relative to the Company and its competitors.
Competitive Strengths
Market Leadership. The Company is the largest distributor of spirits in
Indiana and Michigan and one of the largest in Illinois. The Company's market
leadership reflects its strong relationships with both suppliers and customers
and provides the Company with numerous advantages over smaller distributors,
including significant economies of scale and increased purchasing power. The
Company maintains and seeks to enhance its market leadership by providing high
levels of service to its suppliers and customers and through its investments in
technology and information systems.
Strong Supplier Relationships. The Company's success is due in part to
its long-standing relationships with its major wine and spirits suppliers, many
of which extend back more than 20 years. The strength of these relationships was
recently demonstrated when each of the Company's three largest suppliers
(Seagram, Fortune Brands and Diageo-UDV) selected the Company over numerous
competitors to be its exclusive distributor of spirits in Michigan. In Indiana
and Michigan, the Company is the exclusive distributor of seven out of the top
ten brands of spirits sold in the United States, including Absolut, Jim Beam,
Jose Cuervo, Popov, Seagram's Gin, Seagram's 7 Crown and Smirnoff. In Illinois,
the Company is the exclusive distributor of four out of the top ten U.S. brands.
The Company also represents a significant share of each of its major suppliers'
total United States business. In calendar 1997, the Company distributed
approximately 16% of all cases of spirits sold in the United States by Seagram,
and 11% of all cases of spirits sold by Fortune Brands.
Stable Industry and Diversified Customer Base. Total wine and spirits
industry revenues have grown relatively steadily over the past 25 years, even
during periods of economic decline. The Company offers products to over 36,000
retail locations and no single customer or chain represented more than 6.3% of
the Company's 1998 total revenue. Moreover, the three-tier regulatory framework
established by federal and state law generally prohibits vertical integration by
suppliers and retailers and thereby enhances the stability of the wine and
spirits distribution industry. The Company believes that the nature of the wine
and spirits distribution industry and the Company's diverse customer base
provide it with increased stability and predictability of cash flow relative to
distributors in many other industries.
Customer Service Focus. The Company's commitment to highly effective
customer service has also been a major factor in its historical success.
Management emphasizes on-time delivery (next or second day), product
availability, the ability to accept last-minute orders and special orders for
low volume or unusual items, and reliability on a long-term basis. The Company
provides numerous value-added services to its customers, including category
management, customized advertising and point-of-sale materials, customized
packaging and on-line electronic ordering. Management believes that highly
effective customer service strengthens customer relationships, thereby improving
product positioning and sell-through to the consumer.
Advanced Infrastructure, Distribution Network and Information Systems.
The Company maintains an extensive distribution network consisting of master
warehouses, hyper-terminals and cross-docking facilities strategically located
across Indiana, Illinois and Michigan and a fleet of approximately 350 delivery
vehicles. This distribution system generates significant operating leverage by
enabling the Company to deliver hundreds of suppliers' products from each master
warehouse and optimize delivery routes by maximizing the density of customer
locations served from each facility. In addition, the Company has made
significant investments over the past five years to improve its logistics, sales
and marketing operations, including approximately $32.1 million in material
handling systems and $7.9 million in information systems. The Company has also
recently implemented supplier and customer ordering via electronic data
interchange ("EDI") and on-line reporting systems used by certain suppliers to
track sales. In addition to enhancing supplier and customer relationships, the
implementation of these systems has improved the Company's efficiency and
enabled the Company to remain a low cost provider.
Experienced Management Team. The seven individuals who comprise the
Company's senior management team have an average of over 23 years of experience
in the alcohol-based beverage industry and 12 years of experience with the
Company. In addition, the Company's senior management team has successfully
integrated six acquisitions since 1992. Management's experience and expertise
have enabled the Company to establish and maintain long-term relationships with
both suppliers and customers and take advantage of consolidation and
privatization opportunities.
Operating Strategy
Continue to Maximize Operating Leverage. As the largest or one of the
largest wine and spirits distributors in each of its markets, the Company
continuously seeks to minimize its operating costs by leveraging its resources
in the areas of warehousing, transportation, general and administrative
functions and information systems to create economies of scale. The fixed nature
of many of these costs enables the Company to generate a higher level of
profitability on incremental increases in volume and price. In addition, the
Company's facilities in Illinois and Michigan have additional capacity, which
positions the Company to take advantage of future expansion opportunities in
these markets with relatively low capital expenditures.
Growth Through Addition of New Brands. Long-term relationships are
critical to maintaining supplier and brand continuity with distributors.
Although brand movements among distributors are relatively rare as the result of
these relationships, consolidation of distributors or suppliers can affect
existing relationships and present the Company with opportunities to add brands
affected by the consolidation. For example, the Company believes that Diageo-UDV
(formed through the merger of Guinness and Grand Metropolitan), may eventually
consolidate its brands with a single distributor in Illinois. If this was to
happen, management believes that the Company would have opportunities to acquire
additional brands from other suppliers adversely affected by the consolidation,
or otherwise gain increased market share. Management believes that if these or
similar opportunities arise, the Company's strong regional presence and
established supplier and customer relationships give it a competitive advantage
in winning additional brand representation.
Selectively Pursue Strategic Acquisitions and Joint Ventures. The
Company plans to continue to strengthen its competitive position by selectively
acquiring other distributors and entering into strategic joint ventures both in
its current markets and in contiguous markets. These strategic opportunities may
arise for several reasons. First, suppliers sometimes encourage the
consolidation of distributors in order to reduce costs and improve efficiency.
Second, most distributors are family businesses, and acquisition opportunities
can develop as owners approach retirement age without a definite succession
plan. Third, many distributors lack the resources and supplier support to meet
the demands of large suppliers, including expanding outside of their brand lines
or geographic markets. Management believes the Company's reputation with
suppliers and customers, as well as its financial position, market share and
established infrastructure, make the Company an attractive buyer of, or
strategic partner for, other distributors. As an example of this strategy, the
Company has purchased a 25% interest in a Kentucky distributorship. See
"Prospectus Summary--Recent Developments."
Continue to Invest in Logistics Technology and Information Systems. The
wine and spirits distribution industry is a relatively mature industry which is
not extensively automated. Many of the Company's competitors continue to rely
primarily on manual processes and limited technology. The Company plans to
expand on its recent investments in sales and logistics technology and sales and
marketing information systems to further reduce costs and improve service to its
customers and suppliers.
Capitalize on Further Privatizations. The Company's established
reputation and relationships with its major suppliers enabled it to become the
leading spirits distributor in Michigan, the first control state to privatize
certain aspects of its wholesale spirits distribution business. The Company
believes that other control states may choose to privatize all or part of their
wholesale distribution business, which may allow the Company to expand its
geographic markets without acquiring or merging with existing distributors.
Should any such privatization opportunities arise, particularly in the central
United States, the Company plans to selectively pursue such opportunities by
leveraging its experience in Michigan, its strong relationships with suppliers
and its distribution expertise.
Suppliers and Products
The Company represents many of the largest suppliers of wine and
spirits in the United States, and offers hundreds of brands and more than 12,000
individual products. The breakdown of sales among wine, spirits and other
products distributed by the Company in 1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wine Spirits Other
1996 1997 1998 1996 1997 1998 1996 1997 1998
(Dollars in thousands)
Product sales......... $92,463 $117,014 $125,861 $322,535 $336,280 $342,594 $28,259 $34,777 $36,686
Distribution fees..... -- -- -- -- 2,729 16,270 -- -- --
Percentage of total
Company revenue..... 20.9% 23.8% 24.1% 72.7% 69.1% 68.8% 6.4% 7.1% 7.1%
</TABLE>
In Michigan, spirits distributors have exclusive relationships with
suppliers by law, and receive distribution fees from suppliers as set by the
state, rather than purchasing from the suppliers for resale to customers. This
arrangement has the effect of understating the importance of spirits in the
Company's overall product mix. For purposes of illustrating the scale of the
Company's operations in Michigan, the total wholesale prices of products
delivered by the Company for Michigan in 1997 and 1998 was $42.9 million and
$280.5 million, respectively, based on the fixed wholesale prices of the spirits
delivered by the Company. If these amounts would have been included in revenues,
sales of spirits would have represented 71.4% and 79.3% of the Company's total
revenues in 1997 and 1998, respectively.
<PAGE>
<PAGE>
The Company's products include the following brands, among many others:
<TABLE>
<CAPTION>
<S> <C> <C>
Product Type Brand Names
Vodka: Absolut Popov
Cristall Smirnoff
Ketel One Stolichnaya
Bourbon and Blended Whiskey: Black Velvet Seven Crown
Crown Royal Wild Turkey
Jim Beam Windsor Canadian
Seagram's V.O.
Scotch and Single Malt Whiskey: Chivas Regal Glenlivet
Grant's Isle of Jura
Balvenie J&B Rare
Bowmore Springbank
Glenfiddich
Gin: Bombay Gilbey's
Boodles Seagram's
Rum: Captain Morgan Myers
Malibu Ronrico
Tequila: Herradura Patron
Jose Cuervo
Cognacs/Brandy: Christian Brothers Martell
Hine Remy Martin
Specialty Spirits: Arrow Cordials DeKuyper Cordials
Bailey's Irish Cream Jagermeister
Campari TGI Friday's
Wine: Almaden Perrier Jouet
Banfi Robert Mondavi
Beringer Sebastiani
Caymus Stags Leap
Chateau Lafite Sterling
Rothschild Sutter Home
Gundlach Bundschu Veuve Clicquot
Inglenook
Opus One
Specialty Beer: Goose Island Rogue Ales
Grolsch Sierra Nevada
Petes Wicked Ale
Non-Alcohol: Cameron Springs Perrier
Evian Stewart's
</TABLE>
The Company has entered into written distribution agreements with
several of its principal suppliers which generally may be extended on an annual
basis but are terminable upon 30 days or 60 days written notice to the Company.
In addition, the Company has informal arrangements with many of its suppliers
whereby the Company distributes the suppliers' products pursuant to purchase
orders without written distribution agreements. Although the written agreements
provide the Company with the non-exclusive right to distribute the suppliers'
products in a particular state, in practice the suppliers have generally
selected a distributor to be the exclusive distributor of specified products in
each state. In each of Indiana, Illinois and Michigan, the Company is presently
acting as the exclusive distributor with respect to virtually all of the
products it distributes in that state.
Set forth below is certain information about the leading spirits
suppliers in the United States, their rank in Indiana, Illinois and Michigan,
the length of the Company's relationship with those suppliers and their impact
on 1998 Company revenues.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Length of
State Rank Company Percentage of
Supplier (by U.S. Rank)(1) (calendar 1997) Relationship Company 1998
--------------- (in years)(2) Total Revenues Representative Brands
IN IL MI
1. Diageo-UDV (3)......... 3 * 1 25 7.7% Smirnoff and Jose Cuervo
2. Seagram................ 2 2 3 25 32.6 Absolut and Crown Royal
3. Fortune Brands......... 1 6 2 23 17.7 Jim Beam
<FN>
- -----------
(1) Based on calendar 1997 industry sales information.
(2) All of the relationships expressed in this column represent the
duration of the Company's relationship with the suppliers or their
predecessors in the Indiana market.
(3) Diageo-UDV represents that portion of Diageo PLC formed by merger
between United Distillers (Guinness) and International Distillers &
Vintners (Grand Metropolitan). The Company does not represent Diageo's
interest in the Schieffelin & Somerset joint venture which remains a
separate organization.
* Not represented by the Company in the referenced state.
</FN>
</TABLE>
Top United States wine brands and wineries represented by the Company
include Beringer, Canandaigua, Inglenook, Robert Mondavi and Sebastiani. The
Company currently does not distribute wine in Michigan. Major wine producers
served by the Company in Indiana and Illinois include:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Length of
Company
U.S. Rank(1) State Representation Relationship (in
Supplier/Winery years)(3) Representative Brands
IN IN(2)
Canandaigua Brands...... 2 X X 25 Inglenook and Paul Masson
Sebastiani Vineyards.... 5 X X 15 Sebastiani and Vendange
Sutter Home Winery...... 6 X 5 Sutter Home
Robert Mondavi.......... 7 X 24 Robert Mondavi and Opus One
Banfi Vintners.......... 8 X 25 Riunite and Concha y Toro
Beringer Wine Estates... 10 X X 24 Beringer and Meridian
Seagram................. 11 X X 25 Sterling and Mumm
<FN>
- -----------
(1) Source: 1997 Wine Market Impact Databank Review and Forecast.
(2) The Company represents certain brands in Illinois but not the
entire brand portfolio.
(3) All of the relationships expressed in this column represent the
duration of the Company's relationship with the suppliers or
their predecessors in the Indiana market.
</FN>
</TABLE>
Related Operations
In addition to its core alcohol-based beverage distribution operations,
although not material to the Company's financial results, the Company conducts
related beverage operations through a division, Cameron Springs Water Company
("Cameron Springs"), and through the Company's U.S. Beverage operations. Cameron
Springs is a leading supplier of bottled water in Indiana, serving over 9,000
residential and commercial customers. U.S. Beverage commenced operations as a
division of the Company in March, 1997 to market and sell imported, specialty
and microbrewed beers and specialty malt products nationally. The brand
distribution contracts related to the U.S. Beverage operations are held by an
entity which is 50% owned by NWS-Illinois. In select markets, the Company sells
and distributes premium cigars primarily as a complement to the Company's
distribution of fine wines and spirits.
Customers
Most states (including Indiana, Illinois and Michigan) require wine and
spirits retailers to purchase alcohol-based beverages from licensed
distributors. Suppliers in these states may not legally sell directly to retail
customers. The Company's customers fall into two broad categories depending on
where the alcohol-based beverage ultimately will be consumed: on-premise and
off-premise. Off-premise customers include package liquor stores, grocery
stores, drug stores and mass merchandisers. On-premise customers include hotels,
restaurants and bars, and similar establishments. The Company currently serves
over 36,000 retail locations in Indiana, Illinois and Michigan. No single
customer represented more than 6.3% of the Company's 1998 net sales. As is
customary in the industry, the Company's products are generally purchased under
standard purchase orders and not under long-term supply contracts. As a result,
backlog is not meaningful in the wholesale distribution industry.
The table below summarizes the Company's customer base:
<TABLE>
<CAPTION>
<S> <C> <C>
Percentage of Company 1998
Type of Customer Revenue Representative Customers
----------------------------------------- ---------------------------- -----------------------------------------
Off-Premise
Package Stores.................... 42.6% Gold Standard and Cap'n Cork
Grocery stores, drug stores and mass 24.7 Kroger, Dominicks, Marsh, American Stores
merchandisers.................. (Osco), Walgreens, CVS, Sam's Club, Meijer
Other............................. 4.3 7-Eleven, White Hen, Village Pantry
-------------
Percent of total............... 71.6%
=============
On-Premise
Restaurants and Bars.............. 18.0% Charlie Trotter's, Hard Rock Cafe, House of
Blues, Morton's, Planet Hollywood, Ruth's
Hotels............................ 1.7 Chris, Four Seasons, Hyatt, Hilton
Other............................. 8.7 Crooked Stick Golf Course, the United
Center, American Legion
-------------
Percent of total............... 28.4%
=============
</TABLE>
Management believes that the number and diversity of the Company's
customers and the nature of the Company's business strengthens the Company's
liquidity. The prompt payment of the Company's invoices is governed by law in
all states in which the Company operates. Indiana has a 15 day credit law beyond
which retail customers cannot buy alcohol-based beverages from any distributor
in the market. Illinois has a similar 30 day credit law. Typically, the
Company's bad debt expenses are incurred less than 30 days after shipment since
the credit laws prohibit extension of terms. Average bad debt expense for the
past five years has been less than 0.12% of revenue.
Marketing and Sales
Supplier and Customer Services. The Company's marketing and sales
programs add value for suppliers and customers beyond storage and distribution.
Through its approximately 600-person marketing and sales force, the Company acts
as the field marketing and merchandising arm of its suppliers by maintaining
regular contact with the Company's off-premise and on-premise customers. The
Company customizes national marketing programs developed by its suppliers for
specific retail locations in seeking to derive maximum benefit for the supplier
and customer at each specific retail location. The Company provides its
customers with a wide variety of services, including conducting promotional
events, building product displays, designing shelf sets, cross-marketing between
off-premise and on-premise locations, and (in Michigan) accounts receivable
collection. Management believes that the Company is a market leader in
developing and implementing marketing programs to improve alcohol-based beverage
sales for both suppliers and customers.
Marketing and Sales Teams. The Company divides its marketing and sales
forces by product brands and geographic region. Field sales representatives
provide the primary source of contact with the customer's retail locations.
Brand managers, who concentrate on a small number of suppliers and brands, are
responsible for product pricing, promotion and all other marketing and sales
activity related to their brands. The Company recently formed a National
Accounts Division which is responsible for customers with a national profile.
Sales and marketing personnel are compensated under various compensation plans
which typically combine base pay with a productivity bonus. Members of senior
management also are very active in maintaining supplier and customer
relationships with incentive compensation based on subsidiary, division or
Company-wide performance.
Sales and Marketing Information Systems. The Company's management
information systems are very important to the Company's sales and marketing
efforts. See "--Management Information Systems." Through its proprietary
information systems, the Company seeks to offer improved levels of service to
suppliers and customers through prompt and accurate product deliveries,
demographic information regarding the purchase and sale of alcohol-based
beverages and other important sales and consumption information. Retail
locations can utilize this information to make decisions regarding product
placement in the wine and spirits sections of their stores, while suppliers can
utilize this information to quickly analyze sell-through by product in a
particular customer location.
Warehousing and Distribution
The Company utilizes a series of four master warehouses, three
hyper-terminals and five cross-docking facilities strategically located
throughout Indiana, Illinois and Michigan to store and ship its products pending
sale to customers. The Company uses common carriers to transport products from
suppliers to its master warehouses. Master warehouses located in Chicago,
Indianapolis and Detroit (Brownstown) serve as the primary storage facilities
for the Company's inventory. A smaller master warehouse is located in Champaign,
Illinois. Upon receipt of the product at one of the master warehouses, the
products are inspected and stored on pallets or in racks. Temperature-sensitive
products (such as fine wines) are stored in temperature-controlled areas of the
warehouses. Hyper-terminals located in Peoria, Illinois, South Bend, Indiana and
Grand Rapids, Michigan stock only high volume products and provide an extension
of the master warehouses. See "--Facilities" for a listing of the warehouse
facilities and hyper-terminals of the Company. The Company strives to optimize
inventory levels, taking into account minimum out-of-stock percentages,
projected sales (including seasonal demands), periodic supplier shipments to
meet supplier sales requirements and working capital requirements.
The Company's customers ordinarily receive either next day or
second-day delivery. In general, orders are collected during the day for batch
routing and order "picking" at night. The Chicago and Detroit master warehouses
each use an automated material handling system, including scanners, automated
conveyors, dispensers and sorters. Products from the master warehouses are then
shuttled nightly to either a hyper-terminal or a cross-docking facility where
the orders are consolidated and loaded onto delivery trucks. Cross-docking
facilities located in Belleville, Illinois, Evansville, Indiana, and Traverse
City, Saginaw and Escanaba, Michigan further extend the service areas of the
master warehouses. Orders for delivery out of the various cross-docking
facilities are picked in the master warehouses, shipped in during the night, and
then transferred onto local delivery trucks for final delivery. The Company owns
or leases a total fleet of approximately 350 delivery trucks, consisting of 280
delivery trucks, 18 tractors, 33 trailers, 31 vans and 5 pick-up trucks. To
maximize prompt and efficient product delivery, the Company's fleet is allocated
among the Company's master warehouses, hyper-terminals and cross-docking
facilities located throughout Indiana, Illinois and Michigan.
As a result of a number of factors including state laws and
regulations, the Company maintains independent distribution networks in Indiana,
Illinois and Michigan. The Indiana distribution network operates with the
Indianapolis master warehouse feeding the South Bend hyper-terminal and the
Evansville cross-docking facility. The Michigan distribution network operates
with the Detroit (Brownstown) master warehouse feeding the Grand Rapids
hyper-terminal and the cross-docking facilities located in Escanaba, Saginaw and
Traverse City. The Illinois distribution network is separated into the
metropolitan Chicago area, and all other service areas. The Chicago area is
serviced out of the Chicago master warehouse, while the downstate areas are
serviced by the smaller Champaign master warehouse, the Peoria hyper-terminal
and the Belleville cross-docking facility.
Management Information Systems
The Company employs customized management information systems that have
enabled it to more efficiently utilize its material handling and distribution
system. The Company's information systems help streamline its distribution
network from receipt of order through final delivery by calculating and
implementing efficient product selection, optimizing delivery routes to meet
specific delivery times, and allocating the proper types and volume of products
on specific delivery trucks. These information systems, when used in connection
with the Company's material handling systems, have allowed the Company to more
efficiently manage its inventory and minimize its handling costs per case
primarily by reducing labor costs.
The Company's commitment to technology has also advanced its sales and
marketing initiatives. The Company's sales force is equipped with laptop
computers which allow the Company to expedite order entry and provide instant
feedback to customers regarding order activity. The Company provides its
customers and suppliers with the ability to directly enter and track orders via
electronic data interchange ("EDI"). In addition, the Company's proprietary
information systems provide its sales and marketing personnel, customers and
suppliers with access to a database of information regarding the purchase and
sale of alcohol-based beverages in specific geographic markets. The Company's
suppliers have immediate access to information regarding product and demographic
trends within specific geographic markets and the Company's customers have
access to information regarding popular products or other trends from similarly
situated retail locations. Management believes that its management information
systems enhance its operating performance and improve its relationships with
customers and suppliers.
Facilities
The Company's distribution facilities consist of four master
warehouses, three hyper-terminals and five cross-docking facilities. The
Company's corporate headquarters are located in Indianapolis, Indiana.
The master warehouses, located in Indianapolis, Chicago, Detroit
(Brownstown) and Champaign, serve as the primary storage facilities and regional
offices for the Company. The Chicago warehouse contains approximately 650,000
square feet of warehousing space, including a designated temperature controlled
area for temperature-sensitive products. The Indianapolis warehouse contains
approximately 265,000 square feet of warehousing space, including a designated
temperature controlled area for temperature-sensitive products. In calendar
1997, the Company completed its new Detroit warehouse (approximately 230,000
square feet of warehousing space), including a recently installed material
handling system and eight shipping docks. The Champaign warehouse contains
50,000 square feet of warehousing space and is designed to hold more high volume
products for delivery to customers in central and southern Illinois.
The following is a listing of the Company's warehouses and delivery,
production and office facilities:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Total
Owned/ Square Feet
Location Leased Principal Function
-------------------- ------- ----------- ----------------------------------
Indiana Indianapolis Owned 265,000 Master Warehouse/Office
South Bend Owned 76,800 Hyper-Terminal/Office
Evansville Owned 5,800 Cross-Docking Facility
Evansville Owned 2,400 Office
Ft. Wayne Leased 5,500 Office
Merrillville Leased 2,600 Office
Indianapolis Owned 3,500 Office (Cameron Springs)
Indianapolis Owned 15,000 Production Plant (Cameron Springs)
Illinois Chicago (1) Owned 650,000 Master Warehouse/Office
Champaign Leased 50,000 Master Warehouse/Office
Peoria Leased 35,000 Hyper-Terminal/Office
Belleville Leased 16,000 Cross-Docking Facility/Office
Rockford Leased 5,000 Office
Springfield Leased 1,000 Office
Michigan Detroit (Brownstown) Leased 230,000 Master Warehouse/Office
Grand Rapids Leased 100,000 Hyper-Terminal/Office
Escanaba Leased 7,500 Cross-Docking Facility/Office
Saginaw Leased 1,000 Cross-Docking Facility
Traverse City Leased 5,000 Cross-Docking Facility
<FN>
- -----------
(1) Excludes one of the Company's Chicago properties which consists of
approximately 240,000 square feet and which is in the process of being
sold by the Company. The property presently is leased to an unrelated
third party.
</FN>
</TABLE>
All of the Company's owned properties are subject to liens in favor of
the lenders under the Company's Existing Credit Facility but will not be subject
to liens in favor of the lenders under the New Credit Facility. The Company's
lease agreements for the Detroit master warehouse and the Grand Rapids
hyper-terminal each have a ten-year term (expiring April 20, 2007 and January
31, 2007, respectively) and provide the Company with an option to purchase.
Competition
The wine and spirits wholesale distribution business is highly
competitive. The principal competitive factors in the Company's business include
service, breadth and availability of product brands offered and, to a lesser
extent, price. Distributors compete for new suppliers or brands based on
reputation, market share, access to customers and ability to satisfy supplier
demands. Given its size, supplier relationships, distribution networks and low
operating costs, the Company is well positioned to compete in Indiana, Illinois
and Michigan. The Company's primary competition in Illinois includes Romano
Brothers and Judge & Dolph. Romano Brothers has recently joined with Glazer's
Wholesale Distributing of Dallas, Texas to enter the Indiana market through the
acquisition of a controlling interest in Olinger Distributing, the second
largest Indiana distributor and the only meaningful Indiana competitor. None of
the ten largest United States distributors competes with the Company in
Michigan.
There are significant barriers to entry into the wholesale wine and
spirits distribution business. These barriers include established
supplier-distributor relationships, specialized distribution equipment (material
handling systems and delivery vehicles) and important industry knowledge
regarding pricing, inventory management and distribution logistics.
Historically, entry by organizations not already engaged as wine and spirits
distributors in other markets has been extremely rare. The entrance of new
distributors into existing markets typically takes place through acquisition.
Employees
As of December 31, 1998, the Company had 1,517 employees. Approximately
135 employees in Michigan and 400 employees in Illinois are represented by labor
unions. In Illinois, the Company has relationships with three unions: (i)
Teamsters Union Local 744 (expiring March 2, 2002); (ii) Liquor and Allied
Workers Union Local 3 (annual agreements); and (iii) Teamsters, Chauffeurs &
Helpers Union Local 50 (expiring August 31, 2001). In Michigan, the Company has
relationships with three unions: (i) Teamsters Union Local 337 (expiring March
2, 2001); (ii) Teamsters Union Local 299 (expiring March 2, 2001); and (iii)
Teamsters Union Local 486 (expiring March 2, 2001). Employees of the Company in
Indiana are not represented by any labor unions.
The Company has not experienced any work stoppages in more than 15
years as a result of labor disputes and considers its employee relations to be
good.
Regulatory Considerations
The manufacturing, importation, distribution and sale of alcohol-based
beverages is subject to regulation by the federal government through the
Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms ("ATF"), as
well as by state and local regulatory agencies. Suppliers, distributors and
customers must be properly licensed in order to sell alcohol-based beverages.
In most states, the alcohol-based beverage industry operates within
what is commonly referred to as a three-tier system of distribution. The three
tiers are identified as follows: (a) Tier One is comprised of suppliers which
produce alcohol-based beverages and/or importers of alcohol-based beverages; (b)
Tier Two is comprised of distributors, such as the Company; and (c) Tier Three
is comprised of retail licensees. Under this system, suppliers sell to
distributors, distributors sell to retailers, and retailers sell to consumers.
Suppliers may not sell to retailers or consumers and distributors may not sell
directly to consumers. Most states prohibit suppliers or distributors from
having an interest in retail licensees. The Company directly and through its
affiliates holds federal basic permits and state permits/licenses as a
distributor and importer. Also, NWS-Illinois holds out-of-state shipper permits
that allow it to ship certain products from one state to a licensed distributor
in any one of the other states. As part of the Reorganization, substantially all
of the Company's Illinois operations were transferred from NWS-Illinois to
NWS-LLC. Although NWS-LLC has applied for the necessary federal basic permits
and state permits/licenses to operate as a wholesale distributor of
alcohol-based beverages, NWS-LLC is temporarily operating under the permits and
licenses held by NWS-Illinois under a management services agreement. This
management services agreement provides that while NWS-LLC is responsible for the
storage and delivery of the products to the end customers, NWS-Illinois retains
legal title to the products until such products are sold and title passes to the
final customer. In addition, invoices for all product shipped and delivered by
NWS-LLC will be payable directly to NWS-Illinois. The management services
agreement will terminate at such time that NWS-LLC receives the necessary
federal and state permits and licenses.
The Company is required to have each of its officers, directors and
principal stockholders (owning 5% or more of the issued and outstanding stock)
qualified by federal and state governmental agencies to have an interest in a
licensed company. The Company's officers, directors and principal stockholders
have been, or are in the process of being, deemed to be qualified parties by ATF
and state regulatory agencies.
Suppliers (Tier One) and retail licensees selling directly to consumers
(Tier Three) are more heavily regulated than distributors (Tier Two) by
governmental authorities. Distributors like the Company face scrutiny in a
number of important areas, including initial licensing or permitting and sales
and marketing activities with or on behalf of retail customers. The distributors
may not give or transfer anything of value to their customers in exchange for
business or other consideration. The definition of "value" differs from state to
state. The Company participates in significant promotional activities for
suppliers and customers. Suppliers also are increasingly asking distributors to
be responsible for activities and related costs formerly undertaken by suppliers
as suppliers pursue ways to reduce their operating costs. These increased
demands will likely challenge distributors, including the Company, which desire
to meet the wishes of their suppliers and customers. As a result, the Company
regularly provides training and education programming for its sales and
marketing personnel.
The Company believes that it is in compliance with applicable
regulations in all material respects. Consistent with industry practice, the
sales and marketing activities permitted by distributors for the benefit of Tier
One suppliers are generally regulated by state licensing authorities, many of
which regularly advise distributor representatives of activities that would not
be the subject of enforcement action for failure to comply with all regulations
they administer. The Company relies on such enforcement guidance, which is
subject to change at the discretion of the regulatory authorities, in
determining the scope of its permitted sales and marketing activities.
As part of its regulatory compliance program, the Company is in
frequent contact with regulatory agencies so that the Company can: (i) be kept
current on regulatory developments affecting the Company; (ii) obtain answers
from the agencies to questions from Company personnel regarding compliance
issues; and (iii) encourage enforcement of applicable laws and regulations on a
consistent basis throughout its markets. The Company believes that prompt and
consistent enforcement by the regulatory agencies is important and benefits the
Company.
Certain Legal Matters
The Company is involved in litigation from time to time in the ordinary
course of its business. The Company is a party to a lawsuit brought by several
drivers of NWS-Illinois who allege age discrimination and workers' compensation
retaliation and claim back pay and front pay damages of $1.9 million and $1.0
million, respectively, and the costs of the action. In February, 1999, the
Company tentatively agreed to settle this lawsuit for approximately $475,000
(inclusive of all costs, including attorneys' fees), payable over five years.
Documentation of this settlement agreement has not been completed and approved.
The Company does not believe that an adverse judgment in any other matter to
which the Company is a party would have a material adverse effect on the
Company's results of operation, financial condition or debt service
capabilities.
Environmental Matters
The Company currently owns and/or leases a number of properties, and
historically it has owned and/or leased others. Under applicable environmental
laws, the Company may be responsible for remediation of environmental conditions
relating to the presence of certain hazardous substances on such properties. The
liability imposed by such laws is often joint and several without regard for
whether the property owner or operator knew of, or was responsible for, the
presence of such hazardous substances. In addition, the presence of such
hazardous substances, or the failure to properly remediate such substances, may
adversely affect the property owner's ability to borrow using the real estate as
collateral and to transfer its interest in the real estate. Although the Company
is not aware of the presence of hazardous substances requiring remediation,
there can be no assurance that releases unknown to the Company have not
occurred. Except for blending and bottling of a few of the Company's private
label brands, the Company does not manufacture any of the wine or spirit
products it sells and believes that it has conducted its business in substantial
compliance with applicable environmental laws and regulations.
<PAGE>
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning the
directors and executive officers of NWS who have agreed to serve, subject to the
completion of regulatory filings:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position
James E. LaCrosse............. 66 Chairman, President, Chief Executive Officer and Director
Martin H. Bart................ 66 Sr. Vice President and Director
J. Smoke Wallin............... 32 Executive Vice President, Chief Financial Officer, Secretary
and Director
James Beck.................... 54 President, NWS-Indiana and Director
Mitchell Stoltz............... 45 President, NWS-Illinois and Director
Richard P. Paladino........... 53 President, NWS-Michigan and Director
Richard Quinn................. 64 President, Cameron Springs Division and Director
Norma M. Johnston............. 70 Director
Patricia J. LaCrosse.......... 62 Director
Catherine LaCrosse Wallentine. 31 Director
</TABLE>
James E. LaCrosse has served as Chairman, President, Chief Executive
Officer and a Director of NWS since December, 1998. Previously, Mr. LaCrosse
served as Chairman and Director of the Company since its formation in 1973, and
prior to 1973 was employed by various companies in a financial capacity. Mr.
LaCrosse received an M.B.A. from Harvard University in 1961 and a B.A. in
economics from Wesleyan University in 1957.
Martin H. Bart has served as Senior Vice President and a Director of
NWS since December, 1998. Previously Mr. Bart served as Vice Chairman of the
Company from 1995 to 1998. Prior to joining the Company, Mr. Bart served in
various positions with the Joseph E. Seagram & Son Company from 1956 to 1993,
and retired as Executive Vice President of Sales and Marketing. Mr. Bart
received a B.A. in economics from Long Island University in 1955.
J. Smoke Wallin has served as Executive Vice President, Chief Financial
Officer, Secretary and a Director of NWS since December, 1998. Previously, Mr.
Wallin was Executive Vice President, Corporate Group of the Company from 1993 to
1998. Mr. Wallin began his career at the Company in 1988 and has served in
various positions including Chief Information Officer and Brand Manager. Mr.
Wallin received an M.B.A. in Finance from Vanderbilt University-Owen School of
Management in 1993 and a B.S. in economics from Cornell University in 1989. Mr.
Wallin is Mr. LaCrosse's son-in-law.
James Beck has served as President of NWS-Indiana since 1992. Mr. Beck
joined the Company in 1972, and has served in various positions, including
Executive Vice President of Sales for 14 years prior to being named President of
NWS-Indiana. Mr. Beck has been a Director of NWS since December, 1998. Mr. Beck
received a B.S. in Business from Ball State University in 1968.
Mitchell Stoltz has served as President of NWS-Illinois since 1995.
Prior to becoming President, Mr. Stoltz served as Executive Vice President of
Sales and Marketing for NWS-Illinois. Prior to joining the Company in 1992, Mr.
Stoltz served as Vice President and General Manager for Magnolia Marketing
Company and as President for Admiral Wine Company. Mr. Stoltz has been a
Director of NWS since December, 1998. Mr. Stoltz received an M.M. from
Northwestern University--Kellogg Graduate School of Management in 1985 and a
B.A. in Business from Notre Dame University in 1976.
Richard P. Paladino has served as President of NWS-Michigan since 1997,
and a Director of NWS since December, 1998. Prior to joining the Company, Mr.
Paladino served as Vice President, Finance and Operations of United Beverage
Company from 1984 to 1994. Mr. Paladino received a B.S. in Accounting from Notre
Dame University in 1967.
Richard Quinn has served as President of Cameron Springs Company since
1990. Mr. Quinn has been a Director of NWS since December, 1998. Mr. Quinn
received his A.B. in English Literature from Brown University in 1959.
Norma M. Johnston has been a Director of the Company since 1976, and a
Director of NWS since December, 1998. Mrs. Johnston served as Secretary of the
Company from 1976 to 1998.
Patricia J. LaCrosse has been a Director of the Company since its formation
in 1973, and a Director of NWS since December, 1998. Mrs. LaCrosse received a
B.A. from the University of Michigan in 1957. Mrs. LaCrosse is Mr. LaCrosse's
spouse.
Catherine LaCrosse Wallentine has served as District Sales Manager of
NWS-Illinois since January, 1997, and Director of NWS since December, 1998. Ms.
LaCrosse-Wallentine joined the Company in 1994 and has served in various sales
and marketing positions. Ms. LaCrosse-Wallentine received a B.A. in history from
Indiana University in 1990. Ms. LaCrosse-Wallentine is Mr. LaCrosse's daughter.
Compensation of Directors
Directors of the Company have in the past received $3,000 per year for
serving as directors. Following the Offering, employees of the Company who are
also directors of NWS will not receive any fees or compensation for their
services as directors. NWS will reimburse directors for their expenses incurred
in connection with their activities as directors. Not later than July 31, 1999,
NWS intends to elect up to four independent directors to its Board of Directors
and will, at that time, modify its director compensation policy.
Executive Compensation
NWS currently has no paid employees. The following table sets forth the
compensation paid by the Company to James E. LaCrosse, Chief Executive Officer,
and to each of the four most highly compensated executive officers of the
Company for 1998:
<TABLE>
<CAPTION>
Summary Compensation Table
<S> <C> <C> <C> <C> <C>
Annual Compensation
-------------------
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation(1)
James E. LaCrosse 1998 $407,000 $ -- $40,442(2) $238,000(3)
Chairman, President and CEO
J. Smoke Wallin 1998 113,423 26,000 1,620(4) 5,671
Executive Vice President, Chief Financial
Officer and Secretary
James Beck 1998 135,063 150,000 971(4) 6,753
President, NWS-Indiana
Mitchell Stoltz 1998 164,135 30,000 3,600(5) 8,225
President, NWS-Illinois
Richard Paladino 1998 125,000 -- -- 1,442
President, NWS-Michigan
<FN>
- -----------
(1) Includes employer 401(k) Plan contributions in the following amounts:
Mr. LaCrosse, $8,000; Mr. Wallin, $5,671; Mr. Beck, $6,753; Mr. Stoltz,
$8,225; and Mr. Paladino, $1,442.
(2) Consists of $4,123 representing personal use of a Company supplied
automobile, $5,873 representing payments by the Company for medical
insurance premiums, and $30,446 representing payment by the Company for
medical expenses incurred by one of Mr. LaCrosse's family members.
(3) Includes $230,000 of life insurance premiums paid by the Company on
behalf of Mr. LaCrosse and for the benefit of the LaCrosse family trust
for estate planning purposes. The Company expects the premiums paid on
behalf of Mr. LaCrosse in the future will remain at their current
annual rate. Upon the death of Mr. LaCrosse or termination of the life
insurance policies, the Company is entitled to repayment out of the
proceeds of the policies of all premiums paid on behalf of Mr. LaCrosse
for the benefit of the LaCrosse family trust since the inception of the
policy in 1994.
(4) Represents personal use of a Company supplied automobile.
(5) Represents payments by the Company of country club dues.
</FN>
</TABLE>
CERTAIN TRANSACTIONS
From time to time, NWS-Indiana has loaned money to its principal
shareholders, James E. LaCrosse and Norma M. Johnston, the primary purpose of
which was to provide the necessary funds to finance start-up expenses and
working capital needs of NWS-Illinois, an affiliated company owned prior to the
Reorganization by Mr. LaCrosse, Mrs. Johnston and Martin H. Bart. As of December
31, 1998, total indebtedness of Mr. LaCrosse and Mrs. Johnston to NWS-Indiana
was $10.1 million. The indebtedness, which is presently due upon demand, bears
interest at the prime lending rate of the Company's principal lending
institution (7.75% at December 31, 1998). The proceeds of the loans were
provided by Mr. LaCrosse and Mrs. Johnston to NWS-Illinois in the form of loans
or additional capital contributions. As of December 31, 1998, NWS-Illinois was
indebted to Mr. LaCrosse and Mrs. Johnston in the amount of $4.4 million. This
indebtedness to Mr. LaCrosse and Mrs. Johnston, which matures in 2009, is
subordinated to the Exchange Notes and the New Credit Facility, and bears
interest at 7.75% (prime rate at December 31, 1998). The obligations of
NWS-Illinois under the subordinated shareholder notes are expressly subject to
timely payment by Mr. LaCrosse and Mrs. Johnston of their obligations under
their notes to NWS-Indiana.
On July 27, 1998, Mr. LaCrosse transferred substantially all of his
non-voting stock to a family trust for estate-planning purposes. As a part of
this transfer and in addition to normal distributions for tax purposes, NWS
expects that Mr. LaCrosse will cause NWS to make special distributions to Mr.
LaCrosse, the trust and Mrs. Johnston, subject to the terms and conditions
contained in the Indenture (including the limitation on Restricted Payments) and
the New Credit Facility. The special distributions will be subject to, among
other conditions, payments to NWS-Indiana by Mr. LaCrosse and Mrs. Johnston of
amounts not less than the special distributions under the terms of the notes of
Mr. LaCrosse and Mrs. Johnston to NWS-Illinois. The terms of the New Credit
Facility allows, subject to certain conditions and limitations, the special
distributions.
NWS-Indiana and NWS-Illinois have operated as S corporations under the
Code, and their respective subsidiaries have all operated as qualified
subchapter S subsidiaries under the Code or other similarly taxed pass-through
entities (the "S Corp. Businesses"). NWS has elected or will elect to be treated
as an S corporation under the Code and for each of its subsidiaries to be
qualified subchapter S subsidiaries under the Code or similar pass-through
entities for tax purposes. The S Corp. Businesses have not been subject to tax
on their respective net taxable incomes, and the shareholders of the S Corp.
Businesses have been directly subject to tax on their respective proportionate
shares of such net taxable income. NWS-Indiana and NWS-Illinois have
historically made cash distributions to Mr. LaCrosse, Mrs. Johnston and Mr. Bart
in amounts equal to or greater than their respective tax obligations related to
the S Corp. Businesses. The aggregate amount of these distributions during 1996,
1997 and 1998 were $7.8 million, $6.1 million and $2.8 million, respectively.
The terms of the Indenture and the New Credit Facility permit the NWS to make
distributions to shareholders with respect to their tax liabilities subject to
certain conditions and limitations. See "Description of the Exchange
Notes--Certain Covenants--Restricted Payments."
NWS-Illinois also paid a company owned by Mr. Bart $0.2 million during
1998 for certain consulting services provided by Mr. Bart to NWS-Illinois.
During 1998, NWS-Indiana entered into a five year non-compete agreement with
James Beck, president of NWS-Indiana and a Director of NWS, under which Mr. Beck
was paid $0.3 million by the Company. NWS-Indiana obtained certain inventory and
other property related to the wholesale cigar distribution business previously
operated by Mr. Beck.
The Company pays "split-dollar" insurance premiums on eight insurance
policies on the life of Mr. LaCrosse. See "Management--Executive Compensation."
The Company is entitled to receive reimbursement for all premiums paid out of
the proceeds of these policies upon Mr. LaCrosse's death.
<PAGE>
<PAGE>
PRINCIPAL STOCKHOLDERS
NWS has two authorized classes of capital stock, voting common stock
and non-voting common stock. The following table sets forth the beneficial
ownership following the Reorganization of NWS' voting common stock by each
person known by NWS to (i) beneficially own 5% or more of NWS' voting common
stock, and (ii) by all executive officers and directors of NWS as a group.
Except for Mr. LaCrosse and Mrs. Johnston, who have sole voting and investment
power with respect to their voting common stock, no other executive officer or
director owns any shares of NWS' voting common stock.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Number of
Shares Percent
James E. LaCrosse
700 West Morris Street
Indianapolis, Indiana 46225.................. 86,520 83%
Norma M. Johnston
700 West Morris Street
Indianapolis, Indiana 46225.................. 18,000 17
All executive officers and directors as a group
(9 persons).................................. 104,520 100
</TABLE>
The stockholders of NWS have entered into stockholder agreements with
each other and NWS. Such agreements contain certain restrictions relating to
transfers of stock and provide for certain rights to purchase and sell stock of
each corporation, among other matters. In particular, the stockholder agreement
with NWS governs the transferability of Mrs. Johnston's stock in NWS. The
LaCrosse family is obligated to purchase Mrs. Johnston's stock at her death or
during her lifetime should she decide to sell. NWS becomes obligated to purchase
only if the LaCrosse family refuses or fails to purchase. The LaCrosse family
and NWS also have the right to purchase Mrs. Johnston's stock at the death of
Mr. LaCrosse. Any obligation of NWS to purchase the stock owned by Mrs. Johnston
is subject to the terms of the Existing Credit Facility and will be subject to
the terms of the Indenture governing the Exchange Notes and the New Credit
Facility. No right to purchase stock owned by Mr. LaCrosse or a trust for the
benefit of his family exists in favor of Mrs. Johnston.
The stockholders have also agreed not to take any action or effect any
transfer that would cause NWS or any of its subsidiaries to fail to qualify as
an S corporation or other pass-through entity for federal income tax purposes.
In addition, the stockholders have entered into a Tax Indemnification Agreement
whereby they have agreed to indemnify NWS and its subsidiaries for any loss that
may arise in the event NWS or any of its subsidiaries should fail to maintain
its Pass-Through Status.
The LaCrosse family and the Company own life insurance policies on
behalf of Mrs. Johnston in face amount of $4.0 million and $0.5 million,
respectively.
<PAGE>
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY AND OTHER INDEBTEDNESS
The following sets forth information concerning the Company's New
Credit Facility and Indebtedness expected to be outstanding immediately
following the Exchange Offer. For purposes of this section, the term "Closing
Date" refers to January 25, 1999.
New Credit Facility
General. In January, 1999, the Company entered into the New Credit
Facility with NBD Bank, on behalf of itself and as agent for a syndicate of
other lenders. The New Credit Facility provides for revolving loans to NWS and
the issuance of letters of credit for the account of NWS in an aggregate
principal and stated amount at any time not to exceed $60 million (of which not
more than $5 million may be represented by letters of credit) (the "New Credit
Facility").
Loans under the New Credit Facility are available at any time on and
after the Closing Date and prior to the date which is five years after the
Closing Date. Letters of credit under the New Credit Facility will be available
at any time on and after the Closing Date. The obligations of NWS under the New
Credit Facility will be guaranteed by the Guarantors, as defined herein. See
"Description of the Exchange Notes--Certain Definitions."
Interest Rates and Commitment Fees. At NWS' option, the interest rates
per annum applicable to the New Revolving Credit Facility are either the Base
Rate (as defined) or the Eurodollar Rate (as defined) plus margins ranging from
0% to 1.25% (Base Rate revolving loans) and 1.0% to 3.0% (Eurodollar Rate
revolving loans). The Base Rate is the highest of (a) NBD's prime rate and (b)
the Federal Funds Effective Rate plus 0.50%. The applicable margins depend upon
two factors. First, NWS may elect advance rates on accounts receivable and
inventory of (i) 80% accounts receivable and 60% inventory; (ii) 75% accounts
receivable and 55% inventory; and (iii) 70% accounts receivable and 50%
inventory. Second, NWS' ratio of EBITDA (as defined in the New Credit Facility)
to net interest expense is determined to complete the pricing matrix. The
pricing under the New Credit Facility improves as NWS' advance rates decline and
its interest coverage improves. The margin in respect of the New Credit Facility
is the Base Rate plus .50% and Eurodollar Rate plus 2.25% and is subject to
adjustment after three months following the Closing Date based on the ratio of
NWS' EBITDA to net interest expense.
NWS pays a commission on the face amount of all outstanding letters of
credit at a per annum rate equal to the Applicable Margin (as defined) then in
effect with respect to the Eurodollar Rate loans under the New Credit Facility.
A fronting fee equal to 0.25% per annum on the face amount of each letter of
credit is also payable annually in advance to NBD Bank for its own account. NWS
pays a per annum fee ranging from 0.25% to 0.50% on the undrawn portion of the
commitments in respect of the New Revolving Credit Facility (the "Commitment
Fee"). The Commitment Fee which initially is 0.50% on the undrawn portion is
subject to adjustment after three months following the Closing Date based on the
ratio of NWS' EBITDA to net interest expense.
Collateral. The New Credit Facility is secured by first priority
security interests in all the accounts receivable and inventories of NWS,
NWS-Indiana, NWS-Illinois, NWS-Michigan and NWS-LLC, as well as a pledge of
intercompany notes evidencing loans from NWS to its subsidiaries, which are also
secured by a second priority security interest in the accounts receivable and
inventories of those subsidiaries and which are limited in aggregate amount to
the balance at any time outstanding under the New Credit Facility. The terms of
the pledge agreement and other related security documents in favor of the banks
under the New Credit Facility related to the intercompany indebtedness expressly
limit the collateral to the underlying accounts receivable and inventory.
Covenants. The New Credit Facility contains a number of significant
covenants that, among other things, restricts the ability of NWS and the
Guarantors to dispose of assets, incur additional Indebtedness, pay dividends,
create liens on assets, make investments or acquisitions, engage in mergers or
consolidations, make capital expenditures, or engage in certain transactions
with affiliates and otherwise restrict corporate activities. The New Credit
Facility also limits NWS' ability to repurchase the Exchange Notes in the event
of a Change of Control, as defined in the Indenture. In addition, under the New
Credit Facility NWS is required to comply with a minimum EBITDA interest
coverage ratio of not less than 1.5 to 1.0 increasing on March 31, 2000 to 1.75
to 1.0 and a funded debt maximum of 7.5 to 1.0 decreasing on September 30, 1999
to 6.5 to 1.0.
Events of Default. Events of Default under the New Credit Facility
include, but are not limited to, nonpayment of principal when due; nonpayment of
interest, fees or other amounts after a grace period of five days; material
inaccuracy of representations and warranties; violation of covenants (subject,
in the case of certain covenants, to customary grace periods); cross-default;
bankruptcy events; certain ERISA events; material judgments; actual or asserted
invalidity of any material provision of any guarantee or security document, or
any security interest; and a Change of Control (as defined). Upon the occurrence
of an Event of Default, NBD Bank may, in its capacity as administrative agent,
accelerate payments due under the New Credit Facility.
Other Indebtedness
The Company is obligated under certain loans from third parties and
shareholders of NWS. The Company's master warehouse in Indianapolis, Indiana has
been financed with proceeds from industrial revenue bonds with favorable rates.
The bonds had a principal balance of $0.3 million at December 31, 1998, mature
in 2003 and are secured by the Indianapolis master warehouse. The Company is
also obligated to a former employee in the principal amount of $0.4 million
which matures on June 30, 1999 and under an unsecured non-compete agreement with
a former stockholder which had a principal balance of $0.6 million at December
31, 1998 and matures on April 1, 2000. NWS-Illinois has unsecured notes payable
to James E. LaCrosse and Norma Johnston in the amount of $4.4 million at
December 31, 1998. See "Certain Transactions." All of these notes are
subordinated to the Exchange Notes and the New Credit Facility. The notes due
Mr. LaCrosse and Mrs. Johnston will accrue interest at NBD's prime rate, will
mature in 2009 and may be prepaid at any time by NWS-Illinois, subject to the
limitations contained in the Indenture and the New Credit Facility.
<PAGE>
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
General
The Outstanding Notes were, and the Exchange Notes will be, issued
pursuant to an Indenture (the "Indenture") dated January 25, 1999 among NWS, the
Guarantors and Norwest Bank Minnesota, N.A., as trustee (the "Trustee"). See
"Notice to Investors." The terms of the Exchange Notes are the same as the terms
of the Outstanding Notes, except that (1) the Company registered the Exchange
Notes under the Securities Act, and their transfer is not restricted like the
Outstanding Notes, and (2) holders of the Exchange Notes are not entitled to
certain rights under the Registration Rights Agreement. The terms of the
Exchange Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture
Act"). The Exchange Notes are subject to all such terms, and Holders of Exchange
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of the material provisions of the Indenture and
the Registration Rights Agreement does not purport to be complete and is
qualified in its entirety by reference to the Indenture and the Registration
Rights Agreement, including the definitions therein of certain terms used below.
The definitions of certain terms used in the following summary are set forth
below under "--Certain Definitions." For purposes of this summary, the term
"Company" refers only to National Wine & Spirits, Inc., and not to any of its
subsidiaries. Any valuation required by the Indenture shall be made by the Board
of Directors of the Company in good faith, except as otherwise provided in the
Indenture.
The Outstanding Notes are, and the Exchange Notes will be, general
unsecured obligations of the Company and will rank pari passu in right of
payment with all current and future unsubordinated Indebtedness of the Company
and senior in right of payment to all existing and future subordinated
Indebtedness of the Company. The Outstanding Notes are, and the Exchange Notes
will be, effectively subordinated to all secured Indebtedness of the Company
with respect to the assets securing such Indebtedness, including any borrowings
under the New Credit Facility, which will be secured by a first priority
security interest in all the accounts receivable and inventories of the Company,
NWS-Indiana, NWS-Illinois, NWS-Michigan and NWS-LLC, as well as a pledge of
intercompany notes evidencing loans from NWS to its Subsidiaries, which are also
secured by a second priority security interest in all the accounts receivable
and inventories of those Subsidiaries. As of December 31, 1998, on a pro forma
basis after giving effect to the January, 1999 offering and the New Credit
Facility and the application of the net proceeds therefrom, the Company and its
subsidiaries would have had approximately $122.4 million of outstanding
unsubordinated Indebtedness (excluding the Guarantees), of which $12.4 million
would have been secured Indebtedness.
The operations of the Company are conducted through its subsidiaries
and, therefore, the Company is dependent upon the cash flow of its subsidiaries
to meet its obligations, including its obligations under the Exchange Notes. As
of the date of the Indenture, all of the Company's subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
Principal, Maturity and Interest
The Exchange Notes will be issued in aggregate principal amount of
$110.0 million and will mature on January 15, 2009. Additional Exchange Notes
may be issued pursuant to the Indenture in accordance with the covenant
described below in "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock." Interest on the Exchange Notes will accrue at the rate of
10 1/8% per annum and will be payable semi-annually in arrears on January 15 and
July 15, commencing on July 15, 1999, to Holders of record on the immediately
preceding December 31 and June 30. Interest on the Exchange Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, premium
and interest and Liquidated Damages, if any, on the Exchange Notes will be
payable at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company, payment
of interest and Liquidated Damages, if any, may be made by check mailed to the
Holders of the Exchange Notes at their respective addresses set forth in the
register of Holders of Exchange Notes; provided that all payments of principal,
premium, interest and Liquidated Damages, if any, with respect to Exchange Notes
the Holders of which have given wire transfer instructions to the Company will
be required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Exchange Notes will be issued in
denominations of $1,000 and integral multiples thereof.
Subsidiary Guarantees
The Company's payment obligations under the Exchange Notes will be
jointly and severally guaranteed (the "Subsidiary Guarantees") by the
Guarantors. Each Subsidiary Guarantee will be a senior unsecured obligation of
the Guarantor issuing such Subsidiary Guarantee and will rank pari passu in
right of payment with all unsubordinated Indebtedness of such Guarantor. The
Guarantees will be effectively subordinated to all secured Indebtedness of the
Guarantors, including guarantees under the New Credit Facility, which will be
secured by the Guarantors' inventory and accounts receivable and the pledge of
certain intercompany notes evidencing Credit Facility Intercompany Indebtedness,
which notes are also secured by a second priority security interest in all the
accounts receivable and inventories of the Guarantors and which are at all times
limited in aggregate amount to the balance at any time outstanding under the New
Credit Facility. As of December 31, 1998, on a pro forma basis after giving
effect to the Offering and the New Credit Facility and the application of the
proceeds therefrom, the Guarantors would have had approximately $0.3 million of
outstanding unsubordinated Indebtedness in addition to their Subsidiary
Guarantees of the Exchange Notes and the guarantees of the New Credit Facility.
The obligations of each Guarantor under its Subsidiary Guarantee will be limited
so as not to constitute a fraudulent conveyance under applicable law. See,
however, "Risk Factors--Fraudulent Conveyance Matters."
The Indenture provides that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Exchange Notes, the Indenture and the Registration Rights
Agreement and (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
The Indenture provides that in the event of a sale or other disposition
of all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, or in the event that a Guarantor (other than NWS-Indiana,
NWS-Illinois, NWS-LLC or NWS-Michigan) is designated as an Unrestricted
Subsidiary in accordance with the Indenture, then such Guarantor (in the event
of a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "Redemption or Repurchase at Option of Holders--Asset Sales."
Optional Redemption
The Exchange Notes are not redeemable at the Company's option prior to
January 15, 2004. Thereafter, the Exchange Notes will be subject to redemption
at any time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' written notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on January 15 of the
years indicated below:
<TABLE>
<CAPTION>
<S> <C>
Year Percentage
2004................. 105.0625%
2005................. 103.3750%
2006................. 101.6875%
2007 and thereafter.. 100.0000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after January
20, 1999, the Company may redeem up to 33 1/3% of the aggregate principal
amount of Exchange Notes originally issued under the Indenture at a redemption
price of 110.125% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date, with
the net cash proceeds of one or more public offerings of common stock of the
Company; provided that at least 66 2/3% of the aggregate principal amount of
Exchange Notes remain outstanding immediately after the occurrence of each such
redemption (excluding Exchange Notes held by the Company and its Subsidiaries);
and provided, further, that such redemption shall occur within 45 days of the
date of the closing of each such public offering.
Selection and Notice
If the Company redeems less than all of the Exchange Notes, the Trustee
will select the Exchange Notes for redemption in compliance with the
requirements of the principal national securities exchange, if any, on which the
Exchange Notes are listed, or, if the Exchange Notes are not so listed, on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided that no Exchange Notes of $1,000 or less shall be redeemed
in part. Notices of redemption shall be mailed by first class mail at least 30
but not more than 60 days before the redemption date to each Holder of Exchange
Notes to be redeemed at its registered address. Notices of redemption may not be
conditional. If any Exchange Note is to be redeemed in part only, the notice of
redemption that relates to such Exchange Note shall state the portion of the
principal amount thereof to be redeemed. A new Exchange Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Exchange Note. Exchange Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Exchange Notes or portions of them
called for redemption.
Mandatory Redemption
Except as set forth below under "Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Exchange Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Exchange
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Exchange
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (the "Change of Control Payment"). Within ten days following
any Change of Control, the Company will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase Exchange Notes on the date specified in such notice,
which date shall be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date"), pursuant to
the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Exchange
Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Exchange Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Exchange Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Exchange Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of Exchange Notes
or portions thereof being purchased by the Company. The Paying Agent will
promptly mail to each Holder of Exchange Notes so tendered the Change of Control
Payment for such Exchange Notes, and the Trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Exchange
Note equal in principal amount to any unpurchased portion of the Exchange Notes
surrendered, if any; provided that each such new Exchange Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Exchange Notes to require that
the Company repurchase or redeem the Exchange Notes in the event of a takeover,
recapitalization or similar transaction.
The New Credit Facility contains prohibitions of certain events that
would constitute a Change of Control and limits the Company's ability to
repurchase Exchange Notes in the event of a Change of Control. In addition, the
exercise by the Holders of Exchange Notes of their right to require the Company
to repurchase the Exchange Notes could cause a default under such Indebtedness,
even if the Change of Control itself does not, due to the financial effect of
such repurchases on the Company. Finally, the Company's ability to pay cash to
the Holders of Exchange Notes upon a repurchase may be limited by the Company's
then existing financial resources. See "Risk Factors--Inability to Purchase
Exchange Notes Upon a Change of Control."
The Company will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Exchange Notes validly tendered and not withdrawn under such
Change of Control Offer.
Asset Sales
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; provided that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Exchange Notes or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are converted by the Company or such Restricted Subsidiary
into cash (to the extent of the cash received) within 10 business days, shall be
deemed to be cash for purposes of this provision; provided, however, that the
Company may (A) sell its Cameron Springs bottled water business for fair market
value without complying with clause (ii) of this paragraph provided that the
non-cash consideration received therefor is in the form of securities registered
under the Securities Act or subject to a registration rights agreement providing
for registration under the Securities Act within 90 days after the sale, and (B)
sell beer franchises, brand labels and distribution rights of NWS-Illinois or
sell all or part of its U.S. Beverage operations for fair market value including
cash royalty payments or cash payments over time, without complying with clause
(ii) of this paragraph.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or the applicable Restricted Subsidiary may apply such Net
Proceeds at its option, (a) to repay Indebtedness under a Credit Facility (and
to correspondingly permanently reduce commitments with respect thereto in the
case of revolving borrowings; provided, that no such reduction shall affect the
amount that may be borrowed pursuant to the Borrowing Base as provided in clause
(i)(y) of the second paragraph under "--Incurrence of Indebtedness and Issuance
of Preferred Stock") or (b) to the acquisition of a controlling interest in
another business, the making of a capital expenditure or the acquisition of
other assets that are not classified as current assets, in each case, in a
Permitted Business. Pending the final application of any such Net Proceeds, the
Company or the applicable Restricted Subsidiary may temporarily reduce revolving
credit borrowings or otherwise invest such Net Proceeds in any manner that is
not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10 million, the Company will be required to make an offer to
all Holders of Exchange Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Exchange Notes and any other pari passu Indebtedness
including a comparable asset sale covenant that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Exchange
Notes and such other pari passu Indebtedness tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Exchange Notes and such other pari passu Indebtedness surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Exchange Notes and such other
pari passu Indebtedness shall be purchased on a pro rata basis. Upon completion
of such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Certain Covenants
Restricted Payments
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary
of the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary of the
Company) that is not a Permitted Investment; (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Exchange Notes, except a
payment of interest or principal at Stated Maturity; (iv) make any payment of
salary, bonus, and any other cash compensation, including split-dollar insurance
premiums, that is characterized as income on Form W-2 to or for the benefit of
any Person who is a beneficial owner of more than 10% of the outstanding Voting
Stock of the Company, or to or for the benefit of any immediate family member of
such Person, in excess of $950,000 annually for any individual or in excess of
$2.5 million annually in the aggregate for all such individuals; (v) make any
cash payment (including any repurchase or redemption) after the date of the
Indenture on any Indebtedness owing to any shareholder on any NWS-Illinois
Shareholder Subordinated Exchange Note or (vi) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (vi) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under caption "--Incurrence
of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the Indenture (excluding
Restricted Payments permitted by clauses (ii), (iii), (iv) and (v) of
the next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds
received by the Company from the issue or sale since the date of the
Indenture of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold
to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock) and 100% of the capital contributions received by the Company
after the date of the Indenture in cash, plus (iii) one year and one
day after the date of such receipt, 100% of the cash payments received
by the Company or a Restricted Subsidiary of the Company after the date
of the Indenture on a Company Shareholder Exchange Note Receivable,
plus (iv) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (v) 50% of any dividends received by the Company or a
Controlled Subsidiary after the date of the Indenture from an
Unrestricted Subsidiary of the Company, to the extent that such
dividends were not otherwise included in Consolidated Net Income of the
Company for such period.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (ii) provided that no Default or Event of Default has occurred and is
continuing, the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) provided that no Default or Event of
Default has occurred and is continuing, the defeasance, redemption, repurchase
or other acquisition of subordinated Indebtedness with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (iv) provided that no
Default or Event of Default has occurred and is continuing, the payment of any
dividend by a Restricted Subsidiary of the Company to the holders of its common
Equity Interests on a pro rata basis; (v) the payment of Permitted Quarterly Tax
Distributions to the holders of Capital Stock of any of the S Corp. Businesses
as described below; and (vi) provided that no Default or Event of Default has
occurred and is continuing, the payment of any Restricted Payments not otherwise
permitted in an aggregate amount not exceeding $2.5 million.
For so long as each S Corp. Business qualifies as a pass-through entity
for Federal income tax purposes, such S Corp. Business may make cash
distributions to its shareholders or members, during each Quarterly Payment
Period, in an aggregate amount not to exceed the Permitted Quarterly Tax
Distribution in respect of the related Estimation Period. If any portion of a
Permitted Quarterly Tax Distribution is not distributed during such Quarterly
Payment Period, the Permitted Quarterly Tax Distribution payable during the
immediately following Quarterly Payment Period shall be increased by such
undistributed portion.
Within 10 days following the Company's filing of Internal Revenue
Service Form 1120S for the immediately preceding taxable year, the Tax Amounts
CPA shall file with the Trustee a written statement indicating in reasonable
detail the calculation of the True-up Amount. In the case of a True-up Amount
due to the shareholders or members, the Permitted Quarterly Tax Distribution
payable during the following Quarterly Payment Periods shall be increased by
such True-up Amount. In the case of a True-up Amount due to the Company, the
Permitted Quarterly Tax Distribution payable during the following Quarterly
Payment Periods shall be reduced by such True-up Amount and the excess, if any,
of the True-up Amount over such Permitted Quarterly Tax Distribution shall be
applied to reduce the following Permitted Quarterly Tax Distributions until such
True-up Amount is entirely offset.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; provided
that in no event shall the business currently operated by NWS-Indiana,
NWS-Illinois (other than its U.S. Beverage craft beer business), NWS-LLC or
NWS-Michigan be transferred to or held by an Unrestricted Subsidiary. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $5.0 million. Not later than the date
of making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, together with a copy of any fairness
opinion or appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock; provided, however, that the Company and any Guarantor
may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1.0 if such
incurrence or issuance occurs on or prior to the second anniversary of the date
of the Indenture, and 2.25 to 1.0 if such incurrence or issuance occurs at any
time thereafter, in each case, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period;
The provisions of the first paragraph of this covenant will not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company or any Guarantor of
Indebtedness and letters of credit under Credit Facilities; provided,
that the aggregate principal amount of all Indebtedness (with letters
of credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted Subsidiaries
thereunder) at any time outstanding under all Credit Facilities after
giving effect to such incurrence, does not exceed an amount equal to
the greater of (x) $60.0 million (provided that such amount shall be
reduced to the extent of any reduction or elimination of any commitment
under any Credit Facility resulting from or relating to the formation
of any Receivables Subsidiary or the consummation of any Qualified
Receivables Transaction) less the aggregate amount of all Net Proceeds
of Asset Sales that have been applied by the Company or any of its
Restricted Subsidiaries since the date of the Indenture to repay
Indebtedness under a Credit Facility pursuant to the covenant described
above under the caption "--Asset Sales" and (y) the amount of the
Borrowing Base as of the date of such incurrence; provided, further,
that, after giving effect to such incurrence and the application of
proceeds thereof, the aggregate principal amount of all term
Indebtedness and letters of credit (with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of
the Company and its Restricted Subsidiaries thereunder) at any time
outstanding under all Credit Facilities after giving effect to such
incurrence, does not exceed an amount equal to the greater of (a) $30.0
million and (b) 50% of the amount of the Borrowing Base as of the date
of such incurrence;
(ii) the incurrence by the Company or any of its
Restricted Subsidiaries of the Existing Indebtedness;
(iii) the incurrence of Indebtedness represented by the
Exchange Notes issued on the Issue Date and the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company and its Restricted
Subsidiaries (including industrial revenue bonds, tax increment
financing and related reimbursement obligations), in an aggregate
principal amount, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (iv), not to exceed $5 million at any time
outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness that was permitted by the Indenture to be incurred
pursuant to clause (ii) or (iii) of this paragraph or pursuant to the
immediately preceding paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness, including Credit Facility
Intercompany Indebtedness, between or among the Company and any
Restricted Subsidiary that is a Guarantor; provided, however, that (i)
except for Credit Facility Intercompany Indebtedness, (A) if the
Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Exchange Notes, or (B) if a Guarantor
is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to all Obligations with respect to such Guarantor's
Subsidiary Guarantee and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary that is a
Guarantor and (B) any sale or other transfer of any such Indebtedness
to a Person that is not either the Company or a Restricted Subsidiary
that is a Guarantor shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding;
(viii) the Guarantee by the Company or any of the Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant (except clause (ix) of this paragraph);
(ix) the incurrence by a Receivables Subsidiary of
Indebtedness in a Qualified Receivables Transaction that is without
recourse to the Company or to any other Subsidiary of the Company or
their assets (other than such Receivables Subsidiary and its assets
and, as to the Company or any Subsidiary of the Company, other than
pursuant to representations, warranties, covenants and indemnities
customary for such transactions) and is not guaranteed by any such
Person;
(x) the incurrence by the Company's Unrestricted Subsidiaries
of Non-Recourse Debt, provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt, such event shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary that was not
permitted by this clause (x); and
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding
(which may, but need not, be borrowed under Credit Facilities),
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (xi), not to exceed $10 million.
At December 31, 1998, the Borrowing Base was approximately $ 89.8
million.
The Indenture also provides that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Exchange Notes on substantially
identical terms; provided, however, that no Indebtedness of the Company shall be
deemed to be contractually subordinated in right of payment to any other
Indebtedness of the Company solely by virtue of being unsecured.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness will
not be deemed to be an incurrence of Indebtedness for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued to the extent contemplated by the definition
of such term.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if (i) the Company or such Restricted Subsidiary, as applicable
could have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described below under the caption "--Liens," (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with, the covenant
described above under the caption "-- Asset Sales."
Liens
The Indenture provides that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits (other than Permitted Quarterly
Tax Distributions or distributions to enable the Company to make Permitted
Quarterly Tax Distributions), or (b) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the New Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the New Credit Facility as in effect on the date of the Indenture, (c) the
Indenture and the Exchange Notes, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred, (f) by reason of customary non-assignment provisions
in leases entered into in the ordinary course of business and consistent with
past practices, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (h) any agreement for the sale
or other disposition of a Restricted Subsidiary that restricts distributions by
that Restricted Subsidiary pending its sale or other disposition, (i) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of the covenant described
above under the caption "--Liens" that limit the right of the Company or any of
its Restricted Subsidiaries to dispose of the assets subject to such Lien, (k)
provisions with respect to the disposition or distribution of assets or property
pursuant to Asset Sales (or transactions which, but for their size, would be
Asset Sales) with respect to assets to be sold, or in joint venture agreements
and other similar agreements entered into in the ordinary course of business,
(l) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business, and (m)
Indebtedness or other contractual requirements of a Receivables Subsidiary in
connection with a Qualified Receivables Transaction, provided that such
restrictions apply only to such Receivables Subsidiary and the contractual
requirements of the Company and its Restricted Subsidiaries to transfer assets
to such Receivables Subsidiary in Qualified Receivables Transactions.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Subsidiary after the date of the
Indenture, then, except for Subsidiaries that have been properly designated as
Unrestricted Subsidiaries in accordance with the Indenture for so long as they
continue to constitute Unrestricted Subsidiaries and except Receivables
Subsidiaries, such newly acquired or created Subsidiary shall become a Guarantor
and execute a Supplemental Indenture and deliver an Opinion of Counsel, in
accordance with the terms of the Indenture. In addition, if any Unrestricted
Subsidiary is redesignated, or becomes, a Restricted Subsidiary, such Restricted
Subsidiary shall become a Guarantor and execute a Supplemental Indenture and
deliver an Opinion of Counsel, in accordance with the terms of the Indenture.
Notwithstanding the foregoing, any Restricted Subsidiary that is not
incorporated under the laws of the United States or any political subdivision
thereof shall not be required to become a Guarantor unless such Restricted
Subsidiary guarantees other Indebtedness of the Company or another Subsidiary of
the Company.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Exchange Notes and the
Indenture pursuant to a supplemental Indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Controlled Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, immediately after such transaction
after giving pro forma effect thereto and any related financing transactions as
if the same had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Stock) of the Company, (v) salaries, bonuses
and employee benefits paid to the officers of the Company and its Subsidiaries
in the ordinary course of business consistent with past practice; (vi)
transactions in the ordinary course of business between the Company or any
Restricted Subsidiary and (x) any Person that is not a Restricted Subsidiary (A)
that is engaged in a Permitted Business and (B) in which the Company has an
Investment on the date of the Indenture or makes an Investment permitted by the
Indenture, and (C) in which neither the Principal, any Related Party or any
officer, director or equity owner of the Company or any of its Subsidiaries has
any beneficial ownership interest (other than indirectly through the Company or
a Restricted Subsidiary), or (y) Consolidated Rectifying, Inc. for the bottling,
blending and/or manufacture of distilled spirits in the ordinary course of
business and consistent with past practice, (vii) transactions between a
Receivables Subsidiary and any Person in which the Receivables Subsidiary has an
Investment in connection with any Qualified Receivables Transaction and (viii)
Permitted Investments and Restricted Payments that are permitted by the
provisions of the Indenture described above under the caption "--Restricted
Payments."
Limitation on Issuances and Sales of Capital Stock of Controlled Subsidiaries
The Indenture provides that the Company (i) will not, and will not
permit any Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Controlled Subsidiary of the
Company to any Person (other than the Company or a Controlled Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other disposition
is of all the Capital Stock of such Controlled Subsidiary and (b) the cash Net
Proceeds from such transfer, conveyance, sale, lease or other disposition are
applied in accordance with the covenant described above under the caption
"--Asset Sales" and (c) after giving effect to such disposition, such Controlled
Subsidiary remains a Controlled Subsidiary and (ii) will not permit any
Controlled Subsidiary of the Company to issue any of its Equity Interests (other
than, if necessary, shares of its Capital Stock constituting directors'
qualifying shares) to any Person other than to the Company or a Controlled
Subsidiary of the Company if, after giving effect thereto, such Controlled
Subsidiary would cease to be a Controlled Subsidiary. The foregoing limitations
shall not prevent any increase in the ownership or profits interest of Martin H.
Bart or his successors in NWS-LLC or any successor entity thereto in accordance
with the terms of the limited liability company agreement governing NWS-LLC on
the date of the Indenture, and as amended or replaced thereafter in a manner not
adverse to the Holders of the Exchange Notes.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
Payments for Consent
The Indenture provides that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Exchange Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Indenture or the Exchange Notes unless
such consideration is offered to be paid or is paid to all Holders of the
Exchange Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Exchange Notes are outstanding, the Company will furnish to the
Holders of Exchange Notes (i) beginning with the quarterly period ending
December 31, 1998, all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, either on the face
of the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries) and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports, in each case within the time periods
specified in the Commission's rules and regulations. In addition, beginning with
the first quarterly period commencing after the consummation of the exchange
offer contemplated by the Registration Rights Agreement, whether or not required
by the rules and regulations of the Commission, the Company will file a copy of
all such information and reports with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Company and any Subsidiary Guarantors have agreed that, for so
long as any Exchange Notes remain outstanding, they will furnish to the Holders
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Exchange Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Exchange Notes
(whether or not prohibited by the subordination provisions of the Indenture);
(iii) failure by the Company or any Subsidiary to comply with the provisions
described under the captions "--Change of Control," "--Merger, Consolidation or
Sale of Assets," "--Restricted Payments" or "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; (iv) failure by the Company for 60 days after
notice to comply with any of its other agreements in the Indenture or the
Exchange Notes; (v) default under any mortgage, Indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (vii) the termination of any Subsidiary
Guarantee for any reason not permitted by the Indenture, or the denial of any
Guarantor or any Person acting on behalf of any Guarantor of such Guarantor's
obligations under its respective Subsidiary Guarantee; and (viii) certain events
of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then Outstanding Notes may
declare all the Exchange Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all Outstanding Notes will become due and
payable without further action or notice. Holders of the Exchange Notes may not
enforce the Indenture or the Exchange Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then Outstanding Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Exchange Notes
notice of any continuing Default or Event of Default (except a Default or Event
of Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest. In the case of any Event of
Default occurring by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding payment of
the premium that the Company would have had to pay if the Company then had
elected to redeem the Exchange Notes pursuant to the optional redemption
provisions of the Indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the Exchange Notes. If an Event of Default occurs prior to January 15, 2004
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Exchange Notes prior to January 15, 2004, then the premium
specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Exchange Notes.
The Holders of a majority in aggregate principal amount of the Exchange
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Exchange Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Exchange Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator, or stockholder, partner
or member of the Company or any Guarantor, as such, shall have any liability for
any obligations of the Company or any Guarantor under the Exchange Notes, the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Exchange Notes by accepting a
Exchange Note waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Exchange Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the Outstanding Notes
("Legal Defeasance") except for (i) the rights of Holders of outstanding
Exchange Notes to receive payments in respect of the principal of, premium, if
any, and interest and Liquidated Damages on such Exchange Notes when such
payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Exchange Notes concerning issuing temporary
Exchange Notes, registration of Exchange Notes, mutilated, destroyed, lost or
stolen Exchange Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Exchange Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Exchange Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Exchange Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the Outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Exchange Notes are being defeased to maturity or to a
particular redemption date; (ii) in the case of Legal Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
Outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that, assuming no intervening bankruptcy of the
Company between the date of deposit and the 91st day following the deposit and
assuming no Holder of Exchange Notes is an insider of the Company, after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Exchange Notes over the
other creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Exchange Note selected for redemption. Also, the Company is not required to
transfer or exchange any Exchange Note for a period of 15 days before a
selection of Exchange Notes to be redeemed.
The registered Holder of an Exchange Note will be treated as the owner
of it for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture
or the Exchange Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Exchange Notes then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Exchange Notes), and any
existing default or compliance with any provision of the Indenture or the
Exchange Notes may be waived with the consent of the Holders of a majority in
principal amount of the then Outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Exchange
Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Exchange Notes held by a non-consenting Holder): (i)
reduce the principal amount of Exchange Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Exchange Note or alter the provisions with respect to the
redemption of the Exchange Notes (other than provisions relating to the
covenants described above under the caption "--Repurchase at the Option of
Holders"), (iii) reduce the rate of or change the time for payment of interest
on any Exchange Note, (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Exchange Notes (except a
rescission of acceleration of the Exchange Notes by the Holders of at least a
majority in aggregate principal amount of the Exchange Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Exchange
Note payable in money other than that stated in the Exchange Notes, (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Exchange Notes to receive payments of
principal of or premium, if any, or interest on the Exchange Notes, (vii) waive
a redemption payment with respect to any Exchange Note (other than a payment
required by one of the covenants described above under the caption "--Repurchase
at the Option of Holders") or (viii) make any change in the foregoing amendment
and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Exchange Notes, the Company and the Trustee may amend or supplement the
Indenture or the Exchange Notes to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Exchange Notes in addition to or in place of
certificated Exchange Notes, to provide for the assumption of the Company's
obligations to Holders of Exchange Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Exchange Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Exchange Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Exchange Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture
and Registration Rights Agreement without charge by writing to National Wine &
Spirits Corporation, P.O. Box 1602, Indianapolis, Indiana 46206-1602, Attention:
Secretary.
Book-Entry, Delivery and Form
Exchange Notes exchanged for Outstanding Notes sold to Qualified
Institutional Buyers and Outstanding Notes offered and sold in offshore
transactions in reliance upon Regulation S, if any, initially will be in the
form of one or more registered global notes without interest coupons
(collectively, the "Global Exchange Notes"). Upon issuance, the Global Exchange
Notes will be deposited with the Trustee, as custodian for The Depositary Trust
Company ("DTC"), in New York, New York, and registered in the name of DTC or its
nominee for credit to the accounts of DTC's Direct and Indirect Participants (as
defined below). Transfer of beneficial interests in Global Exchange Notes will
be subject to the applicable rules and procedures of DTC and its Direct and
Indirect Participants (including, if applicable, those of the Euroclear System
("Euroclear") and Cedel Bank, societe anonyme ("CEDEL")), which may change from
time to time.
The Global Exchange Notes may be transferred, in whole and not in part,
only to another nominee of DTC or to a successor of DTC or its nominee in
certain limited circumstances. Beneficial interests in the Global Exchange Notes
may be exchanged for Notes in certificated form in certain limited
circumstances. See "--Transfer of Interests in Global Exchange Notes for
Certificated Exchange Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The
Exchange Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
Depositary Procedures
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations, including
Euroclear and Cedel. Access to DTC's system is also available to other entities
that clear through, or maintain a direct or indirect custodial relationship
with, a Direct Participant (collectively, the "Indirect Participants").
DTC has advised the Company that, pursuant to DTC's procedures, (i)
upon deposit of the Global Exchange Notes, DTC will credit the accounts of the
Direct Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Exchange Notes that have been allocated to them
by the Initial Purchasers, and (ii) DTC will maintain records of the ownership
interests of such Direct Participants in the Global Exchange Notes and the
transfer of ownership interests by and between Direct Participants. DTC will not
maintain records of the ownership interests of, or the transfer of ownership
interests by and between, Indirect Participants or other owners of beneficial
interests in the Global Exchange Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the Global Exchange Notes.
Investors in the U.S. Global Exchange Notes may hold their interests
therein directly through DTC if they are Direct Participants in DTC or
indirectly through organizations that are Direct Participants in DTC. Morgan
Guaranty Trust Company of New York, Brussels office is the operator and
depository of Euroclear, and Citibank, N.A. is the operator and depository of
CEDEL (each a "nominee" of Euroclear and CEDEL, respectively). Therefore, they
will each be recorded on DTC's records as the holders of all ownership interests
held by them on behalf of Euroclear and CEDEL, respectively. Euroclear and CEDEL
must maintain on their own records the ownership interests, and transfers of
ownership interests by and between, their own customers' securities accounts.
DTC will not maintain such records. All ownership interests in any Global
Exchange Notes, including those of customers' securities accounts held through
Euroclear or CEDEL, may be subject to the procedures and requirements of DTC.
The laws of some states in the United States require that certain
persons take physical delivery in definitive, certificated form, of securities
that they own. This may limit or curtail the ability to transfer beneficial
interests in a Global Exchange Note to such persons. Because DTC can act only on
behalf of Direct Participants, which in turn act on behalf of Indirect
Participants and others, the ability of a person having a beneficial interest in
a Global Exchange Note to pledge such interest to persons or entities that are
not Direct Participants in DTC, or to otherwise take actions in respect of such
interests, may be affected by the lack of physical certificates evidencing such
interests. For certain other restrictions on the transferability of the Exchange
Notes see "-- Transfers of Interests in Global Exchange Notes for Certificated
Exchange Notes."
Except as described in "--Transfers of Interests in Global Exchange
Notes for Certificated Exchange Notes", owners of beneficial interests in the
Global Exchange Notes will not have Exchange Notes registered in their names,
will not receive physical delivery of Exchange Notes in certificated form and
will not be considered the registered owners or holders thereof under the
Indenture for any purpose.
Under the terms of the Indenture, the Company, the Guarantors and the
Trustee will treat the persons in whose names the Exchange Notes are registered
(including Exchange Notes represented by Global Exchange Notes) as the owners
thereof for the purpose of receiving payments and for any and all other purposes
whatsoever. Payments in respect of the principal, premium, Liquidated Damages,
if any, and interest on Global Exchange Notes registered in the name of DTC or
its nominee will be payable by the Trustee to DTC or its nominee as the
registered holder under the Indenture. Consequently, neither the Company, the
Trustee nor any agent of the Company or the Trustee has or will have any
responsibility or liability for (i) any aspect of DTC's records or any Direct
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global Exchange Notes or for
maintaining, supervising or reviewing any of DTC's records or any Direct
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in any Global Exchange Note or (ii) any other matter
relating to the actions and practices of DTC or any of its Direct Participants
or Indirect Participants.
DTC has advised the Company that its current payment practice (for
payments of principal, interest and the like) with respect to securities such as
the Exchange Notes is to credit the accounts of the relevant Direct Participants
with such payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Exchange Notes as
shown on DTC's records. Payments by Direct Participants and Indirect
Participants to the beneficial owners of the Exchange Notes will be governed by
standing instructions and customary practices between them and will not be the
responsibility of DTC, the Trustee, the Company or the Guarantors. Neither the
Company, the Guarantors nor the Trustee will be liable for any delay by DTC or
its Direct Participants or Indirect Participants in identifying the beneficial
owners of the Exchange Notes, and the Company and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its nominee
as the registered owner of the Exchange Notes for all purposes.
The Global Exchange Notes will trade in DTC's Same-Day Funds Settlement
System and, therefore, transfers between Direct Participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in immediately
available funds. Transfers between Indirect Participants (other than Indirect
Participants who hold an interest in the Exchange Notes through Euroclear or
CEDEL) who hold an interest through a Direct Participant will be effected in
accordance with the procedures of such Direct Participant but generally will
settle in immediately available funds. Transfers between and among Indirect
Participants who hold interests in the Exchange Notes through Euroclear and
CEDEL will be effected in the ordinary way in accordance with their respective
rules and operating procedures.
Cross-market transfers between Direct Participants in DTC, on the one
hand, and Indirect Participants who hold interests in the Exchange Notes through
Euroclear or CEDEL, on the other hand, will be effected by Euroclear's or
CEDEL's respective Nominee through DTC in accordance with DTC's rules on behalf
of Euroclear or CEDEL; however, delivery of instructions relating to crossmarket
transactions must be made directly to Euroclear or CEDEL, as the case may be, by
the counterparty in accordance with the rules and procedures of Euroclear or
CEDEL and within their established deadlines (Brussels time for Euroclear and UK
time for CEDEL). Indirect Participants who hold interest in the Exchange Notes
through Euroclear and CEDEL may not deliver instructions directly to Euroclear's
or CEDEL's Nominee. Euroclear or CEDEL will, if the transaction meets its
settlement requirements, deliver instructions to its respective Nominee to
deliver or receive interests on Euroclear's or CEDEL's behalf in the relevant
Global Exchange Note in DTC, and make or receive payment in accordance with
normal procedures for same- day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an
Indirect Participant who holds an interest in the Exchange Notes through
Euroclear or CEDEL purchasing an interest in a Global Exchange Note from a
Direct Participant in DTC will be credited, and any such crediting will be
reported to Euroclear or CEDEL during the European business day immediately
following the settlement date of DTC in New York. Although recorded in DTC's
accounting records as of DTC's settlement date in New York, Euroclear and CEDEL
customers will not have access to the cash amount credited to their accounts as
a result of a sale of an interest in a Global Exchange Note to a DTC Participant
until the European business day for Euroclear or CEDEL immediately following
DTC's settlement date.
DTC has advised the Company that it will take any action permitted to
be taken by a holder of Exchange Notes only at the direction of one or more
Direct Participants to whose account interests in the Global Exchange Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes to which such Direct Participant or Direct Participants
has or have given direction. However, if there is an Event of Default under the
Exchange Notes, DTC reserves the right to exchange Global Exchange Notes
(without the direction of one or more of its Direct Participants) for legended
Exchange Notes in certificated form, and to distribute such certificated forms
of Exchange Notes to its Direct Participants. See "--Transfers of Interests in
Global Exchange Notes for Certificated Exchange Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing
procedures to facilitate transfers of interests in the U.S. Global Exchange
Notes among Direct Participants, including Euroclear and CEDEL, they are under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Guarantors,
the Initial Purchasers or the Trustee shall have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective Direct and Indirect
Participants of their respective obligations under the rules and procedures
governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Transfers of Interests in Global Exchange Notes for Certificated Exchange Notes
An entire Global Exchange Note may be exchanged for definitive Exchange
Notes in registered, certificated form without interest coupons ("Certificated
Exchange Notes") if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as Depositary for the Global Exchange Notes and the Company
thereupon fails to appoint a successor Depositary within 90 days or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Certificated Exchange Notes or (iii) there shall have occurred
and be continuing a Default or an Event of Default with respect to the Exchange
Notes. In any such case, the Company will notify the Trustee in writing that,
upon surrender by the Direct and Indirect Participants of their interest in such
Global Exchange Note, Certificated Exchange Notes will be issued to each person
that such Direct and Indirect Participants and the DTC identify as being the
beneficial owner of the related Exchange Notes.
Beneficial interests in Global Exchange Notes held by any Direct or
Indirect Participant may be exchanged for Certificated Exchange Notes upon
request to DTC, by such Direct Participant (for itself or on behalf of an
Indirect Participant), to the Trustee in accordance with customary DTC
procedures. Certificated Exchange Notes delivered in exchange for any beneficial
interest in any Global Exchange Note will be registered in the names, and issued
in any approved denominations, requested by DTC on behalf of such Direct or
Indirect Participants (in accordance with DTC's customary procedures).
Neither the Company, the Guarantors nor the Trustee will be liable for
any delay by the holder of any Global Exchange Note or DTC in identifying the
beneficial owners of Exchange Notes, and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from the
holder of the Global Exchange Note or DTC for all purposes.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Exchange Notes (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of immediately
available same day funds to the accounts specified by the holder of interests in
such Global Exchange Note. With respect to Certificated Exchange Notes, the
Company will make all payments of principal, premium, if any, interest and
Liquidated Damages, if any, by wire transfer of immediately available same day
funds to the accounts specified by the holders thereof or, if no such account is
specified, by mailing a check to each such holder's registered address. The
Company expects that secondary trading in the Certificated Exchange Notes will
also be settled in immediately available funds.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, and, in the case of a natural Person, any
immediate family member of such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control. No Person (other than the Company or any
Subsidiary of the Company) in whom a Receivables Subsidiary makes an Investment
in connection with a Qualified Receivables Transaction will be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of the Indenture described above under the caption "--Change of Control" and/or
the provisions described above under the caption "--Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii)
the issue or sale by the Company or any of its Subsidiaries of Equity Interests
of any of the Company's Restricted Subsidiaries, in the case of either clause
(i) or (ii), whether in a single transaction or a series of related transactions
(a) that have a fair market value in excess of $1 million or (b) for net
proceeds in excess of $1 million. Notwithstanding the foregoing: (i) a transfer
of assets by the Company to a Restricted Subsidiary that is a Guarantor or by a
Restricted Subsidiary that is a Guarantor to the Company or to another
Restricted Subsidiary that is a Guarantor, (ii) an issuance of Equity Interests
by a Controlled Subsidiary to the Company or to another Controlled Subsidiary,
(iii) a Permitted Investment or a Restricted Payment that is permitted by the
covenant described above under the caption "--Restricted Payments", (iv) sales
of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" to a Receivables Subsidiary
for the fair market value thereof, including cash in an amount at least equal to
75% of the book value thereof as determined in accordance with GAAP, it being
understood that, for the purposes of this clause, (iv) notes received in
exchange for the transfer of accounts receivable and related assets will be
deemed cash if the Receivables Subsidiary or other payor is required to repay
said notes as soon as practicable from available cash collections less amounts
required to be established as reserves pursuant to contractual agreements with
entities that are not Affiliates of the Company entered into as part of a
Qualified Receivables Transaction, (v) transfers of accounts receivable and
related assets of the type specified in the definition of "Qualified Receivables
Transaction" (or a fractional undivided interest therein) by a Receivables
Subsidiary in a Qualified Receivables Transaction, and (vi) transfers from
NWS-Illinois and NWS-LLC to U.S. Beverage of assets directly related to, and
primarily used in, the operations of U.S. Beverage will not be deemed to be
Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Borrowing Base" means, as of any date, an amount equal to the sum of
(a) 80% of the face amount of all accounts receivable owned by the Company and
its Restricted Subsidiaries as of such date that are not more than 45 days past
due; provided, however, that any accounts receivable owned by a Receivables
Subsidiary, or which the Company or any of its Subsidiaries has agreed to
transfer to a Receivables Subsidiary, shall be excluded for purposes of
determining such amount, and (b) 65% of the book value of all inventory owned by
the Company and its Restricted Subsidiaries as of such date, all calculated on a
consolidated basis in accordance with GAAP. To the extent that information is
not available as to the amount of accounts receivable or inventory or trade
payables as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership (whether general or limited) or membership
interests and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition, and
(vi) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i)-(v) of this definition.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act other than the Principal or his Related Parties (as defined
below), (ii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principal and his Related Parties,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
40% of the Voting Stock of the Company (measured by voting power rather than
number of shares), (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) the
Company consolidates with, or merges with or into, any Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Exchange Notes to
require the Company to repurchase such Exchange Notes as a result of a sale,
lease, transfer, conveyance, or other disposition of less than all of the assets
of the Company and its Subsidiaries taken as a whole to another Person or group
may be uncertain.
"Code" means the Internal Revenue Code of 1986, as amended. "Company
Shareholder Exchange Note Receivable" means any promissory note receivable by
the Company or a Subsidiary of the Company on the date of the Indenture from any
shareholder of the Company. "Consolidated" has the meaning accorded under GAAP,
provided, however that any calculation under the Indenture requiring a
determination on a consolidated basis for any period ending prior to the date of
the Reorganization shall be determined on a combined basis for NWS-Indiana,
NWS-Illinois and their subsidiaries.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) (A) if such Person is an S-Corporation or
substantially similar pass-through entity for Federal income tax purposes, the
amount of all Permitted Quarterly Tax Distributions of such Person and, without
duplication, its Consolidated Subsidiaries for such period, as adjusted for any
True-up Amount then determined for such period, and (B) if such Person is not an
S-Corporation or substantially similar pass-through entity for Federal income
tax purposes, any provision for taxes based on income or profits of such Person
and its Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, plus (iii)
consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligation, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations but excluding amortization
of debt issuance costs and non-cash interest accrued or accruing on any
NWS-Illinois Shareholder Subordinated Exchange Note), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, plus (v) LIFO expense, plus
(vi) start-up expenses reported on the combined financial statements of the
Company, NWS-Indiana and NWS-Illinois for any quarterly period ending on or
prior to March 31, 1998 that is included in the period for which the calculation
is being made, plus (vii) prepayment penalties associated with the prepayment of
Indebtedness on the date of the Indenture to the extent any such expense was
deducted in computing such Consolidated Net Income minus (viii) non-cash items
increasing such Consolidated Net Income for such period including, without
limitation, LIFO income and non-cash interest income, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the Permitted Quarterly Tax Distributions (adjusted as provided
above) of, the provision for taxes based on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Subsidiary of a
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, reduced by the amount of Permitted Quarterly Tax Distributions of
such Person and, without duplication, its Consolidated Subsidiaries for such
period, as adjusted for any True-up Amount then determined for such period, if
such Person is an S-Corporation or substantially similar pass-through entity for
Federal income tax purposes; provided that (i) the Net Income (but not loss) of
any Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a
Controlled Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, (v) the Net Income (but not loss) of
any Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Restricted Subsidiaries, and (vi) interest received or
accrued on a Company Shareholder Exchange Note Receivable shall be excluded when
determining the Company's ability to make Restricted Payments under the
Indenture.
"Consolidated Tangible Assets" means with respect to any Person as of
any date, the amount which, in accordance with GAAP, would be set forth under
the caption "Total Assets" (or any like caption) on a consolidated balance sheet
of such person and its Restricted Subsidiaries, less all intangible assets,
including, without limitation, goodwill, organization costs, patents,
trademarks, copyrights, franchises and research and development costs.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Controlled Subsidiary" of the Company means a Restricted Subsidiary of
the Company (i) 90% or more of the economic interest in the total Equity
Interests or other ownership interests of which and 90% or more of the voting
rights represented by the Voting Stock of which is owned by the Company, either
directly or through one or more Controlled Subsidiaries, and (ii) over which the
Company possesses, directly or indirectly, the power to direct or cause the
direction of the management or policies.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Credit Facility Intercompany Indebtedness" means intercompany
Indebtedness of Subsidiaries to the Company.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Exchange Notes mature; provided,
however, that any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Company to repurchase
such Capital Stock upon the occurrence of a Change of Control or an Asset Sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Estimation Period" means the period for which a shareholder who is an
individual is required to estimate for Federal income tax purposes his
allocation of taxable income from a calendar year in connection with determining
his estimated federal income tax liability for such period.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations, but excluding
amortization of debt issuance costs and excluding non-cash interest accrued or
accruing for such period on any NWS-Illinois Shareholder Subordinated Exchange
Note) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all cash dividend payments
or other distributions (and non-cash dividend payments in the case of a Person
that is a Restricted Subsidiary) on any series of preferred equity of such
Person times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person (or in the case of a Person that is an "S
Corporation" or other pass-through entity for federal income tax purposes, the
combined federal, state and local income tax rate that was or would have been
utilized to calculate the Tax Amount of such Person), expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) NWS-Indiana, NWS-Illinois, NWS-LLC and
NWS-Michigan and (ii) any other subsidiary that executes a Subsidiary Guarantee
in accordance with the provisions of the Indenture, and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"immediate family" has the meaning assigned to such term in Rule
16a1-(e) under the Exchange Act.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing Indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"Issue Date" means the date on which the initial $110 million in
aggregate principal amount of the Exchange Notes is originally issued under the
Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with any Qualified Receivables
Transaction, any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person for any period, (i) the
net income (loss) of such Person for such period, determined in accordance with
GAAP and before any reduction in respect of preferred interests or dividends,
excluding, however, (a) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with (1)
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (2) the disposition of any securities by such Person
or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries and (b) any extraordinary
or nonrecurring gain (but not loss), together with any related provision for
taxes or Permitted Quarterly Tax Distributions on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets that were
the subject of such Asset Sale and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement executed on
the date of the Indenture, by and among the Company and NBD Bank, as agent,
providing for up to $60.0 million of revolving credit borrowings, including any
related notes, guarantees, collateral documents, instruments, letters of credit
and agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Exchange Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"NWS-Indiana" means National Wine & Spirits Corporation, an Indiana
corporation, and its successors.
"NWS-Illinois" means NWS, Inc., an Illinoi corporation, and its
successors.
"NWS-LLC" means NWS-Illinois, LLC, an Illinois limited liability
company, and its successors.
"NWS-Michigan" means NWS Michigan, Inc., a Michigan corporation, and
its successors.
"NWS-Illinois Shareholder Subordinated Exchange Note" means any note
payable to any shareholder of the Company by NWS-Illinois that is outstanding on
the date of the Indenture and (i) matures on December 31, 2009, (ii) does not
require redemption prior to maturity, and (iii) that is subordinated in right of
payment to the Exchange Notes.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any of the businesses engaged in by the
Company and its Subsidiaries on the date of the Indenture and any extensions
thereof or other businesses reasonably related thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Controlled Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person, if as a result of such Investment (i) such Person becomes a Controlled
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Controlled Subsidiary of the
Company; (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase at
the Option of Holders--Asset Sales"; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; (f) Investments made after the date of the Indenture in wholesale
alcohol-based beverage distribution businesses (measured on the dates such
Investments were made and without giving effect to subsequent changes in value)
that are not, after giving effect to such Investments, Controlled Subsidiaries,
in an aggregate amount outstanding after giving effect to any such Investment
not exceeding 10% of Consolidated Tangible Assets; (g) redemptions of the
interests in NWS-LLC that are held by Martin H. Bart on the date of the
Indenture, and his successors and assigns; (h) the acquisition by a Receivables
Subsidiary in connection with a Qualified Receivables Transaction of Equity
Interests of a trust or other Person established by such Receivables Subsidiary
to effect such Qualified Receivables Transaction, and any other Investment by
the Company or a Subsidiary of the Company in a Receivables Subsidiary or any
Investment by a Receivables Subsidiary in any other Person in connection with a
Qualified Receivables Transaction provided, that such other Investment is in the
form of a note or other instrument that the Receivables Subsidiary or other
Person is required to repay as soon as practicable from available cash
collections less amounts required to be established as reserves pursuant to
contractual agreements with entities that are not Affiliates of the Company
entered into as part of a Qualified Receivables Transaction; (i) transfers from
NWS-Illinois and NWS-LLC to U.S. Beverage of assets directly related to, and
primarily used in, the operations of U.S. Beverage; and (j) other Investments in
any Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (j)
that are at the time outstanding, not to exceed $7.0 million.
"Permitted Liens" means (i) (A) Liens securing Indebtedness and
Guarantees permitted by the terms of the Indenture to be incurred pursuant to
any Credit Facilities (including the New Credit Facility) on (x) accounts
receivable and the related assets of the type specified in the definition of
"Qualified Receivables Transaction" and inventory and proceeds thereof and (y)
Credit Facility Intercompany Indebtedness (and any documents or instruments
evidencing the same or any security therefore), and (B) any such Liens on assets
of the type described in clause (i)(A)(x) securing Credit Facility Intercompany
Indebtedness, provided, however, that any Liens permitted by clause (i)(A)(y)
and clause (i)(B) shall only constitute Permitted Liens for so long as (1) the
Credit Facility pursuant to which such Liens were granted contains a provision
stating in substance that in the event of any bankruptcy, insolvency or similar
proceeding involving any Guarantor, the claims of the lenders under such Credit
Facility with respect to the Guarantee of such Guarantor shall be reduced by the
amount of claims, if any, which are made by such lenders and allowed in such
proceeding with respect to the Credit Facility Intercompany Indebtedness pledged
to secure such Indebtedness under the Credit Facility, net of any offsets
against such Credit Facility Intercompany Indebtedness relating to Indebtedness
or other obligations owed by the Company to such Guarantor, and provided further
that such reduction shall be rescinded in the event of equitable subordination
of the claims with respect to the Credit Facility Intercompany Indebtedness
unless such equitable subordination arose out of or resulted from the acts or
omissions of any lenders under the Credit Facility and (2) any intercompany
notes representing any Credit Facility Intercompany Indebtedness that are
pledged to secure Indebtedness under such Credit Facility are at all times
limited in aggregate amount to the balance at any time outstanding under such
Credit Facility; (ii) Liens in favor of the Company or any Restricted
Subsidiary; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Restricted Subsidiary of
the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering
only the assets acquired with such Indebtedness; (vii) Liens existing on the
date of the Indenture; (viii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (ix) Liens
incurred in the ordinary course of business of the Company or any Subsidiary of
the Company with respect to obligations that do not exceed $5.0 million at any
one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; (x)
Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries and (xi) Liens on assets of a Receivables Subsidiary
incurred in connection with a Qualified Receivables Transaction.
"Permitted Quarterly Tax Distribution" means quarterly distributions of
Tax Amounts determined on the basis of the estimated taxable income of the
Company, for the related Estimation Period, provided, however, that (A) prior to
any distributions of Tax Amounts the Company shall deliver an officers'
certificate certifying that the Tax Amounts to be distributed were determined
pursuant to the terms of the Indenture and stating to the effect that the
Company qualifies as an S-Corporation or substantially similar pass-through
entity for Federal income tax purposes and (B) at the time of such
distributions, the most recent audited financial statements of the Company
reflect that the Company was treated as an S-Corporation or substantially
similar pass-through entity for Federal income tax purposes for the period
covered by such financial statements.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Exchange Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and is subordinated in right of payment to, the Exchange Notes on terms
at least as favorable to the Holders of Exchange Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Principal" means James E. LaCrosse.
"Qualified Receivables Transaction" means any transaction or series of
transactions entered into by the Company or any of its Subsidiaries pursuant to
which the Company or any of its Subsidiaries sells, conveys or otherwise
transfers to (i) a Receivables Subsidiary (in the case of a transfer by the
Company or any of its Subsidiaries) and (ii) any other Person (in the case of a
transfer by a Receivables Subsidiary), or grants a security interest in, any
accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Quarterly Payment Period" means the period commencing on the tenth day
and ending on and including the twentieth date of each month in which Federal
individual estimated tax payments are due (provided that payments in respect of
estimated state income taxes due in January may instead, at the option of the
Company, be paid during the last five days of the immediately preceding
December.
"Receivables Subsidiary" means a Subsidiary of the Company which
engages in no activities other than in connection with the financing of accounts
receivable and which is designated by the Board of Directors of the Company (as
provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness
or any other Obligations (contingent or otherwise) of which (i) is guaranteed by
the Company or any Subsidiary of the Company (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to representations, warranties, covenants and indemnities entered into
in the ordinary course of business in connection with a Qualified Receivables
Transaction), (ii) is recourse to or obligates the Company or any Subsidiary of
the Company in any way other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction or (iii) subjects any
property or asset of the Company or any Subsidiary of the Company (other than
accounts receivable and related assets as provided in the definition of
"Qualified Receivables Transaction"), directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to representations,
warranties, covenants and indemnities entered into in the ordinary course of
business in connection with a Qualified Receivables Transaction, (b) with which
neither the Company nor any Subsidiary of the Company has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to
the Company or such Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing accounts receivable
and (c) with which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such Subsidiary's financial condition or
cause such Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company will be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolutions of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Related Party" means any immediate family member of the Principal and
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of the Principal and/or such other Persons
referred to in this definition.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"S Corp. Businesses" means the Company and any Subsidiary of the
Company that qualifies as a qualified subchapter S subsidiary or is classified
as a partnership or other pass-through entity for Federal income tax purposes.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Tax Amounts" with respect to any taxable period shall not exceed an
amount equal to (A) the product of (x) the taxable income of the Company for
such period as determined by the Tax Amounts CPA and (y) the Tax Percentage
reduced by (B) to the extent not previously taken into account, any income tax
benefit attributable to the Company which could be realized (without regard to
the actual realization) by its shareholders in the current or any prior taxable
year, or portion thereof, commencing on or after the Issue Date (including any
tax losses or tax credits), computed at the applicable Tax Percentage for the
year that such benefit is taken into account for purposes of this computation.
"Tax Amounts CPA" means Katz, Sapper & Miller or a nationally
recognized certified public accounting firm.
"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of Federal and state income tax, imposed on an
individual taxpayer, as certified by the Tax Amounts CPA in a certificate filed
with the Trustee. The rate of "state income tax" to be taken into account for
purposes of determining the Tax Percentage for a particular taxable year shall
be deemed to be the highest state marginal tax rate applicable to any
stockholder.
"True-up Amount" means, in respect of a particular taxable year, an
amount determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such taxable year and (ii) the actual Tax Amounts for such year. For purposes
of this Agreement, the amount equal to the excess, if any, of the amount
described in clause (i) over the amount described in clause (ii) above shall be
referred to as the "True-up Amount due to the Company" and the excess, if any,
of the amount described in clause (ii) over the amount described in clause (i)
above shall be referred to as the "True-up Amount due to the shareholders."
"True-up Determination Date" means the date on which the Tax Amounts
CPA delivers a statement to the Trustee indicating the True-up Amount.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
is designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "Certain Covenants-- Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Incurrence of Indebtedness
and Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
DESCRIPTION OF OUTSTANDING NOTES
The Outstanding Notes evidence the same indebtedness as that which will
be evidenced by the Exchange Notes and are entitled to the benefits of the
Indenture. The form and terms of the Outstanding Notes are the same as the form
and terms of the Exchange Notes except that none of the Outstanding Notes were
registered under the Securities Act. Therefore, the Outstanding Notes may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. Accordingly,
the Outstanding Notes may not be sold or transferred to, or acquired on behalf
of, any pension or welfare plan (as described in Section 3 of the Employee
Retirement Income Security Act of 1974). For a description of the terms of the
Exchange Notes, see "Description of Exchange Notes."
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement dated as of January 25, 1999. Pursuant to the
Registration Rights Agreement, the Company and Guarantors agreed to file the
Exchange Offer Registration Statement, of which this Prospectus forms a part,
with the Commission within 60 days of the Issue Date, and use their respective
best efforts to have it declared effective at the earliest possible time. The
Company and the Guarantors also agreed to use their best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, to keep the
Exchange Offer open for a period of not less than 20 business days and cause the
Exchange Offer to be consummated no later than the 30th business day after it is
declared effective by the Commission.
If (i) the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Outstanding Notes which are Transfer
Restricted Securities notifies the Company prior to the 20th business day
following the consummation of the Exchange Offer that (a) it is prohibited by
law or Commission policy from participating in the Exchange Offer, (b) it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus, and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
it, or (c) it is a broker-dealer and holds Outstanding Notes acquired directly
from the Company or any of the Company's affiliates, the Company and the
Guarantors will file with the Commission a Shelf Registration Statement to
register for public resale the Transfer Restricted Securities held by any such
Holder who provides the Company with certain information for inclusion in the
Shelf Registration Statement.
For the purposes of the Registration Rights Agreement, "Transfer
Restricted Securities" means each Outstanding Note until the earliest of the
date of which (i) such Outstanding Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Securities Act, (ii) such
Outstanding Note has been disposed of in accordance with the Shelf Registration
Statement, (iii) such Outstanding Note is disposed of by a Broker-Dealer
pursuant to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus contained therein)
or (iv) such Outstanding Note is distributed to the public pursuant to Rule 144
under the Securities Act.
The Registration Rights Agreement provides that (i) if the Company
fails to file an Exchange Offer Registration Statement with the Commission on or
prior to the 60th day after the Issue Date, (ii) if the Exchange Offer
Registration Statement is not declared effective by the Commission on or prior
to the 150th day after the Issue Date, (iii) if the Exchange Offer is not
consummated on or before the 30th business day after the Exchange Offer
Registration Statement is declared effective, (iv) if obligated to file the
Shelf Registration Statement and the Company fails to file the Shelf
Registration Statement with the Commission on or prior to the 30th day after
such filing obligation arises, (v) if obligated to file a Shelf Registration
Statement and the Shelf Registration Statement is not declared effective on or
prior to the 90th day after the obligation to file a Shelf Registration
Statement arises, or (vi) if the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, is declared effective but
thereafter ceases to be effective or useable in connection with resales of the
Transfer Restricted Securities, for such time of non-effectiveness or
non-usability (each, a "Registration Default"), the Company and the Guarantors
agree to pay to each Holder of Transfer Restricted Securities affected thereby
liquidated damages ("Liquidated Damages") in an amount equal to $0.05 per week
per $1,000 in principal amount of Transfer Restricted Securities held by such
Holder for each week or portion thereof that the Registration Default continues
for the first 90 day period immediately following the occurrence of such
Registration Default. The amount of the Liquidated Damages shall increase by an
additional $0.05 per week per $1,000 in principal amount of Transfer Restricted
Securities with respect to each subsequent 90 day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $0.50
per week per $1,000 in principal amount of Transfer Restricted Securities. The
Company and the Guarantors shall not be required to pay Liquidated Damages for
more than one Registration Default at any given time. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
All accrued Liquidated Damages shall be paid by the Company or the
Guarantors to Holders entitled thereto by wire transfer to the accounts
specified by them or by mailing checks to their registered address if no such
accounts have been specified.
<PAGE>
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States ("U.S.") federal
income tax consequences associated with the exchange of the Outstanding Notes
for the Exchange Notes pursuant to the Exchange Offer and the ownership and
disposition of the Exchange Notes that are applicable to those holders of
Exchange Notes who purchased the Outstanding Notes upon original issuance and
who acquires an Exchange Note pursuant to the Exchange Offer. The summary is
based upon current laws, regulations, rulings and judicial decisions, all of
which are subject to change (possibly with retroactive effect) and to differing
interpretations. The discussion below does not address all aspects of U.S.
federal income taxation that may be relevant to particular holders in the
context of their specific investment circumstances or certain types of holders
subject to special treatment under such laws (e.g., financial institutions,
tax-exempt organizations, insurance companies or dealers in securities or
currencies, persons that will hold Exchange Notes as a position in a "straddle"
or conversion transaction, or as part of a "synthetic security" or other
integrated financial transaction, or persons that have a "functional currency"
other than the U.S. dollar). In addition, the discussion does not address any
aspect of state, local or foreign taxation and assumes that purchasers of the
Exchange Notes will hold them as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code.
For purposes of the discussion, a "U.S. Holder" is a beneficial holder
of a Exchange Note that is an individual who is a citizen or resident of the
U.S., a corporation, partnership or other entity created under the laws of the
U.S. or any political subdivision thereof, or an estate that is subject to U.S.
federal income taxation without regard to the source of income or a trust whose
administration is subject to the primary supervision of a U.S. court and which
has one or more U.S. Persons who have authority to control substantial decisions
of the trust. A "Non-U.S. Holder" is any holder who is not a U.S. Holder.
Prospective holders of the Exchange Notes are urged to consult their
tax advisors concerning the U.S. federal income tax consequences of acquiring,
owning and disposing of the Exchange Notes as well as the application of state,
local and foreign income and other tax laws.
S Corporation Status
NWS has elected or will elect to be treated as an S corporation under
the Code and for each of its subsidiaries to be qualified subchapter S
subsidiaries under the Code or other similarly taxed pass-through entities.
Accordingly, the shareholders of NWS are directly subject to tax on their
respective proportionate shares of the taxable income of NWS and its
subsidiaries for federal and certain state income tax purposes.
While NWS believes that it qualifies and will continue to qualify as an
S corporation and that its subsidiaries have qualified and will continue to
qualify as S corporations, qualified subchapter S subsidiaries or other
pass-through entities for federal and state income tax purposes ("Pass-Through
Status"), if the Pass-Through Status of NWS or any of its subsidiaries were
successfully challenged, such entity could be required to pay federal and
certain state income taxes (plus interest and possibly penalties) on its past
and future taxable income. While the shareholders have agreed to indemnify NWS
if the Pass-Through Status of NWS or any of its subsidiaries is successfully
challenged, there can be no assurance that the resultant payment of taxes,
interest and penalties will not have a material adverse effect on NWS' financial
condition, results of operations or debt service capabilities.
Continuation of NWS' Status as an S Corporation
The consummation of the Initial Offering was conditioned, among other
things, upon the receipt by NWS of an opinion of Ice Miller Donadio & Ryan,
counsel to NWS in connection with the Initial Offering, that the issuance of the
Outstanding Notes would not cause the termination of the Pass-Through Status of
NWS or any of its subsidiaries. Investors should be aware, however, that
opinions of counsel are not binding upon the Internal Revenue Service or any
court, and there can be no assurance that the Internal Revenue Service or a
court will agree with the conclusion expressed in the opinion referred to above.
The following discussion assumes that the Exchange Notes will be treated as
indebtedness for all federal income tax purposes.
U.S. Holders
Exchange Offer
The exchange of an Outstanding Note for an Exchange Note pursuant to
the Exchange Offer will not constitute a "significant modification" of the
Outstanding Note for United States federal income tax purposes and, accordingly,
the Exchange Note received will be treated as a continuation of the Outstanding
Note in the hand of such holder. As a result, there will be no United States
federal income tax consequences to a United States Holder who exchanges an
Outstanding Note for an Exchange Note pursuant to the Exchange Offer, and any
such holder will have the same adjusted tax basis and holding period in the
Exchange Note as it had in the Outstanding Note immediately before the exchange.
Payments of Interest
Payments of interest on an Exchange Note will be taxable to a U.S.
Holder as ordinary interest income at the time that such payments are accrued or
are received (in accordance with the U.S. Holder's method of tax accounting).
If NWS is required to pay Liquidated Damages (as defined herein under
"Description of the Exchange Notes--Registration Rights; Liquidated Damages"),
such payment will be taxable to a U.S. Holder as ordinary income in accordance
with such U.S. Holder's method of accounting for tax purposes. NWS believes that
the likelihood that it would be required to pay Liquidated Damages is remote.
Accordingly, NWS does not intend to treat the possibility of paying Liquidated
Damages as affecting the yield to maturity of the Exchange Notes.
Redemption, Sale or Other Disposition of Exchange Notes
If an Exchange Note is redeemed, sold or otherwise disposed of, a U.S.
Holder generally will recognize gain or loss equal to the excess of the amount
realized on the sale or other disposition of such Exchange Note (to the extent
such amount does not represent accrued but unpaid interest) over such U.S.
Holder's tax basis in the Exchange Note. Such gain or loss will be capital gain
or loss, assuming that the U.S. Holder has held the Exchange Note as a capital
asset and none of the gain is market discount. Capital gain or loss will be
long-term capital gain if the U.S. Holder has held the Exchange Note for more
than 12 months at the time of disposition.
A "market discount Exchange Note" is an Exchange Note that is acquired
other than at the original issuance, where the tax basis of the Exchange Note to
the holder is less than the stated redemption price of the Exchange Note at
maturity. The excess of such redemption price over the tax basis is the "market
discount." In general, upon the disposition of a market discount Exchange Note,
gain shall be treated as ordinary income up to the amount of market discount
attributable to the holder of the Exchange Note. Holders who acquire a Exchange
Note after original issuance at a discount should consult their tax advisors
concerning the recognition of the market discount.
Information Reporting and Backup Withholding
A noncorporate U.S. Holder may be subject to information reporting and
to backup withholding at a rate of 31% with respect to payments of principal and
interest made on an Exchange Note, or on proceeds of disposition of an Exchange
Note before maturity, unless such U.S. Holder provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the information reporting and backup withholding
rules.
Any amounts withheld under the backup withholding rules will be allowed
as a refund or credit against the U.S. Holder's U.S. federal income tax
liability provided the required information is furnished to the Internal Revenue
Service.
Non-U.S. Holders
Payments of Interest
No withholding of U.S. federal income tax will be required with respect
to payments by NWS of interest on an Exchange Note to a Non-U.S. Holder of such
Exchange Note, provided that (i) the Holder does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
NWS entitled to vote, is not a controlled foreign corporation that is related to
NWS through stock ownership, a foreign tax-exempt organization or foreign
private foundation for U.S. federal income tax purposes, and (ii) the
requirements of Sections 871(h) or 881(c) of the Code, as set forth below, are
satisfied. Notwithstanding the above, a Non-U.S. Holder that is engaged in the
conduct of a U.S. trade or business will be subject to (i) U.S. federal income
tax on interest that is effectively connected with such trade or business and
(ii) if the Non-U.S. Holder is a corporation, a U.S. branch profits tax equal to
30% of its "effectively connected earnings and profits" (as adjusted) for the
taxable year, unless it qualifies for an exemption from such tax or a lower tax
rate under an applicable treaty.
Redemption, Sale or Other Disposition of Exchange Notes
A Non-U.S. Holder generally will not be subject to tax on any capital
gains recognized upon the redemption, sale, or other disposition of an Exchange
Note unless (i) such gain is effectively connected with the conduct of a U.S.
trade or business by the Non-U.S. Holder or (ii) in the case of a Non-U.S.
Holder who is a nonresident alien individual, such holder is present in the U.S.
for 183 or more days in the taxable year and certain other requirements are met.
In the case of (i) above, the Non-U.S. Holder will be subject to tax on its net
income at graduated rates. In the case of (ii) above, the non-U.S. Holder will
be subject to tax at a rate of 30% on any such capital gains to the extent that
such capital gains exceed his U.S. source capital losses.
Federal Estate Tax
An Exchange Note held by an individual who at the time of death is not
a citizen or resident of the U.S. will not be subject to U.S. federal estate tax
as a result of such individual's death, provided that the individual does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of NWS entitled to vote and that the interest accrued on
such Exchange Notes was not effectively connected with a U.S. trade or business.
Owner Statement Requirement
Sections 871(h) and 881(c) of the Code require that either the
beneficial owner of an Exchange Note or a securities clearing organization, bank
or other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") and that holds an
Exchange Note on behalf of such owner file a statement with NWS or its agent to
the effect that the beneficial owner is not a U.S. person in order to avoid
withholding of U.S. federal income tax. Under current regulations, this
requirement will be satisfied if NWS or its agent receives (i) a statement (an
"Owner's Statement") from the beneficial owner of an Exchange Note in which such
owner certifies, under penalties of perjury, that such owner is not a U.S.
person and provides such owner's name and address, or (ii) a statement from the
Financial Institution holding the Exchange Note on behalf of the beneficial
owner in which the Financial Institution certifies, under penalties of perjury,
that it has received the Owner's Statement together with a copy of the Owner's
Statement. The beneficial owner must inform NWS or its agent (or, in the case of
a statement described in clause (ii) of the immediately preceding sentence, the
Financial Institution) within 30 days of any change in information on the
Owner's Statement.
Backup Withholding and Information Reporting
Under current U.S. federal income tax law, a 31% backup withholding tax
is applied to certain payments made to, and to the proceeds of sales before
maturity by, certain U.S. persons if such persons (i) fail to furnish their
taxpayer identification numbers which, for an individual, would be his or her
Social Security Number or (ii) in certain circumstances, fail to certify, under
penalties of perjury, that they have both furnished a correct taxpayer
identification number and not been notified by the Internal Revenue Service that
they are subject to backup withholding for failure to report interest payments.
Under current regulations, this backup withholding will not apply to payments
made by NWS or a paying agent on an Exchange Note if the Owner's Statement is
received; provided in each case that NWS or the paying agent, as the case may
be, does not have actual knowledge that the payee is a U.S. person.
Under current regulations, payments of the proceeds of the sale of an
Exchange Note to or through a foreign office of a "broker" will not be subject
to backup withholding but will be subject to information reporting if the broker
is a U.S. person, a controlled foreign corporation for U.S. federal income tax
purposes, or a foreign person 50% or more of whose gross income is from a U.S.
trade or business for a specified three-year period unless the broker has in its
records documentary evidence that the holder of an Exchange Note is not a U.S.
person and certain conditions are met or the holder of an Exchange Note
otherwise establishes an exemption. Payment of the proceeds of a sale to or
through the U.S. office or a broker is subject to backup withholding and
information reporting unless the holder certifies its non-U.S. status under
penalties of perjury or otherwise establishes an exemption.
On October 7, 1997, the Treasury Department released new Treasury
Regulations governing the backup withholding and information reporting
requirements described above. The new regulations would not generally alter the
treatment of Non-U.S. Holders who furnish an Owner's Statement to the payor. The
new regulations may change certain procedures applicable to the foreign office
of a U.S. broker or foreign brokers with certain types of relationships to the
U.S. Based on a recent Internal Revenue Service notice, the new regulations
generally are effective for payments made after December 31, 1999. Prospective
investors should consult their tax advisors regarding the effect, if any, of
such new Treasury Regulations on an investment in the Exchange Notes.
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the SEC set forth in no-action letters
issued to third parties in similar transactions, the Company believes that the
Exchange Notes issued in the Exchange Offer in exchange for the Outstanding
Notes may be offered for resale, resold and otherwise transferred by holders
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that the Exchange Notes are acquired in the
ordinary course of such holders' business and the holders are not engaged in,
and do not intend to engage in, and have no arrangement or understanding with
any person to participate in, a distribution of Exchange Notes. This position
does not apply to any holder that is (1) an "affiliate" of the Company within
the meaning of Rule 406 under the Securities Act, (2) a broker-dealer who
acquired Outstanding Notes directly from the Company or (3) broker-dealers who
acquired Outstanding Notes as a result of market-making or other trading
activities. Any broker-dealer ("Participating Broker-Dealers") receiving
Exchange Notes in the Exchange Offer are subject to a prospectus delivery
requirement with respect to resales of the Exchange Notes. To date, the SEC has
taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Outstanding
Notes to the initial purchasers) with this Prospectus.
Each broker-dealer receiving Exchange Notes for its own account in the
Exchange Offer must acknowledge that it will deliver a Prospectus in any resale
of the Exchange Notes. Participating Broker-Dealers may use this Prospectus in
reselling Exchange Notes, if the Outstanding Notes were acquired for their own
accounts as a result of market-making activities or other trading activities.
The Company has agreed that a Participating Broker-Dealer may use this
Prospectus in reselling Exchange Notes for a period ending one year after the
Expiration Date or, if earlier, when a Participating Broker-Dealer has disposed
of all Exchange Notes. A Participating Broker-Dealer intending to use this
Prospectus in the resale of Exchange Notes must notify the Company on or before
the Expiration Date that it is a Participating Broker-Dealer. This notice may be
given in the space provided for in the Letter of Transmittal or may be delivered
to the Exchange Agent. The Company has agreed that, for a period of one year
after the Expiration Date, it will make this Prospectus, and any amendment or
supplement to this Prospectus, available to any broker-dealer that requests
these documents in the Letter of Transmittal. See "The Exchange Offer --
Resales of Exchange Notes" for more information.
The Company will not receive any cash proceeds from the Exchange Notes.
Broker-dealers acquiring Exchange Notes for their own accounts may sell the
notes in one or more transactions in the over-the-counter market, in negotiated
transactions, through writing options on the Exchange Notes or a combination of
such methods. Any resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any broker-dealer and/or the purchasers of Exchange Notes.
Any broker-dealer reselling Exchange Notes that it received in the
Exchange Offer and any broker or dealer that participates in a distribution of
Exchange Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act. Any profit on any resale of Exchange Notes and any commissions
or concessions received by any persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a Prospectus, a
broker-dealer will not admit that it is an "underwriter" within the meaning of
the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes offered
hereby will be passed upon for NWS by Ice Miller Donadio & Ryan, Indianapolis,
Indiana.
CHANGE IN INDEPENDENT AUDITORS
In 1998, the Company reassessed its requirements for auditing services.
The Company advised Katz, Sapper & Miller, its independent auditors at that
time, that it would interview national accounting firms prior to retaining an
auditor for its March 31, 1998 audit. Following such interviews, in March,
1998 the Company retained Ernst & Young LLP as its independent auditors. Katz,
Sapper & Miller audited the combined financial statements of the Company for the
years ended March 31, 1994 through March 31, 1997. During such years, the
auditors' reports on such financial statements contained no adverse opinions or
disclaimers of opinion and there were no qualifications or modifications of the
opinions due to uncertainty, audit scope, or accounting principles. During such
period, there were no disagreements with the Company's independent auditors on
any matters of accounting principles or practices, financial statement
disclosures, or auditing scope or procedure.
EXPERTS
The combined financial statements of National Wine & Spirits
Corporation and NWS, Inc. at March 31, 1998, and for the year then ended,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, and at March 31, 1997, and for each of
the two years in the period ended March 31, 1997, by Katz, Sapper & Miller, LLP,
independent auditors, as set forth in their respective reports thereon appearing
elsewhere herein, and are included in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 for the registration of the Exchange Notes (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement"). This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement. For further information with respect to the Company and the Exchange
Notes, reference is made to the Registration Statement. While the Company
believes that the material information has been provided regarding the contracts
and documents described herein, the statements contained in this Prospectus as
to the contents of any such contract or other document are not necessarily
complete, and, where such contract or other document is an exhibit to the
Registration Statement, each such statement is qualified in all respects by the
provisions in such exhibit, to which reference is hereby made.
The Company is not currently subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon
completion of the Exchange Offer, the Company will be subject to the information
requirements of the Exchange Act and, in accordance therewith, will file
periodic reports and other information with the Commission. The Registration
Statement, such reports and other information can be inspected and copied at the
public reference facility of the Commission located at 450 Fifth Street, N.W.,
Washington D.C. 20549 and at regional public reference facilities maintained by
the Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material, including copies of all or any portion of the
Registration Statement, can be obtained from the public reference facility of
the Commission at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
Pursuant to the Indenture governing the Outstanding Notes and the Exchange
Notes, the Company has agreed that, beginning with the fiscal period ending
December 31, 1998 and for long as any of the Outstanding Notes or Exchange Notes
remain outstanding, it will furnish to the holders of the Outstanding Notes and
Exchange Notes (the "Holders") quarterly and annual financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission, if the Company were subject to Section 13
or 15(d) of the Exchange Act, including, with respect to annual information
only, a report thereon by the Company's certified independent public accountants
as such would be required in such reports to the Commission, and, in each case,
together with a management's discussion and analysis of financial condition and
results of operations which would be so required. Such requirements may be
satisfied through the filing and provision of such documents and reports which
would otherwise be required pursuant to Section 13 in respect of the Company.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO COMBINED FINANCIAL STATEMENTS
<S> <C>
Page
National Wine & Spirits Corporation and NWS, Inc.
Reports of Independent Auditors..................................................................................... F-2
Combined Balance Sheets as of March 31, 1997 and 1998 and as of December 31, 1998 (unaudited)....................... F-4
Combined Statements of Income for the years ended March 31, 1996, 1997 and 1998 and for the nine-month periods
ended December 31, 1997 and 1998 (unaudited)..................................................................... F-5
Combined Statements of Stockholders' Equity for the years ended March 31, 1996, 1997 and 1998 and for the
nine-month period ended December 31, 1998 (unaudited)............................................................ F-6
Combined Statements of Cash Flows for the years ended March 31, 1996, 1997 and 1998 and for the nine-month periods
ended December 31, 1997 and 1998 (unaudited)..................................................................... F-7
Notes to Combined Financial Statements.............................................................................. F-8
</TABLE>
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors and Stockholders
National Wine & Spirits Corporation and NWS, Inc.
We have audited the accompanying combined balance sheet of National Wine &
Spirits Corporation and NWS, Inc. as of March 31, 1998, and the related combined
statements of income, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of National Wine &
Spirits Corporation and NWS, Inc. at March 31, 1998, and the combined results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Indianapolis, Indiana
July 17, 1998
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors and Stockholders
National Wine & Spirits Corporation and NWS, Inc.
We have audited the accompanying combined balance sheet of National Wine &
Spirits Corporation and NWS, Inc. as of March 31, 1997, and the related combined
statements of income, stockholders' equity and cash flows for each of the two
years in the period then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of National Wine &
Spirits Corporation and NWS, Inc. at March 31, 1997, and the combined results of
their operations and their cash flows for each of the two years in the period
then ended in conformity with generally accepted accounting principles.
Katz, Sapper & Miller, LLP
Indianapolis, Indiana
June 18, 1997 (except for
Note 4, as to which the
date is September 2, 1997)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL WINE & SPIRITS CORPORATION AND NWS, INC.
COMBINED BALANCE SHEETS
<S> <C> <C> <C>
March 31, March 31, December 31,
1997 1998 1998
------------- ------------- -------------
ASSETS Unaudited)
Current assets:
Cash............................................................... $ 3,395,000 $ 1,370,000 $ 3,217,000
Accounts receivable, less allowance for doubtful accounts of
$926,000 in 1997, $900,000 in 1998 and $1,370,000 at 34,740,000 31,313,000 56,361,000
December 31, 1998...............................................
Inventories........................................................ 72,078,000 76,734,000 74,563,000
Prepaid expenses and other......................................... 4,123,000 4,933,000 3,759,000
-------------- ------------- -------------
Total current assets.................................................. 114,336,000 114,350,000 137,900,000
Property and equipment, net........................................... 40,670,000 48,565,000 49,948,000
Other assets:
Notes receivable................................................... 55,000 1,772,000 1,653,000
Cash surrender value of life insurance, net of loans............... 904,000 1,396,000 1,631,000
Investment in Kentucky Distributor................................. -- -- 6,400,000
Intangible assets, net of amortization............................. 3,068,000 2,487,000 3,760,000
Deferred pension costs............................................. 489,000 362,000 451,000
Deposits and other................................................. 844,000 170,000 393,000
-------------- ------------- -------------
Total other assets.................................................... 5,360,000 6,187,000 14,288,000
-------------- ------------- -------------
Total assets.......................................................... $ 160,366,000 $169,102,000 $202,136,000
============== ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 31,239,000 $ 33,721,000 $ 39,543,000
Accrued payroll and payroll taxes.................................. 4,838,000 5,034,000 5,354,000
Excise taxes payable............................................... 7,981,000 5,883,000 4,872,000
Other accrued expenses and taxes................................... 5,366,000 7,086,000 5,824,000
Notes payable to stockholders...................................... 5,450,000 6,135,000 --
Current maturities of long-term debt............................... 5,163,000 6,200,000 100,224,000
-------------- ------------- -------------
Total current liabilities............................................. 60,037,000 64,059,000 155,817,000
Deferred pension liability............................................ 927,000 362,000 479,000
Long-term debt........................................................ 88,932,000 90,099,000 20,721,000
-------------- ------------- -------------
Total liabilities..................................................... 149,896,000 154,520,000 177,017,000
Stockholders' equity:
Voting common stock, $.01 par value................................ 2,000 2,000 2,000
Nonvoting common stock $.01 par value.............................. 101,000 101,000 101,000
Additional paid-in capital......................................... 23,154,000 23,154,000 24,961,000
Retained earnings (deficit)........................................ (2,357,000) 1,929,000 5,708,000
Unrecognized net pension loss...................................... (438,000) -- --
-------------- ------------- -------------
20,462,000 25,186,000 30,772,000
Notes receivable from stockholders................................. (9,991,000) (10,603,000) (5,652,000)
Cost of treasury stock............................................. (1,000) (1,000) (1,000)
-------------- ------------- -------------
Total stockholders' equity............................................ 10,470,000 14,582,000 25,119,000
-------------- ------------- -------------
Total liabilities and stockholders' equity............................ $ 160,366,000 $169,102,000 $202,136,000
============== ============= =============
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL WINE & SPIRITS CORPORATION AND NWS, INC.
COMBINED STATEMENTS OF INCOME
<S> <C> <C> <C> <C> <C>
Nine months ended
Years Ended March 31, December 31,
-------------------------------------------- -------------------------------
1996 1997 1998 1997 1998
(Unaudited) (Unaudited)
Net product sales........................... $ 443,257,000 $ 488,071,000 $ 505,141,000 $ 401,927,000 $ 423,367,000
Distribution fees........................... -- 2,729,000 16,270,000 13,121,000 14,010,000
-------------- -------------- -------------- -------------- --------------
Total revenue............................ 443,257,000 490,800,000 521,411,000 415,048,000 437,377,000
Cost of products sold....................... 364,792,000 402,072,000 411,734,000 329,566,000 346,516,000
-------------- -------------- -------------- -------------- --------------
Gross profit............................. 78,465,000 88,728,000 109,677,000 85,482,000 90,861,000
Selling, general and administrative expenses:
Warehouse and delivery................ 19,777,000 23,489,000 33,428,000 25,864,000 27,178,000
Selling............................... 26,213,000 30,906,000 32,328,000 24,483,000 29,421,000
Administrative........................ 22,935,000 24,747,000 30,042,000 21,534,000 22,091,000
Start-up costs........................ -- 1,157,000 3,320,000 3,163,000 --
-------------- -------------- -------------- -------------- --------------
68,925,000 80,299,000 99,118,000 75,044,000 78,690,000
-------------- -------------- -------------- -------------- --------------
Income from operations...................... 9,540,000 8,429,000 10,559,000 10,438,000 12,171,000
Interest expense: -------------- -------------- -------------- -------------- --------------
Related parties.......................... (123,000) (338,000) (507,000) (371,000) (363,000)
Third parties............................ (7,812,000) (8,148,000) (9,165,000) (6,954,000) (7,655,000)
-------------- -------------- -------------- -------------- --------------
(7,935,000) (8,486,000) (9,672,000) (7,325,000) (8,018,000)
Other income:
Equity earnings in Kentucky distributor.. -- -- -- -- 400,000
Gain on sale of assets................... 172,000 41,000 4,139,000 4,225,000 97,000
Interest income.......................... 999,000 1,003,000 1,246,000 746,000 749,000
Rental and other income.................. 248,000 616,000 839,000 192,000 187,000
-------------- -------------- -------------- -------------- --------------
Total other income.......................... 1,419,000 1,660,000 6,224,000 5,163,000 1,433,000
-------------- -------------- -------------- -------------- --------------
Net income.................................. $ 3,024,000 $ 1,603,000 $ $7,111,000 $ 8,276,000 $ 5,586,000
============== ============== ============== ============== ==============
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL WINE & SPIRITS CORPORATION AND NWS, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.01 Par Value Accumulated Notes
Common Stock Additional Retained Other Receivable Cost of Total
Paid-in Earnings Comprehensive from Treasury Stockholders'
Voting Nonvoting Capital (Deficit) Income (Loss) Stockholders Stock Equity
Balance at April 1, 1995............ $2,000 $ 52,000 $17,610,000 $6,973,000 $ (508,000) $(8,766,000) $ (1,000) $15,362,000
Comprehensive income:
Net income.................... -- -- -- 3,024,000 -- -- -- 3,024,000
Decrease in unrecognized net
pension loss................ -- -- -- -- 292,000 -- -- 292,000
Total comprehensive income....... -- -- -- -- -- -- -- 3,316,000
Increase in notes receivable from
stockholders.................. -- -- -- -- -- (691,000) -- (691,000)
Distributions to stockholders.... -- -- -- (7,835,000) -- -- -- (7,835,000)
Capital contributions............ -- -- 4,056,000 -- -- -- -- 4,056,000
Issuance of 21,347 shares of NWS,
Inc. voting common stock...... -- -- -- -- -- -- -- --
NWS, Inc. nonvoting common stock
dividend declared............. -- 45,000 -- (45,000) -- -- -- --
------ --------- ---------- ----------- ------------- ------------ ----------- ----------
Balance at March 31, 1996........... 2,000 97,000 21,666,000 2,117,000 (216,000) (9,457,000) (1,000) 14,208,000
Comprehensive income:
Net income.................... -- -- -- 1,603,000 -- -- -- 1,603,000
Increase in unrecognized net
pension loss................ -- -- -- -- (222,000) -- -- (222,000)
Total comprehensive income....... -- -- -- -- -- -- -- 1,381,000
Increase in notes receivable from
stockholders.................. -- -- -- -- -- (534,000) -- (534,000)
Distributions to stockholders.... -- -- -- (6,077,000) -- -- -- (6,077,000)
Capital contributions............ -- -- 1,488,000 -- -- -- -- 1,488,000
Issuance of 408,554 shares of NWS,
Inc. nonvoting common stock... -- 4,000 -- -- -- -- -- 4,000
------ --------- ---------- ----------- ------------- ------------ ----------- ----------
Balance at March 31, 1997........... 2,000 101,000 23,154,000 (2,357,000) (438,000) (9,991,000) (1,000) 10,470,000
Comprehensive income:
Net income.................... -- -- -- 7,111,000 -- -- -- 7,111,000
Decrease in unrecognized net
pension -- -- -- -- 438,000 -- -- 438,000
loss..........................
Total comprehensive income....... -- -- -- -- -- -- -- 7,549,000
Increase in notes receivable from
stockholders.................. -- -- -- -- -- (612,000) -- (612,000)
Distributions to stockholders.... -- -- -- (2,825,000) -- -- -- (2,825,000)
------ --------- ---------- ----------- ------------- ------------ ----------- ----------
Balance at March 31, 1998........... 2,000 101,000 23,154,000 1,929,000 -- (10,603,000) (1,000) 14,582,000
Unaudited:
Net income.................... -- -- -- 5,586,000 -- -- -- 5,586,000
Decrease in notes receivable
from stockholders........... -- -- -- -- -- 4,951,000 -- 4,951,000
Conversion of notes payable to
stockholders to equity...... -- -- 1,807,000 -- -- -- -- 1,807,000
Distributions to stockholders. -- -- -- 1,807,000) -- -- -- (1,807,000)
------ --------- ---------- ----------- ------------- ------------ ----------- ----------
Balance at December 31, 1998 $2,000 $ 101,000 $24,961,000 $ 5,708,000 $ -- $(5,652,000) $ (1,000) $25,119,000
(Unaudited).................... ====== ========= =========== =========== ============= ============ =========== ==========
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL WINE & SPIRITS CORPORATION AND NWS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C> <C> <C>
Nine months ended
Years Ended March 31, December 31,
1996 1997 1998 1997 1998
(Unaudited) (Unaudited)
Operating activities:
Net income................................... $ 3,024,000 $ 1,603,000 $ 7,111,000 $ 8,276,000 $ 5,586,000
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation of property and equipment.. 3,997,000 4,613,000 5,872,000 4,160,000 5,116,000
Gain on sale of assets.................. (172,000) (41,000) (4,139,000) (4,225,000) (97,000)
Amortization of intangible assets....... 905,000 1,144,000 1,243,000 892,000 958,000
Equity earnings in Kentucky
distributor -- -- -- -- (400,000)
Changes in operating assets and liabilities:
Accounts receivable.................. (4,422,000) (568,000) 3,427,000 (20,707,000) (25,048,000)
Inventories.......................... (15,132,000) (1,191,000) (4,656,000) 2,038,000 2,171,000
Prepaid expenses and other........... (447,000) (1,692,000) (810,000) (8,000) 1,174,000
Accounts payable..................... 4,413,000 864,000 2,482,000 (4,888,000) 5,822,000
Accrued expenses and taxes........... 1,107,000 2,207,000 (747,000) (469,000) (1,925,000)
Net cash provided (used) by operating activities (6,727,000) 6,939,000 9,783,000 (14,931,000) (6,643,000)
Investing activities:
Purchase of property and equipment........... (3,609,000) (10,447,000) (13,952,000) (12,069,000) (6,518,000)
Proceeds from sales of property and equipment 128,000 88,000 253,000 74,000 116,000
Investment in Kentucky distributor........... -- -- -- -- (6,000,000)
Payment for supplier's net assets............ -- (181,000) -- -- --
Intangible assets............................ (1,827,000) (947,000) (730,000) (254,000) (2,231,000)
Proceeds from sale of intangibles............ -- -- 3,000,000 3,000,000 --
Deposits and other........................... (52,000) (58,000) 1,766,000 (83,000) (223,000)
(Increase) decrease in cash surrender value of
insurance, net............................. (263,000) (16,000) (492,000) 27,000 (235,000)
Increase in receivable from affiliate........ (143,000) -- -- -- --
Decrease (increase) in notes receivable 689,000 1,590,000 -- (1,698,000) 119,000
from supplier................................
Collections on notes receivable.............. -- 34,000 247,000 -- --
Net cash used by investing activities........... (5,077,000) (9,937,000) (9,908,000) (11,003,000) (14,972,000)
Financing activities:
Net proceeds (borrowings) on line of credit.. 15,921,000 1,414,000 (3,078,000) 19,188,000 20,680,000
Proceeds of long-term debt................... 45,000 13,811,000 11,257,000 12,504,000 8,800,000
Principal payments on long-term debt......... (2,038,000) (7,302,000) (5,975,000) (4,983,000) (4,834,000)
Proceeds of borrowings from stockholder...... 2,463,000 2,919,000 685,000 250,000 --
Repayments of borrowings from stockholders... (657,000) -- -- -- --
Issuance of NWS, Inc. common stock........... -- 4,000 -- -- --
Additional paid-in capital................... 4,056,000 1,488,000 -- -- --
Notes receivable from stockholders and others (859,000) (646,000) (1,964,000) (376,000) 623,000
Distributions to stockholders................ (7,142,000) (6,770,000) (2,825,000) (1,120,000) (1,807,000)
Net cash provided (used) by financing activities 11,789,000 4,918,000 (1,900,000) 24,463,000 23,462,000
Net increase (decrease) in cash................. (15,000) 1,920,000 (2,025,000) (471,000) 1,847,000
Cash, beginning of period....................... 1,490,000 1,475,000 3,395,000 3,395,000 1,370,000
Cash, end of period............................. $ 1,475,000 $ 3,395,000 $ 1,370,000 $ 2,924,000 $ 3,217,000
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
NATIONAL WINE & SPIRITS CORPORATION AND NWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business and Principles of Combination
The accompanying combined financial statements include the accounts of
National Wine & Spirits Corporation (NWSC), its wholly owned subsidiary, NWS
Michigan, Inc. (NWSM) and its affiliate, NWS, Inc. (NWSI), collectively, the
Companies. NWSC and NWSI are brother-sister companies whose principal
stockholders are the same persons. All significant intercompany accounts and
transactions have been eliminated from the combined financial statements.
Substantially all revenues result from the sale of liquor, beer and wine.
In December, 1998, a reorganization took place which created a new
holding company ("NWS") into which all of the shares of capital stock in NWSC
and NWSI owned by Mr. Lacrosse (or a trust for the benefit of his family) or
Mrs. Johnston were contributed in exchange for shares of NWS. In addition, NWSC
subsequently distributed all of its shares in NWSM to NWS. Finally, a new
limited liability company subsidiary of NWSI was created into which
substantially all of the Company's Illinois operations were transferred
("NWS-LLC"). Prior to the reorganization, the financial statements were
presented on a combined basis and subsequent to the reorganization the financial
statements are presented on a consolidated basis. There were no changes in
operations as a result of the reorganization.
Based in Indianapolis, NWSC is a wholesale distributor of liquor and
wines throughout Indiana. Based in Chicago, NWSI is a wholesale distributor of
liquor and wines throughout Illinois. NWSM was organized October 18, 1996, as a
wholesale distributor of liquor throughout Michigan, and commenced operations in
February 1997. NWSC also operates a bottled water division and a division for
distribution of cigars and accessories. The Companies perform periodic credit
evaluations of its customers' financial condition and generally do not require
collateral. Credit losses have been within management's expectations.
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements.
In the opinion of the Companies, all adjustments (consisting of only
normal recurring accruals) considered necessary to present fairly the financial
position as of December 31, 1998 and the statements of income, stockholders'
equity and cash flows for the nine-month periods ended December 31, 1997 and
1998 have been included.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
<PAGE>
<PAGE>
1. Nature of Business and Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
The Companies' cash, accounts receivable, short-term notes receivable,
accounts payable, short-term notes payable and certain other accrued liabilities
are all short-term in nature and the carrying amount approximates fair value.
Long-term notes receivable and payable have primarily variable interest rates,
thus their carrying amounts approximate fair value.
Inventories
Substantially all inventories are stated at the lower of cost,
determined by the last-in, first-out (LIFO) method, or market.
Bulk whiskey represents the Companies' interest in certain whiskey
inventories which are being aged by the supplying distiller. This interest
serves as collateral for related notes payable to the distiller. In accordance
with industry practices, storage and handling costs incurred during the aging
process are included as a component of the cost of bulk whiskey.
Advertising Costs
Advertising costs are charged to operations when incurred. Advertising
expense was $2,157,000, $2,712,000 and $2,087,000 for 1996, 1997 and 1998,
respectively.
Property and Equipment
Property and equipment are recorded at cost and are being depreciated
using primarily the straight-line method over their expected useful lives as
follows:
<TABLE>
<CAPTION>
<S> <C>
Land improvements............ 15 - 40 years
Buildings and improvements... 10 - 40 years
Furniture and equipment...... 5 - 7 years
Warehouse equipment.......... 7 years
Automobiles and trucks....... 5 years
</TABLE>
Intangible Assets
Intangible assets include the cost of certain assets obtained in the
acquisition of various distributors, costs incurred in obtaining financing and
amounts paid to acquire supplier distribution rights. These costs are being
amortized by the straight-line method over lives of the agreements or their
estimated useful lives which range from two to ten years. Accumulated
amortization related to these assets was $2,068,000 and $3,311,000 at March 31,
1997 and 1998, respectively.
<PAGE>
<PAGE>
1. Nature of Business and Summary of Significant Accounting Policies (continued)
Long-lived Assets
The carrying value of the long-lived assets is periodically reviewed by
management. If this review indicates that the carrying value may be impaired
then the impaired amount will be written off.
Income Taxes
There is no provision for federal or state income taxes reflected in
the financial statements because the stockholders have consented to the
Companies' elections to be taxed as S corporations under the applicable
provisions of the Internal Revenue Code. The Companies' income is taxable
directly to their stockholders.
Comprehensive Income
During the year ended March 31, 1998, the Companies adopted the
provisions of Statement of Financial Accounting Standards No. 130, Reporting of
Comprehensive Income, which requires entities to report comprehensive income in
their basic financial statements. Comprehensive income refers to the change in
an entity's equity during a period resulting from all transactions and events
other than capital contributed by and distributions to the entities' owners. For
the Companies, comprehensive income is equal to net income plus the change in
unrecognized net pension gain or loss. The Companies have elected to report
comprehensive income in the combined statements of stockholders' equity. The
Companies' prior years' financial statements have been reclassified for
comparative reporting purposes, however, there was no change in the net income
previously reported for the years ended March 31, 1996 and 1997.
Revenue Recognition
NWSC and NWSI purchase inventory items for sale to customers and are
liable for payment to the suppliers, as well as collecting payment from
customers. NWSM receives a fixed fee per case of liquor distributed from the
State of Michigan (distribution fees) which is also responsible for payments to
suppliers. All shipments are cash on delivery and are deposited directly to the
State of Michigan.
Net sales and distribution fees are recognized at the time product is
shipped.
Start-up Costs
Start-up costs to commence operations and to reach normal capacity are
expensed as incurred, in accordance with Statement of Position 98-5, Reporting
on the Costs of Start-up Activities.
Recently Issued Accounting Pronouncements
In July, 1997, the Financial Accounting Standards Board issued
Statement No. 131 (SFAS 131), Disclosures About Segments of an Enterprise and
Related Information. Under SFAS 131, the Companies will report financial and
descriptive information about its operating segments. SFAS 131 is effective for
the Companies beginning with the March 31, 1999 annual financial statements.
While the Companies have not yet finalized their evaluation of the impact of
adoption of SFAS 131, they presently believe that they will be reporting
multiple operating segments.
<PAGE>
<PAGE>
1. Nature of Business and Summary of Significant Accounting Policies
(continued)
Reclassification
Certain amounts in the 1997 and 1996 financial statements have been
reclassified to conform to the 1998 presentation.
2. Inventories
Inventories at March 31 are comprised of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1998
Inventories at FIFO.(approximates
replacement cost)........ $78,508,000 $83,734,000
Less: LIFO reserve.......... 6,430,000 7,000,000
----------- -----------
$72,078,000 $76,734,000
=========== ===========
</TABLE>
If the Companies had used the FIFO inventory method, net income would have
been $545,000, $1,455,000 and $570,000 greater for 1996, 1997 and 1998,
respectively.
3. Property and Equipment
Property and equipment at March 31 is comprised of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1998
Land and improvements............................. $ 1,348,000 $ 1,421,000
Buildings and improvements........................ 24,674,000 27,233,000
Furniture and equipment........................... 12,391,000 14,307,000
Warehouse equipment............................... 12,768,000 23,580,000
Automobiles and trucks............................ 7,542,000 8,069,000
------------ -----------
58,723,000 74,610,000
Less: Accumulated depreciation.................... 21,484,000 26,045,000
------------ -----------
37,239,000 48,565,000
Property and equipment not yet placed in service.. 3,431,000 --
------------ -----------
$ 40,670,000 $ 48,565,000
============ ============
</TABLE>
<PAGE>
<PAGE>
4. Debt
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
March 31, March 31, December 31,
1997 1998 1998
(Unaudited)
Mortgage Notes Payable:
National Wine & Spirits Corporation
City of Indianapolis-First Mortgage Note, Series 1983--payable monthly,
with interest computed at 80% of the prime lending rate of NBD Bank,
N.A., through April 2003. Secured by certain property
in Indianapolis.................................................... $471,000 $372,000 $296,000
Bank-payable in monthly installments, plus interest at 1% above the
Bank's prime lending rate, through October 1, 2003. Secured by
certain property................................................... 183,000 162,000 145,000
NWS, Inc.
Bank loans secured by substantially all of the Company's assets:
Mortgage note payable in monthly installments of $63,000, plus
interest at the Bank's prime lending rate plus 2%, through July 1,
2000, when the unpaid principal balance is due..........
2,503,000 1,752,000 1,189,0000
Mortgage note payable in monthly installments of $14,000, plus interest
at the Bank's prime lending rate plus 1%, through March 31, 2002,
when the unpaid principal balance is due........
2,492,000 2,339,000 2,148,000
--------- --------- ---------
5,649,000 4,625,000 3,778,000
Notes Payable:
National Wine & Spirits Corporation
Bank revolving line of credit, which bears interest, as defined, to
maturity on September 30, 1999. Secured by substantially all
assets. (A)........................................................ 24,218,000 23,193,000 29,695,000
Term loan for Kentucky investment, repaid in January, 1999........... -- -- 7,500,000
Heaven Hill Distillers, Inc. notes payable. Repaid in March 1998.....
348,000 -- --
Term loans payable in monthly installments of $51,000, including
interest at 9.53%, through May 1999. The notes are secured by
certain assets and are guaranteed by NWSI.......................... 1,170,000 651,000 180,000
Term loan payable in monthly installments of $30,000, including
interest at 7.73%, through December 29, 2002. Secured by certain
assets............................................................. -- 1,462,000 1,269,000
NWS Michigan, Inc.
Term loan payable in monthly installments of $67,000, plus interest at the
Bank's LIBOR rate plus 2.75%, through September 5, 2002.
Secured by certain assets.......................................... -- 3,600,000 3,000,000
<PAGE>
<PAGE>
4. Debt (continued)
March 31, March 31, December 31,
1997 1998 1998
(Unaudited)
Term loan payable in monthly installments of $62,000, plus interest at the
Bank's LIBOR rate plus 3.0%, through November 14, 2002.
Secured by certain assets.......................................... $ -- $ 4,936,000 $ 4,381,000
NWS, Inc.
Bank revolving line of credit, which bears interest, as defined, to
maturity on September 30, 1999. Secured by substantially all
assets. (B)........................................................ 45,571,000 43,518,000 57,695,000
Term loan payable. Repaid July 1997. ............................... 83,000 -- --
Term loan with interest only payable quarterly at the Bank's LIBOR rate
plus .25% until maturity on June 16, 2001. The note is
subordinate to the senior bank debt................................ 6,000,000 6,000,000 6,000,000
Subordinated promissory note payable to a former employee on
June 30, 1999. Interest only is payable quarterly at the prime
rate plus 1'2%. The note is subordinate to senior bank debt....... 750,000 350,000 350,000
Bank home equity line of credit with interest only payable monthly
at the Bank's prime lending rate plus 1%, through November 1, 1999, when
the unpaid principal balance is due The loan is secured by a condominium
and is guaranteed by the majority stockholder of
NWS, Inc........................................................... 500,000 500,000 500,000
Promissory note payable to the State of Illinois in monthly
installments of $9,000, including interest at 6.5%, through
February 14, 2000, when a balloon payment of $501,000 is due. The
note is secured by substantially all assets and is guaranteed by
the majority stockholder of NWS, Inc............................... 631,000 568,000 511,000
Term loan payable in monthly installments of $133,000, plus
interest at the one month LIBOR rate plus 3.25%, through
March 2001. The note is secured by certain assets and is
guaranteed by NWSC................................................. 6,533,000 4,933,000 3,733,000
Term loans payable in monthly installments of $60,000, including
interest at 9.43%, through April 1999. The notes are secured by
certain assets and are guaranteed by NWSC.......................... 1,354,000 737,000 234,000
Term loan payable in annual installments of $300,000 in 1999 and
$500,000 in 2000 and 2001, including interest...................... -- -- 1,300,000
Term loan payable in monthly installments of $12,000, including
interest at 9.51%, through July 2000. The note is secured by
certain assets and is guaranteed by NWSC........................... -- 304,000 213,000
--------- --------- ---------
87,158,000 90,752,000 116,561,000
<PAGE>
<PAGE>
4. Debt (continued)
March 31, March 31, December 31,
1997 1998 1998
Non-competition agreement payable to a former stockholder in annual
installments of $300,000, beginning April 1, 1995 through April 1, 2000.
The obligation is secured by proceeds of life insurance from
NWSC's majority stockholder........................................ $ 1,200,000 $ 900,000 $ 600,000
Other 88,000 22,000 6,000
94,095,000 96,299,000 120,945,000
Less: Current maturities 5,163,000 6,200,000 100,224,000
$88,932,000 $90,099,000 $20,721,000
=========== =========== ===========
<FN>
- -----------
(A) On September 2, 1997, NWSC entered into a credit agreement, which was amended March 31, 1998, that
provides a revolving line of credit for borrowings of up to $35 million through September 30, 1999. The
portion of the line of credit available to fund advances to NWSI and NWSM is $10 million (see Note 8).
Line of credit borrowings are limited to eligible accounts receivable plus eligible inventories. The
credit agreement permits NWSC to elect an interest rate based upon either the prime lending rate or
LIBOR. At March 31, 1998, $19,000,000 of the credit line borrowings bear interest at 3.00% above the
LIBOR rate (8.70% at March 31, 1998). The remaining $4,193,000 of credit line borrowings bear interest
at the prime lending rate plus .50% (9.00% at March 31, 1998). Credit line borrowings are secured by
substantially all of NWSC's assets (including life insurance on NWSC's principal stockholders) and are
guaranteed by NWSI and NWSM. NWSC's bank credit agreement requires NWSC to maintain certain financial
ratios and earnings, and restricts the amount of capital expenditures and distributions NWSC may make to
its stockholders.
(B) On September 2, 1997, NWSI entered into a credit agreement, which was amended March 31, 1998, that
provides a revolving line of credit for borrowings of up to $60 million through September 30, 1999. Line
of credit borrowings are limited to eligible accounts receivable plus eligible inventories. The credit
agreement permits NWSI to elect an interest rate based upon either the prime lending rate or LIBOR. At
March 31, 1998, $35,000,000 of the credit line borrowings bear interest at 3.00% above the LIBOR rate
(8.68% at March 31, 1998). The remaining $8,518,000 of credit line borrowings bear interest at the prime
lending rate plus .50% (9.00% at March 31, 1998). Through October 27, 1999, the LIBOR rate is capped at
a maximum of 8.0% related to $25,000,000 of the credit line borrowings subject to the LIBOR rate. Credit
line borrowings are secured by substantially all of NWSI's assets (including life insurance on NWSI's
principal stockholders) and are guaranteed by NWSC and NWSM. Additionally, NWSI had a supplier letter of
credit of which $560,000 was outstanding at March 31, 1998. NWSI's bank credit agreement includes
certain restrictions and requires NWSI to maintain certain financial ratios and earnings. In addition,
the agreement restricts the amount of capital expenditures and distributions NWSI may make to its
stockholders.
</FN>
</TABLE>
<PAGE>
<PAGE>
4. Debt (continued)
At March 31, 1998, the Companies were in violation of certain loan
covenants in their credit agreements. These violations were waived by the
lenders at March 31, 1998. Subsequent to March 31, 1998, the Companies have been
in compliance with their covenants.
At March 31, 1998, the aggregate principal maturities for long-term
obligations are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999............ $ 6,200,000
2000............ 72,759,000
2001............ 4,797,000
2002............ 8,133,000
2003............ 3,541,000
Thereafter...... 869,000
$96,299,000
</TABLE>
NWSI had subordinated notes payable to its two principal stockholders
aggregating $5,450,000 and $6,135,000 at March 31, 1997 and 1998, respectively.
These notes earn interest at the effective borrowing rate on NWSI's revolving
line of credit. See Note 11.
NWSI has a commitment from a lender for $30,000,000 of debt financing.
At March 31, 1998, there were no amounts outstanding on this commitment.
Cash paid for interest was $8,049,000, $8,445,000 and $9,643,000 for
1996, 1997 and 1998, respectively.
5. Common Stock
NWSC has two authorized classes of capital stock: voting $.01 par value
common shares and nonvoting $.01 par value common shares. NWSI also has two
authorized classes of capital stock: voting $.01 par value common shares and
nonvoting $.01 par value common shares. Both classes of stock have the same
relative rights, performance limitations and restrictions, except that nonvoting
shares are not entitled to vote on any matters submitted to a vote of the
stockholders, except as provided by law.
5. Common Stock (continued)
Following are the details of common stock at March 31, 1997 and 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Shares
Authorized Issued Outstanding Amount
Voting
NWSC-$.01 par value......... 200,000 104,521 104,520 $ 1,000
NWSI-$.01 par value......... 200,000 88,256 88,256 1,000
-------
$ 2,000
Nonvoting
NWSC-$.01 par value......... 20,000,000 5,226,050 5,226,001 $ 53,000
NWSI-$.01 par value......... 10,000,000 4,813,354 4,813,354 48,000
---------
$ 101,000
</TABLE>
Treasury stock recorded at a cost of $1,000 consisted of 1 share of
NWSC $.01 par value voting common stock and 49 shares of NWSC $.01 par value
nonvoting common stock at March 31, 1997 and 1998.
6. Commitments
The Companies lease office and warehouse space under noncancellable
operating leases ranging from two to ten years, some of which included renewal
and purchase options and escalation clauses, expiring on various dates through
2007. The Companies also lease certain trucks and equipment pursuant to
noncancellable operating leases with terms ranging from three to seven years.
Future minimum rent payments as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999......... $ 2,715,000
2000......... 2,712,000
2001......... 2,391,000
2002......... 2,138,000
2003......... 2,083,000
Thereafter... 5,462,000
$ 17,501,000
</TABLE>
Rent expense was $1,218,000, $2,114,000 and $3,732,000 for 1996, 1997
and 1998, respectively.
<PAGE>
<PAGE>
6. Commitments (continued)
NWSI has committed to purchase warehouse equipment of approximately
$3,500,000.
NWSI is committed under a distribution agreement to pay $500,000 over
the next four years.
7. Pension Plans
The Companies sponsor a multiple-employer defined benefit pension plan
covering substantially all of their warehousemen and drivers. Under terms of the
Plan, the Companies are liable for any unsatisfied liabilities of the other
affiliated entities. The Companies make contributions to the Plan based on
amounts permitted by law. Contributions to the Plan by the Companies were
$179,000, $171,000 and $224,000 in the years ended March 31, 1996, 1997 and
1998, respectively.
For purposes of financial reporting, the Companies use the projected
unit credit actuarial cost method to determine the net periodic pension cost and
projected benefit obligations under Statement of Financial Accounting Standards
No. 87. Under this method the service cost is computed as the actuarial present
value of the benefit accruing during the current year based on the assumption
that benefits accrue uniformly over each participant's working lifetime. The
projected benefit obligation is the actuarial present value of benefits accrued
in prior years based on the assumption that benefits accrue uniformly over each
participant's working lifetime.
The components of net periodic pension cost of the defined benefit plan
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1997 1998
Service cost-benefits earned during the year.............. $ 111,000 $ 146,000 $ 114,000
Interest on projected benefit obligation.................. 144,000 171,000 196,000
Actual return on plan assets.............................. (220,000) (121,000) (624,000)
Amortization of unrecognized net transition asset......... 20,000 19,000 19,000
Amortization of loss...................................... 16,000 15,000 8,000
Amortization of prior service cost........................ -- 19,000 19,000
Difference between expected and actual return on plan assets 102,000 (20,000) 471,000
---------- ----------- ----------
Net periodic pension cost................................. $ 173,000 $ 229,000 $ 203,000
========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
7. Pension Plans (continued)
The funded status and amounts recognized in the accompanying combined
balance sheets at March 31, 1997 and 1998 for the defined benefit pension plan
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1998
Actuarial present value of accumulated benefit obligations:
Vested....................................................... $ 2,717,000 $ 2,812,000
Nonvested.................................................... 264,000 294,000
------------- ------------
Accumulated benefit obligation.................................. 2,981,000 3,106,000
Effect of anticipated future compensation levels (A)............ -- --
Projected benefit obligation.................................... 2,981,000 3,106,000
Less: Fair value of plan assets................................. 1,877,000 2,662,000
------------- ------------
Minimum liability............................................... $ 1,104,000 $ 444,000
============= ============
Balance Sheet Classification:
Current accrued liability.................................... $ 177,000 $ 82,000
Noncurrent deferred additional liability..................... 927,000 362,000
------------- ------------
Minimum liability............................................... $ 1,104,000 $ 444,000
============= ============
Deferred pension costs (intangible asset)....................... $ 489,000 $ 362,000
Unrecognized net pension loss................................... 438,000 --
------------- ------------
$ 927,000 $ 362,000
============= ============
</TABLE>
(A) Plan benefits are based on years of service, rather than compensation
levels.
The deferred pension cost asset is being amortized on a straight-line
basis over a 17 1'2 year period. Plan assets are comprised primarily of common
stocks and bonds.
In determining the net periodic pension cost, the discount rate for the
benefit obligation was 6.75% in 1997 and 1998. The expected long-term rate of
return on assets was 8.00% for 1996, 1997 and 1998.
The Companies also sponsor a defined contribution pension plan for
substantially all employees not covered by the defined benefit plan.
Contributions to the Plan are made at the discretion of the Companies and may
not exceed 5% of a participant's compensation. The Companies' pension expense
for the defined contribution plan was $631,000, $773,000 and $942,000 for 1996,
1997 and 1998, respectively.
NWSI contributes to union-sponsored multiemployer pension plans which
provide for contributions based on a specified rate per labor hour. Union
employees constitute approximately 56% of NWSI's workforce. Contributions
charged to expense were $443,000, $509,000 and $565,000 for 1996, 1997 and 1998,
respectively. Information as to NWSI's portion of accumulated plan benefits and
plan net assets is not currently available. Under the Employee Retirement Income
Security Act of 1974 as amended, an employer upon withdrawal from a
multiemployer plan is required to continue funding its proportionate share of
the plan's unfunded vested benefits. NWSI has no intention of withdrawing from
the plans.
8. Related Party Transactions
In December 1991, two of NWSC's stockholders purchased NWSI. NWSC may
make advances to NWSI under a note which bears interest at NWSC's effective
borrowing rate on its bank revolving line of credit. At March 31, 1998,
$2,193,000 was advanced under the note. The note is subject to renewal in
September 1999.
NWSC also makes advances to NWSM which bear interest at NWSC's
effective borrowing rate on its bank revolving line of credit. At March 31,
1998, $6,601,000 was advanced to NWSM.
NWSC had notes receivable from its two stockholders totaling $9,991,000
and $10,603,000 at March 31, 1997 and 1998, respectively. The notes earn
interest at NWSC's effective borrowing rate on its revolving line of credit.
Interest income earned was $818,000, $870,000 and $893,000 during 1996, 1997 and
1998, respectively. Proceeds of the notes were used by the stockholders to
purchase additional capital stock of NWSI and to make loans to NWSI. The notes,
which are due on demand, have been reflected as a reduction of stockholders'
equity in the combined balance sheets as it is the Companies' present intent to
satisfy these receivables through future stockholder distributions. See Note 11.
The unaudited notes receivable balance at December 31, 1998 was approximately
$10,100,000.
In January 1998, NWSC paid an employee $300,000 pursuant to a five year
non-compete agreement related to the start-up of NWSC's cigar division.
During fiscal 1998, the Companies paid $170,000 for consulting fees to
a minority stockholder of NWSI.
<PAGE>
<PAGE>
8. Related Party Transactions (continued)
Consolidated Rectifying, Inc. (CRI), a related party, is an Illinois
liquor bottler, blender and manufacturer which utilized brands, trademarks and
tradenames licensed to it from NWSI. On December 20, 1996, NWSI purchased
substantially all of the assets, and assumed certain liabilities, of CRI for
$181,000.
<TABLE>
<CAPTION>
<S> <C>
Assets acquired:
Accounts receivable.............. $ 1,951,000
Inventory........................ 6,773,000
Property and equipment........... 509,000
---------------
9,233,000
Liabilities assumed:
Excise tax payable............... (4,637,000)
Liabilities and debt............. (2,482,000)
Receivable/payable from supplier. (1,933,000)
---------------
Net assets acquired................. $ 181,000
===============
</TABLE>
Effective June 25, 1997, NWSI sold certain of its licensed brands,
trademarks and tradenames for approximately $5,250,000. NWSI recognized a gain
of $4,071,000 which represents the $5,250,000 less $1,179,000 transaction costs
and the costs of assets related to the brands which were disposed. The purchase
price is receivable under a $2,250,000 seven-year promissory note, with the
remaining balance received in cash at the sale date. At March 31, 1998 the note
receivable balance was $2,045,000.
NWSI had a short-term note receivable from CRI with a balance of
$613,000 at March 31, 1996. The note was repaid in December 1996. Interest
accrued on the note was $168,000 and $112,000 for the years ended March 31, 1996
and 1997, respectively.
Transactions with CRI not disclosed elsewhere in the financial
statements for the years ended March 31, 1996 and 1997 were as follows (none in
1998):
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1997
Sales................................................. $ 640,000 $ 715,000
Purchases of inventory................................ 30,390,000 19,721,000
Purchase discounts.................................... 384,000 113,000
Administrative and data processing charged to CRI..... 225,000 169,000
Operational items paid by NWSI........................ 28,555,000 17,326,000
Rent expense charged to CRI........................... 132,000 88,000
</TABLE>
9. Concentration of Risk
Purchases from four international suppliers accounted for approximately
65%, 62% and 65% of all revenues in 1996, 1997 and 1998, respectively.
<PAGE>
<PAGE>
10. Litigation
The Companies are a party to various lawsuits and claims arising in the
normal course of business. While the ultimate resolution of lawsuits or claims
against the Companies cannot be predicted with certainty, management does not
expect that these matters will have a material adverse effect on the financial
position or results of operations of the Companies.
11. Subsequent Events--Unaudited
Effective July 31, 1998, the Companies and their stockholders executed
new notes payable to stockholders to provide for a legal right of offset against
the notes receivable from stockholders. Accordingly, as of December 31, 1998,
the notes payable to stockholders (principal plus accrued interest) have been
offset against the notes receivable from stockholders, with the resulting net
amount reflected as a reduction of stockholders' equity.
In September, 1998, the Companies guaranteed a $1.3 million obligation
of a related entity.
In December, 1998, the Company formed a new distributorship in Kentucky
(Commonwealth Wine & Spirits, LLC) in partnership with two existing
Kentucky-based distributors, The Vertner Smith Company ("Vertner") and Kentucky
Wine & Spirits ("Kentucky W&S"). Under the terms, the Company will invest $7.5
million ($4.5 million in cash and a $3.0 million cash franchise fee), in
exchange for 25% of the new company, which management believes is the largest
distributor of wine and spirits in Kentucky. Vertner and Kentucky W&S equally
own the remaining 75%. At December 31, 1998, $6.0 million had been paid and a
$1.5 million commitment remained outstanding. The Company has accounted for its
investment in Kentucky using the equity method.
In January, 1999, the Company issued $110,000,000 of senior notes to
qualified institutional buyers. The net proceeds to the Company from the sales
of the notes were approximately $107,000,000. The notes are unsecured, bear
interest at 10.125% per annum and are due January 2009. These senior notes are
unconditionally guaranteed by the Company's subsidiaries. Audited financial
information of guarantor subsidiaries has been omitted because the senior notes
are guaranteed by all direct and indirect subsidiaries of the parent, which has
no operations or assets separate from its investments in its subsidiaries.
Concurrently with the offering of the senior notes, the Company entered
into a new $60.0 million credit facility secured by the accounts receivable and
inventory of the Company. With proceeds from the senior notes offering and
borrowings under the new credit facility, the Company retired substantially all
of its bank revolving and term indebtedness.
On January 25, 1999, the Company paid a dividend of approximately $1.8
million.
The Company is party to a lawsuit brought by several drivers of
NWS-Illinois who allege age discrimination and workers' compensation retaliation
and claim back pay and front pay damages of $1.9 million and $1.0 million,
respectively, and the cost of the action. On February 19, 1999, the Company
reached a tentative agreement with the Plaintiffs which will release the Company
from all claims, including legal fees, in exchange for $475,000. Documentation
of the settlement has not been completed and approved.
<PAGE>
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the Offering covered by this Prospectus. If given
or made, such information or representations must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer to
sell or a solicitation to buy, the Exchange Notes offered hereby in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sale hereunder
shall, in any circumstances, create an implication that there has not been any
change in the facts set forth in this Prospectus or in the affairs of the
Company since the date hereof.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
Prospectus Summary..................................................................... 2
Risk Factors........................................................................... 16
The Exchange Offer..................................................................... 25
Reorganization of the Company.......................................................... 34
Use of Proceeds........................................................................ 34
Capitalization......................................................................... 35
Selected Combined Financial and Other Data............................................. 36
Management's Discussion and Analysis of Financial Condition and Results of Operations.. 39
Business.............................................................................. . 48
Management............................................................................. 61
Certain Transactions................................................................... 63
Principal Stockholders................................................................. 65
Description of New Credit Facility and Other Indebtedness.............................. 66
Description of the Exchange Notes...................................................... 68
Description of Outstanding Notes....................................................... 99
Registration Rights; Liquidated Damages................................................ 99
Certain U.S. Federal Income Tax Considerations......................................... 101
Plan of Distribution................................................................... 105
Legal Matters.......................................................................... 105
Change in Independent Auditors......................................................... 106
Experts................................................................................ 106
Additional Information................................................................. 106
Index to Combined Financial Statements................................................. F-1
</TABLE>
Until _______, 1999 (forty days after the date of this prospectus), all
dealers that effect transactions in these securities, whether or not
participating in this Offering, may be required to deliver a Prospectus. This is
in addition to the dealers' obligations to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
[LOGO]
NATIONAL WINE & SPIRITS, INC.
Exchange Offer for
$110,000,000 10 1/8% Senior Notes
Due 2009
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers
The following summary is qualified in its entirety be reference to the
complete text of the statute and the amended articles of incorporation referred
to below.
National Wine & Spirits, Inc. ("NWS") is empowered by Chapter 37 of the
Indiana Business Corporation Law (the "IBCL"), subject to the procedures and
limitations therein, to indemnify any person against expenses (including
attorneys' fees) and the obligation to pay a judgment, settlement, penalty, fine
or reasonable expenses incurred with respect to a threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal, in which such person is made a
party by reason of such person's being or having been a director, officer,
employee or agent of NWS if his or her conduct was in good faith and he or she
reasonably believed that, if acting in the individual's official capacity, the
conduct was in the best interests of the corporation and in all other cases, the
conduct was not opposed to the corporation's best interests. In the case of any
criminal proceeding, NWS is empowered to indemnify a person if he or she had
reasonable cause to believe the conduct was lawful or had no reasonable cause to
believe the conduct was unlawful. The statute provides that indemnification
pursuant to its provisions is not exclusive of other rights of indemnification
to which a person may be entitled under a corporation's articles of
incorporation or bylaws, vote of directors or stockholders, or otherwise. In
addition, unless limited by its articles of incorporation, a corporation shall
indemnify a person who was wholly successful in the defense of any proceeding to
which the person was a party because the person is or was a director, officer,
employee or agent against reasonable expenses incurred by him or her in
connection with the proceeding.
Article VIII of NWS' articles of incorporation, dated December 18,
1998, obligates NWS to indemnify any person in connection with any liability
arising by reason of such person's status as a past or present director,
officer, employee or agent of NWS or of any other enterprise which he or she is
serving or served in any capacity at the request of NWS if such person acted in
good faith and in a manner he or she reasonably believed, in the case of conduct
in his or her official capacity, was in the best interest of NWS, and in all
other cases, was not opposed to the best interests of NWS, and, with respect to
any criminal action or proceeding, he or she either had reasonable cause to
believe his or her conduct was lawful or no reasonable cause to believe his or
her conduct was unlawful.
ITEM 21. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Exhibits
Exhibit No. Description
3(a) Articles of Incorporation of National Wine &
Spirits, Inc.
3(b) Bylaws of National Wine & Spirits, Inc.
4(a) Indenture relating to the Exchange Notes,
dated as of January 25, 1999 among National
Wine & Spirits, Inc., the Subsidiary
Guarantors and Norwest Bank Minnesota, N.A.,
as trustee (including cross-reference sheet
regarding sections 310 through 318(a) of the
Trust Indenture Act)
4(b) A/B Exchange Registration Rights Agreement,
dated as of January 25, 1999, among National
Wine & Spirits, Inc., the Subsidiary
Guarantors and the Initial Purchasers
4(c) Form of Exchange Notes (including related Subsidiary Guarantors)
4(d) Guaranty entered into as of January 25, 1999 by all Subsidiary Guarantors
5 Opinion and Consent of Ice Miller, Donadio & Ryan (to be filed by amendment)
10(a) Purchase Agreement, dated January 20, 1999, among National Wine & Spirits, Inc.,
the Subsidiary Guarantors and the Initial Purchasers
10(b) Credit Agreement, dated January 25, 1999, among National Wine & Spirits, Inc., the
Subsidiary Guarantors and NBD, as agent.
12 Statement regarding computation of ratios
16 Letter regarding change in certifying accountants
21 List of subsidiaries
23(a) Consent of Ernst & Young LLP
23(b) Consent of Katz, Sapper & Miller, LLP
23(c) Consent of Ice Miller Donadio & Ryan (contained in Exhibit 5)
24 Powers of Attorney (contained in signature pages of this Registration Statement)
25 Statement of eligibility of trustee
27 Financial Data Schedule
99.1 Form of Letter of Transmittal with respect to the Exchange Offer
99.2 Form of Notice of Guaranteed Delivery with respect to the Exchange Offer
(b) Financial Statement Schedules
II. Valuation and qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
</TABLE>
<PAGE>
<PAGE>
ITEM 22. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement.
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereto), which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii)To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
Registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed to be underwriters, in addition to the
information called for by the other Items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed
pursuant to the immediately preceding undertaking or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on March ____, 1999.
NATIONAL WINE & SPIRITS, INC.
By:
----------------------------------------
James E. LaCrosse,
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the ______ day of March, 1999 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
________________________ Chairman, President and Chief Executive Officer
James E. LaCrosse (Principal Executive Officer)
________________________ Executive Vice President, Chief Financial Officer and
J. Smoke Wallin Secretary (Principal Financial and Accounting Officer)
/s/ MARTIN H. BART* Director
Martin H. Bart
/s/ JAMES BECK* Director
James Beck
/s/ MITCHELL STOLTZ* Director
Mitchell Stoltz
/s/ RICHARD P. PALADINO* Director
Richard P. Paladino
/s/ RICHARD QUINN* Director
Richard Quinn
/s/ NORMA M. JOHNSTON* Director
Norms M. Johnston
/s/ PATRICIA J. LACROSSE* Director
Patricia J. LaCrosse
/s/ CATHERINE LACROSSE WALLENTINE* Director
Catherine LaCrosse Wallentine
*By: /s/ James E. LaCrosse
ATTORNEY-IN-FACT
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of National Wine & Spirits,
Inc., do hereby constitute and appoint James E. LaCrosse and J. Smoke Wallin our
true and lawful attorney and agent, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorney and agent may deem necessary or advisable
to enable said corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but
without limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the _______ day of March, 1999 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
/s/ JAMES E. LACROSSE Chairman, President and Chief Executive Officer
James E. LaCrosse
/s/ J. SMOKE WALLIN Executive Vice President, Chief Financial Officer and
J. Smoke Wallin Secretary
/s/ MARTIN H. BART Director
Martin H. Bart
/s/ JAMES BECK Director
James Beck
/s/ MITCHELL STOLTZ Director
Mitchell Stoltz
/s/ RICHARD P. PALADINO Director
Richard P. Paladino
/s/ RICHARD QUINN Director
Richard Quinn
/s/ NORMA M. JOHNSTON Director
Norma M. Johnston
/s/ PATRICIA J. LACROSSE Director
Patricia J. LaCrosse
/s/ CATHERINE LACROSSE WALLENTINE Director
Catherine LaCrosse Wallentine
</TABLE>
<PAGE>
<PAGE>
Exhibit 3(a)
ARTICLES OF INCORPORATION
OF
NATIONAL WINE & SPIRITS, INC.
This Corporation (the "Corporation") is governed by the applicable
provisions of the Indiana Business Corporation Law.
ARTICLE I
Name
The name of the Corporation is National Wine & Spirits, Inc.
ARTICLE II
Purposes and Powers
Section 2.01. Purposes. The purposes for which the Corporation is formed
are the transaction of any or all lawful business for which corporations may be
incorporated under the Indiana Business Corporation Law, as the same may, from
time to time, be amended (the "Act").
Section 2.02. Powers. In general, to possess and exercise all the powers
and privileges granted by the Act or by any other law of the State of Indiana or
by these Articles of Incorporation ("Articles"), together with any powers
incident thereto.
ARTICLE III
Registered Office and Resident Agent
Section 3.01. Registered Office. The street address of the Corporation's
initial registered office is 700 W. Morris Street, Indianapolis, Indiana 46225.
Section 3.02. Registered Agent. The name and business address of the
Corporation's initial registered agent is James E. LaCrosse, 700 W. Morris
Street, Indianapolis, IN 46225.
ARTICLE IV
Shares
Section 4.01. Number. The total number of shares which the Corporation
shall have authority to issue is 20,200,000 shares (the "Common Shares"), all of
which are without par value.
Section 4.02. Rights, Privileges, Limitations and Restrictions of Common
Shares.
(a) Classes of Shares. There shall be two classes of shares of
the Corporation: one class of shares of the Corporation shall be
designated as "Voting Common Shares", consisting of 200,000 of the
authorized shares; and one class of shares of the Corporation shall be
designated as "Non-Voting Common Shares", consisting of 20,000,000 of
the authorized shares.
(b) Dividends. Subject to any limitations prescribed in this
Article IV and any further limitations prescribed in accordance
therewith, and except as otherwise provided by law, the holders of
Voting Common Shares and Non-Voting Common Shares (collectively, the
"Shareholders") shall be entitled to receive when and as declared by
the Board of Directors, out of the assets of the Corporation which are
by law available therefor, pro rata dividends payable either in cash,
in property or securities of the Corporation.
(c) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation, the
Shareholders shall be entitled, after payment or provision for payment
of the debts and other liabilities of the Corporation to share ratably
in the remaining net assets of the Corporation.
(d) Voting Rights. Each holder of Voting Common Shares shall
be entitled to one vote for each share owned of record on the books of
the Corporation on each matter submitted to a vote of the holders of
Voting Common Shares. The holders of Non-Voting Common Shares shall
have no voting rights, except as otherwise required by law.
Section 4.03. Issuance of Shares. The Board of Directors has authority
to authorize and direct the issuance by the Corporation of Common Shares at such
times, in such amounts, to such persons, for such considerations and upon such
terms and conditions as it may, from time to time, determine upon, subject only
to the restrictions, limitations, conditions and requirements imposed by the
Act, other applicable laws and these Articles, as the same may, from time to
time, be amended.
Section 4.04. Distribution. Upon Shares Subject only to the
restrictions, limitations, conditions and requirements imposed by the Act, other
applicable laws and these Articles, as the same may, from time to time, be
amended, the Board of Directors has authority to authorize and direct the
payment of dividends and the making of other distributions by the Corporation in
respect of the issued and outstanding Common Shares (i) at such times, in such
amount and forms, from such sources and upon such terms and conditions as it
may, from time to time, determine upon, and (ii) in shares of the same class
without obtaining the affirmative vote or the written consent of the holders of
the shares of the class or series in which the payment or distribution is to be
made.
Section 4.05. Acquisition of Shares. The Board of Directors has the
authority to authorize and direct the acquisition by the Corporation of the
issued and outstanding Common Shares at such times, in such amounts, for such
considerations, from such persons, imposed by the Act, other applicable laws and
these Articles, as the same may, from time to time, be amended.
Section 4.06. Recognition Procedure for Beneficial Ownership of Shares
or Rights. The Board of Directors may establish in the Bylaws of the Corporation
a recognition procedure by which the beneficial owner of any share or right of
the Corporation that is registered on the books of the Corporation in the name
of a nominee is recognized by the Corporation, to the extent provided in any
such recognition procedure, as the owner thereof.
Section 4.07. Disclosure Procedure for Beneficial Ownership of Shares
or Rights. The Board of Directors may establish in the Bylaws of the Corporation
a disclosure procedure by which the name of the beneficial owner of any share or
right of the Corporation that is registered on the books of the Corporation in
the name of a nominee shall, to the extent not prohibited by the Act or other
applicable laws, be disclosed to the Corporation. Any disclosure procedure
established by the Board of Directors may include reasonable sanctions to ensure
compliance therewith, including without limitation (i) prohibiting the voting
of, (ii) providing for mandatory or optional reacquisition by the Corporation
of, and (iii) the withholding or payment into escrow of any dividend or other
distribution in respect of, any share or right of the Corporation as to which
the name of the beneficial owner is not disclosed to the Corporation as required
by such disclosure procedure.
Section 4.08. No Preemptive Rights. The holders of the Common Shares
shall have no preemptive rights to subscribe to or purchase any Common Shares or
other securities of the Corporation.
Section 4.09. Record Ownership of Shares or Rights. The Corporation, to
the extent permitted by law, shall be entitled to treat the person in whose name
any share or right of the Corporation is registered on the books of the
Corporation as the owner thereof for all purposes, and shall not be bound to
recognize any equitable or any other claim to, or interest in, such share or
right on the part of any other person, whether or not the Corporation shall have
notice thereof.
ARTICLE V
Directors
Section 5.01. Number. The number of Directors of the Corporation shall
not be less than two (2) nor more than fifteen (15), as may be specified from
time to time by resolution adopted by a majority of the total number of the
Corporation's Directors. If and whenever the Board of Directors has not
specified the number of Directors, the number shall be two (2). The initial
Board of Directors shall consist of the following individuals:
James E. LaCrosse
J. Smoke Wallin
Section 5.02. Vacancies. Subject to the Act, newly-created
directorships resulting from any increase in the authorized number of Directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
only by a majority vote of all of the Directors remaining in office. Directors
so chosen shall hold office for a term expiring at the annual meeting of
Shareholders at which the term of the class to which they have been elected
expires. No decrease in the number of authorized Directors constituting the
entire Board of Directors shall shorten the term of any incumbent Directors.
Section 5.03. Removal. Any Director(s), or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least a majority of the voting
power of all of the shares of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class. For purposes of this
Section 5.03, the term "cause" means an act or acts of dishonesty by a Director
constituting a felony under applicable law and resulting or intending to result
directly or indirectly in improper gain to or personal enrichment of such
Director at the Corporation's expense.
Section 5.04. Shareholder Nomination of Director Candidates and
Introduction of Business. Advance notice of Shareholder nominations for the
election of Directors and of business to be brought by Shareholders before any
meeting of the Shareholders of the Corporation shall be given in the manner
provided in the Bylaws of the Corporation.
Section 5.05. Calling of Special Shareholder Meetings. Special meetings
of the Shareholders of the Corporation may be called only by the Chairman of the
Board of Directors or by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of Directors of the Corporation. Shareholders
have no right to call or demand a special meeting of the Shareholders to be
held. All requests for a special meeting shall state the purpose or purposes
thereof, and the business transacted at the special meeting shall be confined to
the purposes stated in the call and matters germane thereto.
Section 5.06. Bylaws. The Board of Directors of the Corporation shall
have the power, without the assent or vote of the Shareholders, to make, alter,
amend or repeal the Bylaws of the Corporation by the affirmative vote of a
number of Directors equal to a majority of the number who constitute a full
Board of Directors at the time of such action. Shareholders shall not have any
power to make, alter, amend or repeal the Bylaws of the Corporation.
Section 5.07. Action without a Meeting. The Board of Directors is
expressly authorized to take such action or actions as the Board determines to
be necessary or desirable without a meeting, provided that such action is
evidenced by a written consent describing the action which must be signed by
each Director.
Section 5.08. Authorized Board Actions. In furtherance and not in
limitation of the powers conferred by law or in these Articles, as the same may,
from time to time, be amended, the Board of Directors (and any committee of the
Board of Directors) is expressly authorized, to the extent permitted by law, to
take such action or actions as the Board of Directors or such committee may
determine to be reasonably necessary or desirable to (A) encourage any person to
enter into negotiations with the Board of Directors and management of the
Corporation with respect to any transaction which may result in a change in
control of the Corporation which is proposed or initiated by such person or (B)
contest or oppose any such transaction which the Board of Directors or such
committee determines to be unfair, abusive or otherwise undesirable with respect
to the Corporation and its business, assets or properties or the Shareholders of
the Corporation, including, without limitation, the adoption of such plans or
the issuance of such rights, options, capital stock, notes, debentures or other
evidences of indebtedness or other securities of the Corporation (which issuance
may be with or without consideration, and may be issued pro rata), which rights,
options, capital stock, notes, evidences of indebtedness and other securities
(i) may be exchangeable for or convertible into cash or other securities on such
terms and conditions as may be determined by the Board of Directors or such
committee and (ii) may provide for the treatment of any holder or class of
holders thereof designated by the Board of Directors or any such committee in
respect of the terms, conditions, provisions and rights of such securities which
is different from, and unequal to, the terms, conditions, provisions and rights
applicable to all other holders thereof.
Section 5.09. Executive Committee. The Board of Directors is expressly
authorized to appoint an Executive Committee (the "Executive Committee")
consisting of two or more Directors to serve as directed from time to time by
the Board of Directors.
ARTICLE VI
Incorporator
The name and post office address of the Incorporator of the Corporation
is as follows:
James E. LaCrosse
P.O. Box 1602
Indianapolis, Indiana 46206-1602
ARTICLE VII
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
Section 7.01. Amendments of Articles. Except as otherwise provided in
Article 4, the Corporation reserves the right to increase or decrease the number
of its authorized shares, or any class thereof, and to reclassify the same, and
to amend, alter, change or repeal any provision contained in these Articles, or
any amendment hereto, or to add any provision to these Articles or to any
amendment hereto, in any manner now or hereafter prescribed or permitted by the
Act or any other applicable laws, and all rights and powers conferred upon
Shareholders, Directors and/or Officers in these Articles, or any amendment
hereto, are granted subject to this reserve power. No Shareholder has a vested
property right resulting from any provision in these Articles, or any amendment
hereto, or authorized to be in the Bylaws of the Corporation or these Articles
by the Act, including, without limitation, provisions relating to management,
control, capital structure, dividend entitlement, or purpose or duration of the
Corporation.
Section 7.02. Action by Shareholders. Meetings of the Shareholders of
the Corporation shall be held at such place, within or outside the State of
Indiana, as may be specified in the Bylaws of the Corporation or in the
respective notices or waivers of notice thereof. Any action required or
permitted to be taken at any meeting of the Shareholders may be taken without a
meeting if a consent in writing setting forth the action so taken is signed by
all the Shareholders entitled to vote with respect thereto, and such written
consent is filed with the minutes of the proceedings of the Shareholders.
Section 7.03. Action by Directors. Meetings of the Board of Directors
of the Corporation or any committee thereof shall be held at such place, within
or outside the State of Indiana, as may be specified in the Bylaws of the
Corporation or in the respective notices or waivers of notice thereof. Any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by all members of
the Board of Directors or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of such Board of
Directors or committee.
Section 7.04. Places of Keeping of Corporate Records. The Corporation
shall keep at its principal office a copy of (a) its Articles of Incorporation
and all amendments thereto and restatements thereof currently in effect; (b) its
Bylaws, and all amendments thereto currently in effect; (c) minutes of all
meetings of the Shareholders and records of all actions taken by the
Shareholders without a meeting (collectively, the "Shareholders Minutes") for
the prior three years; (d) all written communications by the Corporation to the
Shareholders including the financial statements furnished by the Corporation to
the Shareholders ("Shareholder Communications") for the prior three years; (e) a
list of the names and business addresses of the current Directors and the
current Officers of the Corporation; and (f) the most recent Annual Report of
the Corporation as filed with the Secretary of State of Indiana. The Corporation
shall also keep and maintain at its principal office, or at such other place or
places within or outside the State of Indiana as may be provided, from time to
time, in the Bylaws of the Corporation, (l) minutes of all meetings of the Board
of Directors and of each committee of such Board, and records of all actions
taken by the Board of Directors and by each committee without a meeting; (2)
appropriate accounting records of the Corporation; (3) a record of the
Shareholders in a form that permits preparation of a list of the names and
addresses of all the Shareholders, in alphabetical order, stating the number of
shares held by each Shareholder; and (4) Shareholders Minutes for periods
preceding the prior three years. All of the records of the Corporation described
in this Section 7.04 (collectively, the "Corporate Records") shall be maintained
in written form or in another form capable of conversion into written form
within a reasonable time.
Section 7.05. Reliance on Corporate Records and other Information.
(a) General Limitation. No Director, member of any committee
of the Board of Directors, or of another committee appointed by the
Board of Directors, Officer, employee or agent of the Corporation
("Corporate Person") shall be liable for any loss or damage if, in
taking or omitting to take any action causing such loss or damage,
either (l) such Corporate Person acted (A) in good faith, (B) with the
care an ordinarily prudent person in a like position would have
exercised under similar circumstances, and (C) in a manner such
Corporate Person reasonably believed was in the best interests of the
Corporation, or (2) such Corporate Person's breach of or failure to act
in accordance with the standards of conduct set forth above (the
"Standards of Conduct") did not constitute willful misconduct or
recklessness.
(b) Reliance on Corporate Records and other Information. Any
Corporate Person shall be fully protected, and shall be deemed to have
complied with the Standards of Conduct, in relying in good faith, with
respect to any information contained therein, upon (l) the Corporate
Records, or (2) information, opinions, reports or statements (including
financial statements and other financial data) prepared or presented by
(A) one or more other Corporate Persons whom such Corporate Person
reasonably believes to be competent in the matters presented, (B) legal
counsel, public accountants or other persons as to matters that such
Corporate Person reasonably believes are within such person's
professional or expert competence, (C) a committee of the Board of
Directors or other committee appointed by the Board of Directors, of
which such Corporate Person is not a member, if such Corporate Person
reasonably believes such committee of the Board of Directors or such
appointed committee merits confidence, or (D) the Board of Directors,
if such Corporate Person is not a Director and reasonably believes that
the Board merits confidence.
Section 7.06. Interest of Directors in Contracts. Any contract or other
transaction between the Corporation and (a) any Director, or (b) any
corporation, unincorporated association, business trust, estate, partnership,
trust, joint venture, individual or other legal entity ("Legal Entity") (1) in
which any Director has a material financial interest or is a general partner, or
(2) of which any Director is a Director, Officer, or trustee (collectively, a
"Conflict Transaction"), shall be valid for all purposes, if the material facts
of the Conflict Transaction and the Director's interest were disclosed or known
to the Board of Directors, a committee of the Board of Directors with authority
to act thereon, or the Shareholders entitled to vote thereon, and the Board of
Directors, such committee or such Shareholders authorized, approved or ratified
the Conflict Transaction. A Conflict Transaction is authorized, approved or
ratified:
(A) By the Board of Directors or such committee, if it
receives the affirmative vote of a majority of the Directors who have
no interest in the Conflict Transaction, notwithstanding the fact that
such majority may not constitute a quorum or a majority of the Board of
Directors or such committee or a majority of the Directors present at
the meeting, and notwithstanding the presence or vote of any Director
who does have such an interest; provided, however, that no Conflict
Transaction may be authorized, approved or ratified by a single
Director; and
(B) By such Shareholders, if it receives the vote of a
majority of the shares entitled to be counted, in which vote shares
owned or voted under the control of any Director who, or of any Legal
Entity that, has an interest in the Conflict Transaction may be
counted; provided, however, that a majority of such shares, whether or
not present, shall constitute a quorum for the purpose of authorizing,
approving or rationing a Conflict Transaction.
This Section 7.06 shall not be construed to require authorization,
ratification or approval by the Shareholders of any Conflict Transaction, or to
invalidate any Conflict Transaction that would otherwise be valid under the
common and statutory law applicable thereto.
Section 7.07. Direction of Purposes and Exercise of Powers by
Directors. The Board of Directors, subject to any specific limitations or
restrictions imposed by the Act or these Articles, shall direct the carrying out
of the purpose and exercise the powers of the Corporation, without previous
authorization or subsequent approval by the Shareholders of the Corporation. In
addition to any other considerations which the Board of Directors may lawfully
take into account, in determining whether to take or to refrain from taking
corporate action on any matter, including making or declining to make any
recommendation to the Shareholders of the Corporation, the Board of Directors
may in its discretion consider the long-term as well as short-term best
interests of the Corporation (including the possibility that these interests may
be best served by the continued independence of the Corporation), taking into
account, and weighing as the Directors deem appropriate, the social and economic
effects of such action on present and future employees, suppliers and customers
of the Corporation and any subsidiaries of the Corporation (including account
holders and borrowers of any such subsidiaries), the effect upon communities in
which offices or other facilities of the Corporation are located, the effect on
the Corporation's ability to fulfill its corporate obligations, and any other
factors the Directors consider pertinent.
Section 7.08. Compensation of Directors. The Board of Directors is
hereby specifically authorized, in and by the Bylaws of the Corporation, or by
resolution duly adopted by such Board of Directors, to make provision for
reasonable compensation to its members for their services as Directors, and to
fix the basis and conditions upon which such compensation shall be paid. Any
Director of the Corporation may also serve the Corporation in any other capacity
and receive compensation therefor in any form.
Section 7.09. Direction of Purposes and Exercise of Powers by
Directors. The Board of Directors, subject to any specific limitations or
restrictions imposed by the Act or these Articles, as the same may, from time to
time, be amended, shall direct the carrying out of the purposes and exercise the
powers of the Corporation, without previous authorization or subsequent approval
by the Shareholders of the Corporation.
ARTICLE VIII
Indemnification
Section 8.01. General. The Corporation shall, to the fullest extent to
which it is empowered to do so by the Act, or any other applicable laws, as from
time to time in effect, indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, by reason of the fact that he is or was a Director,
Officer, employee or agent of the Corporation, or who, while serving as such
Director, Officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a Director, Officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, whether for profit or not, against
expenses (including counsel fees), judgments, settlements, penalties and fines
(including excise taxes assessed with respect to employee benefit plans)
actually or reasonably incurred by him in accordance with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably believed, in
the case of conduct in his official capacity, was in the best interest of the
Corporation, and in all other cases, was not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, he
either had reasonable cause to believe his conduct was lawful or no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not meet the prescribed standard of conduct.
Section 8.02. Authorization of Indemnification. To the extent that a
Director, Officer, employee or agent of the Corporation has been successful, on
the merits or otherwise, in the defense of any action, suit or proceeding
referred to in Section 8.01, or in the defense of any claim, issue or matter
therein, the Corporation shall indemnify such person against expenses (including
counsel fees) actually and reasonably incurred by such person in connection
therewith. Any other indemnification under Section 8.01 (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case,
upon a determination that indemnification of the Director, Officer, employee or
agent is Permissible in the circumstances because he has met the applicable
standard of conduct. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of Directors who were not at
the time parties to such action, suit or proceeding; or (b) if a quorum cannot
be obtained under subdivision (a), by a majority vote of a committee duly
designated by the Board of Directors (in which designation Directors who are
parties may participate), consisting of two or more Directors not at the time
parties to such action, suit or proceeding; or (c) by special legal counsel: (l)
selected by the Board of Directors or its committee in the manner prescribed in
subdivision (a) or (b), or (2) if a quorum of the Board of Directors cannot be
obtained under subdivision (a) and a committee cannot be designated under
subdivision (b), selected by a majority vote of the full Board of Directors (in
which selection Directors who are parties may participate); or (d) by the
Shareholders, but shares owned by or voted under the control of Directors who
are at the time parties to such action, suit or proceeding may not be voted on
the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection (c)
to select counsel.
Section 8.03. Good Faith Defined. For purposes of any determination
under Section 8.01, a person shall be deemed to have acted in good faith and to
have otherwise met the applicable standard of conduct set forth in Section 8.01
if his action is based on information, opinions, reports, or statements,
including financial statements and other financial data, if prepared or
presented by (a) one or more Officers or employees of the Corporation or another
enterprise whom he reasonably believes to be reliable and competent in the
matters presented; (b)legal counsel, public accountants, appraisers or other
persons as to matters he reasonably believes are within the person's
professional or expert competence; or (c) a committee of the Board of Directors
of the Corporation or another enterprise of which the person is not a member if
he reasonably believes the committee merits confidence. The term "another
enterprise" as used in this Section 8.03 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
Director, Officer, partner, trustee, employee or agent. The provisions of this
Section 8.03 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standards of conduct set forth in Section 8.01.
Section 8.04. Payment of Expenses in Advance. Expenses incurred in
connection with any civil or criminal action, suit or proceeding may be paid for
or reimbursed by the Corporation in advance of the final disposition of such
action, suit or proceeding, as authorized in the specific case in the same
manner described in Section 8.02, upon receipt of a written affirmation of the
Director, Officer, employee or agent's good faith belief that he has met the
standard of conduct described in Section 8.01 and upon receipt of a written
undertaking by or on behalf of the Director, Officer, employee or agent to repay
such amount if it shall ultimately be determined that he did not meet the
standard of conduct set forth in this Article VIII, and a determination is made
that the facts then known to those making the determination would not preclude
indemnification under this Article VIII.
Section 8.05. Provisions. The indemnification provided by this Article
shall not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under these Articles, the Bylaws of the
Corporation, any resolution of the Board of Directors or Shareholders, any other
authorization, whenever adopted, after notice, by a majority vote of all Voting
Stock then outstanding, or any contract, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a Director, Officer, employee
or agent, and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 8.06. Vested Right to Indemnification. The right of any
individual to indemnification under this Article VIII shall vest at the time of
occurrence or performance of any event, act or omission giving rise to any
action, suit or proceeding of the nature referred to in Section 8.01 and, once
vested, shall not later be impaired as a result of any amendment, repeal,
alteration or other modification of any or all of these provisions.
Notwithstanding the foregoing, the indemnification afforded under this Article
VIII shall be applicable to all alleged prior acts or omissions of any
individual seeking indemnification hereunder, regardless of the fact that such
alleged acts or omissions may have occurred prior to the adoption of this
Article VIII.
Section 8.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer, employee or
agent of the Corporation, or who is or was serving at the request of the
Corporation as a Director, Officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against any liability asserted against or incurred by the
individual in that capacity or arising from the individual's status as a
Director, Officer, employee or agent, whether or not the Corporation would have
power to indemnify the individual against the same liability under this Article
VIII.
Section 8.08. Additional Definitions. For purposes of this Article
VIII, references to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
For purposes of this Article VIII, "serving an employee benefit plan at
the request of the Corporation" shall include any service as a Director,
Officer, employee or agent of the Corporation which imposes duties on, or
involves services by such Director, Officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries. A person who acted
in good faith and in a manner he reasonably believed to be in the best interests
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interest of the
Corporation" referred to in this Article VIII.
For purposes of this Article IX, "party" includes any individual who is
or was a plaintiff, defendant or respondent in any action, suit or proceeding,
or who is threatened to be made a named defendant or respondent in any action,
suit or proceeding.
For purposes of this Article VIII, "official capacity," when used with
respect to a Director, shall mean the office of Director of the Corporation; and
when used with respect to an individual other than a Director, shall mean the
office in the Corporation held by the Officer or the employment or agency
relationship undertaken by the employee or agent on behalf of the Corporation.
"Official capacity" does not include service for any other foreign or
domestic corporation or any partnership, joint venture, trust, employee benefit
plan, or other enterprise, whether for profit or not.
Section 8.09. Payments to a Business Expense. Any payments made to any
indemnified party under this Article VIII under any other right to
indemnification shall be deemed to be an ordinary and necessary business expense
of the Corporation, and payment thereof shall not subject any person responsible
for the payment, or the Board of Directors, to any action for corporate waste or
to any similar action.
IN WITNESS WHEREOF, the undersigned executes these Articles of
Incorporation and verifies and affirms, subject to penalties for perjury, that
the facts herein stated are true this 23rd day of December, 1998.
/s/ JAMES E. LACROSSE
James E. LaCrosse, Incorporator
This instrument was prepared by Joseph E. DeGroff, Attorney at Law, Ice Miller
Donadio & Ryan, One American Square, Box 82001, Indianapolis, Indiana
46282-0002.
Exhibit 3(b)
CODE OF BY-LAWS
OF
NATIONAL WINE & SPIRITS, INC.
ARTICLE 1
Identification
Section 1.01. Name. The name of the Corporation is National Wine & Spirits,
Inc. (hereinafter referred to as the "Corporation").
Section 1.02. Place of Keeping Corporate Books and Records. The books of
of account, records, documents and papers of the Corporation shall be kept at
any place or places within or outside the State of Indiana as directed by the
Board of Directors of the Corporation (the "Board of Directors"). In the absence
of a direction, the books of account, records, documents and papers shall be
kept at the principal office of the Corporation.
Section 1.03. Seal. The Board of Directors may designate the design and
cause the Corporation to obtain and use a corporate seal, but the failure of the
Board of Directors to designate a seal or the absence of the impression of the
corporate seal from any document shall not affect in any way the validity or
effect of such document.
Section 1.04. Fiscal Year. The fiscal year of the Corporation shall end at
such time as the Board of Directors shall determine. In the event the Board of
Directors shall not make such a determination, the fiscal year of the
Corporation shall end on the last Saturday in September.
ARTICLE 2
Shares
Section 2.01. Certificates for Shares. Each holder of shares of Common
Stock of the Corporation shall be entitled to a certificate in such form as the
Board of Directors may prescribe from time to time, signed by the President or
the Vice-President, and the Secretary (or an Assistant Secretary, if any) of the
Corporation.
Section 2.02. Transfer of Shares. The Common Stock of the Corporation shall
be transferable only on the books of the Corporation upon surrender of the
certificate or certificates representing the same, properly endorsed by the
registered holder or by his duly authorized attorney, such endorsement or
endorsements to be witnessed by one witness. The requirement for such witnessing
may be waived in writing upon the form of endorsement by the President of the
Corporation.
Section 2.03. Lost, Stolen or Destroyed Certificates. The Corporation may
issue a new certificate for shares of Common Stock and in the place of any
certificate theretofore issued and alleged to have been lost, stolen or
destroyed, but the Board of Directors may require the owner of such lost, stolen
or destroyed certificate, or his legal representative, to furnish an affidavit
as to such loss, theft or destruction and to give a bond in such form and
substance, and with such surety or sureties, with fixed or open penalty, as it
may direct to indemnify the Corporation against any claim that may be made on
account of the alleged loss, theft or destruction of such certificate. A new
certificate may be issued without requiring any bond when, in the judgment of
the Board of Directors, it is not imprudent to do so.
ARTICLE 3
Meetings of Shareholders
Section 3.01. Place of Meetings. All meetings of Shareholders of the
Corporation shall be held at the principal office of the Corporation or at such
other place, within or without the State of Indiana, as may be specified in the
respective notices or waivers of notice thereof.
Section 3.02. Annual Meeting. Unless otherwise determined by the Board of
Directors, the annual meeting of the Shareholders for the election of Directors,
and for the transaction of such other business as may properly come before the
meeting, shall be held at 9:00 a.m. on the third day of the third month
following the close of each fiscal year, if such day is not a legal holiday, and
if a holiday then on the first following day that is not a legal holiday.
Failure to hold the annual meeting at the designated time shall not work any
forfeiture or a dissolution of the Corporation.
Section 3.03. Special Meetings. Special meetings of the Shareholders may be
called by the President or a majority of the Board of Directors. Any request for
a special meeting of the Shareholders shall state the purpose or purposes of the
proposed meeting.
Section 3.04. Record Date. The Board of Directors may fix a record date,
not exceeding seventy (70) days prior to the date of any meeting of
Shareholders, for the purpose of determining the Shareholders entitled to notice
of and to vote at such meeting. In the absence of action by the Board of
Directors fixing a record date as herein provided, the record date shall be the
fourteenth day prior to the date of the meeting.
Section 3.05. Notice of Meetings. A written or printed notice, stating the
place, day and hour of the meeting, and, in the case of a special meeting or
when otherwise required by any provision of Indiana Business Corporation Law,
the Articles of Incorporation, as amended, or the Code of By-Laws, the purpose
or purposes for which the meeting is called, shall be delivered or mailed by the
Secretary or by the persons calling the meeting to each holder of Common Stock
of the Corporation at the time entitled to vote, at such address as appears on
the records of the Corporation, at least ten (10) days before the date of the
meeting. Each Shareholder who has in the manner provided below waived notice of
a Shareholders' meeting, or who personally attends a Shareholders' meeting, or
who is represented thereat by a proxy duly authorized to appear or by an
instrument of proxy complying with the requirements hereinafter set forth, shall
be conclusively presumed to have been given due notice of such meeting.
Section 3.06. Waiver of Notice. Notice of any such meeting may be waived in
writing by any Shareholder if the waiver sets forth in reasonable detail the
purpose or purposes for which the meeting is called, and the time and place
thereof. Attendance at any meeting, in person or by proxy, shall constitute a
waiver of notice of such meeting.
Section 3.07. Proxies. A Shareholder entitled to vote at any meeting of
Shareholders may vote either in person or by proxy executed in writing by the
Shareholder or a duly authorized attorney-in-fact of such Shareholder. For
purposes of this section, a proxy granted by telegram, telex, telecopy or other
document transmitted electronically for or by a Shareholder shall be deemed
"executed in writing by the Shareholder." The general proxy of a fiduciary shall
be given the same effect as the general proxy of any other Shareholder. No proxy
shall be valid after eleven months from the date of its execution unless a
longer time is expressly provided therein.
Section 3.08. Quorum. At any meeting of Shareholders, the holders of a
majority of the outstanding shares which may be voted on the business to be
transacted at such meeting, represented in person or by proxy, shall constitute
a quorum, and a majority vote of such quorum shall be necessary for the
transaction of any business by the meeting, unless a greater number is required
by law, the Articles of Incorporation, as amended, or the Code of By-Laws. In
case a quorum shall not be present at any meeting, the holders of record of a
majority of such shares so present in person or by proxy may adjourn the meeting
from time to time, without notice, other than announcement at the meeting, until
a quorum shall be present or represented. At any such adjourned meeting at which
a quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally scheduled.
Section 3.09. Voting Lists. The Secretary of the Corporation shall make, at
least five (5) days before each election of Directors, a complete list of the
Shareholders entitled by the Articles of Incorporation, as amended, to vote at
such election, arranged in alphabetical order, with the address and number of
shares so entitled to vote held by each, which list shall be on file at the
principal office of the Corporation and subject to inspection by any shareholder
at any time during usual business hours for a period of five (5) days prior to
such election. Such list shall be produced and kept open at the time and place
of election and subject to the inspection of any Shareholder during the holding
of such election. The original stock register or transfer book, or a duplicate
thereof kept in the State of Indiana, shall be the only evidence as to who are
the Shareholders entitled to examine such list, or the stock ledger or transfer
book, or to vote at any meeting of the Shareholders.
Section 3.10. Order of Business. The order of business at the annual
meetings, and so far as practicable at all other meetings, of Shareholders,
shall be:
Item (1). Proof of due notice of meeting.
Item (2). Determination of quorum.
Item (3). Reading and disposal of any unapproved minutes.
Item (4). Reports of Officers and Committees.
Item (5). Unfinished business.
Item (6). New business.
Item (7). Election of Directors.
Item (8). Adjournment.
Section 3.11. Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Shareholders may be taken without a meeting if
a consent in writing setting forth the action so taken is signed by all the
Shareholders entitled to vote with respect thereto, and such written consent is
filed with the proceedings of the Shareholders.
ARTICLE 4
Board of Directors
Section 4.01. Number. The business and affairs of the Corporation shall
be managed by a Board of Directors of not less than two (2) nor more than
fifteen (15) Directors, as may be specified from time to time by resolution
adopted by a majority of the total number of the Corporation's Directors,
divided into three classes as provided in the Amended and Restated Articles of
Incorporation. If and whenever the Board of Directors has not specified the
number of Directors, the number shall be two (2). The Board of Directors may
elect or appoint from among its members, a Chairman of the Board (the
"Chairman"), who need not be an officer (an "Officer") or employee of the
Corporation. The Chairman shall preside at all Shareholder Meetings and Board
Meetings and shall have such other powers and perform such other duties as are
incident to such position and as may be assigned by the Board of Directors.
Section 4.02. Vacancies and Removal. Any vacancy occurring in the Board
of Directors shall be filled as provided in the Articles of Incorporation.
Shareholders shall be notified of any increase in the number of Directors and
the name, principal occupation and other pertinent information about any
Director elected by the Board of Directors to fill any vacancy. Any Director, or
the entire Board of Directors, may be removed from office only as provided in
the Articles of Incorporation.
Section 4.03. Powers of Directors. The Board of Directors shall
exercise all the powers of the Corporation, subject to the restrictions imposed
by law, the Articles of Incorporation, as amended, or the Code of By-Laws.
Section 4.04. Annual Meeting. Unless otherwise determined by the
President or the Board of Directors, the Board of Directors shall meet each year
immediately after the annual meeting of the Shareholders, at the place where
such meeting of the Shareholders has been held, for the purpose of organization,
election of Officers, and consideration of any other business that may properly
be brought before the meeting. No notice shall be necessary for the holding of
this annual meeting. If such meeting is not held as above provided, the election
of Officers may be held at any subsequent duly constituted meeting of the Board
of Directors.
Section 4.05. Other Meetings. Regular meetings of the Board of
Directors may be held, without notice, at such time as may from time to time be
fixed by resolution of the Board of Directors. Special meetings of the Board of
Directors may be called at any time by the President, and shall be called on the
written request of any member of the Board of Directors. Notice of such a
special meeting shall be sent by the Secretary to each Director at his residence
or usual place of business by letter or telegram, at such time that, in regular
course, such notice would reach such place not later than during the second day
immediately preceding the day for such meeting; or may be delivered by the
Secretary to a Director personally at any time during such second preceding day.
At any meeting at which all Directors are present, notice of the time, place and
purpose thereof shall be deemed waived; and notice may be waived (either before
or after the time of the meeting) by absent Directors, either by written
instrument or telegram. Such meetings may be held at any place within or outside
the State of Indiana, as may be specified in the respective notices, or waivers
of notice, thereof.
Section 4.06. Meeting by Telephone, etc. Any or all of the members of
the Board of Directors or of any committee designated by the Board of Directors
may participate in a meeting of the Board of Directors or the committee by means
of conference telephone or similar communications equipment by which all persons
participating in the meeting can communicate with each other, and participation
by these means constitutes presence in person at the meeting.
Section 4.07. Quorum. The presence of a majority of the actual number
of Directors then elected and qualified shall be necessary to constitute a
quorum for the transaction of any business except as may otherwise be required
in the Articles of Incorporation, as amended, with respect to the filling of
vacancies in the Board of Directors. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors unless the act of a greater number is required by law, the Articles
of Incorporation, as amended, or the Code of By-Laws. Anything herein to the
contrary notwithstanding, two-thirds of the Directors present at a meeting at
which a quorum is present shall be necessary to approve the (i) sale or merger
of the Corporation, the disposition of all or substantially all of its assets or
any similar transaction, (ii) declaration of dividends or similar distributions,
(iii) acquisition of any material business or assets, (iv) incurrence or
forgiveness of a loan to any Corporation shareholder or officer, (v) annual
budget, (vi) compensation plans for top management including bonuses, (vii)
incurrence of any capital expenditures in excess of budget, (viii) employee
stock incentive plans, (ix) incurrence of debt or issuance of new equity and
amendment, and (x) any amendment, alteration or repeal of the Code of By-Laws.
Section 4.08. Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee.
Section 4.09. Removal of Directors. Directors may be removed only as
provided in the Articles of Incorporation of the Corporation.
Section 4.10. Resignations. Any Director may resign at any time by
giving written notice to the Board of Directors, the President or the Secretary.
Such resignation shall take effect at the time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 4.11. Compensation of Directors. The Board of Directors is
empowered and authorized to fix and determine the compensation of Directors for
attendance at meetings of the Board of Directors and additional compensation for
such additional services any of such Directors may perform for the Corporation.
Section 4.12. Executive Committee. The Board of Directors is authorized
to appoint an Executive Committee (the "Executive Committee") consisting of two
or more Directors to serve in such capacities as directed from time to time by
the Board of Directors.
ARTICLE 5
Officers
Section 5.01. Number; Term of Office. The officers of the Corporation
shall be a Chairman of the Board, Chief Executive Officer, a President, a Chief
Financial Officer, one or more Vice-Presidents, one or more of whom may be
designated as Executive or Senior Vice-Presidents, a Treasurer, a Secretary, and
such other officers or agents with such titles and such duties as the Board of
Directors may from time to time determine, each to have such authority,
functions or duties as in the Code of Bylaws provided or as the Board of
Directors may from time to time determine, and each to hold office for such term
as may be prescribed by the Board of Directors and until such person's successor
shall have been chosen and shall qualify, or until such person's death or
resignation, or until such person's removal in the manner hereinafter provided.
The Chairman of the Board shall be elected from among the directors. One person
may hold the offices and perform the duties of any two or more of said officers;
provided, however, that no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law, the
Articles of Incorporation or the Code of Bylaws to be executed, acknowledged or
verified by two or more officers. The Board of Directors may from time to time
authorize any officer to appoint and remove any such other officers and agents
and to prescribe their powers and duties. The Board of Directors may require any
officer or agent to give security for the faithful performance of such person's
duties.
Section 5.02. Election of Officers. The Officers shall be elected
annually by the Board of Directors; provided, however, that the Board of
Directors may at any time elect one or more persons to new or different offices
and/or change the title, designation and duties and responsibilities of any of
the Officers consistent with the law, the Articles of Incorporation and the Code
of Bylaws.
Section 5.03. Resignations. Any Officer may resign at any time by
giving written notice to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5.04. Removal. Any Officer may be removed either with or
without cause, at any time, by the vote of a majority of the actual number of
Directors elected and qualified.
Section 5.05. Vacancies. Whenever any vacancies shall occur in any
office by death, resignation, removal, increase in the number of offices of the
Corporation, or otherwise, the same shall be filled by the Board of Directors,
and the Officer so chosen shall hold office during the remainder of the term for
which his predecessor was chosen or as otherwise provided herein.
Section 5.06. Chairman of the Board and Chief Executive Officer. The
Chairman of the Board shall preside at all meetings of the Board of Directors
and, if present, preside at meetings of the shareholders. The Chairman of the
Board shall also hold the title of Chief Executive Officer. He shall have such
other duties and responsibilities as may be specified by the Board of Directors.
Section 5.07. President. The President shall be a Director and, subject
to the control of the Board of Directors, shall have general charge of and
supervision and authority over the business and affairs of the Corporation, and
shall have such other powers and perform such other duties as are incident to
this office and as may be assigned to him by the Board of Directors. In the case
of the absence or disability of the Chairman or if no Chairman shall be elected
or appointed by the Board of Directors, the President shall preside at all
Shareholder Meetings and Board Meetings.
Section 5.08. Chief Financial Officer. The Chief Financial Officer
shall supervise the Corporation's financial activities, subject to the
supervision and direction of the Chairman of the Board and the President of the
Corporation; such officer shall report directly to the President; and such
officer shall have such other duties as the Board of Directors may from time to
time delegate.
Section 5.09. Vice Presidents. Each of the Vice Presidents shall have
such powers and perform such duties as may be prescribed for him by the Board of
Directors or delegated to him by the President. In the case of the absence,
disability, death, resignation or removal from office of the President, the
powers and duties of the President shall, for the time being, devolve upon and
be exercised by the Executive Vice President, if there be one, and if not, then
by such one of the Vice Presidents as the Board of Directors or the President
may designate, or, if there be but one Vice President, then upon such Vice
President; and he shall thereupon, during such period, exercise and perform all
of the powers and duties of the President, except as may be otherwise provided
by the Board of Directors.
Section 5.10. Secretary. The Secretary shall have the custody and care
of the records, minutes and the Stock Book of the Corporation; shall attend all
Shareholder Meetings and Board Meetings, and duly record and keep the minutes of
their proceedings in a book or books to be kept for that purpose; shall give or
cause to be given notice of all Shareholder Meetings and Board Meetings when
such notice shall be required; shall file and take charge of all papers and
documents belonging to the Corporation; and shall have such other powers and
perform such other duties as are incident to the office of secretary of a
business corporation, subject at all times to the direction and control of the
Board of Directors and the President.
Section 5.11. Treasurer. The Treasurer shall have control over all
records of the Corporation pertaining to moneys and securities belonging to the
Corporation; shall have charge of, and be responsible for, the collection,
receipt, custody and disbursements of funds of the Corporation; shall have the
custody of all securities belonging to the Corporation; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; and shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper receipts or making proper vouchers for
such disbursements and preserving the same it all times during his term of
office. When necessary or proper, he shall endorse on behalf of the Corporation
all checks, notes or other obligations payable to the Corporation or coming into
his possession for or on behalf of the Corporation, and shall deposit the funds
arising therefrom, together with all other funds and valuable effects of the
Corporation coming into his possession, in the name and the credit of the
Corporation in such depositories as the Board of Directors from time to time
shall direct, or in the absence of such action by the Board of Directors, as may
be determined by the President or any Vice President. The Treasurer shall
furnish at meetings of the Board of Directors, or when otherwise requested, a
statement of the financial condition of the Corporation. The Treasurer shall
also have such other powers and perform such other duties as are incident to the
office of treasurer of a business corporation, subject at all times to the
direction and control of the Board of Directors and the President.
Section 5.12. Assistant Officers. The Board of Directors may from time
to time designate and elect assistant officers who shall have such powers and
duties as the officers whom they are elected to assist shall specify and
delegate to them, and such other powers and duties as the Code of By-Laws, the
Board of Directors or the President may prescribe. An Assistant Secretary may,
in the absence or disability of the Secretary, attest the execution of all
documents by the Corporation.
Section 5.13. Delegation of Authority. In case of the absence of any
Officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors may delegate the powers or duties of
such Officer to any other Officer or to any Director, for the time being,
provided a majority of the entire Board of Directors concurs therein.
ARTICLE 6
Special Corporate Acts, Negotiable
Instruments. Deeds. Contracts and Stock
Section 6.01. Execution of Negotiable Instruments. All checks, drafts,
bills of exchange and orders for the payment of money of the Corporation shall,
unless otherwise directed by the Board of Directors, or unless otherwise
required by law, be signed by any two of the following officers: President,
Vice-President, Secretary or Treasurer. The President may, however, authorize
any one or more of such officers to sign checks, drafts, bills of exchange and
orders for the payment of money by the Corporation singly and without necessity
of countersignature; and the Board of Directors may designate any employee or
employees of the Corporation, in addition to those named above, who may, in the
name of the Corporation, execute checks, drafts, bills of exchange and orders
for the payment of money by the Corporation or in its behalf.
Section 6.02. Execution of Deeds, Contracts, Etc. All deeds, notes,
bonds and mortgages made by the Corporation and all other written contracts and
agreements, other than those executed in the ordinary course of corporate
business, to which the Corporation shall be a party shall be executed in its
name by the President, the Vice-President or by any other Officer so authorized
by the Board of Directors, acting by resolution; and the Secretary, when
necessary or required, shall attest the execution thereof.
Section 6.03. Ordinary Contracts and Agreements. All written contracts
and agreements into which the Corporation enters in the ordinary course of
business operations shall be executed by any Officer of the Corporation or by
any other employee of the Corporation designated by the President to execute
such contracts and agreements.
Section 6.04. Endorsement of Certificates for Shares. Unless otherwise
directed by the Board of Directors, any share or shares issued by any
corporation and owned by the Corporation (including reacquired shares of the
Corporation) may, for sale or transfer, be endorsed in the name of the
Corporation by the President or the Vice-President, and such endorsement shall
be duly attested by the Secretary.
Section 6.05. Voting of Shares Owned by Corporation. Unless otherwise
directed by the Board of Directors, any share or shares issued by any other
corporation and owned, or controlled by the Corporation may be voted at any
shareholders' meeting of such other corporation by the President of the
Corporation if he be present, or in his absence by the Vice-President of the
Corporation. Whenever, in the judgment of the President, it is desirable for the
Corporation to execute a proxy or give a shareholders' consent in respect to any
share or shares issued by any other corporation and owned by the Corporation,
such proxy or consent shall be executed in the name of the Corporation by the
President or the Vice-President of the Corporation. Any person or persons
designated in the manner above stated as the proxy or proxies of the Corporation
shall have full right, power and authority to vote the share or shares issued by
such other corporation and owned by the Corporation in the same manner as such
share or shares might be voted by the Corporation.
ARTICLE 7
Amendments
Section 7.01. Amendment of By-Laws. Subject to the requirements of
Section 4.07, the power to make, alter, amend or repeal the Code of By-Laws of
the Corporation is vested in the Board of Directors.
Exhibit 4(a)
NATIONAL WINE & SPIRITS, INC.
NATIONAL WINE & SPIRITS CORPORATION
NWS, INC.
NWS MICHIGAN, INC.
NWS-ILLINOIS, LLC
UP TO $200,000,000
SERIES A AND SERIES B
10 1/8% SENIOR NOTES DUE 2009
- -----------------------------------------------------------------------------
INDENTURE
Dated as of January 25, 1999
- -----------------------------------------------------------------------------
NORWEST BANK MINNESOTA, N.A.
Trustee
- -----------------------------------------------------------------------------
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CROSS-REFERENCE TABLE*
<S> <C>
Trust Indenture
Act Section Indenture Section
310 (a)(1)....................... 7.10
(a)(2)....................... 7.10
(a)(3)....................... N.A.
(a)(4)....................... N.A.
(a)(5)....................... 7.10
(b).......................... 7.10
(c).......................... N.A.
311 (a).......................... 7.11
(b).......................... 7.11
(c).......................... N.A.
312 (a).......................... 2.05
(b).......................... 11.03
(c).......................... 11.03
313 (a).......................... 7.06
(b)(1)....................... 10.03
(b)(2)....................... 7.07
(c).......................... 7.06;11.02
(d).......................... 7.06
314 (a).......................... 4.03;11.02
(b).......................... 10.02
(c)(1)....................... 11.04
(c)(2)....................... 11.04
(c)(3)....................... N.A.
(e).......................... 11.05
(f).......................... N.A.
315 (a).......................... 7.01
(b).......................... 7.05,11.02
(c).......................... 7.01
(d).......................... 7.01
(e).......................... 6.11
316 (a) (last sentence).......... 2.09
(a)(1)(A).................... 6.05
(a)(1)(B).................... 6.04
(a)(2)....................... N.A.
(b).......................... 6.07
(c).......................... 2.12
317 (a)(1)....................... 6.08
(a)(2)....................... 6.09
(b).......................... 2.04
318 (a).......................... 11.01
(b).......................... N.A.
(c).......................... 11.01
N.A. means not applicable.
* This Cross Reference Table is not part of this Indenture.
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.........................................................................................1
Section 1.02. Other Definitions..................................................................................20
Section 1.03. Incorporation by Reference of Trust Indenture Act..................................................20
Section 1.04. Rules of Construction..............................................................................21
ARTICLE 2 THE NOTES
Section 2.01. Form and Dating....................................................................................21
Section 2.02. Execution and Authentication.......................................................................23
Section 2.03. Registrar and Paying Agent.........................................................................23
Section 2.04. Paying Agent to Hold Money in Trust................................................................24
Section 2.05. Holder Lists.......................................................................................24
Section 2.06. Transfer and Exchange..............................................................................24
Section 2.07. Replacement Notes..................................................................................37
Section 2.08. Outstanding Notes..................................................................................37
Section 2.09. Treasury Notes.....................................................................................38
Section 2.10. Temporary Notes....................................................................................38
Section 2.11. Cancellation.......................................................................................38
Section 2.12. Defaulted Interest.................................................................................38
ARTICLE 3 REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.................................................................................39
Section 3.02. Selection of Notes to Be Redeemed..................................................................39
Section 3.03. Notice of Redemption...............................................................................39
Section 3.04. Effect of Notice of Redemption.....................................................................40
Section 3.05. Deposit of Redemption Price........................................................................40
Section 3.06. Notes Redeemed in Part.............................................................................41
Section 3.07. Optional Redemption................................................................................41
Section 3.08. Mandatory Redemption...............................................................................41
Section 3.09. Offer to Purchase by Application of Excess Proceeds................................................41
ARTICLE 4 COVENANTS
Section 4.01. Payment of Notes...................................................................................43
Section 4.02. Maintenance of Office or Agency....................................................................44
Section 4.03. Reports............................................................................................44
Section 4.04. Compliance Certificate.............................................................................45
Section 4.05. Taxes..............................................................................................45
Section 4.06. Stay, Extension and Usury Laws.....................................................................46
Section 4.07. Restricted Payments................................................................................46
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.....................................49
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.........................................50
Section 4.10. Asset Sales........................................................................................52
Section 4.11. Transactions with Affiliates.......................................................................53
Section 4.12. Liens..............................................................................................54
Section 4.13. Line of Business...................................................................................54
Section 4.14. Corporate Existence................................................................................54
Section 4.15. Offer to Repurchase Upon Change of Control.........................................................55
Section 4.16. No Senior Subordinated Debt........................................................................56
Section 4.17. Limitation on Sale and Leaseback Transactions......................................................56
Section 4.18. Limitation on Issuances and Sales of Capital Stock of Controlled Subsidiaries......................56
Section 4.19. Additional Subsidiary Guarantees...................................................................57
Section 4.20. Payments for Consent...............................................................................57
ARTICLE 5 SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets...........................................................57
Section 5.02. Successor Corporation Substituted..................................................................58
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01. Events of Default..................................................................................58
Section 6.02. Acceleration.......................................................................................60
Section 6.03. Other Remedies.....................................................................................61
Section 6.04. Waiver of Past Defaults............................................................................61
Section 6.05. Control by Majority................................................................................61
Section 6.06. Limitation on Suits................................................................................61
Section 6.07. Rights of Holders of Notes to Receive Payment......................................................62
Section 6.08. Collection Suit by Trustee.........................................................................62
Section 6.09. Trustee May File Proofs of Claim...................................................................62
Section 6.10. Priorities.........................................................................................63
Section 6.11. Undertaking for Costs..............................................................................63
ARTICLE 7 TRUSTEE
Section 7.01. Duties of Trustee..................................................................................64
Section 7.02. Rights of Trustee..................................................................................65
Section 7.03. Individual Rights of Trustee.......................................................................65
Section 7.04. Trustee's Disclaimer...............................................................................65
Section 7.05. Notice of Defaults.................................................................................66
Section 7.06. Reports by Trustee to Holders of the Notes.........................................................66
Section 7.07. Compensation and Indemnity.........................................................................66
Section 7.08. Replacement of Trustee.............................................................................67
Section 7.09. Successor Trustee by Merger, etc...................................................................68
Section 7.10. Eligibility; Disqualification......................................................................68
Section 7.11. Preferential Collection of Claims Against Company..................................................68
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...........................................69
Section 8.02. Legal Defeasance and Discharge.....................................................................69
Section 8.03. Covenant Defeasance................................................................................69
Section 8.04. Conditions to Legal or Covenant Defeasance.........................................................70
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions......71
Section 8.06. Repayment to Company...............................................................................72
Section 8.07. Reinstatement......................................................................................72
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes................................................................72
Section 9.02. With Consent of Holders of Notes...................................................................73
Section 9.03. Compliance with Trust Indenture Act................................................................75
Section 9.04. Revocation and Effect of Consents..................................................................75
Section 9.05. Notation on or Exchange of Notes...................................................................75
Section 9.06. Trustee to Sign Amendments, etc....................................................................75
ARTICLE 10 SUBSIDIARY GUARANTEES
Section 10.01. Guarantee.........................................................................................75
Section 10.02. Limitation on Guarantor Liability.................................................................76
Section 10.03. Execution and Delivery of Subsidiary Guarantee....................................................77
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms................................................77
Section 10.05. Releases Following Sale of Assets.................................................................78
ARTICLE 11 MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls......................................................................79
Section 11.02. Notices...........................................................................................79
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.....................................80
Section 11.04. Certificate and Opinion as to Conditions Precedent................................................80
Section 11.05. Statements Required in Certificate or Opinion.....................................................80
Section 11.06. Rules by Trustee and Agents.......................................................................81
Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders..........................81
Section 11.08. Governing Law.....................................................................................81
Section 11.09. No Adverse Interpretation of Other Agreements.....................................................81
Section 11.10. Successors........................................................................................81
Section 11.11. Severability......................................................................................82
Section 11.12. Counterpart Originals.............................................................................82
Section 11.13. Table of Contents, Headings, etc..................................................................82
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A1 FORM OF 144A GLOBAL NOTE
Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
</TABLE>
<PAGE>
<PAGE>
INDENTURE dated as of January 25, 1999 between National Wine & Spirits,
Inc., an Indiana corporation (the "Company"), the Guarantors (as defined
herein), and Norwest Bank Minnesota, N.A., as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10 1/8% Series
A Senior Notes due 2009 (the "Series A Notes") and the 10 1/8% Series B Senior
Notes due 2009 (the "Series B Notes" and, together with the Series A Notes, the
"Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means up to $90 million aggregate principal amount
of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
Initial Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, and, in the case of a natural Person, any
immediate family member of such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control. No Person (other than the Company or any
Subsidiary of the Company) in whom a Receivables Subsidiary makes an Investment
in connection with a Qualified Receivables Transaction will be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of Sections 4.15 and/or 5.01and not by the provisions of Section 4.10 of this
Indenture), and (ii) the issue or sale by the Company or any of its Subsidiaries
of Equity Interests of any of the Company's Restricted Subsidiaries, in the case
of either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $1 million
or (b) for net proceeds in excess of $1 million. Notwithstanding the foregoing:
(i) a transfer of assets by the Company to a Restricted Subsidiary that is a
Guarantor or by a Restricted Subsidiary that is a Guarantor to the Company or to
another Restricted Subsidiary that is a Guarantor, (ii) an issuance of Equity
Interests by a Controlled Subsidiary to the Company or to another Controlled
Subsidiary, (iii) a Permitted Investment or a Restricted Payment that is
permitted by Section 4.07 of this Indenture, (iv) sales of accounts receivable
and related assets of the type specified in the definition of "Qualified
Receivables Transaction" to a Receivables Subsidiary for the fair market value
thereof, including cash in an amount at least equal to 75% of the book value
thereof as determined in accordance with GAAP, it being understood that, for the
purposes of this clause (iv), notes received in exchange for the transfer of
accounts receivable and related assets will be deemed cash if the Receivables
Subsidiary or other payor is required to repay said notes as soon as practicable
from available cash collections less amounts required to be established as
reserves pursuant to contractual agreements with entities that are not
Affiliates of the Company entered into as part of a Qualified Receivables
Transaction, (v) transfers of accounts receivable and related assets of the type
specified in the definition of "Qualified Receivables Transaction" (or a
fractional undivided interest therein) by a Receivables Subsidiary in a
Qualified Receivables Transaction, and (vi) transfers from NWS-Illinois and
NWS-LLC to U.S. Beverage of assets directly related to, and primarily used in,
the operations of U.S. Beverage will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the sum of
(a) 80% of the face amount of all accounts receivable owned by the Company and
its Restricted Subsidiaries as of such date that are not more than 45 days past
due; provided, however, that any accounts receivable owned by a Receivables
Subsidiary, or which the Company or any of its Subsidiaries has agreed to
transfer to a Receivables Subsidiary, shall be excluded for purposes of
determining such amount, and (b) 65% of the book value of all inventory owned by
the Company and its Restricted Subsidiaries as of such date, all calculated on a
consolidated basis in accordance with GAAP. To the extent that information is
not available as to the amount of accounts receivable or inventory or trade
payables as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
"Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership (whether general or limited) or membership
interests and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition, and
(vi) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i)-(v) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act other than the Principal or his Related Parties (as defined
below), (ii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principal and his Related Parties,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
40% of the Voting Stock of the Company (measured by voting power rather than
number of shares), (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) the
Company consolidates with, or merges with or into, any Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means National Wine & Spirits, Inc., and any and all
successors thereto.
"Company Shareholder Note Receivable" means any promissory note
receivable by the Company or a Subsidiary of the Company on the date of this
Indenture from any shareholder of the Company.
"Consolidated" has the meaning accorded under GAAP, provided, however
that any calculation under this Indenture requiring a determination on a
consolidated basis for any period ending prior to the date of the Reorganization
shall be determined on a combined basis for NWS-Indiana, NWS-Illinois and their
subsidiaries.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) (A) if such Person is an S-Corporation or
substantially similar pass-through entity for Federal income tax purposes, the
amount of all Permitted Quarterly Tax Distributions of such Person and, without
duplication, its Consolidated Subsidiaries for such period, as adjusted for any
True-up Amount then determined for such period, and (B) if such Person is not an
S-Corporation or substantially similar pass-through entity for Federal income
tax purposes, any provision for taxes based on income or profits of such Person
and its Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, plus (iii)
consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligation, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations but excluding amortization
of debt issuance costs and non-cash interest accrued or accruing on any
NWS-Illinois Shareholder Subordinated Note), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, plus (v) LIFO expense, plus (vi)
start-up expenses reported on the combined financial statements of the Company,
NWS-Indiana and NWS-Illinois for any quarterly period ending on or prior to
March 31, 1998 that is included in the period for which the calculation is being
made, plus (vii) prepayment penalties associated with the prepayment of
Indebtedness on the date of this Indenture to the extent any such expense was
deducted in computing such Consolidated Net Income minus (viii) non-cash items
increasing such Consolidated Net Income for such period including, without
limitation, LIFO income and non-cash interest income, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the Permitted Quarterly Tax Distributions (adjusted as provided
above) of, the provision for taxes based on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Subsidiary of a
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, reduced by the amount of Permitted Quarterly Tax Distributions of
such Person and, without duplication, its Consolidated Subsidiaries for such
period, as adjusted for any True-up Amount then determined for such period, if
such Person is an S-Corporation or substantially similar pass-through entity for
Federal income tax purposes; provided that (i) the Net Income (but not loss) of
any Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a
Controlled Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, (v) the Net Income (but not loss) of
any Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Restricted Subsidiaries, and (vi) interest received or
accrued on a Company Shareholder Note Receivable shall be excluded when
determining the Company's ability to make Restricted Payments under this
Indenture.
"Consolidated Tangible Assets" means with respect to any Person as of
any date, the amount which, in accordance with GAAP, would be set forth under
the caption "Total Assets" (or any like caption) on a consolidated balance sheet
of such person and its Restricted Subsidiaries, less all intangible assets,
including, without limitation, goodwill, organization costs, patents,
trademarks, copyrights, franchises and research and development costs.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Controlled Subsidiary" of the Company means a Restricted Subsidiary of
the Company (i) 90% or more of the economic interest in the total Equity
Interests or other ownership interests of which and 90% or more of the voting
rights represented by the Voting Stock of which is owned by the Company, either
directly or through one or more Controlled Subsidiaries, and (ii) over which the
Company possesses, directly or indirectly, the power to direct or cause the
direction of the management or policies.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Credit Facility Intercompany Indebtedness" means intercompany
Indebtedness of Subsidiaries to the Company.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof,
substantially in the form of Exhibit A1 hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature; provided, however,
that any Capital Stock that would constitute Disqualified Stock solely because
the holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall
not constitute Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption complies with Section 4.07
hereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Estimation Period" means the period for which a shareholder who is an
individual is required to estimate for Federal income tax purposes his
allocation of taxable income from a calendar year in connection with determining
his estimated federal income tax liability for such period.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date of this Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations, but excluding
amortization of debt issuance costs and excluding non-cash interest accrued or
accruing for such period on any NWS-Illinois Shareholder Subordinated Note) and
(ii) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Restricted Subsidiaries or secured by a Lien on assets of such Person
or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all cash dividend payments or other
distributions (and non-cash dividend payments in the case of a Person that is a
Restricted Subsidiary) on any series of preferred equity of such Person times
(b) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax rate
of such Person (or in the case of a Person that is an "S Corporation" or other
pass-through entity for federal income tax purposes, the combined federal, state
and local income tax rate that was or would have been utilized to calculate the
Tax Amount of such Person), expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A1 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) NWS-Indiana, NWS-Illinois, NWS-LLC and
NWS-Michigan and (ii) any other subsidiary that executes a Subsidiary Guarantee
in accordance with the provisions of this Indenture, and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"immediate family" has the meaning assigned to such term in Rule
16a1-(e) under the Exchange Act.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing Indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means the first $110 million aggregate principal amount
of Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with any Qualified Receivables
Transaction, any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with GAAP
and before any reduction in respect of preferred interests or dividends,
excluding, however, (i) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with (a)
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions), or (b) the disposition of any securities by such Person
or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries, and (ii) any extraordinary
or nonrecurring gain (but not loss), together with any related provision for
taxes or Tax Distributions on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets that were
the subject of such Asset Sale and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement to be
executed on or prior to the date of this Indenture, by and among the Company and
NBD Bank, as agent, providing for up to $60.0 million of revolving credit
borrowings, including any related notes, guarantees, collateral documents,
instruments, letters of credit and agreements executed in connection therewith,
and in each case as amended, modified, renewed, refunded, replaced or refinanced
from time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"NWS-Illinois" means NWS, Inc., an Illinois corporation, and its
successors.
"NWS-Illinois Shareholder Subordinated Note" means any note payable by
NWS-Illinois that is outstanding on the date of this Indenture and (i) matures
on December 31, 2009, (ii) does not require redemption prior to maturity, and
(iii) that is subordinated in right of payment to the Notes.
"NWS-Indiana" means National Wine & Spirits Corporation, an Indiana
corporation, and its successors.
"NWS-LLC" means NWS-Illinois, LLC, an Illinois limited liability
company, and its successors.
"NWS-Michigan" means NWS Michigan, Inc., a Michigan corporation, and
its successors.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means any of the businesses engaged in by the
Company and its Subsidiaries on the date of this Indenture and any extensions
thereof or other businesses reasonably related thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Controlled Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person, if as a result of such Investment (i) such Person becomes a Controlled
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Controlled Subsidiary of the
Company; (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 hereof; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; (f) Investments made after the date of this Indenture in wholesale
alcohol-based beverage distribution businesses (measured on the dates such
Investments were made and without giving effect to subsequent changes in value)
that are not, after giving effect to such Investments, Controlled Subsidiaries,
in an aggregate amount outstanding after giving effect to any such Investment
not exceeding 10% of Consolidated Tangible Assets; (g) redemptions of the
interests in NWS-LLC that are held by Martin H. Bart on the date of this
Indenture, and his successors and assigns; (h) the acquisition by a Receivables
Subsidiary in connection with a Qualified Receivables Transaction of Equity
Interests of a trust or other Person established by such Receivables Subsidiary
to effect such Qualified Receivables Transaction, and any other Investment by
the Company or a Subsidiary of the Company in a Receivables Subsidiary or any
Investment by a Receivables Subsidiary in any other Person in connection with a
Qualified Receivables Transaction provided, that such other Investment is in the
form of a note or other instrument that the Receivables Subsidiary or other
Person is required to repay as soon as practicable from available cash
collections less amounts required to be established as reserves pursuant to
contractual agreements with entities that are not Affiliates of the Company
entered into as part of a Qualified Receivables Transaction; (i) transfers from
NWS-Illinois and NWS-LLC to U.S. Beverage of assets directly related to, and
primarily used in, the operations of U.S. Beverage; and (j) other Investments in
any Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (j)
that are at the time outstanding, not to exceed $7.0 million.
"Permitted Liens" means (i) (A) Liens securing Indebtedness and
Guarantees permitted by the terms of this Indenture to be incurred pursuant to
any Credit Facilities (including the New Credit Facility) on (x) accounts
receivable and the related assets of the type specified in the definition of
"Qualified Receivables Transaction" and inventory and proceeds thereof and (y)
Credit Facility Intercompany Indebtedness (and any documents or instruments
evidencing the same or any security therefore), and (B) any such Liens on assets
of the type described in clause (i)(A)(x) securing Credit Facility Intercompany
Indebtedness, provided, however, that any Liens permitted by clause (i)(A)(y)
and clause (i)(B) shall only constitute Permitted Liens for so long as (1) the
Credit Facility pursuant to which such Liens were granted contains a provision
stating in substance that in the event of any bankruptcy, insolvency or similar
proceeding involving any Guarantor, the claims of the lenders under such Credit
Facility with respect to the Guarantee of such Guarantor shall be reduced by the
amount of claims, if any, which are made by such lenders and allowed in such
proceeding with respect to the Credit Facility Intercompany Indebtedness pledged
to secure such Indebtedness under the Credit Facility, net of any offsets
against such Credit Facility Intercompany Indebtedness relating to Indebtedness
or other obligations owed by the Company to such Guarantor, and provided further
that such reduction shall be rescinded in the event of equitable subordination
of the claims with respect to the Credit Facility Intercompany Indebtedness
unless such equitable subordination arose out of or resulted from the acts or
omissions of any lenders under the Credit Facility and (2) any intercompany
notes representing any Credit Facility Intercompany Indebtedness that are
pledged to secure Indebtedness under such Credit Facility are at all times
limited in aggregate amount to the balance at any time outstanding under such
Credit Facility; (ii) Liens in favor of the Company or any Restricted
Subsidiary; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Restricted Subsidiary of
the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the third paragraph of Section 4.09
hereof covering only the assets acquired with such Indebtedness; (vii) Liens
existing on the date of this Indenture; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (ix)
Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding and that (a) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; (x)
Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries and (xi) Liens on assets of a Receivables Subsidiary
incurred in connection with a Qualified Receivables Transaction.
"Permitted Quarterly Tax Distribution" means quarterly distributions of
Tax Amounts determined on the basis of the estimated taxable income of the
Company, for the related Estimation Period, provided, however, that (A) prior to
any distributions of Tax Amounts the Company shall deliver an officers'
certificate certifying that the Tax Amounts to be distributed were determined
pursuant to the terms of this Indenture and stating to the effect that the
Company qualifies as an S-Corporation or substantially similar pass-through
entity for Federal income tax purposes and (B) at the time of such
distributions, the most recent audited financial statements of the Company
reflect that the Company was treated as an S-Corporation or substantially
similar pass-through entity for Federal income tax purposes for the period
covered by such financial statements.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principal" means James E. LaCrosse.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Receivables Transaction" means any transaction or series of
transactions entered into by the Company or any of its Subsidiaries pursuant to
which the Company or any of its Subsidiaries sells, conveys or otherwise
transfers to (i) a Receivables Subsidiary (in the case of a transfer by the
Company or any of its Subsidiaries) and (ii) any other Person (in the case of a
transfer by a Receivables Subsidiary), or grants a security interest in, any
accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Quarterly Payment Period" means the period commencing on the tenth day
and ending on and including the twentieth date of each month in which Federal
individual estimated tax payments are due (provided that payments in respect of
estimated state income taxes due in January may instead, at the option of the
Company, be paid during the last five days of the immediately preceding
December.
"Receivables Subsidiary" means a Subsidiary of the Company which
engages in no activities other than in connection with the financing of accounts
receivable and which is designated by the Board of Directors of the Company (as
provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness
or any other Obligations (contingent or otherwise) of which (i) is guaranteed by
the Company or any Subsidiary of the Company (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to representations, warranties, covenants and indemnities entered into
in the ordinary course of business in connection with a Qualified Receivables
Transaction), (ii) is recourse to or obligates the Company or any Subsidiary of
the Company in any way other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction or (iii) subjects any
property or asset of the Company or any Subsidiary of the Company (other than
accounts receivable and related assets as provided in the definition of
"Qualified Receivables Transaction"), directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to representations,
warranties, covenants and indemnities entered into in the ordinary course of
business in connection with a Qualified Receivables Transaction, (b) with which
neither the Company nor any Subsidiary of the Company has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to
the Company or such Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing accounts receivable
and (c) with which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such Subsidiary's financial condition or
cause such Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company will be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolutions of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Registration Rights Agreement" means the Registration Rights
Agreement, of even date herewith, by and among the Company and the other parties
named on the signature pages thereof, as such agreement may be amended, modified
or supplemented from time to time, and, with respect to any Additional Notes,
one or more registration rights agreements between the Company and the other
parties thereto, as such agreement(s) may be amended, modified or supplemented
from time to time, relating to rights given by the Company to the purchasers of
Additional Notes to register such Additional Notes under the Securities Act..
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A2 hereto bearing the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" means any immediate family member of the Principal and
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of the Principal and/or such other Persons
referred to in this definition.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"S Corp. Businesses" means the Company and any Subsidiary of the
Company that qualifies as a qualified subchapter S subsidiary or is classified
as a partnership or other pass-through entity for Federal income tax purposes.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and on the Notes, executed
pursuant to the provisions of this Indenture.
"Tax Amounts" with respect to any taxable period shall not exceed an
amount equal to (A) the product of (x) the taxable income of the Company for
such period as determined by the Tax Amounts CPA and (y) the Tax Percentage
reduced by (B) to the extent not previously taken into account, any income tax
benefit attributable to the Company which could be realized (without regard to
the actual realization) by its shareholders in the current or any prior taxable
year, or portion thereof, commencing on or after the Issue Date (including any
tax losses or tax credits), computed at the applicable Tax Percentage for the
year that such benefit is taken into account for purposes of this computation.
"Tax Amounts CPA" means Katz, Sapper & Miller or a nationally
recognized certified public accounting firm.
"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of Federal and state income tax, imposed on an
individual taxpayer, as certified by the Tax Amounts CPA in a certificate filed
with the Trustee. The rate of "state income tax" to be taken into account for
purposes of determining the Tax Percentage for a particular taxable year shall
be deemed to be the highest state marginal tax rate applicable to any
stockholder.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.ss.ss.77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under
the TIA.
"True-up Amount" means, in respect of a particular taxable year, an
amount determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such taxable year and (ii) the actual Tax Amounts for such year. For purposes
of this Indenture, the amount equal to the excess, if any, of the amount
described in clause (i) over the amount described in clause (ii) above shall be
referred to as the "True-up Amount due to the Company" and the excess, if any,
of the amount described in clause (ii) over the amount described in clause (i)
above shall be referred to as the "True-up Amount due to the shareholders."
"True-up Determination Date" means the date on which the Tax Amounts
CPA delivers a statement to the Trustee indicating the True-up Amount.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note substantially
in the form of Exhibit A1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
is designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall
be in default of such covenant). The Board of Directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
<S> <C>
Defined in
Term Section
---- -------
"Affiliate Transaction"................... 4.11
"Asset Sale Offer"........................ 3.09
"Authentication Order".................... 2.02
"Bankruptcy Law".......................... 4.01
"Change of Control Offer"................. 4.15
"Change of Control Payment"............... 4.15
"Change of Control Payment Date".......... 4.15
"Covenant Defeasance"..................... 8.03
"Event of Default"........................ 6.01
"Excess Proceeds"......................... 4.10
"incur"................................... 4.09
"Legal Defeasance"........................ 8.02
"Offer Amount"............................ 3.09
"Offer Period"............................ 3.09
"Paying Agent"............................ 2.03
"Permitted Debt".......................... 4.09
"Purchase Date"........................... 3.09
"Registrar"............................... 2.03
"Restricted Payments"..................... 4.07
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantee means the Company and the
Guarantors, respectively, and any successor obligor upon the Notes and the
Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include the
singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act shall be deemed
to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each Note
shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof. The terms and provisions
contained in the Notes shall constitute, and are hereby expressly made, a part
of this Indenture and the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. However, to the extent any provision of any
Note conflicts with the express provisions of this Indenture, the provisions of
this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in the form
of Exhibits A1 or A2 attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S
shall be issued initially in the form of the Regulation S Temporary Global Note,
which shall be deposited on behalf of the purchasers of the Notes represented
thereby with the Trustee, as custodian for the Depositary, and registered in the
name of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedel Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or an IAI Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
from the Company. Following the termination of the Restricted Period, beneficial
interests in the Regulation S Temporary Global Note shall be exchanged for
beneficial interests in Regulation S Permanent Global Notes pursuant to the
Applicable Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Note. The aggregate principal amount of the Regulation S Temporary Global
Note and the Regulation S Permanent Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee, as the case may be, in connection with transfers of
interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating
Procedures of the Euroclear System" and "Terms and Conditions Governing Use of
Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer
Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests
in the Regulation S Temporary Global Note and the Regulation S Permanent Global
Notes that are held by Participants through Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount of $200 million. The aggregate principal
amount of Notes outstanding at any time may not exceed $200 million except as
provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and will notify
the Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or a Subsidiary) shall have no further
liability for the money. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Temporary Regulation S
Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company
in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form
of a beneficial interest in the IAI Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in
the form of Exhibit B hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet
been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the
Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the aggregate principal amount of
beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in
the form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest
in a Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Restricted Definitive Note, then, upon receipt by the Registrar of
the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof, the Trustee shall
cause the aggregate principal amount of the applicable Global Note to
be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to
the Person designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on transfer contained
therein.
(ii) Beneficial Interests in Regulation S Temporary Global
Note to Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and
(C) hereof, a beneficial interest in the Regulation S Temporary Global
Note may not be exchanged for a Definitive Note or transferred to a
Person who takes delivery thereof in the form of a Definitive Note
prior to (x) the expiration of the Restricted Period and (y) the
receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in
a Restricted Global Note may exchange such beneficial interest for
an Unrestricted Definitive Note or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an exchange,
or the transferee, in the case of a transfer , certifies in the
applicable Letter of Transmittal that it is not (1) a broker-dealer,
(2) a Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate ( as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in
a Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a Definitive
Note that does not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount.
Any Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(iii) shall be registered in such name
or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Any Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(iii) shall not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration requirements
of the Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities Act
other than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive
Notes proposes to exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive
Notes proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above at a time when an Unrestricted Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the
Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Definitive
Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request
by a Holder of Definitive Notes and such Holder's compliance with the provisions
of this Section 2.06(e), the Registrar shall register the transfer or exchange
of Definitive Notes. Prior to such registration of transfer or exchange, the
requesting Holder shall present or surrender to the Registrar the Definitive
Notes duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by its attorney,
duly authorized in writing. In addition, the requesting Holder shall provide any
additional certifications, documents and information, as applicable, required
pursuant to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with
the Registration Rights Agreement, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.02, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they
are not participating in a distribution of the Exchange Notes and (z) they are
not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Notes to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global Notes
and Definitive Notes issued under this Indenture unless specifically stated
otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph
(B) below, each Global Note and each Definitive Note (and all Notes
issued in exchange therefor or substitution thereof) shall bear the
legend in substantially the following form.
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A) (1), (2). (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO NATIONAL WINE & SPIRITS, INC. OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE
TO NWS THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO NWS) OR (G)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THIS INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii),
(c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.06 (and all Notes issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a
legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THIS INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THIS INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THIS
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THIS INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT
OF NATIONAL WINE & SPIRITS, INC."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE
AS SPECIFIED IN THIS INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15
and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in
part or (C) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. In the event
of partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the redemption date by the Trustee from the outstanding Notes not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to January 15, 2004. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, upon not less than 30 nor more than 60
days' written notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on January 15 of the years
indicated below:
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<CAPTION>
<S> <C>
Year Percentage
---- ----------
2004....................... 105.0625%
2005....................... 103.3750%
2006....................... 101.6875%
2007 and thereafter........ 100.0000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time prior to January 15, 2002, the Company may redeem up to 33 1/3% of the
aggregate principal amount of Notes originally issued under this Indenture at a
redemption price equal to 110.125% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of one or more public offerings of
common stock of the Company; provided that at least 66 2/3% of the aggregate
principal amount of the Notes remain outstanding immediately after the
occurrence of each such redemption (excluding Notes held by the Company and its
Subsidiaries); and provided further that such redemption occurs within 45 days
of the date of the closing of each such initial public offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as set forth in Sections 4.10 and 4.15 hereof, the Company shall not
be required to make mandatory redemption payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may elect to have Notes purchased in integral multiples of $1,000
only;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an agent of
the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) beginning with the quarterly period ending December 31, 1998, all
quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries (showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto and in Management's Discussion and
Analysis of Financial Condition and Results of Operations, the financial
condition and results of operations of the Company and its Restricted
Subsidiaries) and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports, in each case, within the time periods specified
in the SEC's rules and regulations. In addition, beginning with the first
quarterly period commencing after consummation of the Exchange Offer, whether or
not required by the rules and regulations of the SEC, the Company shall file a
copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA ss. 314(a).
(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenant (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the Company) that
is not a Permitted Investment; (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; (iv) make any payment of salary, bonus, and any
other cash compensation, including split-dollar insurance premiums, that is
characterized as income on Form W-2 to or for the benefit of any Person who is a
beneficial owner of more than 10% of the outstanding Voting Stock of the
Company, or to or for the benefit of any immediate family member of such Person,
in excess of $950,000 annually for any individual or in excess of $2.5 million
annually in the aggregate for all such individuals; (v) make any cash payment
(including any repurchase or redemption) after the date of this Indenture on any
Indebtedness owing on any NWS-Illinois Shareholder Subordinated Note; or (vi)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (vi) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in Section
4.09 hereof; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of this Indenture (excluding
Restricted Payments permitted by clauses (ii), (iii), (iv) and (v) of
the next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of this Indenture to the end of the Company's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds
received by the Company from the issue or sale since the date of this
Indenture of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold
to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock) and 100% of the capital contributions received by the Company
after the date of this Indenture in cash, plus (iii) one year and one
day after the date of such receipt, 100% of the cash payments received
by the Company or a Restricted Subsidiary of the Company after the date
of this Indenture on a Company Shareholder Note Receivable, plus (iv)
to the extent that any Restricted Investment that was made after the
date of this Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment, plus (v)
50% of any dividends received by the Company or a Controlled Subsidiary
after the date of this Indenture from an Unrestricted Subsidiary of the
Company, to the extent that such dividends were not otherwise included
in Consolidated Net Income of the Company for such period.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) provided that no Default or Event of Default has occurred and is
continuing, the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) provided that no Default or Event of
Default has occurred and is continuing, the defeasance, redemption, repurchase
or other acquisition of subordinated Indebtedness with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (iv) provided that no
Default or Event of Default has occurred and is continuing, the payment of any
dividend by a Restricted Subsidiary of the Company to the holders of its common
Equity Interests on a pro rata basis; (v) the payment of Permitted Quarterly Tax
Distributions to the holders of Capital Stock of any of the S Corp. Businesses
as described below; and (vi) provided that no Default or Event of Default has
occurred and is continuing, the payment of any Restricted Payments not otherwise
permitted in an aggregate amount not exceeding $2.5 million.
For so long as each S Corp. Business qualifies as a pass-through entity
for Federal income tax purposes, such S Corp. Business may make cash
distributions to its shareholders or members, during each Quarterly Payment
Period, in an aggregate amount not to exceed the Permitted Quarterly Tax
Distribution in respect of the related Estimation Period. If any portion of a
Permitted Quarterly Tax Distribution is not distributed during such Quarterly
Payment Period, the Permitted Quarterly Tax Distribution payable during the
immediately following Quarterly Payment Period shall be increased by such
undistributed portion.
Within 10 days following the Company's filing of Internal Revenue
Service Form 1120S for the immediately preceding taxable year, the Tax Amounts
CPA shall file with the Trustee a written statement indicating in reasonable
detail the calculation of the True-up Amount. In the case of a True-up Amount
due to the shareholders or members, the Permitted Quarterly Tax Distribution
payable during the following Quarterly Payment Periods shall be increased by
such True-up Amount. In the case of a True-up Amount due to the Company, the
Permitted Quarterly Tax Distribution payable during the following Quarterly
Payment Periods shall be reduced by such True-up Amount and the excess, if any,
of the True-up Amount over such Permitted Quarterly Tax Distribution shall be
applied to reduce the following Permitted Quarterly Tax Distributions until such
True-up Amount is entirely offset.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; provided
that in no event shall the business currently operated by NWS-Indiana,
NWS-Illinois (other than its U.S. Beverage craft beer business), NWS-LLC or
NWS-Michigan be transferred to or held by an Unrestricted Subsidiary. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $5.0 million. Not later than the date
of making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, together with a copy of any fairness
opinion or appraisal required by this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits (other than Permitted Quarterly Tax Distributions or distributions to
enable the Company to make Permitted Quarterly Tax Distributions), or (b) pay
any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of this
Indenture, (b) the New Credit Facility as in effect as of the date of this
Indenture, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the New Credit Facility as in effect on the date of this Indenture,
(c) this Indenture and the Notes, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of
this Indenture to be incurred, (f) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h) any
agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale or other
disposition, (i) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (j) Liens securing
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
Section 4.12 hereof that limit the right of the Company or any of its Restricted
Subsidiaries to dispose of the assets subject to such Lien, (k) provisions with
respect to the disposition or distribution of assets or property pursuant to
Asset Sales (or transactions which, but for their size, would be Asset Sales)
with respect to assets to be sold, or in joint venture agreements and other
similar agreements entered into in the ordinary course of business, (l)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business, and (m) Indebtedness
or other contractual requirements of a Receivables Subsidiary in connection with
a Qualified Receivables Transaction, provided that such restrictions apply only
to such Receivables Subsidiary and the contractual requirements of the Company
and its Restricted Subsidiaries to transfer assets to such Receivables
Subsidiary in Qualified Receivables Transactions.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company and any Guarantor may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1.0 if such incurrence or issuance occurs on or prior
to the second anniversary of the date hereof, and 2.25 to 1.0 if such incurrence
or issuance occurs at any time thereafter, in each case, determined on a pro
forma basis (including a pro forma application of the net proceeds therefrom),
as if the additional Indebtedness had been incurred, or the Disqualified Stock
had been issued, as the case may be, at the beginning of such four-quarter
period.
The provisions of the first paragraph of this Section 4.09 shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company or any Guarantor of
Indebtedness and letters of credit under Credit Facilities; provided,
that the aggregate principal amount of all Indebtedness (with letters
of credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted Subsidiaries
thereunder) at any time outstanding under all Credit Facilities after
giving effect to such incurrence, does not exceed an amount equal to
the greater of (x) $60.0 million (provided that such amount shall be
reduced to the extent of any reduction or elimination of any commitment
under any Credit Facility resulting from or relating to the formation
of any Receivables Subsidiary or the consummation of any Qualified
Receivables Transaction) less the aggregate amount of all Net Proceeds
of Asset Sales that have been applied by the Company or any of its
Restricted Subsidiaries since the date of this Indenture to repay
Indebtedness under a Credit Facility pursuant to Section 4.10 hereof
and (y) the amount of the Borrowing Base as of the date of such
incurrence; provided, further, that, after giving effect to such
incurrence and the application of proceeds thereof, the aggregate
principal amount of all term Indebtedness and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Restricted
Subsidiaries thereunder) at any time outstanding under all Credit
Facilities after giving effect to such incurrence, does not exceed an
amount equal to the greater of (a) $30.0 million and (b) 50% of the
amount of the Borrowing Base as of the date of such incurrence;
(ii) the incurrence by the Company or any of its
Restricted Subsidiaries of the Existing Indebtedness;
(iii) the incurrence of Indebtedness represented by the
Initial Notes and the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company and its Restricted
Subsidiaries (including industrial revenue bonds, tax increment
financing and related reimbursement obligations), in an aggregate
principal amount, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (iv), not to exceed $5 million at any time
outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness that was permitted by this Indenture to be incurred
pursuant to clause (ii) or (iii) of this paragraph or pursuant to the
immediately preceding paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness, including Credit Facility
Intercompany Indebtedness, between or among the Company and any
Restricted Subsidiary that is a Guarantor; provided, however, that (i)
except for Credit Facility Intercompany Indebtedness, (A) if the
Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes, or (B) if a Guarantor is the
obligor on such Indebtedness, such Indebtedness is expressly
subordinated to all Obligations with respect to such Guarantor's
Subsidiary Guarantee and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary that is a
Guarantor and (B) any sale or other transfer of any such Indebtedness
to a Person that is not either the Company or a Restricted Subsidiary
that is a Guarantor shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding;
(viii) the Guarantee by the Company or any of the Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of the
Company that was permitted to be incurred by another provision of this
Section 4.09 (except clause (ix) of this paragraph);
(ix) the incurrence by a Receivables Subsidiary of
Indebtedness in a Qualified Receivables Transaction that is without
recourse to the Company or to any other Subsidiary of the Company or
their assets (other than such Receivables Subsidiary and its assets
and, as to the Company or any Subsidiary of the Company, other than
pursuant to representations, warranties, covenants and indemnities
customary for such transactions) and is not guaranteed by any such
Person;
(x) the incurrence by the Company's Unrestricted Subsidiaries
of Non-Recourse Debt, provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt, such event shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary that was not
permitted by this clause (x); and
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding
(which may, but need not, be borrowed under Credit Facilities),
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (xi), not to exceed $10 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
shall be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph of this Section 4.09. Accrual of interest, the
accretion of accreted value and the payment of interest in the form of
additional Indebtedness shall not be deemed to be an incurrence of Indebtedness
for purposes of this Section 4.09; provided, in each such case, that the amount
thereof is included in Fixed Charges of the Company as accrued to the extent
contemplated by the definition of such term.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received) within 10 business days, shall be deemed to be cash for
purposes of this provision; provided, however, that the Company may (A) sell its
Cameron Springs bottled water business for fair market value without complying
with clause (ii) of this paragraph provided that the non-cash consideration
received therefor is in the form of securities registered under the Securities
Act or subject to a registration rights agreement providing for registration
under the Securities Act within 90 days after the sale, and (B) sell beer
franchises, brand labels and distribution rights of NWS-Illinois or sell all or
part of its U.S. Beverage operations for fair market value including cash
royalty payments or cash payments over time, without complying with clause (ii)
of this paragraph.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or the applicable Restricted Subsidiary may apply such Net
Proceeds at its option, (a) to repay Indebtedness under a Credit Facility (and
to correspondingly permanently reduce commitments with respect thereto in the
case of revolving borrowings; provided, that no such reduction shall affect the
amount that may be borrowed pursuant to the Borrowing Base as provided in clause
(i)(y) of the third paragraph of Section 4.09) or (b) to the acquisition of a
controlling interest in another business, the making of a capital expenditure or
the acquisition of other assets that are not classified as current assets, in
each case, in a Permitted Business. Pending the final application of any such
Net Proceeds, the Company or the applicable Restricted Subsidiary may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10 million, the Company
shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase
the maximum principal amount of Notes and any other pari passu Indebtedness
including a comparable asset sale covenant that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture. To the extent that the aggregate amount of Notes and
such other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may use any remaining Excess Proceeds
for general corporate purposes. If the aggregate principal amount of Notes and
such other pari passu Indebtedness surrendered by holders thereof exceeds the
amount of Excess Proceeds, the Notes and such other pari passu Indebtedness
shall be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Stock) of the Company, (v) salaries, bonuses
and employee benefits paid to the officers of the Company and its Subsidiaries
in the ordinary course of business consistent with past practice; (vi)
transactions in the ordinary course of business between the Company or any
Restricted Subsidiary and (x) any Person that is not a Restricted Subsidiary (A)
that is engaged in a Permitted Business and (B) in which the Company has an
Investment on the date of this Indenture or makes an Investment permitted by
this Indenture, and (C) in which neither the Principal, any Related Party or any
officer, director or equity owner of the Company or any of its Subsidiaries has
any beneficial ownership interest (other than indirectly through the Company or
a Restricted Subsidiary), or (y) Consolidated Rectifying, Inc. for the bottling,
blending and/or manufacture of distilled spirits in the ordinary course of
business and consistent with past practice, (vii) transactions between a
Receivables Subsidiary and any Person in which the Receivables Subsidiary has an
Investment in connection with any Qualified Receivables Transaction and (viii)
Permitted Investments and Restricted Payments that are permitted by the
provisions of Section 4.07 of this Indenture.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or suffer to exist any Lien
securing any Indebtedness or trade payables on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Section 4.13. Line of Business.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses, except to such
extent as would not be material to the Company and its Restricted Subsidiaries
taken as a whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Company shall mail a notice to each Holder stating: (1)
that the Change of Control Offer is being made pursuant to this Section 4.15 and
that all Notes tendered will be accepted for payment; (2) the purchase price and
the purchase date, which shall be no earlier than 30 days and no later than 60
days after from the date such notice is mailed (the "Change of Control Payment
Date"); (3) that any Note not tendered will continue to accrue interest; (4)
that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date; (5)
that Holders electing to have any Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (7) that Holders whose
Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof. The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes in connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered by such Holder, if any; provided, that each such new Note
shall be in a principal amount of $1,000 or an integral multiple thereof. The
Company shall publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.09 hereof and all other provisions in this Indenture
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
Section 4.16. No Senior Subordinated Debt.
The Company shall not incur any Indebtedness that is contractually
subordinated in right of payment to any other Indebtedness of the Company unless
such Indebtedness is also contractually subordinated in right of payment to the
Notes on substantially identical terms; provided, however, that no Indebtedness
of the Company shall be deemed to be contractually subordinated to any other
Indebtedness of the Company solely by virtue of being unsecured.
Section 4.17. Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
or such Restricted Subsidiary, as applicable could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale
and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof and (b) incurred a Lien to
secure such Indebtedness pursuant to Section 4.12 hereof (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with, Section 4.10
hereof.
Section 4.18. Limitation on Issuances and Sales of Capital Stock of
Controlled Subsidiaries.
The Company (i) shall not, and shall not permit any Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock of any Controlled Subsidiary of the Company to any Person (other than the
Company or a Controlled Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Controlled Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with
Section 4.10 hereof and (c) after giving effect to such disposition, such
Controlled Subsidiary remains a Controlled Subsidiary and (ii) will not permit
any Controlled Subsidiary of the Company to issue any of its Equity Interests
(other than, if necessary, shares of its Capital Stock constituting directors'
qualifying shares) to any Person other than to the Company or a Controlled
Subsidiary of the Company if, after giving effect thereto, such Controlled
Subsidiary would cease to be a Controlled Subsidiary. The foregoing limitations
shall not prevent any increase in the ownership or profits interest of Martin H.
Bart or his successors in NWS-LLC or any successor entity thereto in accordance
with the terms of the limited liability company agreement governing NWS-LLC on
the date hereof, and as amended or replaced thereafter in a manner not adverse
to the Holders of the Notes.
Section 4.19. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Subsidiary after the date of this Indenture, then, except for
Subsidiaries that have been properly designated as Unrestricted Subsidiaries in
accordance with the terms of this Indenture for so long as they continue to
constitute Unrestricted Subsidiaries and except Receivables Subsidiaries, such
newly acquired or created Subsidiary shall become a Guarantor and shall execute
a Supplemental Indenture and deliver an Opinion of Counsel, in accordance with
the terms of this Indenture. The form of such Supplemental Indenture is attached
as Exhibit F hereto. In addition, if any Unrestricted Subsidiary is
redesignated, or becomes, a Restricted Subsidiary, such Restricted Subsidiary
shall become a Guarantor and execute a Supplemental Indenture and deliver an
Opinion of Counsel, in accordance with the terms of this Indenture.
Notwithstanding the foregoing, any Restricted Subsidiary that is not
incorporated under the laws of the United States or any political subdivision
thereof shall not be required to become a Guarantor unless such Restricted
Subsidiary guarantees other Indebtedness of the Company or another Subsidiary of
the Company.
Section 4.20. Payments for Consent.
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia,
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Registration Rights
Agreement, the Notes and this Indenture pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee, (iii) immediately after such
transaction, no Default or Event of Default exists and (iv) except in the case
of a merger of the Company with or into a Controlled Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made shall, immediately after such transaction after giving pro forma effect
thereto and any related financing transactions as if the same had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of Section 4.09 hereof.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise;
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.09, 4.15 or 5.01 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes (including Additional Notes, if
any) then outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries, whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (i) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary and such judgment or
judgments remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $5 million;
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii) consents to the appointment of a custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due;
or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints a custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(i) except as permitted by this Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
such Guarantor's Subsidiary Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs on or after January 15, 2004 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to January 15,
2004 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on January 15 of the years
set forth below, as set forth below (expressed as a percentage of the principal
amount of the Notes on the date of payment that would otherwise be due but for
the provisions of this sentence):
<TABLE>
<CAPTION>
<S> <C>
Year Percentage
---- ----------
1999....... 113.5000%
2000....... 111.8125%
2001....... 110.1250%
2002....... 108.4375%
2003....... 106.7500%
</TABLE>
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then outstanding
Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium and
Liquidated Damages, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged as bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Notes under Article
2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's obligations in connection therewith
and (d) this Article Eight. Subject to compliance with this Article Eight, the
Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.04, 4.05, 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and 4.19 hereof and clause
(iv) of Section 5.01 hereof with respect to the outstanding Notes on and after
the date the conditions set forth in Section 8.04 are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(c) through 6.01(f) and 6.01(i) hereof shall
not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company pursuant
to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with
the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or a
Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and
4.15 hereof) and the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including Additional Notes, if any) voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the Notes
except as provided above with respect to Sections 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including Additional Notes, if
any) and a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 4.10 or 4.15 hereof,
(h) make any change in Section 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or this Indenture, except in accordance with the terms of
this Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01. Guarantee.
Subject to this Article 10, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
Section 10.02. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor will, after giving effect to such maximum
amount and all other contingent and fixed liabilities of such Guarantor that are
relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under this
Article 10, result in the obligations of such Guarantor under its Subsidiary
Guarantee not constituting a fraudulent transfer or conveyance.
Section 10.03. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by its
President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall
be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.19 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture, the Registration Rights Agreement and Subsidiary Guarantees in
accordance with Section 4.19 hereof and this Article 10, to the extent
applicable.
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 10.05, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless:
(a) subject to Section 10.05 hereof, the Person formed by or surviving
any such consolidation or merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, this Indenture and the Subsidiary Guarantee on the
terms set forth herein or therein; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 10.05. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, or in the event that a
Guarantor (other than NWS-Indiana, NWS-LLC, NWS-Illinois or NWS-Michigan) is
designated as an Unrestricted Subsidiary in accordance with the terms of this
Indenture, then such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture, including without
limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of
an Officers' Certificate and an Opinion of Counsel to the effect that such sale
or other disposition was made by the Company in accordance with the provisions
of this Indenture, including without limitation Section 4.10 hereof, the Trustee
shall execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 10.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the Company and/or any Guarantor:
National Wine & Spirits, Inc.
P.O. Box 1602
Indianapolis, Indiana 46206-1602
Telecopier No.: (317) 685-8810
Attention: J. Smoke Wallin
With a copy to:
Ice, Miller, Donadio & Ryan
One American Square, 34th Floor
Box 82001
Indianapolis, Indiana 46282
Telecopier No.: (317) 236-2219
Attention: Joseph E. DeGroff
If to the Trustee:
Norwest Bank Minnesota, N.A.
Corporate Trust
Northwest Center
6th & Marquette
Minneapolis, Minnesota 55479
Telecopier No.: (612) 667-9825
Attention: Corporate Trust Services
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 11.03. Communication by Holders of Notes with Other Holders
of Notes.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or such Guarantor under the Notes, the
Subsidiary Guarantees, this Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors. All agreements of each Guarantor in this Indenture shall bind
its successors, except as otherwise provided in Section 10.05.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
<PAGE>
SIGNATURES
Dated as of January 25, 1999
NATIONAL WINE & SPIRITS, INC.
By: /s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman, President and Chief Executive
Officer
NATIONAL WINE & SPIRITS CORP.
By: /s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS, INC.
By: /s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS-ILLINOIS, LLC
By: /s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS MICHIGAN, INC.
By: /s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
<PAGE>
<PAGE>
NORWEST BANK MINNESOTA, N.A.
By: /s/ TIMOTHY P. MOWDY
Name: Timothy P. Mowdy
Title: Designated Signor
<PAGE>
<PAGE>
[Face of Note]
CUSIP/CINS ____________
10 1/8% Series A Senior Notes due 2009
No. ___ $____________
NATIONAL WINE & SPIRITS, INC.
promises to pay to Cede & Co. or its registered assigns
the principal sum of
Dollars on January 15, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: December 31 and June 30
Dated: January 25, 1999
NATIONAL WINE & SPIRITS, INC.
By:
Name:
Title:
This is one of the Notes referred to in the within-mentioned Indenture:
NORWEST BANK MINNESOTA, N.A.,
as Trustee
By: __________________________________
Designated Signor
<PAGE>
<PAGE>
[Back of Note]
10 1/8% Series A Senior Notes due 2009
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. National Wine & Spirits, Inc., an Indiana corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 10
1/8% per annum from January 25, 1999 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages
semi-annually in arrears on January 15 and July 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be July 15, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the December 31 or June
30 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota, N.A.,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of January 25, 1999 ("Indenture") between the Company and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $200 million in aggregate
principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to January 15, 2004.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on January
15 of the years indicated below:
<TABLE>
<CAPTION>
<C> <C>
Percentage
Year
2004.............................. 105.0625%
2005.............................. 103.3750%
2006.............................. 101.6875%
2007 and thereafter............... 100.0000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time prior to January 15, 2002, the Company may redeem up to 33 1/3% of
the aggregate principal amount of Notes originally issued under the Indenture at
a redemption price equal to 110.125% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of one or more public offerings of
common stock of the Company; provided that at least 66 2/3% in aggregate
principal amount of the Notes remain outstanding immediately after the
occurrence of such redemption and that such redemption occurs within 45 days of
the date of the closing of each such initial public offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within five
days of each date on which the aggregate amount of Excess Proceeds exceeds $10
million, the Company shall commence an offer to all Holders of Notes (as "Asset
Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum
principal amount of Notes and any other pari passu Indebtedness including a
comparable asset sale covenant that may be purchased out of the Excess Proceeds
at an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes and such other pari passu Indebtedness tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use such deficiency
for general corporate purposes. If the aggregate principal amount of Notes and
such other pari passu Indebtedness surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Notes and such other pari passu Indebtedness
shall be purchased on a pro rata basis. Holders of Notes that are the subject of
an offer to purchase will receive an Asset Sale Offer from the Company prior to
any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder whose Notes are to be redeemed at
its registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000, unless all of the Notes
held by a Holder are to be redeemed. On and after the redemption date interest
ceases to accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of $1,000
and integral multiples of $1,000. The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption, except for the unredeemed portion of any Note being
redeemed in part. Also, the Company need not exchange or register the transfer
of any Notes for a period of 15 days before a selection of Notes to be redeemed
or during the period between a record date and the corresponding Interest
Payment Date.
10. PERSONS DEEMED OWNERS.
The registered Holder of a Note may be treated as its owner for all
purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
voting as a single class. Without the consent of any Holder of a Note, the
Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's or Guarantor's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act, or to allow any
Guarantor to execute a supplemental indenture to the Indenture and/or a
Subsidiary Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES.
Events of Default include: (i) default for 30 days in the payment when due
of interest or Liquidated Damages on the Notes; (ii) default in payment when due
of principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise, (iii) failure by the Company to comply with Section
4.07, 4.09, 4.15 or 5.01 of the Indenture; (iv) failure by the Company for 60
days after notice to the Company by the Trustee or the Holders of at least 25%
in principal amount of the Notes then outstanding voting as a single class to
comply with certain other agreements in the Indenture, the Notes; (v) default
under certain other agreements relating to Indebtedness of the Company which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness or (b) results in the acceleration of such
Indebtedness prior to its express maturity; (vi) certain final judgments for the
payment of money that remain undischarged for a period of 60 days; (vii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Material Subsidiaries; and (viii) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor or any Person acting on its behalf shall deny or
disaffirm its obligations under such Guarantor's Subsidiary Guarantee. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Upon such declaration, the Notes shall
become due and payable immediately. Notwithstanding the foregoing, in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes will become due and payable without further action or
notice. Holders may not enforce the Indenture or the Notes except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY.
The Trustee, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company or its Affiliates,
and may otherwise deal with the Company or its Affiliates, as if it were not the
Trustee.
14. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, incorporator or stockholder, of the Company,
as such, shall not have any liability for any obligations of the Company under
the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION.
This Note shall not be valid until authenticated by the manual signature of
the Trustee or an authenticating agent.
16. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES.
In addition to the rights provided to Holders of Notes under the Indenture,
Holders of Restricted Global Notes and Restricted Definitive Notes shall have
all the rights set forth in the A/B Exchange Registration Rights Agreement dated
as of January 25, 1999, between the Company and the parties named on the
signature pages thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes and the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon. The Company will furnish to any Holder upon written
request and without charge a copy of the Indenture and/or the Registration
Rights Agreement. Requests may be made to: National Wine & Spirits, Inc. P.O.
Box 1602 Indianapolis, Indiana 46206-1602 Attention: J. Smoke Wallin
<PAGE>
<PAGE>
ASSIGNMENT FORM
(I) or (we) assign and transfer this Note to:
(Insert assignee's legal name)
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________
to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Date:
Your Signature:
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of
the Indenture, check the appropriate box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE>
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in another
Global Note or for a Definitive Note, or exchanges of a part of another Global
Note or Definitive Note for an interest in this Global Note, have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized officer of
Principal Amount Principal Amount following such decrease Trustee or Note
Date of Exchange of this Global Note of this Global Note (or increase) Custodian
---------------- ------------------- ------------------- ------------- ---------
</TABLE>
* This schedule should be included only if the Note is issued in global form.
<PAGE>
<PAGE>
[Face of Regulation S Temporary Global Note]
CUSIP/CINS __________
10 1/8% Series A Senior Notes due 2009
No. ___ $__________
NATIONAL WINE & SPIRITS, INC.
promises to pay to Cede & Co. or its registered assigns
the principal sum of
Dollars on January 15, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: December 31 and June 30
Dated: January 25, 1999
NATIONAL WINE & SPIRITS, INC.
By:
Name:
Title:
This is one of the Notes referred to in the within-mentioned Indenture:
NORWEST BANK MINNESOTA, N.A.,
as Trustee
By: __________________________________
Designated Signor
<PAGE>
<PAGE>
[Back of Regulation S Temporary Global Note]
10 1/8% Series A Senior Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A) (1), (2). (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO NATIONAL WINE & SPIRITS, INC. OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE
TO NWS THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO NWS) OR (G)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING. Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST.
National Wine & Spirits, Inc., an Indiana corporation (the "Company"), promises
to pay interest on the principal amount of this Note at 10 1/8% per annum from
January 25, 1999 until maturity and shall pay the Liquidated Damages payable
pursuant to Section 5 of the Registration Rights Agreement referred to below.
The Company will pay interest and Liquidated Damages semi-annually in arrears on
January 15 and July 1 of each year, or if any such day is not a Business Day, on
the next succeeding Business Day (each an "Interest Payment Date"). Interest on
the Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of issuance; provided that if
there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be July 15, 1999. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the December 31 or June
30 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR.
Initially, Norwest Bank Minnesota, N.A., the Trustee under the Indenture,
will act as Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to any Holder. The Company or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE.
The Company issued the Notes under an Indenture dated as of January 25, 1999
("Indenture") between the Company and the Trustee. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the Indenture shall govern and be controlling. The Notes are
obligations of the Company limited to $200 million in aggregate principal
amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company
shall not have the option to redeem the Notes prior to January 15, 2004.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on January
15 of the years indicated below:
<TABLE>
<CAPTION>
<S> <C>
Year Percentage
---- ----------
2004......................... 105.0625%
2005......................... 103.3750%
2006......................... 101.6875%
2007 and thereafter.......... 100.0000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time prior to January 15, 2002, the Company may redeem up to 33 1/3% of
the aggregate principal amount of Notes originally issued under the Indenture at
a redemption price equal to 110.125% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of one or more public offerings of
common stock of the Company; provided that at least 66 2/3% in aggregate
principal amount of the Notes remain outstanding immediately after the
occurrence of such redemption and that such redemption occurs within 45 days of
the date of the closing of each such initial public offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within five
days of each date on which the aggregate amount of Excess Proceeds exceeds $10
million, the Company shall commence an offer to all Holders of Notes (as "Asset
Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum
principal amount of Notes and any other pari passu Indebtedness including a
comparable asset sale covenant (including Additional Notes, if any) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes and such other pari passu Indebtedness
(including Additional Notes, if any) tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may use such deficiency for general
corporate purposes. If the aggregate principal amount of Notes and such other
pari passu Indebtedness surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Notes and such other pari passu Indebtedness shall be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase will receive an Asset Sale Offer from the Company prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
8. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder whose Notes are to be redeemed at
its registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000, unless all of the Notes
held by a Holder are to be redeemed. On and after the redemption date interest
ceases to accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of $1,000
and integral multiples of $1,000. The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption, except for the unredeemed portion of any Note being
redeemed in part. Also, the Company need not exchange or register the transfer
of any Notes for a period of 15 days before a selection of Notes to be redeemed
or during the period between a record date and the corresponding Interest
Payment Date.
10. PERSONS DEEMED OWNERS.
The registered Holder of a Note may be treated as its owner for all
purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class, and any existing default or
compliance with any provision of the Indenture, the Subsidiary Guarantees or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes and Additional Notes, if any, voting as a
single class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or Guarantor's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the Indenture
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Subsidiary Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES.
Events of Default include: (i) default for 30 days in the payment when due
of interest or Liquidated Damages on the Notes; (ii) default in payment when due
of principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise, (iii) failure by the Company to comply with Section
4.07, 4.09, 4.15 or 5.01 of the Indenture; (iv) failure by the Company for 60
days after notice to the Company by the Trustee or the Holders of at least 25%
in principal amount of the Notes (including Additional Notes, if any) then
outstanding voting as a single class to comply with certain other agreements in
the Indenture, the Notes; (v) default under certain other agreements relating to
Indebtedness of the Company which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness or (b) results in
the acceleration of such Indebtedness prior to its express maturity; (vi)
certain final judgments for the payment of money that remain undischarged for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Material Subsidiaries; and (viii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor or any Person acting on its
behalf shall deny or disaffirm its obligations under such Guarantor's Subsidiary
Guarantee. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon such declaration,
the Notes shall become due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes will become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY.
The Trustee, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company or its Affiliates,
and may otherwise deal with the Company or its Affiliates, as if it were not the
Trustee.
14. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, incorporator or stockholder, of the Company,
as such, shall not have any liability for any obligations of the Company under
the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION.
This Note shall not be valid until authenticated by the manual signature of
the Trustee or an authenticating agent.
16. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES.
In addition to the rights provided to Holders of Notes under the Indenture,
Holders of Restricted Global Notes and Restricted Definitive Notes shall have
all the rights set forth in the A/B Exchange Registration Rights Agreement dated
as of January 25, 1999, between the Company and the parties named on the
signature pages thereof or, in the case of Additional Notes, Holders of
Restricted Global Notes and Restricted Definitive Notes shall have the rights
set forth in one or more registration rights agreements, if any, between the
Company and the other parties thereto relating to rights given by the Company to
the purchasers of any Additional Notes (collectively, the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon. The Company will furnish to any
Holder upon written request and without charge a copy of the Indenture and/or
the Registration Rights Agreement. Requests may be made to:
National Wine & Spirits, Inc.
P.O. Box 1602
Indianapolis, Indiana 46206-1602
Attention: J. Smoke Wallin
<PAGE>
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
(Insert assignee's legal name)
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE>
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global Note for
an interest in another Global Note, or of other Restricted Global Notes for an
interest in this Regulation S Temporary Global Note, have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized officer of
Principal Amount Principal Amount following such decrease Trustee or Note
Date of Exchange of this Global Note of this Global Note (or increase) Custodian
---------------- ------------------- ------------------- ------------- ---------
</TABLE>
<PAGE>
<PAGE>
FORM OF CERTIFICATE OF TRANSFER
National Wine & Spirits, Inc.
P.O. Box 1602
Indianapolis, Indiana 46206-1602
Attention: J. Smoke Wallin
Norwest Bank Minnesota, N.A.
Corporate Trust
Northwest Center
6th & Marquette
Minneapolis, Minnesota 55479
Attention: Curtis D. Schwegman
Re: 10 1/8% Senior Notes due 2009
Reference is hereby made to the Indenture, dated as of January 25, 1999 (the
"Indenture"), between National Wine & Spirits, Inc., as issuer (the "Company"),
and Norwest Bank Minnesota, N.A., as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial interest in
the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] Check if Transferee will take delivery of a beneficial interest in
the Temporary Regulation S Global Note, the Regulation S Global Note or a
Definitive Note pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. [ ] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act; or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof; or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act; or
(d) [ ]such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Indenture and (2) if
such Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $250,000, an Opinion of Counsel provided by the Transferor
or the Transferee (a copy of which the Transferor has attached to this
certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture. This certificate and the
statements contained herein are made for your benefit and the benefit of the
Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
<PAGE>
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) Regulation S Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
-----------
(ii) Regulation S Global Note (CUSIP ), or
------------
(iii) IAI Global Note (CUSIP ); or
------------
(iv) Unrestricted Global Note (CUSIP ); or
------------
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
<PAGE>
<PAGE>
FORM OF CERTIFICATE OF EXCHANGE
National Wine & Spirits, Inc.
P.O. Box 1602
Indianapolis, Indiana 46206-1602
Attention: J. Smoke Wallin
Norwest Bank Minnesota, N.A.
Corporate Trust
Northwest Center
6th & Marquette
Minneapolis, Minnesota 55479
Attention: Curtis D. Schwegman
Re: 10 1/8% Senior Notes due 2009
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of January 25, 1999 (the
"Indenture"), between National Wine & Spirits, Inc., as issuer (the "Company"),
and Norwest Bank Minnesota, N.A., as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ] Check if Exchange is from Restricted Definitive Note to beneficial
interest in an Unrestricted Global Note. In connection with the Owner's Exchange
of a Restricted Definitive Note for a beneficial interest in an Unrestricted
Global Note, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
___ 144A Global Note, ___ Regulation S Global Note, ___ IAI Global Note with an
equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
<PAGE>
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
National Wine & Spirits, Inc.
P.O. Box 1602
Indianapolis, Indiana 46206-1602
Attention: J. Smoke Wallin
Norwest Bank Minnesota, N.A.
Corporate Trust
Northwest Center
6th & Marquette
Minneapolis, Minnesota 55479
Attention: Curtis D. Schwegman
Re: 10 1/8% Senior Notes due 2009
Reference is hereby made to the Indenture, dated as of January 25, 1999 (the
"Indenture"), between National Wine & Spirits, Inc., as issuer (the "Company"),
and Norwest Bank Minnesota, N.A., as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture. In
connection with our proposed purchase of $____________ aggregate principal
amount of:
(a) a beneficial interest in a Global Note, or
(b) a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the United States Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been registered
under the Securities Act, and that the Notes and any interest therein may not be
offered or sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell the Notes or any interest therein, we will do so
only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule
144A under the Securities Act to a "qualified institutional buyer" (as defined
therein), (C) to an institutional "accredited investor" (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed letter substantially in the
form of this letter and, if such transfer is in respect of a principal amount of
Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in
form reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser that resales
thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act) and have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are each able to bear the economic risk of our
or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by us for
our own account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion. You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
[Insert Name of Accredited Investor]
By:
Name:
Title:
Dated:
<PAGE>
<PAGE>
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor Person
under the Indenture) has, jointly and severally, unconditionally guaranteed, to
the extent set forth in the Indenture and subject to the provisions in the
Indenture dated as of January 25, 1999 (the "Indenture") among National Wine &
Spirits, Inc., the Guarantors listed on Schedule I thereto and Norwest Bank
Minnesota, N.A., as trustee (the "Trustee"), (a) the due and punctual payment of
the principal of, premium, if any, and interest on the Notes (as defined in the
Indenture), whether at maturity, by acceleration, redemption or otherwise, the
due and punctual payment of interest on overdue principal and premium, and, to
the extent permitted by law, interest, and the due and punctual performance of
all other obligations of the Company to the Holders or the Trustee all in
accordance with the terms of the Indenture and (b) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. The obligations of the Guarantors to the Holders of
Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture
are expressly set forth in Article 10 of the Indenture and reference is hereby
made to the Indenture for the precise terms of the Subsidiary Guarantee. Each
Holder of a Note, by accepting the same, agrees to and shall be bound by such
provisions.
NATIONAL WINE & SPIRITS CORP.
By:
Name:
Title:
NWS, INC.
By:
Name:
Title:
NWS-ILLINOIS, LLC
By:
Name:
Title:
NWS MICHIGAN, INC.
By:
Name:
Title:
<PAGE>
<PAGE>
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of National Wine & Spirits, Inc. (or its permitted successor), an
Indiana corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and Norwest Bank Minnesota, N.A.,
as trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee an
indenture (the "Indenture"), dated as of January 25, 1999 providing for the
issuance of an aggregate principal amount of up to $100,000,000 of 10 1/8%
Senior Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to
execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Guaranteeing
Subsidiary and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and severally
Guarantee to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, the Notes or the obligations
of the Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly paid in full
when due, whether at maturity, by acceleration, redemption or otherwise, and
interest on the overdue principal of and interest on the Notes, if any, if
lawful, and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Notes or any
of such other obligations, that same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions hereof or thereof, the recovery of
any judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
(c) The following is hereby waived: diligence presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the Indenture, and the
Guaranteeing Subsidiary accepts all obligations of a Guarantor under the
Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise to return
to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other
similar official acting in relation to either the Company or the Guarantors, any
amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and the Trustee,
on the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any declaration of acceleration of such obligations as
provided in Article 6 of the Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
(i) Pursuant to Section 10.02 of the Indenture, after giving effect to any
maximum amount and any other contingent and fixed liabilities that are relevant
under any applicable Bankruptcy or fraudulent conveyance laws, and after giving
effect to any collections from, rights to receive contribution from or payments
made by or on behalf of any other Guarantor in respect of the obligations of
such other Guarantor under Article 10 of the Indenture, this new Subsidiary
Guarantee shall be limited to the maximum amount permissible such that the
obligations of such Guarantor under this Subsidiary Guarantee will not
constitute a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the
Subsidiary Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another corporation,
Person or entity whether or not affiliated with such Guarantor unless:
(i) subject to Sections 10.04 and 10.05 of the Indenture, the Person formed by
or surviving any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such Guarantor, pursuant
to a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Subsidiary Guarantee on the
terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no Default or Event of
Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary Guarantees so issued
shall in all respects have the same legal rank and benefit under the Indenture
as the Subsidiary Guarantees theretofore and thereafter issued in accordance
with the terms of the Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 and Section 10.05 of Article 10 of
the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained
in the Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor, or shall
prevent any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transaction) a
Restricted Subsidiary of the Company, or in the event that a Guarantor (other
than NWS-Indiana, NWS-LLC, NWS-Illinois or NWS-Michigan) is designated as an
Unrestricted Subsidiary in accordance with the terms of the Indenture, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably required in order
to evidence the release of any Guarantor from its obligations under its
Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under the Indenture
as provided in Article 10 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer,
employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as
such, shall have any liability for any obligations of the Company or any
Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and
shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental Indenture
or for or in respect of the recitals contained herein, all of which recitals are
made solely by the Guaranteeing Subsidiary and the Company.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed and attested, all as of the date first above written.
Dated: _______________, ____
[GUARANTEEING SUBSIDIARY]
By: _______________________________
Name:
Title:
NATIONAL WINE & SPIRITS, INC.
By: _______________________________
Name:
Title:
NATIONAL WINE & SPIRITS CORP.
By:_________________________________
Name:
Title:
NWS, INC.
By:_________________________________
Name:
Title:
NWS-ILLINOIS, LLC
By:_________________________________
Name:
Title:
NWS MICHIGAN, INC.
By:_________________________________
Name:
Title:
NORWEST BANK MINNESOTA, N.A.,
as Trustee
By:________________________________
Designated Signor
<PAGE>
<PAGE>
Schedule I
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of the Issue
Date:
National Wine & Spirits Corp.
NWS, Inc.
NWS-Illinois, LLC NWS Michigan, Inc.
Exhibit 4(b)
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of January 25, 1999
by and among
National Wine and Spirits, Inc.
National Wine & Spirits Corporation
NWS, Inc.
NWS-Illinois, LLC
NWS Michigan, Inc.
and
Donaldson, Lufkin & Jenrette Securities Corporation
Bear, Stearns & Co. Inc.
First Chicago Capital Markets, Inc.
<PAGE>
<PAGE>
This Registration Rights Agreement (this "Agreement") is made
and entered into as of January 25, 1999, by and among National Wine & Spirits,
Inc., an Indiana corporation (the "Company"), National Wine & Spirits
Corporation, NWS, Inc., NWS-Illinois, LLC, and NWS Michigan, Inc. (the
"Guarantors"), and Donaldson, Lufkin & Jenrette Securities Corporation, Bear,
Stearns & Co. Inc. and First Chicago Capital Markets, Inc. (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed
to purchase the Company's 10 1/8% Senior Subordinated Notes due 2009 (the
"Series A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement,
dated January 20, 1999, (the "Purchase Agreement"), by and among the Company,
the Guarantors and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Series A Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 9 of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them the Indenture,
dated the date hereof among the Company, the Guarantors and Norwest Bank
Minnesota, N.A., as Trustee, relating to the Series A Notes and the Series B
Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Certificated Securities: Definitive Notes, as defined in the
Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes tendered by
Holders thereof pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a
principal amount of Series B Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal amount
of Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, and pursuant to Regulation S
under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Series B Notes and related
Subsidiary Guarantees pursuant to an Exchange Offer or (b) the registration for
resale of Transfer Restricted Securities pursuant to the Shelf Registration
Statement, in each case, (i) that is filed pursuant to the provisions of this
Agreement and (ii) including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments) and all exhibits and
material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 10 1/8% Series B Senior Subordinated
Notes due 2009 to be issued pursuant to the Indenture: (i) in the Exchange Offer
or (ii) as contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Subsidiary Guarantees: As defined in the Indenture.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: (i) Each Series A Note and the
related Subsidiary Guarantees, until the earliest to occur of (a) the date on
which such Series A Note is exchanged in the Exchange Offer for a Series B Note
which is entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Series A Note has been disposed of in accordance with a Shelf
Registration Statement, or (c) the date on which such Series A Note is
distributed to the public pursuant to Rule 144 under the Act and (ii) each
Series B Note acquired by a Broker-Dealer for its own account as a result of
market making activities or other trading activities until the date on which
such Series B Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantors shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 60 days after the
Closing Date (such 60th day being the "Filing Deadline"), (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 150 days after the
Closing Date (such 150th day being the "Effectiveness Deadline"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Notes to be offered
in exchange for the Series A Notes that are Transfer Restricted Securities and
(ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange
Offer Series A Notes that such Broker-Dealer acquired for its own account as a
result of market making activities or other trading activities (other than
Series A Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 business days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Series B Notes and the Subsidiary
Guarantees shall be included in the Exchange Offer Registration Statement. The
Company and the Guarantors shall use their respective best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter (such 30th day being the "Consummation
Deadline").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a prospectus meeting
the requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the prospectus
contained in the Exchange Offer Registration Statement is available for sales of
Series B Notes by Broker-Dealers, the Company and the Guarantors agree to use
their respective best efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Section 6(a) and (c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the date on which the Exchange Offer is Consummated or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold pursuant thereto. The Company and
the Guarantors shall provide sufficient copies of the latest version of such
Prospectus to such Broker-Dealers, promptly upon request, and in no event later
than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 business days following
the Consummation of the Exchange Offer that (A) such Holder was prohibited by
law or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the Series B Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "Shelf Registration Statement")), relating to
all Transfer Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 60 days after the
Filing Deadline for the Shelf Registration Statement (such 60th day the
"Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company and the Guarantors shall use their respective best efforts
to keep any Shelf Registration Statement required by this Section 4(a)
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Sections 6(b) and (c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years (as extended pursuant to Section 6(c)(i)) following the Closing
Date, or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Shelf Registration Statement have been sold pursuant
thereto.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 2 business days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself declared effective within 5 business days of filing
such post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "Registration Default"), then the
Company and the Guarantors hereby jointly and severally agree to pay to each
Holder of Transfer Restricted Securities affected thereby liquidated damages in
an amount equal to $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 in principal
amount of Transfer Restricted Securities; provided that the Company and the
Guarantors shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company and the Guarantors to pay liquidated damages with respect to securities
shall survive until such time as such obligations with respect to such
securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use their respective best
efforts to effect such exchange and to permit the resale of Series B Notes by
Broker-Dealers that tendered in the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and (z) comply with
all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the Company
raises a substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Company and the Guarantors hereby
agree to seek a no-action letter or other favorable decision from the
Commission allowing the Company and the Guarantors to Consummate an
Exchange Offer for such Transfer Restricted Securities. The Company and
the Guarantors hereby agree to pursue the issuance of such a decision to
the Commission staff level. In connection with the foregoing, the Company
and the Guarantors hereby agree to take all such other actions as may be
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating
in telephonic conferences with the Commission staff, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer, a
written representation to the Company and the Guarantors (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an Affiliate of
the Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in,
a distribution of the Series B Notes to be issued in the Exchange Offer
and (C) it is acquiring the Series B Notes in its ordinary course of
business. Each Holder using the Exchange Offer to participate in a
distribution of the Series B Notes will be required to acknowledge and
agree that, if the resales are of Series B Notes obtained by such Holder
in exchange for Series A Notes acquired directly from the Company or an
Affiliate thereof, it (1) could not, under Commission policy as in effect
on the date of this Agreement, rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and similar no-action letters (including, if applicable, any
no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and, if applicable, any no-action letter obtained pursuant to
clause (i) above, (B) including a representation that neither the Company
nor any Guarantor has entered into any arrangement or understanding with
any Person to distribute the Series B Notes to be received in the Exchange
Offer and that, to the best of the Company's and each Guarantors'
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer and (C)
any other undertaking or representation required by the Commission as set
forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall
(i) comply with all the provisions of Section 6(c) below and
use their respective best efforts to effect such registration to permit the sale
of the Transfer Restricted Securities being sold in accordance with the intended
method or methods of distribution thereof (as indicated in the information
furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto
the Company and the Guarantors will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof; and
(ii) issue, upon the request of any Holder or purchaser of
Series A Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Notes and the Subsidiary Guarantees on the Shelf
Registration Statement for this purpose and issue the Series B Notes to the
purchaser(s) of securities subject to the Shelf Registration Statement in the
names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement,
as applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain
an untrue statement of material fact or omit to state any material fact
necessary to make the statements therein not misleading or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors
shall file promptly an appropriate amendment to such Registration
Statement curing such defect, and, if Commission review is required, use
their respective best efforts to cause such amendment to be declared
effective as soon as practicable; if at any time the Commission shall
issue any stop order suspending the effectiveness of any Registration
Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption
from qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company and the Guarantors shall use
their respective best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and
such names as the selling Holders may request at least two business days
prior to such sale of Transfer Restricted Securities;
(iv) use their respective best efforts to cause the disposition
of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Transfer Restricted
Securities; provided, however, that neither the Company nor any Guarantor
shall be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(v) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with The Depository Trust
Company;
(vi) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act); and
(vii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use its best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner.
(d) Additional provisions applicable to Shelf Registration Statements
and Certain Exchange Offer Prospectuses. In connection with each Shelf
Registration Statement, and each Exchange Offer Registration Statement if and to
the extent that an Initial Purchaser has notified the Company that it is a
holder of Series B Notes that are Transfer Restricted Securities (for so long as
such Series B Notes are Transfer Restricted Securities or for the period
provided in Section 3, whichever is shorter), the Company and the Guarantors
shall:
(i) advise each Holder promptly and, if requested by such
Holder, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B)
of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
under the Act or of the suspension by any state securities commission of
the qualification of the Transfer Restricted Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for any of
the preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) if any fact or event contemplated by Section 6(d)(i)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(iii) furnish to each Holder in connection with such exchange or
sale, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial
filing of such Registration Statement), which documents will be subject to
the review and comment of such Holders in connection with such sale, if
any, for a period of at least five business days, and the Company will not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which such Holders shall
reasonably object within five business days after the receipt thereof. A
Holder shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains an untrue statement of a
material fact or omits to state any material fact necessary to make the
statements therein not misleading or fails to comply with the applicable
requirements of the Act;
(iv) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Holders may reasonably
request;
(v) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the Company
and the Guarantors and cause the Company's and the Guarantors' officers,
directors and employees to supply all information reasonably requested by
any such Holder, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent
to the filing thereof and prior to its effectiveness;
(vi) if requested by any Holders in connection with such
exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(vii) furnish to each Holder in connection with such exchange or
sale without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(viii) deliver to each Holder without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the Company
and the Guarantors hereby consent to the use (in accordance with law) of
the Prospectus and any amendment or supplement thereto by each selling
Holder in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(ix) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated
by this Agreement as may be reasonably requested by any Holder in
connection with any sale or resale pursuant to any applicable Registration
Statement. In such connection, the Company and the Guarantors shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each Holder, upon Consummation of the Exchange Offer or
upon the effectiveness of the Shelf Registration Statement, as the
case may be:
(1) a certificate, dated such date, signed on behalf of
the Company and each Guarantor by (x) the President or any Vice
President and (y) a principal financial or accounting officer of
the Company and such Guarantor, confirming, as of the date
thereof, the matters set forth in Sections 6(y), 9(a) and 9(b)
of the Purchase Agreement and such other similar matters as such
Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors covering matters similar to those set
forth in paragraph (e) of Section 9 of the Purchase Agreement
and such other matters as such Holder may reasonably request,
and in any event including a statement to the effect that such
counsel has participated in conferences with officers and other
representatives of the Company and the Guarantors,
representatives of the independent public accountants for the
Company and the Guarantors and has considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing,
no facts came to such counsel's attention that caused such
counsel to believe that the applicable Registration Statement,
at the time such Registration Statement or any post-effective
amendment thereto became effective and, in the case of the
Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and, in
the case of the opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation, contained an
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made,
not misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules and
other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 9(h) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with the matters covered in clause (A) above and with any customary
conditions contained in any agreement entered into by the Company and
the Guarantors pursuant to this clause (ix);
(x) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that neither the
Company nor any Guarantor shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject; and
(xi) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of Section
13 or Section 15(d) of the Exchange Act.
(e) Restrictions on Holders. Each Holder's acquisition of a Transfer
Restricted Security constitutes such Holder's agreement that, upon receipt of
the notice referred to in Section 6(d)(i)(C) or any notice from the Company of
the existence of any fact of the kind described in Section 6(d)(i)(D) hereof (in
each case, a "Suspension Notice"), such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until (i) such Holder has received copies of the
supplemented or amended Prospectus contemplated by Section 6(d)(ii) hereof, or
(ii) such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus (in
each case, the "Recommencement Date"). Each Holder receiving a Suspension Notice
shall be required to either (i) destroy any Prospectuses, other than permanent
file copies, then in such Holder's possession which have been replaced by the
Company with more recently dated Prospectuses or (ii) deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such Holder's possession of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of the Suspension Notice. The
time period regarding the effectiveness of such Registration Statement set forth
in Section 3 or 4 hereof, as applicable, shall be extended by a number of days
equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the date of delivery of the Recommencement
Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including certificates for the
Series B Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company, the Guarantors and, with respect to Holders who are
entitled to the benefits of Section 6(b) in respect of any sale subject to such
provision, one counsel for the Holders of Transfer Restricted Securities which
shall be Latham & Watkins or such other counsel as may be selected by a majority
of such Holders; (v) all application and filing fees in connection with listing
the Series B Notes on a national securities exchange or automated quotation
system pursuant to the requirements hereof; and (vi) all fees and disbursements
of independent certified public accountants of the Company and the Guarantors
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are entitled to the benefits of Section 6(d) of this Agreement
and who are tendering Series A Notes into in the Exchange Offer and/or selling
or reselling Series A Notes or Series B Notes pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Series B Notes or registered Series A Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the Company
by any of the Holders; provided, however, that the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit of any
Holder who failed to deliver a Prospectus (as then amended or supplemented,
provided by the Company to the Holder in the requisite quantity on a timely
basis to permit proper delivery on or prior to such Holder's agreement to sell
Notes) to the person asserting any losses, claims, damages, liabilities or
judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if such
material misstatement or omission or alleged material misstatement or omission
was cured in such Prospectus and such Prospectus was required by law to be
delivered at or prior to such sale.
(b) Each Holder of Transfer Restricted agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, or the Guarantors to the same extent as the foregoing indemnity
from the Company and the Guarantors set forth in section (a) above, but only
with reference to information relating to such Holder furnished in writing to
the Company by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company and Guarantors, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Guarantors, on the one hand, and the Holders, on the other hand, from their
sale of Transfer Restricted Securities or (ii) if the allocation provided by
clause 8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Guarantors, on
the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and of the Holder, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or such Guarantor, on the one hand, or by
the Holder, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and judgments referred to above shall be deemed to
include, subject to the limitations set forth in the second paragraph of Section
8(a), any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company, the Guarantors and each Holder agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any matter,
including any action that could have given rise to such losses, claims, damages,
liabilities or judgments. Notwithstanding the provisions of this Section 8, no
Holder, its directors, its officers or any Person, if any, who controls such
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total received by such Holder with respect to the
sale of Transfer Restricted Securities pursuant to a Registration Statement
exceeds (i) the amount paid by such Holder for such Transfer Restricted
Securities and (ii) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(d) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each Holder hereunder and not joint.
SECTION 9. RULE 144A and RULE 144
The Company and each Guarantor agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding and during any period
in which the Company or such Guarantor (i) is not subject to Section 13 or 15(d)
of the Exchange Act, to make available, upon request of any Holder, to such
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to
Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby
in a timely manner in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree
that any failure by the Company and/or the Guarantors to comply with their
respective obligations under Sections 3 and 4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders for which there is
no adequate remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantor's obligations under
Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
National Wine & Spirits, Inc.
P. O. Box 1602
Indianapolis, IN 46206-1602
Telecopier No.: (317) 658-8810
Attention: James LaCrosse
All such notices and communications shall be deemed to have been
duly given at the time delivered by hand, when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
NATIONAL WINE & SPIRITS, INC.
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman, President and Chief Executive
Officer
NATIONAL WINE & SPIRITS CORPORATION
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS, INC.
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS-ILLINOIS, LLC
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS MICHIGAN, INC.
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
<PAGE>
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
On behalf of the Initial Purchasers
By:/s/ DAVID COSTANZO
Name: David Costanzo
Title: Vice President
Exhibit 4(c)
[Face of Note]
CUSIP/CINS ____________
10 1/8% Series B Senior Notes due 2009
No. ___ $____________
NATIONAL WINE & SPIRITS, INC.
promises to pay to Cede & Co. or its registered assigns
the principal sum of
Dollars on January 15, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: December 31 and June 30
Dated: January 25, 1999
NATIONAL WINE & SPIRITS, INC.
By:
Name:
Title:
This is one of the Notes referred to in the within-mentioned Indenture:
NORWEST BANK MINNESOTA, N.A.,
as Trustee
By: __________________________________
Designated Signor
<PAGE>
<PAGE>
[Back of Note]
10 1/8% Series B Senior Notes due 2009
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. National Wine & Spirits, Inc., an Indiana corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 10
1/8% per annum from January 25, 1999 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages
semi-annually in arrears on January 15 and July 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be July 15, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the December 31 or June 30 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium and Liquidated Damages, if any, and interest
at the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to principal of and interest, premium and Liquidated Damages on,
all Global Notes and all other Notes the Holders of which shall have provided
wire transfer instructions to the Company or the Paying Agent. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota, N.A., the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
January 25, 1999 ("Indenture") between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $200 million in aggregate
principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company
shall not have the option to redeem the Notes prior to January 15, 2004.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on January
15 of the years indicated below:
<TABLE>
<CAPTION>
<S> <C>
Year Percentage
2004......................................... 105.0625%
2005......................................... 103.3750%
2006......................................... 101.6875%
2007 and thereafter.......................... 100.0000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time prior to January 15, 2002, the Company may redeem up to 33 1/3% of
the aggregate principal amount of Notes originally issued under the Indenture at
a redemption price equal to 110.125% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of one or more public offerings of
common stock of the Company; provided that at least 66 2/3% in aggregate
principal amount of the Notes remain outstanding immediately after the
occurrence of such redemption and that such redemption occurs within 45 days of
the date of the closing of each such initial public offering.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company
shall not be required to make mandatory redemption payments with respect to the
Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within five
days of each date on which the aggregate amount of Excess Proceeds exceeds $10
million, the Company shall commence an offer to all Holders of Notes (as "Asset
Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum
principal amount of Notes and any other pari passu Indebtedness including a
comparable asset sale covenant that may be purchased out of the Excess Proceeds
at an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes and such other pari passu Indebtedness tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use such deficiency
for general corporate purposes. If the aggregate principal amount of Notes and
such other pari passu Indebtedness surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Notes and such other pari passu Indebtedness
shall be purchased on a pro rata basis. Holders of Notes that are the subject of
an offer to purchase will receive an Asset Sale Offer from the Company prior to
any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes voting as a single class, and any existing default or
compliance with any provision of the Indenture, the Subsidiary Guarantees or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes voting as a single class. Without the
consent of any Holder of a Note, the Indenture, the Subsidiary Guarantees or the
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest or Liquidated Damages on the Notes;
(ii) default in payment when due of principal of or premium, if any, on the
Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise, (iii) failure
by the Company to comply with Section 4.07, 4.09, 4.15 or 5.01 of the Indenture;
(iv) failure by the Company for 60 days after notice to the Company by the
Trustee or the Holders of at least 25% in principal amount of the Notes then
outstanding voting as a single class to comply with certain other agreements in
the Indenture, the Notes; (v) default under certain other agreements relating to
Indebtedness of the Company which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness or (b) results in
the acceleration of such Indebtedness prior to its express maturity; (vi)
certain final judgments for the payment of money that remain undischarged for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Material Subsidiaries; and (viii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor or any Person acting on its
behalf shall deny or disaffirm its obligations under such Guarantor's Subsidiary
Guarantee. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon such declaration,
the Notes shall become due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes will become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or
stockholder, of the Company, as such, shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the A/B Exchange Registration
Rights Agreement dated as of January 25, 1999, between the Company and the
parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Notes and the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon. The Company will furnish to any Holder upon written
request and without charge a copy of the Indenture and/or the Registration
Rights Agreement. Requests may be made to:
National Wine & Spirits, Inc.
P.O. Box 1602
Indianapolis, Indiana 46206-1602
Attention: J. Smoke Wallin
<PAGE>
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
(Insert assignee's legal name)
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
_____ Section 4.10 _____ Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE>
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in another
Global Note or for a Definitive Note, or exchanges of a part of another Global
Note or Definitive Note for an interest in this Global Note, have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized officer of
Principal Amount Principal Amount following such decrease Trustee or Note
Date of Exchange of this Global Note of this Global Note (or increase) Custodian
---------------- ------------------- ------------------- ------------- ---------
</TABLE>
Exhibit 4(d)
SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any successor Person
under the Indenture) has, jointly and severally, unconditionally guaranteed, to
the extent set forth in the Indenture and subject to the provisions in the
Indenture dated as of January 25, 1999 (the "Indenture") among National Wine &
Spirits, Inc., the Guarantors listed on Schedule I thereto and Norwest Bank
Minnesota, N.A., as trustee (the "Trustee"), (a) the due and punctual payment of
the principal of, premium, if any, and interest on the Notes (as defined in the
Indenture), whether at maturity, by acceleration, redemption or otherwise, the
due and punctual payment of interest on overdue principal and premium, and, to
the extent permitted by law, interest, and the due and punctual performance of
all other obligations of the Company to the Holders or the Trustee all in
accordance with the terms of the Indenture and (b) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. The obligations of the Guarantors to the Holders of
Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture
are expressly set forth in Article 10 of the Indenture and reference is hereby
made to the Indenture for the precise terms of the Subsidiary Guarantee. Each
Holder of a Note, by accepting the same, agrees to and shall be bound by such
provisions.
NATIONAL WINE & SPIRITS CORP.
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS, INC.
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS-ILLINOIS, LLC
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS MICHIGAN, INC.
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
Exhibit 10(a)
NATIONAL WINE & SPIRITS, INC.
NATIONAL WINE & SPIRITS CORPORATION
NWS, INC.
NWS-ILLINOIS, LLC
NWS MICHIGAN, INC.
$110,000,000
10-1/8% Senior Notes Due 2009
Purchase Agreement
January 20, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE>
<PAGE>
$110,000,000
10-1/8% SENIOR NOTES DUE 2009
OF NATIONAL WINE & SPIRITS, INC.
PURCHASE AGREEMENT
January 20, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
c/o
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
National Wine & Spirits, Inc., an Indiana corporation (the "Company"), proposes
to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Bear, Stearns & Co. Inc. and First Chicago Capital Markets, Inc. (each,
an "Initial Purchaser," and, collectively, the "Initial Purchasers") an
aggregate of $110,000,000 in principal amount of its 10 1/8% Senior Notes due
2009 (the "Series A Notes"), subject to the terms and conditions set forth
herein. The Series A Notes are to be issued pursuant to the provisions of an
indenture (the "Indenture"), to be dated as of the Closing Date (as defined
below), among the Company, the Guarantors (as defined below) and Norwest Bank
Minnesota, N.A., as trustee (the "Trustee"). The Series A Notes and the Series B
Notes (as defined below) issuable in exchange therefor are collectively referred
to herein as the "Notes." The Notes will be guaranteed (the "Subsidiary
Guarantees") by each of the entities listed on Schedule A hereto (each, a
"Guarantor" and collectively the "Guarantors"). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Indenture.
1. Offering Memorandum. The Series A Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Act"). The Company and the Guarantors have prepared a preliminary offering
memorandum, dated January 6, 1999 (the "Preliminary Offering Memorandum") and a
final offering memorandum, dated January 20, 1999 (the "Offering Memorandum"),
relating to the Series A Notes and the Subsidiary Guarantees. Upon original
issuance thereof, and until such time as the same is no longer required pursuant
to the Indenture, the Series A Notes (and all securities issued in exchange
therefor, in substitution thereof or upon conversion thereof) shall bear the
following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE ACT) (A "QIB"), (B) IT HAS
ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT) (AN
"IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE)
AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE
OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF
THE FOREGOING."
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, the principal amounts
of Series A Notes opposite the name of such Initial Purchaser on Schedule B
hereto at a purchase price equal to 97.20% of the principal amount thereof (the
"Purchase Price").
3. Terms of Offering. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBs") and (ii) persons permitted to purchase the
Series A Notes in offshore transactions in reliance upon Regulation S under the
Act (each, a "Regulation S Purchaser") (such persons specified in clauses (i)
and (ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company and the
Guarantors will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to the Company's 10 1/8% Series B Senior Notes due 2009 (the "Series B Notes"),
to be offered in exchange for the Series A Notes (such offer to exchange being
referred to as the "Exchange Offer") and the Subsidiary Guarantees thereof and
(ii) a shelf registration statement pursuant to Rule 415 under the Act (the
"Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, the "Registration Statements") relating to the resale by
certain holders of the Series A Notes and to use their best efforts to cause
such Registration Statements to be declared effective within 150 days after the
Closing Date and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the Indenture,
the Notes, the Subsidiary Guarantees and the Registration Rights Agreement are
hereinafter sometimes referred to collectively as the "Operative Documents."
Concurrently with the Offering of the Notes, the Company will
restructure its operations as described in the Offering Memorandum under the
heading "Reorganization of the Company" (the "Reorganization") and enter into
the New Credit Facility (as defined in the Offering Memorandum).
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price in immediately available
funds for, the Series A Notes shall be made at the offices of Latham & Watkins
in Chicago, Illinois or such other location as may be mutually acceptable. Such
delivery and payment shall be made at 10:00 a.m. Chicago time, on January 25,
1999 or at such other time on the same date or such other date as shall be
agreed upon by the Initial Purchasers and the Company in writing. The time and
date of such delivery and the payment for the Series A Notes are herein called
the "Closing Date."
(b) One or more of the Series A Notes in definitive global form, registered
in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Series A Notes (collectively, the "Global Note"), shall be
delivered by the Company to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by the Company
against payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds to the order of the Company. The Global Note shall be
made available to the Initial Purchasers for inspection not later than 9:30
a.m., New York City time, on the business day immediately preceding the Closing
Date.
5. Agreements of the Company and the Guarantors. Each of the
Company and the Guarantors hereby agrees with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires any additions to
or changes in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein not misleading. The Company and the
Guarantors shall use their best efforts to prevent the issuance of any stop
order or order suspending the qualification or exemption of any Series A Notes
under any state securities or Blue Sky laws and, if at any time any state
securities commission or other federal or state regulatory authority shall issue
an order suspending the qualification or exemption of any Series A Notes under
any state securities or Blue Sky laws, the Company and the Guarantors shall use
their best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by the
Initial Purchasers to the Company as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or supplements
thereto, as the Initial Purchasers may reasonably request for the time period
specified in Section 5(c). Subject to the Initial Purchaser's compliance with
its representations and warranties and agreements set forth in Section 7 hereof,
the Company consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers and in connection with
market-making activities of the Initial Purchasers for so long as any Series A
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchasers shall not previously have
been advised or to which the Initial Purchasers shall reasonably object after
being so advised and (ii) to prepare promptly upon the Initial Purchaser's
reasonable request, any amendment or supplement to the Offering Memorandum which
may be necessary or advisable in connection with such Exempt Resales or such
market-making activities.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchasers, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchasers, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchasers and such other
persons as the Initial Purchasers may designate such number of copies thereof as
the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the registration or qualification of the
Series A Notes for offer and sale to the Initial Purchasers and pursuant to
Exempt Resales under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchasers may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that neither
the Company nor any Guarantor shall be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process or taxation other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make generally
available as soon as practicable after the end of each fiscal year to the record
holders of the Notes a financial report of the Company and its subsidiaries on a
consolidated basis, all such financial reports to include a consolidated balance
sheet, a consolidated statement of operations, a consolidated statement of cash
flows and a consolidated statement of shareholders' equity as of the end of and
for such fiscal year, together with comparable information as of the end of and
for the preceding year, certified by the Company's independent public
accountants and (ii) to mail and make generally available as soon as practicable
after the end of each quarterly period (except for the last quarterly period of
each fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows as of the end
of and for such period, and for the period from the beginning of such year to
the close of such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(g) So long as the Notes are outstanding, to furnish to the Initial
Purchasers as soon as available copies of all reports or other communications
furnished by the Company or any of the Guarantors to its security holders or
furnished to or filed with the Commission or any national securities exchange on
which any class of securities of the Company or any of the Guarantors is listed
and such other publicly available information concerning the Company and/or its
subsidiaries as the Initial Purchasers may reasonably request.
(h) So long as any of the Series A Notes remain outstanding and during any
period in which the Company and the Guarantors are not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
to make available to any holder of Series A Notes in connection with any sale
thereof and any prospective purchaser of such Series A Notes from such holder,
the information ("Rule 144A Information") required by Rule 144A(d)(4) under the
Act.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company and the
Guarantors under this Agreement, including: (i) the fees, disbursements and
expenses of counsel to the Company and the Guarantors and accountants of the
Company and the Guarantors in connection with the sale and delivery of the
Series A Notes to the Initial Purchasers and pursuant to Exempt Resales, and all
other fees and expenses in connection with the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
all amendments and supplements to any of the foregoing (including financial
statements), including the mailing and delivering of copies thereof to the
Initial Purchasers and persons designated by them in the quantities specified
herein, (but excluding any legal fees and expenses of Initial Purchasers'
counsel incurred by such counsel in connection therewith) (ii) all costs and
expenses related to the transfer and delivery of the Series A Notes to the
Initial Purchasers and pursuant to Exempt Resales, including any transfer or
other taxes payable thereon, (iii) all costs of printing or producing this
Agreement, the other Operative Documents and any other agreements or documents
in connection with the offering, purchase, sale or delivery of the Series A
Notes, (iv) all expenses in connection with the registration or qualification of
the Series A Notes and the Subsidiary Guarantees for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Initial Purchasers, not to exceed $10,000 in connection with such
registration or qualification and memoranda relating thereto), (v) the cost of
printing certificates representing the Series A Notes and the Subsidiary
Guarantees, (vi) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in the National Association of
Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL
("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's counsel
in connection with the Indenture, the Notes and the Subsidiary Guarantees,
(viii) the costs and charges of any transfer agent, registrar and/or depositary
(including DTC), (ix) any fees charged by rating agencies for the rating of the
Notes, (x) all costs and expenses of the Exchange Offer and any Registration
Statement, as set forth in the Registration Rights Agreement, (xi) all fees and
expenses in connection with the Escrow Agreement and Escrow Account, and (xii)
and all other costs and expenses incident to the performance of the obligations
of the Company and the Guarantors hereunder for which provision is not otherwise
made in this Section.
(j) To use its best efforts to effect the inclusion of the Series A Notes
in PORTAL and to maintain the listing of the Series A Notes on PORTAL for so
long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the Notes,
and to comply with all of its agreements set forth in the representation letters
of the Company and the Guarantors to DTC relating to the approval of the Notes
by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or otherwise
transfer or dispose of any debt securities of the Company or any Guarantor or
any warrants, rights or options to purchase or otherwise acquire debt securities
of the Company or any Guarantor substantially similar to the Notes and the
Subsidiary Guarantees (other than (i) the Notes and the Subsidiary Guarantees
and (ii) commercial paper issued in the ordinary course of business), without
the prior written consent of the Initial Purchaser.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts to claim,
the benefit of any usury laws against the holders of any Notes and the related
Subsidiary Guarantees.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes and guarantees thereof by the Guarantors registered
pursuant to the Act to be offered in exchange for the Series A Notes and the
Subsidiary Guarantees and to comply with all applicable federal and state
securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the Registration
Rights Agreement.
(q) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Series A Notes and the Subsidiary Guarantees.
6. Representations, Warranties and Agreements of the Company
and the Guarantors. As of the date hereof, each of the Company and the
Guarantors represents and warrants to, and agrees with, the Initial Purchasers,
jointly and severally, that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do not,
and any supplement or amendment to them will not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of the Company, the Guarantors and their respective subsidiaries,
has been duly incorporated or formed, as applicable, is validly existing as a
corporation or limited liability company, as applicable, under the laws of its
jurisdiction of incorporation of formation and has the requisite power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified, in good standing and authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company, the Guarantors and their respective subsidiaries, taken as a whole (a
"Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable.
(d) National Wine & Spirits Corporation, NWS, Inc., NWS Michigan, Inc. and
NWS-Illinois, LLC are the only subsidiaries, direct or indirect, of the Company.
All of the outstanding shares of capital stock of National Wine & Spirits
Corporation, NWS, Inc. and NWS Michigan, Inc. and all of the membership
interests of NWS-Illinois, LLC have been duly authorized and validly issued and
are fully paid and non-assessable, and all of such shares and membership
interests (except the membership interests of NWS-Illinois, LLC owned by Martin
H. Bart, are, or will be on or prior to the Closing Date, owned by the Company,
directly or indirectly through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any nature
(each, a "Lien"). None of the Company or its subsidiaries has any equity
investment in any other entity (except a 50% interest held by NWS, Inc. in U.S.
Beverage, LLC and a 25% interest held by the Company in Commonwealth Wine &
Spirits, LLC as described in the Offering Memorandum).
(e) This Agreement has been duly authorized, executed and delivered by the
Company and each of the Guarantors.
(f) The Indenture and the New Credit Facility have been duly authorized by
the Company and each of the Guarantors. On the Closing Date, the Indenture and
the New Credit Facility will have been validly executed and delivered by the
Company and each of the Guarantors. When the Indenture has been duly executed
and delivered by the Company and each of the Guarantors, the Indenture will be a
valid and binding agreement of the Company and each Guarantor, enforceable
against the Company and each Guarantor in accordance with its terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Indenture will conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended (the "TIA" or "Trust Indenture Act"), and the
rules and regulations of the Commission applicable to an indenture which is
qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the Closing Date,
will have been validly executed and delivered by the Company. When the Series A
Notes have been issued, executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(h) On the Closing Date, the Series B Notes will have been duly authorized
by the Company. When the Series B Notes are issued, executed and authenticated
in accordance with the terms of the Exchange Offer and the Indenture, the Series
B Notes will be entitled to the benefits of the Indenture and will be the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(i) The Subsidiary Guarantee to be endorsed on the Series A Notes by each
Guarantor has been duly authorized by each such Guarantor. On the Closing Date,
the Subsidiary Guarantee will have been duly executed and delivered by each such
Guarantor. When the Series A Notes have been issued, executed and authenticated
in accordance with the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Subsidiary
Guarantee of each Guarantor endorsed thereon will be entitled to the benefits of
the Indenture and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability.
(j) The Subsidiary Guarantee to be endorsed on the Series B Notes by each
Guarantor has been duly authorized by each such Guarantor. When issued, the
Subsidiary Guarantee to be endorsed on the Series B Notes will have been duly
executed and delivered by each such Guarantor. When the Series B Notes have been
issued, executed and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, the Subsidiary Guarantee of each Guarantor endorsed
thereon will be entitled to the benefits of the Indenture and will be the valid
and binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(k) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors. On the Closing Date, the Registration Rights
Agreement will have been duly executed and delivered by the Company and each of
the Guarantors. When the Registration Rights Agreement has been duly executed
and delivered, the Registration Rights Agreement will be a valid and binding
agreement of the Company and each of the Guarantors, enforceable against the
Company and each Guarantor in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(l) Each of the Operative Documents, when executed and delivered, will
conform in all material respects to the descriptions thereof contained in the
Offering Memorandum.
(m) None of the Company or its subsidiaries is in violation of its
respective articles of incorporation, articles of organization, by-laws or
operating agreement, as applicable, or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound.
(n) The execution, delivery and performance of this Agreement, the New
Credit Facility and the other Operative Documents by the Company and each of the
Guarantors, compliance by the Company and each of the Guarantors with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby, including the Reorganization, will not (i)
require any consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states), (ii) conflict with
or constitute a breach of any of the terms or provisions of, or a default under,
the articles of incorporation, articles of organization, by-laws or operating
agreement of the Company or any of the Guarantors or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of the Guarantors is a party or by which the Company or any of the Guarantors or
their respective property is bound, except as would not singly or in the
aggregate have a Material Adverse Effect (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over the Company, any of
the Guarantors or their respective property, (iv) result in the imposition or
creation of (or the obligation to create or impose) a Lien under, any agreement
or instrument to which the Company or any of the Guarantors is a party or by
which the Company or any of the Guarantors or their respective property is
bound, or (v) result in the termination, suspension or revocation of any
Authorization (as defined below) of the Company or any of the Guarantors or
result in any other impairment of the rights of the holder of any such
Authorization.
(o) There are no legal or governmental proceedings pending or threatened to
which the Company or any of the Guarantors, is or could be a party or to which
any of their respective property is or could be subject, which might result,
singly or in the aggregate, in a Material Adverse Effect.
(p) None of the Company or any of the Guarantors has violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), any provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") any law or
regulation of the Federal Bureau of Alcohol, Tobacco and Firearms or of any
state or local government with respect to the purchase, sale or distribution of
alcohol-based beverages ("Alcohol Laws") or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect.
(q) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) or Alcohol Laws which would, singly or in the
aggregate, have a Material Adverse Effect.
(r) Each of the Company and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"Authorization") and has made all filings with and notices to all governmental
or regulatory authorities and self-regulatory organizations and all courts and
other tribunals, including without limitation, under any applicable Alcohol
Laws, as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to have any
such Authorization or to make any such filing or notice would not, singly or in
the aggregate, have a Material Adverse Effect. Each such Authorization is valid
and in full force and effect and each of the Company and the Guarantors is in
compliance with all the terms and conditions thereof and with the rules and
regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
after notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of the holder
of any such Authorization; and such Authorizations contain no restrictions that
are burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction would not,
singly or in the aggregate, have a Material Adverse Effect.
(s) The accountants, the firms of Katz, Sapper & Miller and Ernst & Young
LLP, that have certified the financial statements and supporting schedules
included in the Preliminary Offering Memorandum and the Offering Memorandum are
independent public accountants with respect to the Company and the Guarantors,
as required by the Act and the Exchange Act. The historical financial
statements, together with related schedules and notes, set forth in the
Preliminary Offering Memorandum and the Offering Memorandum comply as to form in
all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
(t) The historical financial statements, together with related schedules
and notes forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly the combined financial position, results of
operations and changes in financial position of the Company and its consolidated
subsidiaries on the basis stated in the Offering Memorandum at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company and its subsidiaries.
(u) Neither the Company nor any of the Guarantors is or, after giving
effect to the offering and sale of the Series A Notes and the application of the
net proceeds thereof as described in the Offering Memorandum, will be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
(v) There are no contracts, agreements or understandings between the
Company or any Guarantor and any person granting such person the right to
require the Company or such Guarantor to file a registration statement under the
Act with respect to any securities of the Company or such Guarantor or to
require the Company or such Guarantor to include such securities with the Notes
and Subsidiary Guarantees registered pursuant to any Registration Statement.
(w) Neither the Company, any of the Guarantors nor any agent thereof acting
on the behalf of them has taken, and none of them will take, any action that
might cause this Agreement or the issuance or sale of the Series A Notes to
violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
(x) No "nationally recognized statistical rating organization" as such term
is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or has
informed the Company or any Guarantor that it is considering imposing) any
condition (financial or otherwise) on the Company's or any Guarantor's retaining
any rating assigned to the Company or any Guarantor, any securities of the
Company or any Guarantor or (ii) has indicated to the Company or any Guarantor
that it is considering (a) the downgrading, suspension, or withdrawal of, or any
review for a possible change that does not indicate the direction of the
possible change in, any rating so assigned or (b) any change in the outlook for
any rating of the Company, any Guarantor or any securities of the Company or any
Guarantor.
(y) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and the Guarantors, taken as a whole, (ii) there has not been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the Company or
any of the Guarantors and (iii) neither the Company nor any of the Guarantors
has incurred any material liability or obligation, direct or contingent.
(z) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of their respective dates, contains all the information specified
in, and meeting the requirements of, Rule 144A(d)(4) under the Act.
(aa) When the Series A Notes and the Subsidiary Guarantees are issued
and delivered pursuant to this Agreement, neither the Series A Notes nor
the Subsidiary Guarantees will be of the same class (within the meaning of
Rule 144A under the Act) as any security of the Company or the Guarantors
that is listed on a national securities exchange registered under Section 6
of the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(bb) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company, any of the
Guarantors or any of their respective representatives (other than the
Initial Purchaser, as to whom the Company and the Guarantors make no
representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Notes have
been issued and sold by the Company within the six-month period immediately
prior to the date hereof.
(cc) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(dd) None of the Company, any of the Guarantors nor any of their respective
affiliates or any person acting on its or their behalf (other than the Initial
Purchaser, as to whom the Company and the Guarantors make no representation) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Act ("Regulation S") with respect to the Series A Notes
or the Subsidiary Guarantees.
(ee) The Company, the Guarantors and their respective affiliates and
all persons acting on their behalf (other than the Initial Purchasers, as
to whom the Company and the Guarantors make no representation) have
complied with and will comply with the offering restrictions requirements
of Regulation S in connection with the offering of the Series A Notes
outside the United States and, in connection therewith, the Offering
Memorandum will contain the disclosure required by Rule 902(h).
(ff) The Series A Notes sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the 40-day
restricted period referred to in Rule 902(c)(3) of the Act and only upon
certification of beneficial ownership of such Series A Notes by non-U.S.
persons or U.S. Persons who purchased such Series A Notes in transactions
that were exempt from the registration requirements of the Act.
(gg) The Series A Notes offered and sold in reliance on Regulation S
have been and will be offered and sold only in offshore transactions.
(hh) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
(ii) No registration under the Act of the Series A Notes or the
Subsidiary Guarantees is required for the sale of the Series A Notes and
the Subsidiary Guarantees to the Initial Purchasers as contemplated hereby
or for the Exempt Resales assuming (i) the Initial Purchaser's
representations and warranties set forth in Section 7 hereof are true and
(ii) the Initial Purchasers have complied with the agreements set forth in
Section 7 hereof.
(jj) Each certificate signed by any officer of the Company or any
Guarantor and delivered to the Initial Purchasers or counsel for the
Initial Purchasers shall be deemed to be a representation and warranty by
the Company or such Guarantor to the Initial Purchasers as to the matters
covered thereby.
(kk) All indebtedness of the Company and the Guarantors that will be
repaid with the proceeds of the issuance and sale of the Series A Notes was
incurred, and the indebtedness represented by the Series A Notes is being
incurred, for proper purposes and in good faith and each of the Company and
the Guarantors was, at the time of the incurrence of such indebtedness that
will be repaid with the proceeds of the issuance and sale of the Series A
Notes, and will be on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Series A Notes)
solvent, and had at the time of the incurrence of such indebtedness that
will be repaid with the proceeds of the issuance and sale of the Series A
Notes and will have on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Series A Notes)
sufficient capital for carrying on their respective business and were, at
the time of the incurrence of such indebtedness that will be repaid with
the proceeds of the issuance and sale of the Series A Notes, and will be on
the Closing Date (after giving effect to the application of the proceeds
from the issuance of the Series A Notes) able to pay their respective debts
as they mature. The Company acknowledges that the Initial Purchasers and,
for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 9 hereof, counsel to the Company and the Guarantors and
counsel to the Initial Purchasers will rely upon the accuracy and truth of
the foregoing representations and hereby consents to such reliance.
7. Initial Purchaser's Representations and Warranties. Each of the Initial
Purchasers, severally and not jointly, represents and warrants to the Company
and the Guarantors, and agrees that:
(a) Such Initial Purchaser is a QIB with such knowledge and experience
in financial and business matters as is necessary in order to evaluate the
merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or
any other applicable jurisdiction and (B) will be reoffering and reselling
the Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A, and (y) in
offshore transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act)
has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Series A Notes
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A
Notes only from, and will offer to sell the Series A Notes only to,
Eligible Purchasers. Each Initial Purchaser further agrees that it will
offer to sell the Series A Notes only to, and will solicit offers to buy
the Series A Notes only from (A) Eligible Purchasers that the Initial
Purchaser reasonably believes are QIBs, and (B) Regulation S Purchasers, in
each case, that agree that (x) the Series A Notes purchased by them may be
resold, pledged or otherwise transferred within the time period referred to
under Rule 144(k) (taking into account the provisions of Rule 144(d) under
the Act, if applicable) under the Act, as in effect on the date of the
transfer of such Series A Notes, only (I) to the Company or any of its
subsidiaries, (II) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Act, (III) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the requirements
of Rule 904 of the Act, (IV) in a transaction meeting the requirements of
Rule 144 under the Act, (V) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel
acceptable to the Company) or (VI) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities
laws of any state of the United States or any other applicable jurisdiction
and (y) they will deliver to each person to whom such Series A Notes or an
interest therein is transferred a notice substantially to the effect of the
foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed
selling efforts within the meaning of Regulation S with respect to the
Series A Notes or the Subsidiary Guarantees.
(f) The Series A Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered
and sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan
or scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not offered or sold and
will not offer or sell the Series A Notes in the United States or to, or
for the benefit or account of, a U.S. Person (other than a distributor), in
each case, as defined in Rule 902 under the Act (i) as part of its
distribution at any time and (ii) otherwise until 40 days after the later
of the commencement of the offering of the Series A Notes pursuant hereto
and the Closing Date, other than in accordance with Regulation S of the Act
or another exemption from the registration requirements of the Act. Such
Initial Purchaser agrees that, during such 40-day restricted period, it
will not cause any advertisement with respect to the Series A Notes
(including any "tombstone" advertisement) to be published in any newspaper
or periodical or posted in any public place and will not issue any circular
relating to the Series A Notes, except such advertisements as permitted by
and include the statements required by Regulation S.
(i) Such Initial Purchaser agrees that, at or prior to confirmation of
a sale of Series A Notes by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the 40-day
restricted period referred to in Rule 903(c)(3) under the Act, it will send
to such distributor, dealer or person receiving a selling concession, fee
or other remuneration a confirmation or notice to substantially the
following effect:
"The Series A Notes covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered and sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the Offering and the
Closing Date, except in either case in accordance with Regulation S under the
Securities Act (or Rule 144A or to accredited institutional investors under Rule
501(a)(1), (2), (3) or (7) under the Act in transactions that are exempt from
the registration requirements of the Securities Act), and in connection with any
subsequent sale by you of the Series A Notes covered hereby in reliance on
Regulation S during the period referred to above to any distributor, dealer or
person receiving a selling concession, fee or other remuneration, you must
deliver a notice to substantially the foregoing effect.
Terms used above have the meanings assigned to them in Regulation S."
Such Initial Purchaser agrees that the Series A Notes offered and sold
in reliance on Regulation S will be represented upon issuance by a global
security that may not be exchanged for definitive securities until the
expiration of the 40-day restricted period referred to in Rule 903(c)(3) of the
Act and only upon certification of beneficial ownership of such Series A Notes
by non-U.S. persons or U.S. persons who purchased such Series A Notes in
transactions that were exempt from the registration requirements of the Act.
Such Initial Purchaser acknowledges that the Company and the Guarantors
and, for purposes of the opinions to be delivered to each Initial Purchaser
pursuant to Section 9 hereof, counsel to the Company and the Guarantors and
counsel to the Initial Purchasers will rely upon the accuracy and truth of the
foregoing representations and such Initial Purchaser hereby consents to such
reliance.
8. Indemnification.
(a) The Company and each Guarantor agree, jointly and severally, to
indemnify and hold harmless the Initial Purchasers, their directors, their
officers and each person, if any, who controls such Initial Purchasers
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages, liabilities and
judgments (including, without limitation, any legal or other expenses
incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Offering
Memorandum (or any amendment or supplement thereto), the Preliminary
Offering Memorandum or any Rule 144A Information provided by the Company or
any Guarantor to any holder or prospective purchaser of Series A Notes
pursuant to Section 5(h) or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Initial Purchasers furnished in writing to the
Company by such Initial Purchasers; provided, however, that the foregoing
indemnity agreement with respect to any Preliminary Offering Memorandum
shall not inure to the benefit of any Initial Purchaser who failed to
deliver a Final Offering Memorandum, as then amended or supplemented, (so
long as the Final Offering Memorandum and any amendment or supplement
thereto was provided by the Company to the several Initial Purchasers in
the requisite quantity and on a timely basis to permit proper delivery on
or prior to the Closing Date) to the person asserting any losses, claims,
damages, liabilities or judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum, or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, if such material misstatement or
omission or alleged material misstatement or omission was cured in the
Final Offering Memorandum, as so amended or supplemented.
(b) The Initial Purchasers, severally and not jointly, agree to
indemnify and hold harmless the Company and the Guarantors, and their
respective directors, officers and managers and each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company or the Guarantors, to the same extent as the
foregoing indemnity from the Company and the Guarantors to the Initial
Purchasers but only with reference, in the case of each Initial Purchaser,
to information relating to the Initial Purchasers furnished in writing to
the Company by such Initial Purchaser, expressly for use in the Preliminary
Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), the
Initial Purchasers shall not be required to assume the defense of such
action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of the Initial
Purchasers). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action
or employ counsel reasonably satisfactory to the indemnified party or (iii)
the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such
fees and expenses shall be reimbursed as they are incurred. Such firm shall
be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation, in the case of the parties indemnified pursuant to Section
8(a), and by the Company, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i)
effected with the written consent of the indemnifying party or (ii)
effected without the written consent of the indemnifying party if the
settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party
for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and,
prior to the date of such settlement, the indemnifying party shall have
failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which the
indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does
not include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8
is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as
a result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantors, on the one hand, and the Initial
Purchasers, severally and not jointly, on the other hand from the offering
of the Series A Notes or (ii) if the allocation provided by clause 8(d)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers, severally and not
jointly, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments,
as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Guarantors, on the one hand and
the Initial Purchasers, severally and not jointly, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes (after underwriting discounts and
commissions, but before deducting expenses) received by the Company, and
the total discounts and commissions received severally and not jointly by
the Initial Purchasers bear to the total price to investors of the Series A
Notes, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Guarantors,
on the one hand, and the Initial Purchasers, severally and not jointly, on
the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantors, on the one hand, or
an Initial Purchaser, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Guarantors and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchasers shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
such Initial Purchasers exceeds the amount of any damages which such Initial
Purchasers have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Series A Notes purchases by each of the Initial Purchasers
hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
9. Conditions of Initial Purchasers' Obligations. The obligations of
the Initial Purchasers to purchase the Series A Notes under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a
possible change that does not indicate the direction of the possible change
in, any rating of the Company or any Guarantor or any securities of the
Company or any Guarantor (including, without limitation, the placing of any
of the foregoing ratings on credit watch with negative or developing
implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not
have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for any rating of the Company
or any Guarantor or any securities of the Company or any Guarantor by any
such rating organization and (iii) no such rating organization shall have
given notice that it has assigned (or is considering assigning) a lower
rating to the Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date
of this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the
Company and the Guarantors, taken as a whole, (ii) there shall not have
been any change or any development involving a prospective change in the
capital stock or in the long-term debt of the Company or any of the
Guarantors and (iii) neither the Company nor any of the Guarantors shall
have incurred any liability or obligation, direct or contingent, the effect
of which, in any such case described in clause 9(c)(i), 9(c)(ii) or
9(c)(iii), in your judgment, is material and adverse and, in your judgment,
makes it impracticable to market the Series A Notes on the terms and in the
manner contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by the President and the Chief Financial Officer
of the Company and each of the Guarantors, confirming the matters set forth
in Sections 6(y), 9(a) and 9(b) and stating that each of the Company and
the Guarantors has complied with all the agreements and satisfied all of
the conditions herein contained and required to be complied with or
satisfied on or prior to the Closing Date. The certificate shall
specifically permit Ice, Miller, Donadio & Ryan to rely upon it.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated the
Closing Date, of Ice, Miller, Donadio & Ryan, counsel for the Company and
the Guarantors, to the effect that:
(I) EACH OF THE COMPANY AND THE GUARANTORS HAS
BEEN DULY INCORPORATED OR FORMED, AS
APPLICABLE, IS VALIDLY EXISTING AS A
CORPORATION OR LIMITED LIABILITY COMPANY, AS
APPLICABLE, UNDER THE LAWS OF ITS
JURISDICTION OF INCORPORATION AND HAS THE
CORPORATE POWER AND AUTHORITY TO CARRY ON
ITS BUSINESS AS DESCRIBED IN THE OFFERING
MEMORANDUM AND TO OWN, LEASE AND OPERATE ITS
PROPERTIES;
(II) EACH OF THE COMPANY AND THE GUARANTORS IS
DULY QUALIFIED AND IS IN GOOD STANDING AS A
FOREIGN CORPORATION OR LIMITED LIABILITY
COMPANY AUTHORIZED TO DO BUSINESS IN EACH
JURISDICTION IN WHICH THE NATURE OF ITS
BUSINESS OR ITS OWNERSHIP OR LEASING OF
PROPERTY REQUIRES SUCH QUALIFICATION, EXCEPT
WHERE THE FAILURE TO BE SO QUALIFIED WOULD
NOT HAVE A MATERIAL ADVERSE EFFECT;
(III) ALL THE OUTSTANDING SHARES OF CAPITAL STOCK
OF THE COMPANY HAVE BEEN DULY AUTHORIZED AND
VALIDLY ISSUED AND ARE FULLY PAID AND
NON-ASSESSABLE;
(IV) EXCEPT AS DISCLOSED IN THE OFFERING
MEMORANDUM, ALL OF THE OUTSTANDING SHARES OF
CAPITAL STOCK AND MEMBERSHIP INTERESTS, AS
APPLICABLE, OF EACH OF THE GUARANTORS HAVE
BEEN DULY AUTHORIZED AND VALIDLY ISSUED AND
ARE FULLY PAID AND NON-ASSESSABLE, AND ARE
OWNED BY THE COMPANY, FREE AND CLEAR OF ANY
LIEN;
(V) THE SERIES A NOTES HAVE BEEN DULY AUTHORIZED
AND, WHEN EXECUTED AND AUTHENTICATED IN
ACCORDANCE WITH THE PROVISIONS OF THE
INDENTURE AND DELIVERED TO AND PAID FOR BY
THE INITIAL PURCHASERS IN ACCORDANCE WITH
THE TERMS OF THIS AGREEMENT, WILL BE
ENTITLED TO THE BENEFITS OF THE INDENTURE
AND WILL BE VALID AND BINDING OBLIGATIONS OF
THE COMPANY, ENFORCEABLE IN ACCORDANCE WITH
THEIR TERMS;
(VI) THE SUBSIDIARY GUARANTEES HAVE BEEN DULY
AUTHORIZED AND, WHEN THE SERIES A NOTES ARE
EXECUTED AND AUTHENTICATED IN ACCORDANCE
WITH THE PROVISIONS OF THE INDENTURE AND
DELIVERED TO AND PAID FOR BY THE INITIAL
PURCHASERS IN ACCORDANCE WITH THE TERMS OF
THIS AGREEMENT, THE SUBSIDIARY GUARANTEES
ENDORSED THEREON WILL BE ENTITLED TO THE
BENEFITS OF THE INDENTURE AND WILL BE VALID
AND BINDING OBLIGATIONS OF THE GUARANTORS,
ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS;
(VII) THE INDENTURE HAS BEEN DULY AUTHORIZED,
EXECUTED AND DELIVERED BY THE COMPANY AND
EACH GUARANTOR AND IS A VALID AND BINDING
AGREEMENT OF THE COMPANY AND EACH GUARANTOR,
ENFORCEABLE AGAINST THE COMPANY AND EACH
GUARANTOR IN ACCORDANCE WITH ITS TERMS;
(VIII) THE NEW CREDIT FACILITY HAS BEEN DULY
AUTHORIZED, EXECUTED AND DELIVERED BY THE
COMPANY AND EACH GUARANTOR AND IS A VALID
AND BINDING AGREEMENT OF THE COMPANY AND
EACH GUARANTOR, ENFORCEABLE AGAINST THE
COMPANY AND EACH GUARANTOR IN ACCORDANCE
WITH ITS TERMS;
(IX) THIS AGREEMENT HAS BEEN DULY AUTHORIZED,
EXECUTED AND DELIVERED BY THE COMPANY
AND THE GUARANTORS;
(X) THE REGISTRATION RIGHTS AGREEMENT HAS BEEN
DULY AUTHORIZED, EXECUTED AND DELIVERED BY
THE COMPANY AND THE GUARANTORS AND IS A
VALID AND BINDING AGREEMENT OF THE COMPANY
AND EACH GUARANTOR, ENFORCEABLE AGAINST THE
COMPANY AND EACH GUARANTOR IN ACCORDANCE
WITH ITS TERMS;
(XI) THE ISSUANCE OF THE SERIES B SENIOR NOTES
HAS BEEN DULY AUTHORIZED;
(XII) THE STATEMENTS UNDER THE CAPTIONS
"REORGANIZATION OF THE COMPANY,"
"DESCRIPTION OF NEW CREDIT FACILITY,"
"DESCRIPTION OF NOTES," AND "CERTAIN U.S.
FEDERAL INCOME TAX CONSIDERATIONS" IN THE
OFFERING MEMORANDUM, INSOFAR AS SUCH
STATEMENTS CONSTITUTE A SUMMARY OF THE LEGAL
MATTERS, DOCUMENTS OR PROCEEDINGS REFERRED
TO THEREIN, FAIRLY PRESENT IN ALL MATERIAL
RESPECTS SUCH
LEGAL MATTERS, DOCUMENTS AND PROCEEDINGS;
(XIII) THE EXECUTION, DELIVERY AND PERFORMANCE
OF THIS AGREEMENT, THE OTHER OPERATIVE
DOCUMENTS AND THE NEW CREDIT FACILITY BY
THE COMPANY AND EACH OF THE GUARANTORS,
THE COMPLIANCE BY THE COMPANY AND EACH OF
THE GUARANTORS WITH ALL PROVISIONS HEREOF
AND THEREOF AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
WILL NOT (I) REQUIRE ANY CONSENT, APPROVAL,
AUTHORIZATION OR OTHER ORDER OF, OR
QUALIFICATION WITH, ANY COURT OR
GOVERNMENTAL BODY OR AGENCY (EXCEPT SUCH
AS MAY BE REQUIRED UNDER THE SECURITIES OR
BLUE SKY LAWS OF THE VARIOUS STATES), (II)
CONFLICT WITH OR CONSTITUTE A BREACH OF ANY
OF THE TERMS OR PROVISIONS OF, OR A DEFAULT
UNDER, THE ARTICLES OF INCORPORATION,
ARTICLES OF ORGANIZATION, BY-LAWS OR
OPERATING AGREEMENT OF THE COMPANY OR ANY OF
THE GUARANTORS OR ANY INDENTURE, LOAN
AGREEMENT, MORTGAGE, LEASE OR OTHER
AGREEMENT OR INSTRUMENT THAT HAS BEEN
IDENTIFIED TO SUCH COUNSEL BY THE COMPANY
TO BE MATERIAL TO THE COMPANY AND THE
GUARANTORS, TAKEN AS A WHOLE, (III) TO OUR
KNOWLEDGE, VIOLATE OR CONFLICT WITH ANY
APPLICABLE LAW OR ANY RULE, REGULATION,
JUDGMENT, ORDER OR DECREE OF ANY COURT OR
ANY GOVERNMENTAL BODY OR AGENCY HAVING
JURISDICTION OVER THE COMPANY, ANY OF THE
GUARANTORS OR THEIR RESPECTIVE PROPERTY, OR
(IV) TO OUR KNOWLEDGE, RESULT IN THE
IMPOSITION OR CREATION OF (OR THE OBLIGATION
TO CREATE OR IMPOSE) A LIEN UNDER, ANY
AGREEMENT OR INSTRUMENT TO WHICH THE COMPANY
OR ANY OF THE GUARANTORS IS A PARTY OR BY
WHICH THE COMPANY OR ANY OF THE GUARANTORS
OR THEIR RESPECTIVE PROPERTY IS BOUND.
(XIV) TO THE BEST OF SUCH COUNSEL'S KNOWLEDGE,
THERE ARE NO LEGAL OR GOVERNMENTAL
PROCEEDINGS PENDING OR THREATENED TO WHICH
THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OR
COULD BE A PARTY OR TO WHICH ANY OF THEIR
RESPECTIVE PROPERTY IS OR COULD BE SUBJECT,
WHICH MIGHT RESULT, SINGLY OR IN THE
AGGREGATE, IN A MATERIAL ADVERSE EFFECT,
OTHER THAN THOSE DISCLOSED IN THE OFFERING
MEMORANDUM.
(XV) NEITHER THE COMPANY NOR ANY GUARANTOR IS
NOR, AFTER GIVING EFFECT TO THE OFFERING AND
SALE OF THE SERIES A NOTES AND THE
APPLICATION OF THE NET PROCEEDS THEREOF AS
DESCRIBED IN THE OFFERING MEMORANDUM, WILL
BE, AN "INVESTMENT COMPANY" AS SUCH TERM IS
DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED;
(XVI) TO THE BEST OF SUCH COUNSEL'S KNOWLEDGE,
EXCEPT AS PROVIDED IN THE REGISTRATION
RIGHTS AGREEMENT, THERE ARE NO CONTRACTS,
AGREEMENTS OR UNDERSTANDINGS BETWEEN THE
COMPANY OR ANY GUARANTOR AND ANY PERSON
GRANTING SUCH PERSON THE RIGHT TO REQUIRE
THE COMPANY OR SUCH GUARANTOR TO FILE A
REGISTRATION STATEMENT UNDER THE ACT WITH
RESPECT TO ANY SECURITIES OF THE COMPANY OR
SUCH GUARANTOR OR TO REQUIRE THE COMPANY
OR SUCH GUARANTOR TO INCLUDE SUCH SECURITIES
WITH THE NOTES AND SUBSIDIARY GUARANTEES
REGISTERED PURSUANT TO ANY REGISTRATION
STATEMENT;
(XVII) IT IS NOT NECESSARY IN CONNECTION WITH THE
OFFER, SALE AND DELIVERY OF THE SERIES A
NOTES TO THE INITIAL PURCHASERS IN THE
MANNER CONTEMPLATED BY THIS AGREEMENT OR IN
CONNECTION WITH THE EXEMPT RESALES TO
QUALIFY THE INDENTURE UNDER THE TIA;
(XVIII) NO REGISTRATION UNDER THE ACT OF THE SERIES
A NOTES IS REQUIRED FOR THE SALE OF THE
SERIES A NOTES TO THE INITIAL PURCHASERS
AS CONTEMPLATED BY THIS AGREEMENT OR FOR THE
EXEMPT RESALES ASSUMING THAT (I) EACH
INITIAL PURCHASER IS A QIB OR A REGULATION S
PURCHASER, (II) THE ACCURACY OF, AND
COMPLIANCE WITH, THE INITIAL PURCHASERS'
REPRESENTATIONS, WARRANTIES AND COVENANTS
CONTAINED IN SECTION 7 OF THIS AGREEMENT,
(III) THE ACCURACY OF THE REPRESENTATIONS
OF THE COMPANY AND THE GUARANTORS SET FORTH
IN THIS AGREEMENT WITH THE EXCEPTION OF THE
REPRESENTATION IN SECTION 6(II) HEREOF.
(XIX) SUCH COUNSEL HAS NO REASON TO BELIEVE THAT,
AS OF THE DATE OF THE OFFERING MEMORANDUM OR
AS OF THE CLOSING DATE, THE OFFERING
MEMORANDUM, AS AMENDED OR SUPPLEMENTED, IF
APPLICABLE (EXCEPT FOR THE FINANCIAL
STATEMENTS AND OTHER FINANCIAL DATA INCLUDED
THEREIN, AS TO WHICH SUCH COUNSEL NEED NOT
EXPRESS ANY BELIEF) CONTAINS ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMITS TO
STATE A MATERIAL FACT NECESSARY IN ORDER TO
MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING.
The opinion described in this Section 9(e) shall be rendered to you at
the request of the Company and the Guarantors and shall so state therein. In
giving such opinion with respect to the matters covered by the last clause of
Section 9(e), Ice, Miller, Donadio & Ryan may state that their opinion and
belief are based upon their participation in the preparation of the Offering
Memorandum and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
(f) You also shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated the Closing
Date, of Siegel, Moses, Schoenstadt & Webster, regulatory counsel for the
Company and the Guarantors, with respect to certain regulatory issues in the
form attached hereto as Exhibit B. The opinion shall be rendered to you at the
request of the Company and the Guarantors and shall so state therein.
(g) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchaser, in form and substance reasonably satisfactory to the Initial
Purchaser.
(h) The Initial Purchasers shall have received, at the time this Agreement
is executed and at the Closing Date, letters dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers from Katz, Sapper & Miller and Ernst & Young LLP, both
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to the Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(i) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Ice, Miller, Donadio & Ryan relating to
certain tax issues in the form of Exhibit C attached hereto.
(j) The Initial Purchasers shall have received an opinion of Michigan
counsel with respect to the due authorization, execution and delivery of the
Operative Documents by NWS Michigan, Inc. in form and substance satisfactory to
the Initial Purchasers.
(k) The Series A Notes shall have been approved by the NASD for trading and to
be duly listed in PORTAL.
(l) The Initial Purchasers shall have received a counterpart, conformed as
executed, of the Indenture which shall have been entered into by the Company,
the Guarantors and the Trustee.
(m) The Company and the Guarantors shall have executed the Registration Rights
Agreement and the Initial Purchasers shall have received an original copy
thereof, duly executed by the Company and the Guarantors.
(n) Neither the Company nor the Guarantors shall have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company or the Guarantors,
as the case may be, at or prior to the Closing Date.
(o) The Reorganization shall have occurred as described in the Offering
Memorandum.
(p) The New Credit Facility (as defined in the Offering Memorandum) shall have
been entered into on substantially the same terms described in the Offering
Memorandum.
10. Effectiveness of Agreement and Termination. This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.
This Agreement may be terminated at any time on or prior to the Closing Date by
the Initial Purchasers by written notice to the Company if any of the following
has occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchaser's judgment, is material and adverse and, in the Initial Purchaser's
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or any Guarantor on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your opinion has a material adverse effect
on the financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers shall fail or
refuse to purchase the Series A Notes which it or they have agreed to purchase
hereunder on such date and the aggregate principal amount of the Series A Notes
which such defaulting Initial Purchaser or Initial Purchasers, as the case may
be, agreed but failed or refused to purchase is not more than one-tenth of the
aggregate principal amount of the Series A Notes to be purchased on such date by
all Initial Purchasers, each non-defaulting Initial Purchaser shall be obligated
severally, in the proportion which the principal amount of the Series A Notes
set forth opposite its name in Schedule B bears to the aggregate principal
amount of the Series A Notes which all the non-defaulting Initial Purchasers, as
the case may be, have agreed to purchase, or in such other proportion as you may
specify, to purchase the Series A Notes which such defaulting Initial Purchaser
or Initial Purchasers, as the case may be, agreed but failed or refused to
purchase on such date; provided that in no event shall the aggregate principal
amount of the Series A Notes which any Initial Purchaser has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 10 by an
amount in excess of one-ninth of such principal amount of the Series A Notes
without the written consent of such Initial Purchaser. If on the Closing Date
any Initial Purchaser or Initial Purchasers shall fail or refuse to purchase the
Series A Notes and the aggregate principal amount of the Series A Notes with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of the Series A Notes to be purchased by all Initial Purchasers
and arrangements satisfactory to the Initial Purchasers and the Company for
purchase of such the Series A Notes are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Initial Purchaser and the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Offering
Memorandum or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Initial Purchaser
from liability in respect of any default of any such Initial Purchaser under
this Agreement.
11. Miscellaneous. Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Company, P.O. Box 1602,
Indianapolis, Indiana 46206-1602 and (ii) if to the Initial Purchasers, c/o
Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York,
New York 10172, Attention: Syndicate Department, or in any case to such other
address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations, warranties
and other statements of the Company, the Guarantors and the Initial Purchasers
set forth in or made pursuant to this Agreement shall remain operative and in
full force and effect, and will survive delivery of and payment for the Series A
Notes, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchasers, the officers or
directors of the Initial Purchasers, any person controlling an Initial
Purchaser, the Company, any Guarantor, the officers or directors of the Company
or any Guarantor, or any person controlling the Company or any Guarantor, (ii)
acceptance of the Series A Notes and payment for them hereunder and (iii)
termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Company and each Guarantor, jointly and
severally, agree to reimburse the Initial Purchasers for all out-of-pocket
expenses (including the fees and disbursements of counsel) incurred by them.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof. The
Company and each Guarantor also agree, jointly and severally, to reimburse each
Initial Purchaser and its officers, directors and each person, if any, who
controls such Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act for any and all fees and
expenses (including without limitation the fees and expenses of counsel)
incurred by them in connection with enforcing their rights under this Agreement
(including without limitation its rights under Section 8). Each Initial
Purchaser, severally and not jointly in proportion to the amounts on Schedule B,
agrees to reimburse the Company and the Guarantors, and their respective
directors, officers and managers and each person, if any, who controls (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) the Company or the Guarantors for any and all fees and expenses (including
without limitation the fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made solely for the
benefit of and shall be binding upon the Company, the Guarantors, the Initial
Purchasers, the Initial Purchasers' directors and officers, any controlling
persons referred to herein, the directors of the Company and the Guarantors and
their respective successors and assigns, all as and to the extent provided in
this Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Series A Notes from the Initial Purchasers merely
because of such purchase.
This Agreement shall be governed and construed in accordance with the laws of
the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
<PAGE>
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among the
Company, the Guarantors and the Initial Purchaser.
Very truly yours,
NATIONAL WINE & SPIRITS, INC., an Indiana Corporation
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman, President and Chief Executive Officer
NATIONAL WINE & SPIRITS CORPORATION, an Indiana Corporation
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS, INC., an Illinois Corporation
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS MICHIGAN, INC., a Michigan Corporation
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
NWS-ILLINOIS, LLC, an Illinois Limited Liability Company
By:/s/ JAMES E. LACROSSE
Name: James E. LaCrosse
Title: Chairman
<PAGE>
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
on behalf of the Initial Purchasers
By:/s/ DAVID PHILIP COSTANZO
Name: David Philip Costanzo
Title: Vice President
<PAGE>
<PAGE>
SCHEDULE A
Guarantors
NATIONAL WINE & SPIRITS CORPORATION
NWS, INC.
NWS-ILLINOIS, LLC
NWS MICHIGAN, INC.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
<S> <C>
Principal Amount
Initial Purchaser of Notes
Donaldson, Lufkin & Jenrette
Securities Corporation................................................... $ 77,000,000
Bear, Stearns & Co. Inc.................................................... $ 16,500,000
First Chicago Capital Markets, Inc. $ 16,500,000
Total...................................................................... $110,000,000
============
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
<PAGE>
EXHIBIT B
FORM OF SIEGEL, MOSES, SCHOENSTADT & WEBSTER OPINION
<PAGE>
<PAGE>
EXHIBIT C
FORM OF TAX OPINION
Exhibit 10(b)
EXECUTION COPY
CREDIT AGREEMENT
dated as of January 25, 1999
among
NATIONAL WINE & SPIRITS, INC.
AND
NBD BANK
BNY FINANCIAL CORPORATION
LASALLE NATIONAL BANK
NATIONAL CITY BANK OF INDIANA
and
NBD BANK, as Agent
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Article Page
1. DEFINITIONS .............................................................. 1
1.1. Certain Definitions............................................ 1
1.2 Other Definitions; Rules of Construction.......................15
2. THE COMMITMENTS AND THE ADVANCES..........................................15
2.1 Commitment of the Banks........................................15
2.2 Termination and Reduction of Commitments.......................16
2.3 Fees...........................................................16
2.4 Disbursement of Advances.......................................17
2.5 Conditions for First Disbursement..............................20
2.6 Further Conditions for Disbursement............................22
2.7 Subsequent Elections as to Loans...............................23
2.8 Limitation of Requests and Elections...........................23
2.9 Minimum Amounts; Limitation on Number of Loans; Etc............24
2.10 Borrowing Base Adjustments.....................................24
2.11 Security and Collateral........................................24
3. PAYMENTS AND PREPAYMENTS OF LOANS.........................................25
3.1 Principal Payments and Prepayments.............................25
3.2 Interest Payments..............................................25
3.3 Letter of Credit Reimbursement Payments........................26
3.4 Payment Method.................................................28
3.5 No Setoff or Deduction.........................................28
3.6 Payment on Non-Business Day; Payment Computations..............28
3.7 Additional Costs...............................................29
3.8 Illegality and Impossibility...................................30
3.9 Indemnification................................................30
4 REPRESENTATIONS AND WARRANTIES............................................31
4.1 Existence and Power............................................31
4.2 Authority......................................................31
4.3 Binding Effect.................................................31
4.4 Restricted and Unrestricted Subsidiaries.......................31
4.5 Litigation.....................................................32
4.6 Financial Condition............................................32
4.7 Corporate Restructuring and Future Financial Statements........32
4.8 Use of Advances................................................32
4.9 Consents, Etc..................................................33
4.10 Taxes..........................................................33
4.11 Title to Properties............................................33
4.12 Borrowing Base.................................................33
4.13 ERISA..........................................................33
4.14 Disclosure.....................................................34
4.15 No Default.....................................................34
4.16 No Burdensome Restrictions.....................................34
4.17 Year 2000......................................................34
5. COVENANTS 34
5.1 Affirmative Covenants..........................................34
(a) Preservation of Corporate Existence, Etc.................35
(b) Compliance with Laws, Etc................................35
(c) Maintenance of Properties; Insurance.....................35
(d) Reporting Requirements...................................36
(e) Accounting; Access to Records, Books, Etc................38
(f) Loans by the Company to the Restricted Subsidiaries......38
(g) Additional Security and Collateral.......................38
(h) Addition of Covenants; Incorporation by Reference........38
(i) Further Assurances.......................................39
(j) Year 2000................................................39
5.2 Negative Covenants.............................................39
(a) Interest Coverage Ratio..................................39
(b) Funded Debt Coverage Ratio...............................39
(c) Indebtedness.............................................40
(d) Liens....................................................40
(e) Merger; Acquisitions, Etc................................41
(f) Disposition of Assets; Etc...............................42
(g) Nature of Business.......................................42
(h) Restricted Payments......................................42
(i) Capital Expenditures.....................................43
(j) Capital Leases...........................................43
(k) Investments..............................................43
(l) Transactions with Affiliates.............................44
(m) Sale and Leaseback Transactions..........................44
(n) Payments and Modification of Subordinated Debt...........44
(o) Payment and Modification of Senior Unsecured Debt........44
(p) Negative Pledge Limitation...............................45
(q) Inconsistent Agreements..................................45
(r) Accounting Changes.......................................45
6. DEFAULT ..................................................................45
6.1 Events of Default..............................................45
6.2 Remedies.......................................................48
7. THE AGENT AND THE BANKS...................................................49
7.1 Appointment and Authorization..................................49
7.2 Agent and Affiliates...........................................49
7.3 Scope of Agent's Duties........................................49
7.4 Reliance by Agent..............................................50
7.5 Default........................................................50
7.6 Liability of Agent.............................................50
7.7 Nonreliance on Agent and Other Banks...........................50
7.8 Indemnification................................................51
7.9 Successor Agent................................................51
7.10 Sharing of Payments............................................52
8. GUARANTY..................................................................53
8.1 Guarantee of Obligations.......................................53
8.2 Nature of Guaranty.............................................53
8.3 Waivers and Other Agreements...................................53
8.4 Obligations Absolute...........................................54
8.5 No Investigation by Banks or Agent.............................54
8.6 Indemnity......................................................55
8.7 Subordination, Subrogation, Etc................................55
8.8 Waiver.........................................................55
8.9 Limitation of Guaranteed Amount................................55
9. MISCELLANEOUS.............................................................57
9.1 Amendments, Etc................................................57
9.2 Notices........................................................57
9.3 No Waiver By Conduct; Remedies Cumulative......................58
9.4 Reliance on and Survival of Various Provisions.................58
9.5 Expenses; Indemnification......................................59
9.6 Successors and Assigns.........................................60
9.7 Counterparts and Telefacsimile Signature.......................63
9.8 Governing Law..................................................63
9.9 Table of Contents and Headings.................................64
9.10 Construction of Certain Provisions.............................64
9.11 Integration and Severability...................................64
9.12 Independence of Covenants......................................64
9.13 Interest Rate Limitation.......................................64
9.14 Waiver of Jury Trial...........................................65
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A....................... Borrowing Base Certificate
Exhibit B....................... Intercompany Note
Exhibit C....................... Note
Exhibit D....................... Pledge Agreement
Exhibit E....................... Security Agreement
Exhibit F....................... Legal Opinion
Exhibit G....................... Assignment and Acceptance
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 2.5(k)................. Debt to be Repaid
Schedule 4.4.................... Restricted and Unrestricted Subsidiaries
Schedule 4.5.................... Litigation
Schedule 4.17................... Year 2000 Program
Schedule 5.2(c)................. Indebtedness
Schedule 5.2(d)................. Liens
Schedule 5.2(j)................. Capital Leases
Schedule 5.2(k)................. Investments
</TABLE>
<PAGE>
<PAGE>
THIS CREDIT AGREEMENT, dated as of January 25, 1999 (this
"Agreement"), is by and among NATIONAL WINE & SPIRITS, INC., an Indiana
corporation (the "Company"), the Guarantors named herein, the Banks set forth on
the signature pages hereof (collectively, the "Banks" and individually, a
"Bank") and NBD BANK, a Michigan banking corporation, as agent for the Banks (in
such capacity, the "Agent").
INTRODUCTION
The Company desires to obtain a revolving credit facility,
including letters of credit, in the aggregate principal amount of $60,000,000,
in order to provide funds and other financial accommodations for working capital
and its other general corporate purposes, and the Banks are willing to establish
such a credit facility in favor of the Company on the terms and conditions
herein set forth.
In consideration of the premises and of the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Certain Definitions. As used herein the following terms shall have the
following respective meanings:
"Adjusted Base Rate" shall mean the per annum rate equal to the
sum of (a) the Applicable Margin plus (b) the greater of (i) the Base Rate in
effect from time to time, and (ii) the sum of one-half of one percent (1/2 of
1%) per annum plus the Federal Funds Rate in effect from time to time; which
Adjusted Base Rate shall change simultaneously with any change in such Base Rate
or Federal Funds Rate, as the case may be.
"Adjusted Base Rate Loan" shall mean any Loan which bears
interest at the Adjusted Base Rate.
"Advance" shall mean any Loan and any Letter of Credit Advance.
"Affiliate", when used with respect to any Person shall mean
any other Person which, directly or indirectly, controls or is controlled by or
is under common control with such Person. For purposes of this definition
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Applicable Margin" shall mean for any date with respect to any
Adjusted Base Rate Loan, Eurodollar Rate Loan, or commitment fee, as the case
may be, the applicable percentage set forth in the applicable column of the
table below for, in the case of Loans, the Borrowing Base level in effect on
such date, based upon the Interest Coverage Ratio as determined as of the end of
each fiscal quarter, commencing with the March 31, 1999 fiscal quarter, for the
period of the four fiscal quarters then ending, as adjusted on the tenth
Business Day following receipt by the Agent of the Company's financial
statements for such fiscal quarter, or fiscal year, as the case may be, and
remaining in effect until the next change to be effected pursuant to this
definition, provided that if any Event of Default has occurred and is
continuing, the Interest Coverage Ratio as of the end of the most recently ended
fiscal quarter shall, for the purposes of this definition, be deemed to be less
than 2.00:1.00 and during the period from the Effective Date through and
including April 30, 1999, the Applicable Margin shall be determined from Tier
VI. In the table below, the abbreviation "bps" means "basis points". Each basis
point is equal to 0.01% per annum.
<TABLE>
<CAPTION>
Applicable Margin (in bps)
<S> <C> <C> <C> <C> <C>
80% A/R + 60% Inv. 75% A/R + 55% Inv. 70% A/R + 50% Inv.
Interest --------------------- ---------------------- ---------------------- Commitment
Coverage Ratio ABR Eurodollar ABR Eurodollar ABR Eurodollar Fee
Tier
I >4.00:1.00 0 150 0 125 0 100 25
II >3.50<=4.00:1.00 0 175 0 150 0 125 30
III >3.00<=3.50:1.00 25 200 0 175 0 150 30
IV >2.50<=3.00:1.00 50 225 25 200 0 175 30
V >2.25<=2.50:1.00 75 250 50 225 25 200 37.5
VI >2.00<=2.25:1.00 100 275 75 250 50 225 50
VII <=2.00:1.00 125 300 100 275 75 250 50
</TABLE>
"Asset Sale" shall mean (i) the sale, lease, conveyance or
other disposition of any assets or rights other than sales of inventory in the
ordinary course of business consistent with past practices and (ii) the issue or
sale by the Company or any of its Restricted Subsidiaries of Equity Interests of
any of the Company's Restricted Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $1 million or (b) for net proceeds in
excess of $1 million, but excluding a transfer of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary.
"Base Rate" shall mean the per annum rate announced by the
Agent from time to time as its "base rate" or its "prime rate" (it being
acknowledged that such announced rate may not necessarily be the lowest rate
charged by the Agent to any of its customers); which Base Rate shall change
simultaneously with any change in such announced rate.
"Borrowing" shall mean the aggregation of Advances, including
each Letter of Credit issuance, of the Banks to be made to the Company, or
continuations and conversions of any Loans, made pursuant to Article II on a
single date and, in the case of any Loans, for a single Interest Period, which
Borrowings may be classified for purposes of this Agreement by reference to the
type of Loans or the type of Advance comprising the related Borrowing, e.g., a
"Eurodollar Rate Borrowing" is a Borrowing comprised of Eurodollar Rate Loans
and a "Letter of Credit Borrowing" is an Advance comprised of a single Letter of
Credit.
"Borrowing Base" shall mean, as of any date, one of the
following three levels: (1) the sum of (a) an amount equal to 80% of the value
of Eligible Accounts Receivable plus (b) an amount equal to 60% of the value of
Eligible Inventory; or (2) the sum of (a) an amount equal to 75% of the value of
Eligible Accounts Receivable plus (b) an amount equal to 55% of the value of
Eligible Inventory; or (3) the sum of (a) 70% of the value of Eligible Accounts
Receivable plus (b) 50% of the value of Eligible Inventory, as selected by the
Company as follows: The initial Borrowing Base shall be the level described in
(3) above. The Company may change the Borrowing Base level by submitting written
notice of its selection of a different Borrowing Base level to the Agent. The
change in the Borrowing Base level shall be effective ten (10) Business Days
following receipt by the Agent of the request to change. The Company may not
change the Borrowing Base level more than four (4) times in any twelve (12)
month period, nor more frequently than once in a sixty (60) day period without
the written consent of the Agent.
"Borrowing Base Certificate" for any date shall mean an
appropriately completed report as of such date in substantially the form of
Exhibit A hereto, certified as true and correct as of such date by a duly
authorized officer of the Company.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which the Agent is not open to the public for carrying on
substantially all of its banking functions in Detroit, Michigan.
"Capital Lease" of any Person shall mean any lease which, in
accordance with generally accepted accounting principles, is or should be
capitalized on the books of such Person.
"Capital Stock" shall mean (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership (whether general or limited) or membership
interests and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations thereunder.
"Commitment" shall mean, with respect to each Bank, the
commitment of each such Bank to make Loans and to participate in Letter of
Credit Advances made through the Agent pursuant to Section 2.1, in amounts not
exceeding in aggregate principal amount outstanding at any time the respective
commitment amounts for each such Bank set forth next to the name of each such
Bank in the signature pages hereof, as such amounts may be reduced from time to
time pursuant to Section 2.2.
"Company Shareholder Note Receivable" shall mean any promissory
note receivable due to NWS-Indiana on the date of this Agreement from any
shareholder of the Company.
"Consolidated" has the meaning accorded under Generally
Accepted Accounting Principles, provided, however, that any calculation under
this Agreement requiring a determination on a Consolidated basis for any period
ending prior to the date of this Agreement shall be determined on a combined
basis for NWS-Indiana and NWS-Illinois.
"Consolidated Cash Flow" shall mean, with respect to the
Company and its Restricted Subsidiaries for any period, their Consolidated Net
Income for such period plus (i) an amount equal to any extraordinary loss plus
any net loss realized in connection with an Asset Sale (to the extent such
losses were deducted in computing such Consolidated Net Income), plus (ii) (A)
as to any Person that is an S-Corporation or substantially similar pass through
entity for Federal income tax purposes, the amount of all distributions for such
period made for the payment of taxes attributable to such Person's income, and
(B) as to any Person that is not an S-Corporation or substantially similar
pass-through entity for Federal income tax purposes, any provision for taxes
based on income or profits of such Person and its Restricted Subsidiaries for
such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) consolidated interest expense
of the Company and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior period
other than debt issuance costs) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of the Company and its Restricted Subsidiaries
for such period to the extent that such depreciation, amortization and other
non-cash expenses were deducted in computing such Consolidated Net Income, plus
(v) LIFO expense, plus (vi) prepayment penalties associated with the prepayment
of Indebtedness with the proceeds of the Senior Unsecured Debt to the extent any
such expense was deducted in computing such Consolidated Net Income, minus (vii)
non-cash items increasing such Consolidated Net Income for such period
including, without limitation, LIFO income, and capitalized interest on
Indebtedness owed to the Company or any Restricted Subsidiary by any owner of
its Capital Stock, and minus (viii) an amount equal to any extraordinary gain
plus any net gain realized in connection with an Asset Sale to the extent such
gains were included in computing such Consolidated Net Income, in each case, on
a Consolidated basis and determined in accordance with Generally Accepted
Accounting Principles.
"Consolidated Net Income" shall mean, with respect to the
Company and its Restricted Subsidiaries for any period, the aggregate of their
Net Income for such period, on a Consolidated basis, determined in accordance
with Generally Accepted Accounting Principles, reduced, as to any Person that is
an S-Corporation or substantially similar pass-through entity for Federal income
tax purposes, by the amount of distributions for such period made for the
payment of taxes attributable to such Person's income.
"Contingent Liabilities" of any Person shall mean, as of any
date, all obligations of such Person or of others for which such Person is
contingently liable, as obligor, guarantor, surety, accommodation party, partner
or in any other capacity, or in respect of which obligations such Person assures
a creditor against loss or agrees to take any action to prevent any such loss
(other than endorsements of negotiable instruments for collection in the
ordinary course of business), including without limitation all reimbursement
obligations of such Person in respect of any letters of credit, surety bonds or
similar obligations (including, without limitation, bankers acceptances) and all
obligations of such Person to advance funds to, or to purchase assets, property
or services from, any other Person in order to maintain the financial condition
of such other Person.
"Contractual Obligation" shall mean as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking to which such Person is a party or by which it or any of
its property is bound.
"Default" shall mean any event or condition which might become
an Event of Default with notice or lapse of time or both.
"Dollars" and "$" shall mean the lawful money of the United
States of America.
"Effective Date" shall mean the effective date specified in the
final paragraph of this Agreement.
"Eligible Accounts Receivable" shall mean, as of any date,
those trade accounts receivable owned by the Company and the Guarantors which
are payable in Dollars and in which the Company and the Guarantors have granted
to the Agent for the benefit of the Banks and the Agent a first-priority
perfected security interest pursuant to the Security Agreements, valued at the
face amount thereof less sales, excise or similar taxes and less returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed, but shall not include any
such account receivable (a) that is not a bona fide existing obligation created
by the sale and actual delivery of inventory, goods or other property or the
furnishing of services or other good and sufficient consideration to customers
of the Company and the Guarantors in the ordinary course of business, (b) that
is more than 45 days past due or, in the case of an account receivable owed to
the U.S. Beverage division of NWS-Illinois and in the case of an account
receivable owed by a Person located in Illinois, that is more than 60 days past
due, (c) that is subject to any dispute, contra-account, defense, offset or
counterclaim or any Lien (except those in favor of the Agent for the benefit of
the Banks under the Security Documents), or the inventory, goods, property,
services or other consideration of which such account receivable constitutes
proceeds is subject to any such Lien, (d) in respect of which the inventory,
goods, property, services or other consideration have been rejected or the
amount is in dispute, (e) that is due from any Affiliate or Subsidiary of the
Company, (f) that has been classified by the Company or a Guarantor as doubtful
or has otherwise failed to meet established or customary credit standards of the
Company or a Guarantor , (g) that is payable by any Person located outside the
United States (which shall not be deemed to include any territories of the
United States) and is not supported by letters of credit issued to the Agent by
commercial banks, and in form and substance, acceptable to the Agent, (h) with
respect to which any representation or warranty contained in Section 4.12 is
incorrect at any time, (i) that is payable by the United States or any of its
departments, agencies or instrumentalities or by any state or other governmental
entity, (j) that is payable by any Person as to which 50% or more of the
aggregate amount of such accounts receivable payable by such Person to the
Company and the Guarantors do not otherwise constitute Eligible Accounts
Receivable, (k) that is payable by any Person that is the subject of any
proceeding seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up or reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors or seeking the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property, or that is not generally paying its
debts as they become due or has admitted in writing its inability to pay its
debts generally or has made a general assignment for the benefit of creditors,
(l) that is evidenced by a promissory note or other instrument, (m) that is
subordinate or junior in right or priority of payment to any other obligation or
claim, or (n) that for any other reason is at any time reasonably deemed by the
Agent to be ineligible.
"Eligible Inventory" shall mean, as of any date, that inventory
owned by the Company and the Guarantors that constitutes raw materials or
finished goods in which the Company and the Guarantors have granted to the Agent
for the benefit of the Banks a first-priority perfected security interest
pursuant to the Security Agreements, valued at the lower of cost or market on a
LIFO basis without deduction for any LIFO reserve, except for bottled water,
which is valued on a FIFO basis, but shall not include any such inventory (a)
that does not constitute raw materials or finished goods readily salable or
usable in the business of the Company and the Guarantors (b) that is located
outside the United States (which shall not be deemed to include any territories
of the United States), (c) that is subject to, or any accounts or other proceeds
resulting from the sale or other disposition thereof could be subject to, any
Lien (except those in favor of the Banks and the Agent under the Security
Documents), including any sale on approval or sale or return transaction or any
consignment, (d) that is not in the possession of the Company or a Guarantor
(unless it is in the possession of a bailee which has issued warehouse receipts
therefor that have been delivered to the Agent), (e) that is held for lease or
is the subject of any lease, (f) that is subject to any trademark, trade name or
licensing arrangement, or any law, rule or regulation, that could limit or
impair the ability of the Banks and the Agent to promptly exercise all rights of
the Banks and the Agent under the Security Documents, (g) if such inventory is
located on premises not owned by the Company or a Guarantor and the landlord or
other owner of such premises shall not have waived its distraint, lien and
similar rights with respect to such inventory and shall not have agreed to
permit the Banks and the Agent to enter such premises pursuant to a waiver and
agreement of such Person in favor of and in form and substance acceptable to the
Banks and the Agent, (h) with respect to which any insurance proceeds are not
payable to the Banks and the Agent as a loss payee or are payable to any loss
payee other than the Banks and the Agent or the Company or a Guarantor, (i) with
respect to which warehouse receipts have been issued but have not been delivered
to the Agent, or (j) that for any other reason is at any time reasonably deemed
by the Agent to be ineligible.
"Environmental Laws" at any date shall mean all provisions of
law, statute, ordinances, rules, regulations, judgments, writs, injunctions,
decrees, orders, awards and standards promulgated by the government of the
United States of America or any foreign government or by any state, province,
municipality or other political subdivision thereof or therein, or by any court,
agency, instrumentality, regulatory authority or commission of any of the
foregoing concerning the protection of, or regulating the discharge of
substances into, the environment.
"Equity Interests" shall mean Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations thereunder.
"ERISA Affiliate" shall mean, with respect to any Person, any
trade or business (whether or not incorporated) which, together with such Person
or any Subsidiary of such Person, would be treated as a single employer under
Section 414 of the Code and the regulations promulgated thereunder.
"Eurodollar Business Day" shall mean, with respect to any
Eurodollar Rate Loan, a day which is both a Business Day and a day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Eurodollar Interest Period" shall mean, with respect to any
Eurodollar Rate Loan, the period commencing on the day such Eurodollar Rate Loan
is made or converted to a Eurodollar Rate Loan and ending on the day which is
one, two or three months thereafter, as the Company may elect under Section 2.4
or 2.7, and each subsequent period commencing on the last day of the immediately
preceding Eurodollar Interest Period and ending on the day which is one, two or
three months thereafter, as the Company may elect under Section 2.4 or 2.7,
provided, however, that (a) any Eurodollar Interest Period which commences on
the last Eurodollar Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Eurodollar Business Day of the appropriate
subsequent calendar month, (b) each Eurodollar Interest Period which would
otherwise end on a day which is not a Eurodollar Business Day shall end on the
next succeeding Eurodollar Business Day or, if such next succeeding Eurodollar
Business Day falls in the next succeeding calendar month, on the next preceding
Eurodollar Business Day, and (c) no Eurodollar Interest Period which would end
after the Termination Date shall be permitted.
"Eurodollar Rate" shall mean, with respect to any Eurodollar
Rate Loan and the related Eurodollar Interest Period, the per annum rate that is
equal to the sum of:
the Applicable Margin, plus
the rate per annum obtained by dividing (i) the per annum rate of
interest at which deposits in Dollars for such Eurodollar Interest
Period and in an aggregate amount comparable to the amount of such
Eurodollar Rate Loan to be made by the Agent in its capacity as a Bank
hereunder are offered to the Agent or any of its Affiliates by other
prime banks in the London interbank market at approximately 11:00 a.m.
London time on the second Eurodollar Business Day prior to the first
day of such Eurodollar Interest Period by (ii) an amount equal to one
minus the stated maximum rate (expressed as a decimal) of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) that are specified on the
first day of such Eurodollar Interest Period by the Board of Governors
of the Federal Reserve System (or any successor agency thereto) for
determining the maximum reserve requirement with respect to
eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) maintained by a member bank
of such System;
all as conclusively determined by the Agent, such sum to be rounded up, if
necessary, to the nearest whole multiple of one one-hundredth of one percent
(1/100 of 1%).
"Eurodollar Rate Loan" shall mean any Loan which bears interest
at the Eurodollar Rate.
"Event of Default" shall mean any of the events or conditions
described in Section 6.1.
"Federal Funds Rate" shall mean the per annum rate that is
equal to the average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published by the Federal Reserve Bank of New York for such day, or, if such rate
is not so published for any day, the average of the quotations for such rates
received by the Agent from three federal funds brokers of recognized standing
selected by the Agent in its discretion;
all as conclusively determined by the Agent, such sum to be rounded up, if
necessary, to the nearest whole multiple of one one-hundredth of one percent
(1/100 of 1%), which Federal Funds Rate shall change simultaneously with any
change in such published or quoted rates.
"Funded Debt" as of any date, shall mean without duplication
all interest-bearing Indebtedness including but not limited to the capitalized
portion of all Capital Lease obligations, all as determined for the Company and
its Restricted Subsidiaries on a Consolidated basis.
"Funded Debt Coverage Ratio" shall mean the ratio of Funded
Debt as of the end of any fiscal quarter of the Company to Consolidated Cash
Flow for the period of the four fiscal quarters ending at the end of such fiscal
quarter. In the event that a Restricted Subsidiary shall have been acquired
during such period, the Consolidated Cash Flow used for this ratio shall include
the results of operations of such Restricted Subsidiary for such period.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, as in effect
from time to time.
"Guaranties" shall mean the guaranties entered into by each of
the Guarantors for the benefit of the Agent and the Banks pursuant to Article 8
of this Agreement, as amended or modified from time to time.
"Guarantors" shall mean NWS-Indiana, NWS-Illinois,
NWS-Illinois, LLC, NWS Michigan, Inc., and each Person that enters into a
Guaranty pursuant to Section 5.1(g)(ii).
"Hazardous Materials" includes, without limitation, any
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances or related materials defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.) and
in the regulations adopted and publications promulgated pursuant thereto, or any
other federal, state or local government law, ordinance, rule or regulation.
"Hedging Obligations" shall mean, with respect to any Person,
the obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Indebtedness" of any Person shall mean, as of any date, (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person as lessee under any Capital Lease, (c) all obligations which are secured
by any Lien existing on any asset or property of such Person whether or not the
obligation secured thereby shall have been assumed by such Person (to the extent
of such Lien if such obligation is not assumed), (d) all obligations of such
Person for the unpaid purchase price for goods, property or services acquired by
such Person, except for trade accounts payable arising in the ordinary course of
business that are not aged more than 45 days after the invoice date, (e) all
obligations of such Person to purchase goods, property or services where payment
therefor is required regardless of whether delivery of such goods or property or
the performance of such services is ever made or tendered (generally referred to
as "take or pay contracts"), and (f) all reimbursement obligations of such
Person in respect of letters of credit.
"Intercompany Note" shall mean the promissory note of a
Subsidiary evidencing Indebtedness of such Subsidiary to the Company, in
substantially the form of Exhibit B hereto and "Intercompany Notes" shall mean
all such promissory notes of all of the Restricted Subsidiaries, provided that
the aggregate principal amount of Intercompany Notes at any time outstanding
shall not exceed the aggregate principal amount of the Advances then
outstanding.
"Interest Coverage Ratio" shall mean with respect to the
Company and its Restricted Subsidiaries for any period, the ratio of their
Consolidated Cash Flow for such period to their Interest Expense for such
period. In addition, for purposes of making the computation referred to above,
(i) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with Generally Accepted Accounting Principles, and to
operations or businesses disposed of prior to the date on which the event for
which the calculation of the Interest Coverage Ratio is made (the "Calculation
Date"), shall be excluded, and (ii) the Interest Expense attributable to
discontinued operations, as determined in accordance with Generally Accepted
Accounting Principles, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Interest Expense will not be obligations of the Company or
any of its Restricted Subsidiaries following the Calculation Date.
"Interest Expense" shall mean, with respect to the Company and
its Restricted Subsidiaries for any period, the sum, without duplication, of (i)
their Consolidated interest expense for such period, whether paid or accrued
(including, without limitation, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations, but excluding interest accrued for such period on any NWSI
Shareholder Subordinated Note net of the amount of interest received in cash for
such period with respect to any Company Shareholder Note Receivable and (ii)
their Consolidated interest expense that was capitalized during such period, in
each case on a Consolidated basis and in accordance with Generally Accepted
Accounting Principles.
"Interest Payment Date" shall mean (a) with respect to any
Eurodollar Rate Loan, the last day of each Interest Period with respect to such
Eurodollar Rate Loan and (b) in all other cases, the last Business Day of each
month occurring after the date hereof, commencing with the first such Business
Day occurring after the date of this Agreement.
"Interest Period" shall mean any Eurodollar Interest Period.
"Investments" of any Person shall mean the purchase or other
acquisition of any Capital Stock of or debt securities of or any evidences of
Indebtedness of, any other Person, or the making of any loan or the advance of
any of its funds or property or the making of any other extension of credit to
or the making of any investment or the acquisition of any interest whatsoever
in, any other Person, or the incurrence of any Contingent Liability.
"Letter of Credit" shall mean a standby or commercial letter of
credit having a stated expiry date or a date upon which the draft must be
reimbursed not later than twelve months after the date of issuance and not later
than the fifth Business Day before the Termination Date issued by the Agent on
behalf of the Banks for the account of the Company or one of its Restricted
Subsidiaries under an application and related documentation acceptable to the
Agent requiring, among other things, immediate reimbursement by the Company to
the Agent in respect of all drafts or other demand for payment honored
thereunder and all expenses paid or incurred by the Agent relative thereto.
"Letter of Credit Advance" shall mean any issuance of a Letter
of Credit under Section 2.4 made pursuant to Section 2.1 in which each Bank
acquires a pro rata risk participation pursuant to Section 2.4(d).
"Letter of Credit Documents" shall have the meaning ascribed
thereto in Section 3.3(b).
"Lien" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, option, conditional sale or
title retaining contract, sale and leaseback transaction, financing statement
filing, lessor's or lessee's interest under any lease, subordination of any
claim or right, or any other type of lien, charge, encumbrance, preferential
arrangement or other claim or right.
"Loan" shall mean any borrowing under Section 2.4 evidenced by
the Notes and made pursuant to Section 2.1. Any such Loan or portion thereof may
also be denominated as an Adjusted Base Rate Loan or a Eurodollar Rate Loan and
such Loans are referred to herein as "types" of Loans.
"Loan Documents" shall mean, collectively, this Agreement, the
Notes, the Security Documents and all agreements, instruments and documents
executed pursuant thereto at any time.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, operations or condition (financial or otherwise) of
the Company and its Restricted Subsidiaries on a consolidated basis, (b) the
ability of the Company or any Guarantor to perform its obligations under any
Loan Document, or (c) the validity of enforceability of any Loan Document or the
rights or remedies of the Agent or the Banks under any Loan Document.
"Multiemployer Plan" shall mean any "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
"Net Income" shall mean, for any period, the Consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
taken as a single accounting period, determined in accordance with Generally
Accepted Accounting Principles; provided that in determining Consolidated Net
Income there shall be excluded, without duplication: (a) the income of any
Person in which any Person other than the Company or a Restricted Subsidiary of
the Company has a joint interest or partnership interest, except to the extent
of the amount of dividends or other distributions actually paid to the Company
or each Restricted Subsidiary by such Person during such period, (b) the
proceeds of any insurance policy, (c) gains from the sale, exchange, transfer or
other disposition of property or assets not in the ordinary course of business
of the Company and its Restricted Subsidiaries and related tax effects in
accordance with Generally Accepted Accounting Principles, and (d) any other
extraordinary or non-recurring gains of the Company or any of its Restricted
Subsidiaries or other income which is not from the continuing operations of the
Company and its Restricted Subsidiaries, and related tax effects, in accordance
with Generally Accepted Accounting Principles.
"Non-Recourse Debt" shall mean Indebtedness (i) as to which
neither the Company nor any of its Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender and (ii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Note" shall mean any promissory note of the Company evidencing
the Loans, in substantially the form of Exhibit C hereto as amended or modified
from time to time and together with any promissory note or notes issued in
exchange or replacement therefor.
"NWS-Illinois" shall mean NWS, Inc., an Illinois corporation.
"NWS-Indiana" shall mean National Wine & Spirits Corporation,
an Indiana corporation.
"NWSI Shareholder Subordinated Note" shall mean any note
payable to any shareholder of the Company by NWS, Inc. that is outstanding on
the date of this Agreement and (i) matures on or after February 1, 2004, (ii)
does not require payment of cash interest or redemption prior to maturity, and
(iii) that is Subordinated Debt.
"Overdue Rate" shall mean (a) in respect of principal of
Adjusted Base Rate Loans, a rate per annum that is equal to the sum of three
percent (3%) per annum plus the Adjusted Base Rate, (b) in respect of principal
of Eurodollar Rate Loans, a rate per annum that is equal to the sum of three
percent (3%) per annum plus the per annum rate in effect thereon until the end
of the then current Interest Period for such Loan and, thereafter, a rate per
annum that is equal to the sum of three percent (3%) per annum plus the Adjusted
Base Rate, and (c) in respect of other amounts payable by the Company hereunder
(other than interest), a per annum rate that is equal to the sum of three
percent (3%) per annum plus the Adjusted Base Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean Liens permitted by Section 5.2(d)
hereof.
"Person" shall include an individual, a corporation, an
association, a partnership, a trust or estate, a joint stock company, a limited
liability company, an unincorporated organization, a joint venture, a trade or
business (whether or not incorporated), a government (foreign or domestic) and
any agency or political subdivision thereof, or any other entity.
"Plan" shall mean, with respect to any Person, any pension plan
(including a Multiemployer Plan) subject to Title IV of ERISA or to the minimum
funding standards of Section 412 of the Code which has been established or
maintained by such Person, any Subsidiary of such Person or any ERISA Affiliate,
or by any other Person if such Person, any Subsidiary of such Person or any
ERISA Affiliate could have liability with respect to such pension plan.
"Pledge Agreement" shall mean each pledge agreement entered
into by the Company in favor of the Agent for the benefit of the Banks pursuant
to this Agreement in substantially the form of Exhibit D hereto, as amended or
modified from time to time.
"Prohibited Transaction" shall mean any transaction involving
any Plan which is proscribed by Section 406 of ERISA or Section 4975 of the
Code.
"Reportable Event" shall mean a reportable event as described
in Section 4043(b) of ERISA including those events as to which the thirty (30)
day notice period is waived under Part 2615 of the regulations promulgated by
the PBGC under ERISA.
"Required Banks" shall mean Banks holding not less than (i)
fifty-one percent (51%) of the aggregate principal amount of the Advances then
outstanding or (ii) fifty-one percent (51%) of the Commitments if no Advances
are then outstanding.
"Requirement of Law" shall mean as to any Person, the
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other governmental authority, in
each case applicable to or binding upon such Person or any of its property to
which such Person or any of its property is subject.
"Restricted Payment" shall mean with respect to the Company or
any Restricted Subsidiary, any dividend, payment or other distribution in
respect of any class of its Capital Stock or any dividend, payment or
distribution in connection with the redemption, purchase, retirement or other
acquisition, directly or indirectly, of any shares of its Capital Stock other
than such dividends, payments or other distributions to the extent payable
solely in shares of the Capital Stock of the Company or to the extent payable to
the Company by a Restricted Subsidiary of the Company.
"Restricted Subsidiary" of a Person shall mean any Subsidiary
of the referent Person that is not an Unrestricted Subsidiary.
"Security Agreement" shall mean each security agreement entered
into by the Company or any Guarantor for the benefit of the Agent and the Banks
pursuant to this Agreement in substantially the form of Exhibit E hereto, as
amended or modified from time to time.
"Security Documents" shall mean, collectively, the Pledge
Agreement, the Security Agreements, and the Guaranties and all other related
agreements and documents, including financing statements and similar documents,
delivered pursuant to this Agreement or otherwise entered into by any Person to
secure the Advances.
"Senior Unsecured Debt" shall mean an aggregate amount of not
less than $100,000,000 of senior unsecured notes issued by the Company on
January 25, 1999 and maturing in 2009.
"Subordinated Debt" of any Person shall mean, as of any date,
that Indebtedness of such Person for borrowed money which is expressly
subordinate and junior in right and priority of payment to the Advances and
other Indebtedness of such Person to the Banks in manner and by agreement
satisfactory in form and substance to the Agent including without limitation
maturities, covenants, defaults, rates and fees acceptable to the Agent.
"Subsidiary" of any Person shall mean any other Person (whether
now existing or hereafter organized or acquired) in which (other than directors
qualifying shares required by law) at least a majority of the securities or
other ownership interests of each class having ordinary voting power or
analogous right (other than securities or other ownership interests which have
such power or right only by reason of the happening of a contingency), at the
time as of which any determination is being made, are owned, beneficially and of
record, by such Person or by one or more of the other Restricted Subsidiaries of
such Person or by any combination thereof. Unless otherwise specified, reference
to "Subsidiary" shall mean a Subsidiary of the Company.
"Termination Date" shall mean the earlier to occur of (a)
January 25, 2004 and (b) the date on which the Commitments shall be terminated
pursuant to Section 2.2 or 6.2.
"Unrestricted Subsidiary" shall mean (i) any Subsidiary of the
Company (other than the Guarantors or any successor to any of them) that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
resolution of such Board; but only to the extent that such Subsidiary: (a) has
no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Agent by filing with the Agent a certified
copy of the resolution of such Board giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing conditions and did not violate any covenant of this Agreement. If, at
any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the indenture with respect to the Senior
Unsecured Debt and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under any covenant
herein, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant contained in this Agreement, (ii) no Default or Event of Default
would be in existence following such designation.
"Year 2000 Issues" shall mean anticipated costs, problems and
uncertainties associated with the inability of certain computer applications to
effectively handle data including dates on and after January 1, 2000, as such
inability affects the business, operations and financial condition of the
Company and its Restricted Subsidiaries and of the Company's and its
Subsidiaries' material customers, suppliers and vendors.
"Year 2000 Program" is defined in Section 4.17.
Other Definitions; Rules of Construction. As used herein, the
terms "Agent", "Banks", "Company" and "this Agreement" shall have the respective
meanings ascribed thereto in the introductory paragraph of this Agreement, and
the term "Guaranteed Obligations" shall have the meaning ascribed thereto in
Section 8.1 of this Agreement. Such terms, together with the other terms defined
in Section 1.1, shall include both the singular and the plural forms thereof and
shall be construed accordingly. All computations required hereunder and all
financial terms used herein shall be made or construed in accordance with
Generally Accepted Accounting Principles unless such principles are inconsistent
with the express requirements of this Agreement; provided that, if the Company
notifies the Agent that the Company wishes to amend any covenant in Article V to
eliminate the effect of any change in Generally Accepted Accounting Principles
in the operation of such covenant (or if the Agent notifies the Company that the
Required Banks wish to amend Article V for such purpose), then the Company's
compliance with such covenant shall be determined on the basis of Generally
Accepted Accounting Principles in effect immediately before the relevant change
in Generally Accepted Accounting Principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Company and the Required Banks. Use of the terms "herein", "hereof", and
"hereunder" shall be deemed references to this Agreement in its entirety and not
to the Section or clause in which such term appears. References to "Sections"
and "subsections" shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided.
ARTICLE 2.
THE COMMITMENTS AND THE ADVANCES
Commitment of the Banks.
Advances. Each Bank agrees, for itself only, subject to the terms and
conditions of this Agreement, to make Loans to the Company pursuant to Section
2.4 and Section 3.3 and to participate in Letter of Credit Advances to the
Company pursuant to Section 2.4, from time to time from and including the
Effective Date to but excluding the Termination Date, not to exceed in aggregate
principal amount at any time outstanding the amount determined pursuant to
Section 2.1(b).
Limitation on Amount of Advances. Notwithstanding anything in this
Agreement to the contrary, (i) the aggregate principal amount of the Advances
made by any Bank at any time outstanding shall not exceed the amount of its
respective Commitment as of the date any such Advance is made, provided,
however, that the aggregate principal amount of Letter of Credit Advances
outstanding at any time shall not exceed $5,000,000, and (ii) the aggregate
principal amount of all Advances at any time outstanding shall not exceed the
amount of the Borrowing Base as of the date of the Borrowing Base Certificate
dated or next preceding the date any such Advance is made.
Termination and Reduction of Commitments.
The Company shall have the right to terminate or reduce the Commitments at
any time and from time to time at its option, provided that (i) the Company
shall give notice of such termination or reduction to the Agent (with sufficient
executed copies for each Bank) specifying the amount and effective date thereof,
(ii) each partial reduction of the Commitments shall be in a minimum amount of
$5,000,000 and in an integral multiple of $1,000,000 and shall reduce the
Commitments of all of the Banks proportionately in accordance with the
respective commitment amounts for each such Bank set forth in the signature
pages hereof next to name of each such Bank, (iii) no such termination or
reduction shall be permitted with respect to any portion of the Commitments as
to which a request for an Advance pursuant to Section 2.4 is then pending and
(iv) the Commitments may not be terminated if any Advances are then outstanding
and may not be reduced below the principal amount of Advances then outstanding.
The Commitments or any portion thereof terminated or reduced pursuant to this
Section 2.2, whether optional or mandatory, may not be reinstated.
For purposes of this Agreement, a Letter of Credit advance (i) shall be
deemed outstanding in an amount equal to the sum of the maximum amount available
to be drawn under the related Letter of Credit on or after the date of
determination and on or before the stated expiry date thereof plus the amount of
any draws under such Letter of Credit that have not been reimbursed as provided
in Section 3.3 and (ii) shall be deemed outstanding at all times on and before
such stated expiry date or such earlier date on which all amounts available to
be drawn under such Letter of Credit have been fully drawn, and thereafter until
all related reimbursement obligations have been paid pursuant to Section 3.3. As
provided in Section 3.3, upon each payment made by the Agent in respect of any
draft or other demand for payment under any Letter of Credit, the amount of any
Letter of Credit Advance outstanding immediately prior to such payment shall be
automatically reduced by the amount of each Loan deemed advanced in respect of
the related reimbursement obligation of the Company.
Fees.
The Company agrees to pay to each Bank a commitment fee on the daily
average unused amount of its respective Commitment, for the period from the
Effective Date to but excluding the Termination Date, at a rate equal to
one-half of one percent (1/2 of 1%) per annum during the period ending on the
30th day of April, 1999, and thereafter at a per annum rate equal to the
Applicable Margin. Accrued commitment fees shall be payable quarterly in arrears
on the last Business Day of each March, June, September and December, commencing
on the first such Business Day occurring after the Effective Date, and on the
Termination Date.
The Company agrees to pay to the Banks a facility fee in the amount of
$150,000. Such facility fee shall be payable on or prior to the Effective Date.
On or before the date of issuance of any Letter of Credit, the Company
agrees (i) to pay to the Banks in the case of a standby Letter of Credit a fee
computed at a per annum rate equal to the Applicable Margin for Eurodollar Rate
Loans in effect at the time of issuance of such Letter of Credit for the period
from and including such date to and including the stated expiry date of such
Letter of Credit, and in the case of a commercial Letter of Credit equal to
one-half of one percent (1/2 of 1%), in both cases of the maximum amount
available to be drawn under such Letter of Credit, and (ii) to pay an additional
fee to the Agent for its own account computed at a per annum rate equal to
one-quarter of one percent (1/4 of 1%) on such maximum amount. Such fees are
nonrefundable and the Company shall not be entitled to any rebate of any portion
thereof if such Letter of Credit does not remain outstanding through its stated
expiry date or for any other reason. The Company further agrees to pay to the
Agent, on demand, such other customary administrative fees, charges and expenses
of the Agent in respect of the issuance, negotiation, acceptance, amendment,
transfer and payment of such Letter of Credit or otherwise payable pursuant to
the application and related documentation under which such Letter of Credit is
issued.
The Company agrees to pay to the Agent an agency fee for its services as
Agent under this Agreement in such amounts as may from time to time be agreed
upon by the Company and the Agent.
Disbursement of Advances.
The Company shall give the Agent telephonic notice of its request for each
Advance not later than 2:00 p.m. Detroit time (i) three Eurodollar Business Days
prior to the date such Advance is requested to be made if such Advance is to be
made as a Eurodollar Rate Loan, (ii) five Business Days prior to the date any
Letter of Credit Advance is requested to be made, and (iii) on the same Business
Day that such Advance is requested to be made in all other cases, which notice
shall specify whether a Eurodollar Rate Loan or Adjusted Base Rate Loan or a
Letter of Credit Advance is requested and, in the case of each requested
Eurodollar Rate Loan, the Interest Period to be initially applicable to such
Loan and, in the case of each Letter of Credit Advance, such information as may
be necessary for the issuance thereof by the Agent. The Agent, not later than
the date of any requested Adjusted Base Rate Loan and not later than the
Business Day next succeeding the day such notice is given with respect to a
Letter of Credit Advance and not later than the day such notice is given with
respect to a Eurodollar Rate Loan, shall provide notice of such requested
Advance to each Bank, provided that in the case of Adjusted Base Rate Loans
where the Agent elects to settle with the Banks weekly instead of at the time of
each such Loan, the Agent shall provide notice of such Loans on the weekly
settlement date next following the dates on which they are requested. Subject to
the terms and conditions of this Agreement, the proceeds of each such requested
Loan shall be made available to the Company by depositing the proceeds thereof
in immediately available funds, in an account maintained and designated by the
Company at the principal office of the Agent. Subject to the terms and
conditions of this Agreement, the Agent shall, on the date any Letter of Credit
Advance is requested to be made, issue the related Letter of Credit on behalf of
the Banks for the account of the Company. Notwithstanding anything herein to the
contrary, the Agent may decline to issue any requested Letter of Credit on the
basis that the beneficiary, the purpose of issuance or the terms or the
conditions of drawing are unacceptable to it in its reasonable discretion.
Each Bank, on the date any Borrowing in the form of a Loan is requested to
be made, or on the date the Agent requests such Bank to make available its share
of such Borrowing pursuant to Section 2.4(c), shall make its pro rata share of
such Borrowing available in immediately available, freely transferable, cleared
funds for disbursement to the Company or application by the Agent to a reduction
of its Loans made pursuant to Section 2.4(c), pursuant to the terms and
conditions of this Agreement at the principal office of the Agent. Unless the
Agent shall have received notice from any Bank prior to the date such Borrowing
is requested to be made under this Section 2.4 that such Bank will not make
available to the Agent such Bank's pro rata portion of such Borrowing, the Agent
may assume that such Bank has made such portion available to the Agent on the
date such Borrowing is requested to be made in accordance with this Section 2.4.
If and to the extent such Bank shall not have so made such pro rata portion
available to the Agent, the Agent may (but shall not be obligated to) make such
amount available to the Company, and such Bank and the Company severally agree
to pay to the Agent forthwith on demand such amount together with interest
thereon, for each day from the date such amount is made available to the Company
by the Agent until the date such amount is repaid to the Agent, at the Federal
Funds Rate. If such Bank shall pay such amount to the Agent together with
interest, such amount so paid shall constitute a Loan by such Bank as a part of
such the related Borrowing for purposes of this Agreement. The failure of any
Bank to make its pro rata portion of any such Borrowing available to the Agent
shall not relieve any other Bank of its obligations to make available its pro
rata portion of such Borrowing on the date such Borrowing is requested to be
made, but no Bank shall be responsible for failure of any other Bank to make
such pro rata portion available to the Agent on the date of any such Borrowing.
Administrative Convenience Loans.
(i) With respect to any Adjusted Base Rate Loan requested on a day other
than the day chosen by the Agent for weekly settlements with the Banks, the
Agent may elect, for administrative convenience, to make such requested Loan
itself and to defer until the next following weekly settlement date notifying
the Banks of such requested Loan. Each Bank's Commitment shall be deemed
utilized by an amount equal to such Bank's pro rata share (based on such Bank's
Commitment) of each such Loan made solely by the Agent for purposes of
determining the amount of Advances required to be made by such Bank, but no
Bank's Commitment, other than the Agent's, shall be deemed utilized for purposes
of determining commitment fees under Section 2.3(a). Each Bank shall be
absolutely and unconditionally obligated to fund its pro rata share (based on
such Bank's Commitment) of any such Loan or, if applicable, purchase a
participating interest in any such Loan pursuant to Section 2.4(c)(ii) and such
obligation shall not be affected by any circumstance, including, without
limitation, (A) any set-off, counterclaim, recoupment, defense or other right
which such Bank has or may have against the Agent or anyone else for any reason
whatsoever; (B) the occurrence or continuance of a Default or an Event of
Default, subject to Section 2.4(c)(ii); (C) any adverse change in the condition
(financial or otherwise) of the Company or any of its Restricted Subsidiaries;
(D) any breach of this Agreement by the Company or any of the Guarantors or any
other Bank; or (E) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing (including without limitation the
Company's failure to satisfy any conditions contained in Article II or any other
provision of this Agreement).
(ii) If, for any reason (including without limitation as a result of the
occurrence of an Event of Default with respect to the Company pursuant to
Section 6.1(h)), Loans may not be made by the Banks as described in Section
2.4(c)(i), then (A) the Company agrees that each Loan not paid pursuant to
Section 2.4(c)(i) shall bear interest, payable on demand by the Agent, at the
Overdue Rate, and (B) effective on the date each such Loan would otherwise have
been made by it, each Bank severally agrees that it shall unconditionally and
irrevocably, without regard to the occurrence of any Default or Event of
Default, in lieu of deemed disbursement of loans, to the extent of such Bank's
Commitment, purchase a participating interest in each such Loan by paying its
participation percentage thereof. Each Bank will immediately transfer to the
Agent, in same day funds, the amount of its participation. Each Bank shall share
on a pro rata basis (calculated by reference to its Commitment) in any interest
which accrues thereon and in all repayments thereof. If and to the extent that
any Bank shall not have so made the amount of such participating interest
available to the Agent, such Bank and the Company severally agree to pay to the
Agent forthwith on demand such amount together with interest thereon, for each
day from the date of demand by the Agent until the date such amount is paid to
the Agent, at (x) in the case of the Company, the interest rate specified above
and (y) in the case of such Bank, the Federal Funds Rate.
All Loans made under this Section 2.4 shall be evidenced by the Notes, and
all such Loans shall be due and payable and bear interest as provided in Article
III. Each Bank is hereby authorized by the Company to record on the schedule
attached to the Notes, or in its books and records, the date, amount and type of
each Loan and the duration of the related Interest Period (if applicable), the
amount of each payment or prepayment of principal thereon, and the other
information provided for on such schedule, which schedule or books and records,
as the case may be, shall constitute prima facie evidence of the information so
recorded, provided, however, that failure of any Bank to record, or any error in
recording, any such information shall not relieve the Company of its obligation
to repay the outstanding principal amount of the Loans, all accrued interest
thereon and other amounts payable with respect thereto in accordance with the
terms of the Notes and this Agreement. Subject to the terms and conditions of
this Agreement, the Company may borrow Loans under this Section 2.4 and under
Section 3.3, prepay Loans pursuant to Section 3.1 and reborrow Loans under this
Section 2.4 and under Section 3.3.
Nothing in this Agreement shall be construed to require or authorize any
Bank to issue any Letter of Credit, it being recognized that the Agent has the
sole obligation under this Agreement to issue Letters of Credit on behalf of the
Banks, and the Commitment of each Bank with respect to Letter of Credit Advances
is expressly conditioned upon the Agent's performance of such obligations. Upon
such issuance by the Agent, each Bank shall automatically acquire a pro rata
risk participation interest in such Letter of Credit Advance based on the amount
of its respective Commitment. If the Agent shall honor a draft or other demand
for payment presented or made under any Letter of Credit, the Agent shall
provide notice thereof to each Bank on the date such draft or demand is honored
unless the Company shall have satisfied its reimbursement obligation under
Section 3.3 by payment to the Agent on such date. Each Bank, on such date, shall
make its pro rata share of the amount paid by the Agent available in immediately
available funds at the principal office of the Agent for the account of the
Agent. If and to the extent such Bank shall not have made such pro rata portion
available to the Agent, such Bank and the Company severally agree to pay to the
Agent forthwith on demand such amount together with interest thereon, for each
day from the date such amount was paid by the Agent until such amount is so made
available to the Agent at a per annum rate equal to the Federal Funds Rate. If
such Bank shall pay such amount to the Agent together with such interest, such
amount so paid shall constitute a Loan by such Bank as part of the Borrowing
disbursed in respect of the reimbursement obligation of the Company under
Section 3.3 for purposes of this Agreement. The failure of any Bank to make its
pro rata portion of any such amount paid by the Agent available to the Agent
shall not relieve any other Bank of its obligation to make available its pro
rata portion of such amount, but no Bank shall be responsible for failure of any
other Bank to make such pro rata portion available to the Agent.
Conditions for First Disbursement. The obligation of the Banks to make the
first Advance hereunder is subject to receipt by each Bank and the Agent of the
following documents and completion of the following matters, in form and
substance satisfactory to each Bank and the Agent:
Charter Documents. Certificates of recent date of the appropriate authority
or official of the Company's and each Guarantor's respective state of
incorporation or organization (listing all charter documents of the Company and
each Guarantor, respectively, on file in that office if such listing is
available) and certifying as to the good standing and corporate existence of the
Company and each Guarantor that is a corporation, and as to the existence and
status of each Guarantor that is a limited liability company, together with
copies of such charter documents of the Company and each Guarantor, certified as
of a recent date by such authority or official and certified as true and correct
as of the Effective Date by a duly authorized officer of the Company;
By-Laws and Corporate Authorizations. Copies of the by-laws or operating
agreement of the Company and each Guarantor together with all authorizing
resolutions and evidence of other corporate or limited liability company action
taken by the Company and each Guarantor to authorize the execution, delivery and
performance by the Company and each Guarantor of this Agreement, the Notes and
the Security Documents to which the Company and such Guarantor, respectively, is
a party and the consummation by the Company and such Guarantor, respectively, of
the transactions contemplated hereby, certified as true and correct as of the
Effective Date by a duly authorized officer of the Company and each Guarantor,
respectively;
Incumbency Certificate. Certificates of incumbency of the Company and each
Guarantor containing, and attesting to the genuineness of, the signatures of
those officers, members or managers authorized to act on behalf of the Company
and such Guarantor in connection with this Agreement, the Notes and the Security
Documents to which the Company or such Guarantor is a party and the consummation
by the Company and such Guarantor of the transactions contemplated hereby,
certified as true and correct as of the Effective Date by a duly authorized
officer of the Company and each Guarantor;
Notes. The Notes duly executed on behalf of the Company for each Bank;
Security Documents. The Security Documents duly executed on behalf of the
Company and each Guarantor, as the case may be, granting to the Banks and the
Agent the collateral and security intended to be provided pursuant to Section
2.11, together with:
Recording, Filing, Etc. Evidence of the recordation, filing and other
action (including payment of any applicable taxes or fees) in such jurisdictions
as the Agent may deem necessary or appropriate with respect to the Security
Documents, including the filing of financing statements and similar documents
which the Agent may deem necessary or appropriate to create, preserve or perfect
the liens, security interests and other rights intended to be granted to the
Banks or the Agent thereunder, together with Uniform Commercial Code record
searches in such offices as the Agent may request;
Leased Property; Landlord Waivers. A schedule setting forth all real
property leased by the Company and each Guarantor in which inventory is located,
together with copies of the related leases, certified as true and correct as of
the Effective Date by a duly authorized officer of the Company, and an agreement
of each landlord under such leases, in form and substance acceptable to the
Banks and the Agent, waiving its distraint, lien and similar rights with respect
to any property subject to the Security Documents and agreeing to permit the
Banks and the Agent to enter such premises in connection therewith;
Casualty and Other Insurance. Evidence that the casualty and other
insurance required pursuant to Section 5.1(c) of this Agreement and pursuant to
each Security Agreement is in full force and effect; and
Intercompany Notes and Security Agreements. The original copies of the
Intercompany Notes, and copies of security agreements and financing statements
given by the Guarantors to the Company granting to the Company security
interests in their accounts and inventory, that are expressly made junior to the
security interest of the Agent in such assets, and that in the case of such
financing statements show the assignment by the Company of its rights as secured
party to the Agent.
(f) Subordination Agreements with respect to Shareholder Subordinated Debt.
Subordination agreements executed by James LaCrosse and Norma Johnston
subordinating to the Loans all Indebtedness to them for borrowed money of the
company and the Guarantors.
(g) Subrogation and Contribution Agreement. A subrogation and contribution
agreement in form satisfactory to the Agent executed by the Guarantors.
(h) Legal Opinions. The favorable written opinion of Ice Miller Donadio &
Ryan, counsel for the Company and each Guarantor in substantially the form of
Exhibit F hereto.
(i) Consents, Approvals, Etc. Copies of all governmental and
nongovernmental consents, approvals, authorizations, declarations, registrations
or filings, if any, required on the part of the Company or any Guarantor in
connection with the execution, delivery and performance of this Agreement, the
Notes, the Security Documents or the transactions contemplated hereby or as a
condition to the legality, validity or enforceability of this Agreement, the
Notes or any of the Security Documents, certified as true and correct and in
full force and effect as of the Effective Date by a duly authorized officer of
the Company, or, if none are required, a certificate of such officer to that
effect;
(j) Fees. The facility fee described in Section 2.3(b); and
(k) Senior Unsecured Debt Issue and Repayment of Indebtedness. The Company
shall have successfully placed the issue of Senior Unsecured Debt and shall have
applied the proceeds thereof and of Loans under this Agreement to repay all
Indebtedness and other obligations outstanding under the Second Amended and
Restated Credit Agreement among NWS-Indiana, certain lenders, NBD Bank and NBD
Bank, N.A. as Agents dated September 2, 1997 and all Indebtedness and other
obligations of NWS-Illinois and NWS-Illinois, LLC under the Second Amended and
Restated Credit Agreement among NWS-Illinois certain lenders and NBD Bank and
NBD Bank, N.A., as Agents, dated as of September 2, 1997, and other debt
described on Schedule 2.5(k) hereof; and the Banks shall have received certified
copies of the documents evidencing the Senior Unsecured Debt issue.
(l) Solvency Certificate. A Solvency Certificate from each of the Company
and the Guarantors in a form acceptable to the Agent.
(m) Year 2000. Information reasonably satisfactory to the Agent and the
Required Banks regarding the Company's Year 2000 Program.
(n) Other. Such other documents, and completion of such other matters, as
the Agent may reasonably request.
Further Conditions for Disbursements. The obligation of the Banks to make
any Advance (including the first Advance), or any continuation or conversion
under Section 2.7 is further subject to the satisfaction of the following
conditions precedent:
The representations and warranties contained in Article 4 hereof and in the
Security Documents shall be true and correct on and as of the date such Advance
is made (both before and after such Advance is made) as if such representations
and warranties were made on and as of such date;
No Default or Event of Default shall exist or shall have occurred and be
continuing on the date such Advance is made (whether before or after such
Advance is made); The Agent shall have received the latest Borrowing Base
Certificate required pursuant to Section 5.1(d)(v) prior to the date such
Advance is made; and
In the case of any Letter of Credit Advance, the Company shall have
delivered to the Agent an application for the related Letter of Credit and other
related documentation requested by and acceptable to the Agent appropriately
completed and duly executed on behalf of the Company.
The Company shall be deemed to have made a representation and warranty to the
Banks at the time of the making of, and the continuation or conversion of, each
Advance to the effects set forth in clauses (a) and (b) of this Section 2.6. For
purposes of this Section 2.6 the representations and warranties contained in
Section 4.6 hereof shall be deemed made with respect to both the financial
statements referred to therein and the most recent financial statements
delivered pursuant to Section 5.1(d)(ii) and (iii).
Subsequent Elections as to Loans. The Company may elect (a) to
continue a Eurodollar Rate Loan, or a portion thereof, as a Eurodollar Rate Loan
or (b) may elect to convert a Eurodollar Rate Loan, or a portion thereof, to a
Loan of another type or (c) elect to convert an Adjusted Base Rate Loan, or a
portion thereof, to a Eurodollar Rate Loan in each case by giving telephonic
notice thereof to the Agent not later than 2:00 p.m. Detroit time four
Eurodollar Business Days prior to the date any such continuation of or
conversion to a Eurodollar Rate Loan is to be effective and not later than 2:00
p.m. Detroit time one Business Day prior to the date such continuation or
conversion is to be effective in all other cases, provided that an outstanding
Eurodollar Rate Loan may only be converted on the last day of the then current
Interest Period with respect to such Loan, and provided, further, if a
continuation of a Loan as, or a conversion of a Loan to, a Eurodollar Rate Loan
is requested, such notice shall also specify the Interest Period to be
applicable thereto upon such continuation or conversion. The Agent, not later
than the Business Day next succeeding the day such notice is given, shall
provide notice of such election to the Banks. If the Company shall not timely
deliver such a notice with respect to any outstanding Eurodollar Rate Loan, the
Company shall be deemed to have elected to convert such Eurodollar Rate Loan to
an Adjusted Base Rate Loan on the last day of the then current Interest Period
with respect to such Loan.
Limitation of Requests and Elections. Notwithstanding any
other provision of this Agreement to the contrary, if, upon receiving a request
for a Eurodollar Rate Loan pursuant to Section 2.4, or a request for a
continuation of a Eurodollar Rate Loan as a Eurodollar Rate Loan of the then
existing type, or a request for a conversion of an Adjusted Base Rate Loan to a
Eurodollar Rate Loan pursuant to Section 2.7, (a) in the case of any Eurodollar
Rate Loan, deposits in Dollars for periods comparable to the Interest Period
elected by the Company are not available to any Bank in the London interbank
market, or (b) the Eurodollar Rate will not adequately and fairly reflect the
cost to any Bank of making, funding or maintaining the related Eurodollar Rate
Loan, or (c) by reason of national or international financial, political or
economic conditions or by reason of any applicable law, treaty or other
international agreement, rule or regulation (whether domestic or foreign) now or
hereafter in effect, or the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Bank with any guideline, request or directive of
such authority (whether or not having the force of law), including without
limitation exchange controls, it is impracticable, unlawful or impossible for,
or shall limit or impair the ability of, (i) any Bank to make or fund the
relevant Loan or to continue such Loan as a Loan of the then existing type or to
convert a Loan to such a Loan or (ii) the Company to make or any Bank to receive
any payment under this Agreement at the place specified for payment hereunder or
to freely convert any amount paid into Dollars at market rates of exchange or to
transfer any amount paid or so converted to the address of its principal office
specified in Section 9.2, then the Company shall not be entitled, so long as
such circumstances continue, to request a Loan of the affected type pursuant to
Section 2.4 or a continuation of or conversion to a Loan of the affected type
pursuant to Section 2.7. In the event that such circumstances no longer exist,
the Banks shall again consider requests for Loans of the affected type pursuant
to Section 2.4, and requests for continuations of and conversions to Loans of
the affected type pursuant to Section 2.7.
Minimum Amounts; Limitation on Number of Loans; Etc. Except
for (a) Advances which exhaust the entire remaining amount of the Commitments,
and (b) payments required pursuant to Section 3.1(c) or Section 3.8, each
Eurodollar Rate Loan and each continuation of or conversion to a Eurodollar Rate
Loan pursuant to Section 2.7 and each prepayment thereof shall be in a minimum
amount of $3,000,000 and in an integral multiple of $1,000,000, and each
Adjusted Base Rate Loan and each continuation of or conversion to an Adjusted
Base Rate Loan shall be in a minimum amount of $250,000 and in an integral
multiple of $50,000. The aggregate number of Eurodollar Rate Loans outstanding
at any one time under this Agreement may not exceed five.
Borrowing Base Adjustments. The Company agrees that if at any
time any trade account receivable or any inventory of the Company fails to
constitute an Eligible Account Receivable or Eligible Inventory, as the case may
be, for any reason, the Agent may, at any time and notwithstanding any prior
classification of eligibility, classify such asset or property as ineligible and
exclude the same from the computation of the Borrowing Base without in any way
impairing the rights of the Banks and the Agent in and to the same under the
Security Agreement.
Security and Collateral. To secure the payment when due of the
Notes and all other obligations of the Company under this Agreement to the Banks
and the Agent, the Company shall execute and deliver, or cause to be executed
and delivered, to the Banks and the Agent Security Documents granting the
following:
Security interests in all present and future accounts and inventory of the
Company.
Security interests in all present and future accounts and inventory of the
Guarantors.
Security interests in the Intercompany Notes and in the collateral securing
such Intercompany Notes.
ARTICLE 3.
PAYMENTS AND PREPAYMENTS OF ADVANCES
Principal Payments and Prepayments.
Unless earlier payment is required under this Agreement, the Company shall
pay to the Banks on the Termination Date the entire outstanding principal amount
of the Loans.
The Company may at any time and from time to time prepay all or a portion
of the Loans, without premium or penalty, provided that (i) the Company may not
prepay any portion of any Loan as to which an election for a continuation of or
a conversion to a Eurodollar Rate Loan is pending pursuant to Section 2.4, and
(ii) unless earlier payment is required under this Agreement, any Eurodollar
Rate Loan may only be prepaid on the last day of the then current Interest
Period with respect to such Loan.
If at any time the aggregate outstanding principal amount of the Revolving
Credit Advances shall exceed the lesser of Borrowing Base or the aggregate
Commitments, the Company shall forthwith pay to the Bank, without demand, an
amount not less than the amount of such excess for application to the
outstanding principal amount of the Loans, provided that if any such prepayment
would be in excess of the outstanding amount of the Loans, the Company shall
deliver cash collateral to the Agent to secure the outstanding Letters of Credit
in the amount of such excess which is greater than the outstanding Loans and the
Company hereby grants to the Agent, for the benefit of the Banks, a first
priority lien and security interest in such collateral, and all such cash
collateral shall be under the sole and exclusive control of the Agent.
Interest Payments. The Company shall pay interest to the Banks on the
unpaid principal amount of each Loan, for the period commencing on the date such
Loan is made until such Loan is paid in full, on each Interest Payment Date and
at maturity (whether at stated maturity, by acceleration or otherwise), and
thereafter on demand, at the following rates per annum:
During such periods that such Loan is an Adjusted Base Rate Loan, the
Adjusted Base Rate.
During such periods that such Loan is a Eurodollar Rate Loan, the
Eurodollar Rate applicable to such Loan for each related Eurodollar Interest
Period.
Notwithstanding the foregoing paragraphs (a) and (b), the Company shall pay
interest on demand by the Agent at the Overdue Rate on the outstanding principal
amount of any Loan and any other amount payable by the Company hereunder (other
than interest) at any time on or after an Event of Default if required in
writing by the Required Banks.
Letter of Credit Reimbursement Payments.
(i) The Company agrees to pay to the Banks, on the day on which the Agent
shall honor a draft or other demand for payment presented or made under any
Letter of Credit, an amount equal to the amount paid by the Agent in respect of
such draft or other demand under such Letter of Credit and all expenses paid or
incurred by the Agent relative thereto. Unless the Company shall have made such
payment to the Banks on such day, upon each such payment by the Agent, the Agent
shall be deemed to have disbursed to the Company, and the Company shall be
deemed to have elected to satisfy its reimbursement obligation by, a Loan
bearing interest at the Adjusted Base Rate for the account of the Banks in an
amount equal to the amount so paid by the Agent in respect of such draft or
other demand under such Letter of Credit. Such Loan shall be disbursed
notwithstanding any failure to satisfy any conditions for disbursement of any
Loan set forth in Article II hereof and, to the extent of the Loan so disbursed,
the reimbursement obligation of the Company under this Section 3.3 shall be
deemed satisfied; provided, however, that nothing in this Section 3.3 shall be
deemed to constitute a waiver of any Default or Event of Default caused by the
failure to the conditions for disbursement or otherwise.
(ii) If, for any reason (including without limitation as a result of the
occurrence of an Event of Default with respect to the Company pursuant to
Section 6.1(h)), Adjusted Base Rate Loans may not be made by the Banks as
described in Section 3.3(a)(i), then (A) the Company agrees that each
reimbursement amount not paid pursuant to the first sentence of Section
3.3(a)(i) shall bear interest, payable on demand by the Agent, at the interest
rate then applicable to Adjusted Base Rate Loans, and (B) effective on the date
each such Adjusted Base Rate Loan would otherwise have been made, each Bank
severally agrees that it shall unconditionally and irrevocably, without regard
to the occurrence of any Default or Event of Default, in lieu of deemed
disbursement of loans, to the extent of such Bank's Commitment, purchase a
participating interest in each reimbursement amount. Each Bank will immediately
transfer to the Agent, in same day funds, the amount of its participation. Each
Bank shall share on a pro rata basis (calculated by reference to its Commitment)
in any interest which accrues thereon and in all repayments thereof. If and to
the extent that any Bank shall not have so made the amount of such participating
interest available to the Agent, such Bank and the Company severally agree to
pay to the Agent forthwith on demand such amount together with interest thereon,
for each day from the date of demand by the Agent until the date such amount is
paid to the Agent, at (x) in the case of the Company, the interest rate then
applicable to Adjusted Base Rate Loans and (y) in the case of such Bank, the
Federal Funds Rate.
The reimbursement obligation of the Company under this Section 3.3 shall be
absolute, unconditional and irrevocable and shall remain in full force and
effect until all obligations of the Company to the Banks hereunder shall have
been satisfied, and such obligations of the Company shall not be affected,
modified or impaired upon the happening of any event, including without
limitation, any of the following, whether or not with notice to, or the consent
of, the Company:
Any lack of validity or enforceability of any Letter of Credit or any
documentation relating to any Letter of Credit or to any transaction related in
any way to such Letter of Credit (the "Letter of Credit Documents");
Any amendment, modification, waiver, consent, or any substitution, exchange
or release of or failure to perfect any interest in collateral or security, with
respect to any of the Letter of Credit Documents;
The existence of any claim, setoff, defense or other right which the
Company may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Persons or entities for whom any such beneficiary or
any such transferee may be acting), the Agent or any Bank or any other Person or
entity, whether in connection with any of the Letter of Credit Documents, the
transactions contemplated herein or therein or any unrelated transactions;
Any draft or other statement or document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
Payment by the Agent to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of the Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to such Letter of Credit;
Any failure, omission, delay or lack on the part of the Agent or any Bank
or any party to any of the Letter of Credit Documents to enforce, assert or
exercise any right, power or remedy conferred upon the Agent, any Bank or any
such party under this Agreement or any of the Letter of Credit Documents, or any
other acts or omissions on the part of the Agent, any Bank or any such party;
Any other event or circumstance that would, in the absence of this clause,
result in the release or discharge by operation of law or otherwise of the
Company from the performance or observance of any obligation, covenant or
agreement contained in this Section 3.3.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which the Company has or may have against the
beneficiary of any Letter of Credit shall be available hereunder to the Company
against the Agent or any Bank.
Payment Method.
All payments to be made by the Company hereunder will be made to the Agent
for the account of the Banks in Dollars and in immediately available funds not
later than 1:00 p.m. at the principal office of the Agent specified in Section
9.2. Payments received after 1:00 p.m. at the place for payment shall be deemed
to be payments made prior to 1:00 p.m. at the place for payment on the next
succeeding Business Day. The Company hereby authorizes the Agent to charge its
account with the Agent in order to cause timely payment of amounts due hereunder
to be made (subject to sufficient funds being available in such account for that
purpose).
At the time of making each such payment, the Company shall, subject to the
other terms and conditions of this Agreement, specify to the Agent that Loan or
other obligation of the Company hereunder to which such payment is to be
applied. In the event that the Company fails to so specify the relevant
obligation or if an Event of Default shall have occurred and be continuing, the
Agent may apply such payments as it may determine in its sole discretion.
On the day such payments are deemed received, the Agent shall remit to the
Banks their pro rata shares of such payments in immediately available funds to
the Banks at their respective address in the United States specified for notices
pursuant to Section 9.2. In the case of payments of principal and interest on
any Borrowing, such pro rata shares shall be determined with respect to each
such Bank by the ratio which the outstanding principal balance of its Loan
included in such Borrowing bears to the outstanding principal balance of the
Loans of all of the Banks included in such Borrowing, and in the case of fees
paid pursuant to Section 2.3 and other amounts payable hereunder (other than the
Agent's fees payable pursuant to Section 2.3(d) and amounts payable to any Bank
under Section 3.7), such pro rata shares shall be determined with respect to
each such Bank by the ratio which the Commitment of such Bank bears to the
Commitments of all the Banks.
No Setoff or Deduction. All payments of principal of and interest on
the Loans and other amounts payable by the Company hereunder shall be made by
the Company without setoff or counterclaim, and free and clear of, and without
deduction or withholding for, or on account of, any present or future taxes,
levies, imposts, duties, fees, assessments, or other charges of whatever nature,
imposed by any governmental authority, or by any department, agency or other
political subdivision or taxing authority.
Payment on Non-Business Day; Payment Computations. Except as otherwise
provided in this Agreement to the contrary, whenever any installment of
principal of, or interest on, any Loan or any other amount due hereunder becomes
due and payable on a day which is not a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day and, in the case of any
installment of principal, interest shall be payable thereon at the rate per
annum determined in accordance with this Agreement during such extension.
Computations of interest and other amounts due under this Agreement shall be
made on the basis of a year of 365 or 366 days (360 days in the case of
Eurodollar Rate Loans) for the actual number of days elapsed, including the
first day but excluding the last day of the relevant period.
Additional Costs.
In the event that any applicable law, treaty or other international
agreement, rule or regulation (whether domestic or foreign) now or hereafter in
effect and whether or not presently applicable to any Bank or the Agent, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Bank or
the Agent with any guideline, request or directive of any such authority
(whether or not having the force of law), shall (a) affect the basis of taxation
of payments to any Bank or the Agent of any amounts payable by the Company under
this Agreement (other than taxes imposed on the overall net income of any Bank
or the Agent, by the jurisdiction, or by any political subdivision or taxing
authority of any such jurisdiction, in which any Bank or the Agent, as the case
may be, has its principal office), or (b) shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by any Bank or the
Agent, or (c) shall impose any other condition with respect to this Agreement,
or any of the Commitments, the Notes or the Loans or any Letter of Credit, and
the result of any of the foregoing is to increase the cost to any Bank or the
Agent, as the case may be, of making, funding or maintaining any Eurodollar Rate
Loan or any Letter of Credit or to reduce the amount of any sum receivable by
any Bank or the Agent, as the case may be, thereon, then the Company shall pay
to such Bank or the Agent, as the case may be, from time to time, upon request
by such Bank (with a copy of such request to be provided to the Agent) or the
Agent, additional amounts sufficient to compensate such Bank or the Agent, as
the case may be, for such increased cost or reduced sum receivable to the
extent, in the case of any Eurodollar Rate Loan, such Bank or the Agent is not
compensated therefor in the computation of the interest rate applicable to such
Eurodollar Rate Loan. A statement as to the amount of such increased cost or
reduced sum receivable, prepared in good faith and in reasonable detail by such
Bank or the Agent, as the case may be, and submitted by such Bank or the Agent,
as the case may be, to the Company, shall be conclusive and binding for all
purposes absent manifest error in computation.
In the event that any applicable law, treaty or other international
agreement, rule or regulation (whether domestic or foreign) now or hereafter in
effect and whether or not presently applicable to any Bank or the Agent, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Bank or
the Agent with any guideline, request or directive of any such authority
(whether or not having the force of law), including any risk-based capital
guidelines, affects or would affect the amount of capital required or expected
to be maintained by such Bank or the Agent (or any corporation controlling such
Bank or the Agent) and such Bank or the Agent, as the case may be, determines
that the amount of such capital is increased by or based upon the existence of
such Bank's or the Agent's obligations hereunder and such increase has the
effect of reducing the rate of return on such Bank's or the Agent's (or such
controlling corporation's) capital as a consequence of such obligations
hereunder to a level below that which such Bank or the Agent (or such
controlling corporation) could have achieved but for such circumstances (taking
into consideration its policies with respect to capital adequacy), then the
Company shall pay to such Bank or the Agent, as the case may be, from time to
time, upon request by such Bank (with a copy of such request to be provided to
the Agent) or the Agent, additional amounts sufficient to compensate such Bank
or the Agent (or such controlling corporation) for any increase in the amount of
capital and reduced rate of return which such Bank or the Agent reasonably
determines to be allocable to the existence of such Bank's or the Agent's
obligations hereunder. A statement as to the amount of such compensation,
prepared in good faith and in reasonable detail by such Bank or the Agent, as
the case may be, and submitted by such Bank or the Agent to the Company, shall
be conclusive and binding for all purposes absent manifest error in computation.
Illegality and Impossibility. In the event that any applicable law, treaty
or other international agreement, rule or regulation (whether domestic or
foreign) now or hereafter in effect and whether or not presently applicable to
any Bank, or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by any Bank with any guideline, request or directive of such
authority (whether or not having the force of law), including without limitation
exchange controls, shall make it unlawful or impossible for any Bank to maintain
any Loan under this Agreement, (b) shall make it impracticable, unlawful or
impossible for, or shall in any way limit or impair ability of, the Company to
make or any Bank to receive any payment under this Agreement at the place
specified for payment hereunder, the Company shall upon receipt of notice
thereof from such Bank, repay in full the then outstanding principal amount of
each Loan so affected, together with all accrued interest thereon to the date of
payment and all amounts owing to such Bank under Section 3.8, (a) on the last
day of the then current Interest Period applicable to such Loan if such Bank may
lawfully continue to maintain such Loan to such day, or (b) immediately if such
Bank may not continue to maintain such Loan to such day.
Indemnification. If the Company makes any payment of principal with respect
to any Eurodollar Rate Loan on any other date than the last day of an Interest
Period applicable thereto (whether pursuant to Section 3.1(c), Section 3.7,
Section 6.2 or otherwise), or if the Company fails to borrow any Eurodollar Rate
Loan after notice has been given to the Banks in accordance with Section 2.4, or
if the Company fails to make any payment of principal or interest in respect of
a Eurodollar Rate Loan when due, the Company shall reimburse each Bank on demand
for any resulting loss or expense incurred by each such Bank, including without
limitation any loss incurred in obtaining, liquidating or employing deposits
from third parties, whether or not such Bank shall have funded or committed to
fund such Loan. A statement as to the amount of such loss or expense, prepared
in good faith and in reasonable detail by such Bank and submitted by such Bank
to the Company, shall be conclusive and binding for all purposes absent manifest
error in computation. Calculation of all amounts payable to such Bank under this
Section 3.9 shall be made as though such Bank shall have actually funded or
committed to fund the relevant Eurodollar Rate Loan through the purchase of an
underlying deposit in an amount equal to the amount of such Loan in the relevant
market and having a maturity comparable to the related Interest Period and,
through the transfer of such deposit to a domestic office of such Bank in the
United States; provided, however, that such Bank may fund any Eurodollar Rate
Loan in any manner it sees fit and the foregoing assumption shall be utilized
only for the purpose of calculation of amounts payable under this Section 3.9.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Banks and the Agent that:
Existence and Power. Each of the Company and the Guarantors is a
corporation or a limited liability company duly organized, validly existing and
in good standing under the laws of the state of its jurisdiction of
incorporation or organization, as the case may be, and is duly qualified to do
business, and is in good standing in all additional jurisdictions where such
qualification is necessary under applicable law. Each of the Company and the
Guarantors has all requisite corporate or limited liability company power to own
or lease the properties used in its business and to carry on its business as now
being conducted and as proposed to be conducted, and to execute and deliver this
Agreement, the Notes and the Security Documents to which it is a party and to
engage in the transactions contemplated by this Agreement.
Authority. The execution, delivery and performance by the Company and each
Guarantor of this Agreement, the Notes and the Security Documents to which it is
a party have been duly authorized by all necessary corporate or limited
liability company action and are not in contravention of any law, rule or
regulation, or any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, or of the terms of the Company's or
the Guarantor's charter, by-laws, articles of organization or operating
agreement or of any contract or undertaking to which the Company or any
Guarantor is a party or by which the Company or any Guarantor or any of their
respective property may be bound or affected and will not result in the
imposition of any Lien on any of their property or of any of their Restricted
Subsidiaries except for Permitted Liens.
Binding Effect. This Agreement is, and the Notes and the Security Documents
to which the Company or any Guarantor is a party when delivered hereunder will
be, legal, valid and binding obligations of the Company and the Guarantor,
respectively, enforceable against the Company and the Guarantor in accordance
with their respective terms.
Restricted and Unrestricted Subsidiaries. Schedule 4.4 hereto correctly
sets forth the name, jurisdiction of incorporation or organization and ownership
of each Subsidiary of the Company, and whether it is a Restricted Subsidiary or
an Unrestricted Subsidiary. Each such Subsidiary and each corporation or limited
liability company becoming a Subsidiary of the Company or any Guarantor after
the date hereof is and will be a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and is and will be duly qualified
to do business in each additional jurisdiction where such qualification is or
may be necessary under applicable law. Each Subsidiary of the Company and each
Guarantor has and will have all requisite corporate or limited liability company
power to own or lease the properties used in its business and to carry on its
business as now being conducted and as proposed to be conducted. All outstanding
shares of Capital Stock of each class of each Subsidiary, the Company and each
Guarantor have been and will be validly issued and are and will be fully paid
and nonassessable, and, except as otherwise indicated in Schedule 4.4 hereto or
disclosed in writing to the Agent and the Banks from time to time, all ownership
interests in the company's subsidiaries, are and will be owned, beneficially and
of record, by the Company or another Subsidiary of the Company free and clear of
any Liens.
Litigation. Except as set forth in Schedule 4.5 hereto, there is no action,
suit or proceeding pending or, to the best of the Company's and the Guarantors'
knowledge, threatened against or affecting the Company, any Guarantor or any of
their respective Subsidiaries before or by any court, governmental authority or
arbitrator, which if adversely decided might have a Material Adverse Effect and,
to the best of the Company's and the Guarantor's knowledge, there is no basis
for any such action, suit or proceeding.
Financial Condition. The individual and combined balance sheet of
NWS-Indiana and NWS-Illinois and the individual and combined statements of
income, retained earnings and cash flows of NWS-Indiana and NWS-Illinois for the
fiscal year ended March 31, 1998 and reported on by Ernst & Young, independent
certified public accountants, and the interim combined balance sheet and interim
combined statements of income, retained earnings and cash flows of NWS-Indiana
and NWS-Illinois, as of or for the six-month period ended on September 30, 1998,
copies of which have been furnished to the Banks, fairly present the combined
financial position of NWS-Indiana and NWS-Illinois as at the respective dates
thereof, and the combined results of operations of NWS-Indiana and NWS-Illinois
for the respective periods indicated, all in accordance with Generally Accepted
Accounting Principles consistently applied (subject, in the case of said interim
statements, to year-end audit adjustments). There has been no event or
development which has had or could reasonably be expected to have a Material
Adverse Effect since March 31, 1998. There is no material Contingent Liability
of the Company or any of its Restricted Subsidiaries that is not reflected in
such financial statements or in the notes thereto.
Corporate Restructuring and Future Financial Statements. All of the shares
of NWS-Illinois. and NWS-Indiana, which were previously owned by James LaCrosse
and Norma Johnston, have been transferred to the Company, and NWS-Illinois and
NWS-Indiana are wholly-owned Subsidiaries of the Company. The financial
statements of the Company, NWS-Illinois, NWS-Indiana and the other Restricted
Subsidiaries of the Company, are now prepared on a Consolidated basis and the
financial statements of the Company and its Restricted Subsidiaries pursuant to
Section 5.1(d) will fairly present the Consolidated financial position of the
Company and its Restricted Subsidiaries as at the respective dates thereof and
the Consolidated results of operations of the Company and its Restricted
Subsidiaries for the respective periods indicated, all in accordance with
Generally Accepted Accounting Principles consistently applied (subject, in the
case of interim statements, to year-end audit adjustments).
Use of Advances. The Company will use the proceeds of the Advances for its
general corporate purposes and to make loans to the Guarantors for their general
corporate purposes, which loans will be evidenced by Intercompany Notes pledged
to the Agent by the Company. Neither the Company nor any Guarantor nor any of
their respective Restricted Subsidiaries extends or maintains, in the ordinary
course of business, credit for the purpose, whether immediate, incidental, or
ultimate, of buying or carrying margin stock (within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Advance will be used for the purpose, whether immediate,
incidental, or ultimate, of buying or carrying any such margin stock or
maintaining or extending credit to others for such purpose. After applying the
proceeds of each Advance, such margin stock will not constitute more than 25% of
the value of the assets (either of the Company or any Guarantor alone or of the
Company and the Guarantors and their respective Restricted Subsidiaries on a
consolidated basis) that are subject to any provisions of this Agreement or any
Security Document that may cause the Advances to be deemed secured, directly or
indirectly, by margin stock.
Consents, Etc. Except for such consents, approvals, authorizations,
declarations, registrations or filings delivered by the Company and the
Guarantors pursuant to Section 2.5(g), if any, each of which is in full force
and effect, no consent, approval or authorization of or declaration,
registration or filing with any governmental authority or any nongovernmental
Person or entity, including without limitation any creditor, lessor or
stockholder of the Company or any Guarantor or any of their respective
Restricted Subsidiaries, is required on the part of the Company or any Guarantor
in connection with the execution, delivery and performance of this Agreement,
the Notes, the Security Documents or the transactions contemplated hereby or as
a condition to the legality, validity or enforceability of this Agreement, the
Notes or any of the Security Documents.
Taxes. The Company and the Guarantors and their respective Restricted
Subsidiaries have filed all tax returns (federal, state and local) required to
be filed and have paid all taxes shown thereon to be due, including interest and
penalties, or have established adequate financial reserves on their respective
books and records for payment thereof in accordance with Generally Accepted
Accounting Principles. Neither the Company nor any Guarantor nor any of their
respective Restricted Subsidiaries knows of any actual or proposed assessment
for taxes based on income or any basis therefor, and no extension of time for
the assessment of deficiencies in any such federal or state tax has been granted
by the Company, any Guarantor or any such Subsidiary.
Title to Properties. Except as otherwise disclosed in the latest balance
sheet delivered pursuant to Section 4.6 or 5.1(d) of this Agreement, the
Company, the Guarantors or one or more of their respective Restricted
Subsidiaries have good and marketable fee simple title to all of the real
property, and a valid and indefeasible ownership interest in all of the other
properties and assets (including, without limitation, the collateral subject to
the Security Documents to which any of them is a party) reflected in said
balance sheet or subsequently acquired by the Company, any Guarantor or any such
Subsidiary. All of such properties and assets are free and clear of any Lien,
except for Permitted Liens.
Borrowing Base. All trade accounts receivable and inventory of the Company
represented or reported by the Company to be, or are otherwise included in,
Eligible Accounts Receivable and Eligible Inventory comply in all respects with
the requirements therefor set forth in the definition thereof, and the
computation of the Borrowing Base set forth in each Borrowing Base Certificate
is true and correct.
ERISA. The Company, the Guarantors, their respective Restricted
Subsidiaries, their ERISA Affiliates and their respective Plans are in
compliance in all material respects with those provisions of ERISA and of the
Code which are applicable with respect to any Plan. No Prohibited Transaction
and no Reportable Event has occurred with respect to any such Plan. None of the
Company, any Guarantor, any of their respective Restricted Subsidiaries or any
of their ERISA Affiliates is an employer with respect to any Multiemployer Plan.
The Company, the Guarantors, their respective Restricted Subsidiaries and their
ERISA Affiliates have met the minimum funding requirements under ERISA and the
Code with respect to each of their respective Plans, if any, and have not
incurred any liability to the PBGC or any Plan. The execution, delivery and
performance of this Agreement, the Notes and the Security Documents do not
constitute a Prohibited Transaction. There is no material Unfunded Benefit
Liability, with respect to any Plan of the Company, any Guarantor, their
respective Restricted Subsidiaries or their ERISA Affiliates.
Disclosure. No report or other information furnished in writing or on
behalf of the Company or any Guarantor to any Bank or the Agent in connection
with the negotiation or administration of this Agreement contains any material
misstatement of fact or omits to state any material fact or any fact necessary
to make the statements contained therein not misleading in light of the
circumstances in which they were made. Neither this Agreement, the Notes, the
Security Documents nor any other document, certificate, or report or statement
or other information furnished to any Bank or the Agent by or on behalf of the
Company or any Guarantor in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading in light of the circumstances in which they were made. There is no
fact known to the Company or any Guarantor which has or which in the future may
have (so far as the Company or any Guarantor can now foresee) a Material Adverse
Effect, which has not been set forth in this Agreement or in the other
documents, certificates, statements, reports and other information furnished in
writing to the Banks by or on behalf of the Company or any Guarantor in
connection with the transactions contemplated hereby.
No Default. Neither the Company nor any Subsidiary is in default or has
received any written notice of default under or with respect to any of its
Contractual Obligations in any respect which could have a Material Adverse
Effect. No Default or Event of Default has occurred and is continuing.
No Burdensome Restrictions. No Requirement of Law or Contractual Obligation
applicable to the Company or any Subsidiary could have a Material Adverse Effect
on the financial condition or business of the Company and its Restricted
Subsidiaries.
4.17 Year 2000. The Company's program for remediating the Year 2000 Issues
on a timely basis (the "Year 2000 Program") is accurately summarized on Schedule
4.17 hereto. Based on the assessment set forth in Schedule 4.17 the Company does
not reasonably anticipate that Year 2000 Issues will have a Material Adverse
Effect.
ARTICLE 5
COVENANTS
Affirmative Covenants. Each of the Company and the Guarantors covenants and
agrees that, until the Termination Date and thereafter until payment in full of
the principal of and accrued interest on the Notes and the performance of all
other obligations of the Company and the Guarantors under this Agreement, unless
the Required Banks shall otherwise consent in writing, it shall, and shall cause
each of their respective Restricted Subsidiaries to:
Preservation of Corporate Existence, Etc. Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence, and its qualification as a foreign corporation or limited liability
company in good standing in each jurisdiction in which such qualification is
necessary under applicable law, and the rights, licenses, permits (including
those required under Environmental Laws), franchises, patents, copyrights,
trademarks and trade names material to the conduct of its businesses; and defend
all of the foregoing against all claims, actions, demands, suits or proceedings
at law or in equity or by or before any governmental instrumentality or other
agency or regulatory authority.
Compliance with Laws, Etc. Comply in all material respects with all
applicable laws, rules, regulations and orders of any governmental authority,
whether federal, state, local or foreign (including without limitation ERISA,
the Code and Environmental Laws), in effect from time to time; and pay and
discharge promptly when due all taxes, assessments and governmental charges or
levies imposed upon it or upon its income, revenues or property, before the same
shall become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise, which, if unpaid, might give rise to Liens
upon such properties or any portion thereof, except to the extent that payment
of any of the foregoing is then being contested in good faith by appropriate
legal proceedings and with respect to which adequate financial reserves have
been established on the books and records of the Company, any Guarantor or any
of their respective Restricted Subsidiaries in accordance with Generally
Accepted Accounting Principles.
Maintenance of Properties; Insurance. Maintain, preserve and protect all
property that is material to the conduct of the business of the Company, any
Guarantor or any of their respective Restricted Subsidiaries and keep such
property in good repair, working order and condition and from time to time make,
or cause to be made all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times in
accordance with customary and prudent business practices for similar businesses;
and, in addition to that insurance required under the Security Documents,
maintain in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms and covering
such risks, including fire and other risks insured against by extended coverage,
as is usually carried by companies engaged in similar businesses and owning
similar properties similarly situated and maintain in full force and effect
public liability insurance, insurance against claims for personal injury or
death or property damage occurring in connection with any of its activities or
any properties owned, occupied or controlled by it, in such amount as it shall
reasonably deem necessary, and maintain such other insurance as may be required
by law or as may be reasonably requested by the Required Banks for purposes of
assuring compliance with this Section 5.1(c).
Reporting Requirements. Furnish to the Banks and the Agent the following:
Promptly and in any event within three Business Days after becoming aware
of the occurrence of (A) any Default or Event of Default, (B) the commencement
of any material litigation against, by or affecting the Company, any Guarantor
or any of their respective Restricted Subsidiaries, and any material
developments therein, or (C) entering into any material contract or undertaking
that is not entered into in the ordinary course of business or (D) any
development in the business or affairs of the Company, any Guarantor or any of
their respective Subsidiaries, including, without limitation, developments with
respect to Year 2000 Issues, which has resulted in or which is likely in the
reasonable judgment of the Company or any Guarantor, to result in a Material
Adverse Effect, a statement of a duly authorized officer of the Company or the
Guarantor, as the case may be setting forth details of each such Default or
Event of Default or such litigation, material contract or undertaking or
development and the action which the Company, such Guarantor or such Subsidiary,
as the case may be, has taken and proposes to take with respect thereto;
As soon as available and in any event within 45 days after the end of each
month of the Company, the Consolidated and consolidating balance sheet of the
Company and its Restricted Subsidiaries, and of the Company and its
Subsidiaries, as of the end of such month, and the related Consolidated and
consolidating statements of income, retained earnings and cash flows for the
period commencing at the end of the previous fiscal year and ending with the end
of such month, setting forth in each case in comparative form the corresponding
figures for the corresponding date or period of the preceding fiscal year, all
in reasonable detail and duly certified (subject to year-end audit adjustments)
by the chief financial officer of the Company as having been prepared in
accordance with Generally Accepted Accounting Principles, together with, in the
case of the financial statements for the last month of each fiscal quarter, a
certificate of a duly authorized officer of the Company stating (A) that no
Default or Event of Default has occurred and is continuing or, if a Default or
Event of Default has occurred and is continuing, a statement setting forth the
details thereof and the action which the Company has taken and proposes to take
with respect thereto, and (B) that a computation (which computation shall
accompany such certificate and shall be in reasonable detail) showing compliance
with Section 5.2(a) and (b) hereof is in conformity with the terms of this
Agreement;
As soon as available and in any event within 120 days after the end of each
fiscal year of the Company, a copy of the Consolidated balance sheet of the
Company and its Restricted Subsidiaries, and of the Company and its
Subsidiaries, as of the end of such fiscal year and the related consolidated
statements of income, retained earnings and changes in financial position of the
Company and its Restricted Subsidiaries, and of the Company and its
Subsidiaries, for such fiscal year, with a customary audit report of Ernst &
Young, or other independent certified public accountants selected by the Company
and acceptable to the Required Banks, without qualifications unacceptable to the
Required Banks, together with a certificate of such accountants stating (A) that
they have reviewed this Agreement and stating further whether, in the course of
their review of such financial statements, they have become aware of any Default
or Event of Default and, if such a Default or Event of Default exists and is
continuing, a statement setting forth the nature and status thereof, and (B)
that a computation by the Company (which computation shall accompany such
certificate and shall be in reasonable detail) showing compliance with Section
5.2 (a) and (b) hereof is in conformity with the terms of this Agreement;
Promptly after the sending or filing thereof, copies of all reports, proxy
statements and financial statements which the Company or any Guarantor or any of
their respective Restricted Subsidiaries sends to or files with any of their
respective security holders or any securities exchange or the Securities and
Exchange Commission or any successor agency thereof;
Promptly and in any event within 10 calendar days following last day of
each month, or within one Business Day following the last day of each week at
any time when the Borrowing Base selected by the Company is equal to the sum of
80% of the value of Eligible Accounts Receivable plus 60% of the value of
Eligible Inventory, a Borrowing Base certificate prepared as of the close of
business on such last day, together with supporting schedules, in form and
detail satisfactory to the Agent, setting forth such information as the Agent
may request with respect to the aging, value, location, and ownership of such
Eligible Accounts Receivable and Eligible Inventory, and other information
relating to the computation of the Borrowing Base and the eligibility of any
property or assets included in such computation, certified as true and correct
by the chief financial officer of the Company;
Promptly and in any event within 10 calendar days after receiving or
becoming aware thereof (A) a copy of any notice of intent to terminate any Plan
of the Company, any Guarantor, their respective Restricted Subsidiaries or any
ERISA Affiliate filed with the PBGC, (B) a statement of the chief financial
officer of the Company or any Guarantor, as the case may be; setting forth the
details of the occurrence of any Reportable Event with respect to any such Plan,
(C) a copy of any notice that the Company, any Guarantor, any of their
respective Restricted Subsidiaries or any ERISA Affiliate may receive from the
PBGC relating to the intention of the PBGC to terminate any such Plan or to
appoint a trustee to administer any such Plan, or (D) a copy of any notice of
failure to make a required installment or other payment within the meaning of
Section 412(n) of the Code or Section 302(f) of ERISA with respect to any such
Plan;
As soon as available and in any event within 15 days after the end of each
month, a report with respect to the Company and its Restricted Subsidiaries,
listing their accounts receivable and accounts payable and the age thereof, and
setting forth in summary form their inventory and its value, in form and detail
satisfactory to the Agent, certified as true and correct by a duly authorized
officer of the Company; and
Promptly, such other information respecting the business, properties,
operations or condition, financial or otherwise, of the Company, any Guarantor
or any of their respective Restricted Subsidiaries as any Bank or the Agent may
from time to time reasonably request.
Accounting; Access to Records, Books, Etc. Maintain a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in accordance with Generally Accepted
Accounting Principles and to comply with the requirements of this Agreement and,
at any reasonable time and from time to time, (i) permit any Bank or the Agent
or any agents or representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
the Company, the Guarantors and their respective Restricted Subsidiaries, and to
discuss the affairs, finances and accounts of the Company, the Guarantors and
their respective Restricted Subsidiaries with their respective directors,
officers, employees and independent auditors, and by this provision each of the
Company and the Guarantors hereby authorizes such Persons to discuss such
affairs, finances and accounts with any Bank or the Agent, and (ii) during any
fiscal quarter that the Borrowing Base is equal to the sum of 80% of the value
of Eligible Accounts Receivable plus 60% of the value of Eligible Inventory,
permit the Agent or any of its agents or representatives to conduct a
comprehensive field audit of its books, records, properties and assets,
including without limitation all collateral subject to the Security Documents,
at any one time during such quarter, at the expense of the Company, and if a
different Borrowing Base level is in effect permit the Agent to do so at any
time, at the expense of the Banks; and
Loans by the Company to the Restricted Subsidiaries. In the event that the
Company makes loans or other advances to or for the benefit of a Restricted
Subsidiary after the Effective Date that are not evidenced by an Intercompany
Note delivered to the Agent, the Company will obtain an Intercompany Note from
the borrowing Restricted Subsidiary to evidence such loans and advances and
shall deliver it to the Agent pursuant to the Pledge Agreement.
Additional Security and Collateral. Promptly (i) execute and deliver and
cause each Restricted Subsidiary of the Company and the Guarantors to execute
and deliver, additional Security Documents, within 30 days after request
therefor by the Banks and the Agent, sufficient to grant to the Agent for the
benefit of the Banks liens and security interests in any after acquired property
of the type described in Section 2.11, and (ii) cause each Person becoming a
Restricted Subsidiary of the Company or any Guarantor from time to time to
execute and deliver to the Banks and the Agent, within 30 days after such Person
becomes a Restricted Subsidiary, a Guaranty and Security Documents, together
with other related documents described in Section 2.5, sufficient to grant to
the Agent for the benefit of the Banks liens and security interests in all
collateral of the type described in Section 2.11. The Company shall notify the
Banks and the Agent, within 10 Business Days after the occurrence thereof, of
the acquisition of any property by the Company or any Guarantor that is not
subject to the existing Security Documents, any Person's becoming a Restricted
Subsidiary and any other event or condition that may require additional action
of any nature in order to preserve the effectiveness and perfected status of the
liens and security interests of the Banks and the Agent with respect to such
property pursuant to the Security Documents.
(h) Addition of Covenants; Incorporation by Reference. If at any time the
Company shall enter into or be a party to any instrument or agreement, including
all such instruments or agreements in existence as of the date hereof and all
such instruments or agreements entered into after the date hereof, relating to
or amending any terms or conditions applicable to any of its Indebtedness or any
issuance or placement of its equity which includes covenants, terms, conditions
or defaults not substantially provided for in this Agreement or more favorable
to the holder or holders thereof than those provided for in this Agreement, then
the Company shall promptly so advise the Agent and the Banks. Thereupon, if the
Agent shall request, upon notice to the Company, the Agent and the Banks shall
enter into with the Company an amendment to this Agreement or an additional
agreement (as the Agent may request), providing for substantially the same
covenants, terms, conditions and defaults as those provided for in such
instrument or agreement to the extent required and as may be selected by the
Agent. In addition to the foregoing, any covenants, terms, conditions or
defaults in the documents governing the Senior Unsecured Debt not substantially
provided for in this Agreement or more favorable to the holders of the Senior
Unsecured Debt than those provided for in this Agreement are hereby incorporated
by reference into this Agreement to the same extent as if set forth fully
herein.
(i) Further Assurances. Will, and will cause each Guarantor to, execute and
deliver within 30 days after request therefor by the Banks and the Agent, all
further instruments and documents and take all further action that may be
necessary or desirable, or that the Agent may request, in order to give effect
to, and to aid in the exercise and enforcement of the rights and remedies of the
Banks under, this Agreement, the Notes and the Security Documents, including
without limitation causing each lessor of real property to the Company or any
Guarantor in which inventory is located to execute and deliver to the Agent,
prior to or upon the commencement of any such tenancy, an agreement in form and
substance acceptable to the Banks and the Agent duly executed on behalf of such
lessor waiving any distraint, lien and similar rights with respect to any
property subject to the Security Documents and agreeing to permit the Banks and
the Agent to enter such premises in connection therewith.
(j) Year 2000. The Company will take and will cause each of its Restricted
Subsidiaries to take all such actions as are reasonably necessary to
successfully implement the Year 2000 Program and to assure that Year 2000 Issues
will not have a Material Adverse Effect. At the request of the Agent, the
Company will provide updates and progress reports with respect to the Year 2000
Program.
Negative Covenants. Until the Termination Date and thereafter until payment
in full of the principal of and accrued interest on the Notes and the
performance of all other obligations of the Company and the Guarantors under
this Agreement, the Company agrees that, unless the Required Banks shall
otherwise consent in writing it shall not, and shall not permit any of its
Restricted Subsidiaries to:
Interest Coverage Ratio. Permit or suffer the Interest Coverage Ratio at
any time to be less than 1.50 to 1.0 at any time during the period ending on
March 30, 2000, and to be less than 1.75 to 1.0 on March 31, 2000 and at any
time thereafter.
Funded Debt Coverage Ratio. Permit or suffer the Funded Debt Coverage Ratio
to be greater than 7.5 to 1.0 at any time during the period ending on September
29, 1999, and to be greater than 6.5 to 1.0 on September 30, 1999 and at any
time thereafter.
Indebtedness. Create, incur, assume or in any manner become liable in
respect of, or suffer to exist, any Indebtedness other than:
The Advances;
The Indebtedness described in Schedule 5.2(c) hereto, having the same terms
as those existing on the date of this Agreement;
Indebtedness of any Restricted Subsidiary of the Company owing to the
Company or to any other Restricted Subsidiary of the Company;
Senior Unsecured Debt;
Subordinated Debt of the Company or any of its Restricted Subsidiaries; and
Indebtedness owing to any Bank that constitutes Hedging Obligations that
are incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness that is permitted by the terms of this
Agreement to be outstanding (valued in an amount equal to the highest
termination payment, if any, that would be payable upon termination for any
reason on the date of determination) not exceeding in aggregate amount
$25,000,000;
(vii) Indebtedness in aggregate principal amount at any time outstanding
not exceeding $5,000,000 which is secured by one or more liens permitted by
Section 5.2(d)(viii) hereof; and
(viii) Additional Indebtedness not to exceed $10,000,000 in aggregate
principal amount at any time outstanding.
Liens. Create, incur or suffer to exist any Lien on any of the assets,
rights, revenues or property, real, personal or mixed, tangible or intangible,
whether now owned or hereafter acquired, of the Company or any of its Restricted
Subsidiaries, other than:
Liens for taxes not delinquent or for taxes being contested in good faith
by appropriate proceedings and as to which adequate financial reserves have been
established on its books and records in accordance with Generally Accepted
Accounting Principles;
Liens (other than any Lien imposed by ERISA or any Environmental Law)
created and maintained in the ordinary course of business which are not material
in the aggregate, and which would not have a Material Adverse Effect and which
constitute (A) pledges or deposits under worker's compensation laws,
unemployment insurance laws or similar legislation, (B) good faith deposits in
connection with bids, tenders, contracts or leases to which the Company or any
of its Restricted Subsidiaries is a party for a purpose other than borrowing
money or obtaining credit, including rent security deposits, (C) liens imposed
by law, such as those of carriers, warehousemen and mechanics, if payment of the
obligation secured thereby is not yet due, (D) Liens securing taxes, assessments
or other governmental charges or levies not yet subject to penalties for
nonpayment, and (E) pledges or deposits to secure public or statutory
obligations of the Company or any of its Restricted Subsidiaries, or surety,
customs or appeal bonds to which the Company or any of its Restricted
Subsidiaries is a party;
Liens affecting real property which constitute minor survey exceptions or
defects or irregularities in title, minor encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of such real property, provided that all of the
foregoing, in the aggregate, do not at any time materially detract from the
value of said properties or materially impair their use in the operation of the
businesses of the Company or any of its Restricted Subsidiaries;
Liens created pursuant to the Security Documents and Liens expressly
permitted by the Security Documents;
Each Lien described in Schedule 5.2(d) hereto may be suffered to exist upon
the same terms as those existing on the date hereof;
Liens in favor of the Company or any of its Restricted Subsidiaries as
security for Indebtedness permitted by Section 5.2(c)(iii);
The interest or title of a lessor under any lease otherwise permitted under
this Agreement with respect to the property subject to such lease to the extent
performance of the obligations of the Company or its Restricted Subsidiary
thereunder is not delinquent by more than 30 days or is being contested in good
faith; and
(viii) Any lien created to secure payment of a portion of the purchase
price of any tangible fixed asset, including, without limitation, real estate
(including improvements thereto) and vehicles, acquired by the Company or any of
its Restricted Subsidiaries may be created or suffered to exist upon such fixed
asset if the outstanding principal amount of the Indebtedness secured by such
Lien does not at any time exceed the purchase price paid by the Company or such
Subsidiary for such fixed asset and the aggregate principal amount at any time
outstanding of all Indebtedness secured by such Liens does not exceed
$5,000,000, provided that such Lien does not encumber any other asset at any
time owned by the Company or such Restricted Subsidiary, and provided, further,
that not more than one such Lien shall encumber such fixed asset at any one
time.
Merger; Acquisitions; Etc. Subject to the limitations contained in Section
5.2(k), purchase or otherwise acquire, whether in one or a series of
transactions, all or a substantial portion of the business, assets, rights,
revenues or property, real, personal or mixed, tangible or intangible, of any
Person, or all or a substantial portion of the Capital Stock of any other
Person; nor merge or consolidate or amalgamate with any other Person or take any
other action having a similar effect, provided, however, that this Section
5.2(e) shall not prohibit any merger or acquisition, including but not limited
to those in which the consideration paid by the Company or a Restricted
Subsidiary consists of its Capital Stock, if (i) the Company shall be the
surviving or continuing corporation thereof, and (ii) immediately before and
after such merger or acquisition, no Default or Event of Default shall exist or
shall have occurred and be continuing and the representations and warranties
contained in Article 4 shall be true and correct on and as of the date thereof
(both before and after such merger or acquisition is consummated) as if made on
the date such merger or acquisition is consummated, and (iii) the Company shall
have provided to the Agent before such merger or acquisition pro forma financial
statements reflecting the occurrence of such merger or acquisition demonstrating
compliance with the covenants contained in this Agreement, certified by a duly
authorized officer of the Company.
Disposition of Assets; Etc. Sell, lease, license, transfer, assign or
otherwise dispose of all or a substantial portion of its business, assets,
rights, revenues or property, real, personal or mixed, tangible or intangible,
whether in one or a series of transactions, other than inventory sold in the
ordinary course of business upon customary credit terms and sales of obsolete
material or equipment, provided, however, that this Section 5.2(f) shall not
prohibit any such sale, lease, license, transfer, assignment or other
disposition if (i) the aggregate book value (disregarding any write-downs of
such book value other than ordinary depreciation and amortization) of all of the
business, assets, rights, revenues and property disposed of (excluding the value
of any Capital Stock of U.S. Beverage Company disposed of) after the date of
this Agreement shall be less than three percent (3%) of such aggregate book
value of the total assets of the Company or such Restricted Subsidiary, as the
case may be, or (ii) with respect to a Restricted Subsidiary at least
seventy-five percent (75%) of the consideration therefor received by such
Restricted Subsidiary is either cash or the assumption of liabilities that are
assumed by the transferee of any such assets pursuant to a novation agreement
that releases the Restricted Subsidiary from further liability, and the cash
proceeds are paid to the Company in reduction of such Restricted Subsidiary's
Indebtedness to the Company, and paid by the Company to the Banks as a permanent
reduction to the Commitments; and (iii) in the case of both (i) and (ii) above,
immediately before and after such transaction no Default or Event of Default
shall exist or shall have occurred and be continuing. Notwithstanding the above,
(a) the Company may sell the Capital Stock of U.S. Beverage Company; (b) the
Company may sell its Cameron Springs bottled water business for fair market
value provided that any non-cash consideration received therefor is in the form
of securities registered under the Securities Act of 1933 or subject to a
registration rights agreement providing for registration under the Securities
Act of 1933 ninety days after the sale; (c) NWS-Illinois may transfer its asset
primarily used in its U.S. Beverage division to U.S. Beverage Company; and (d)
NWS-Illinois may sell beer franchises, brand labels and distribution rights for
fair market value including cash royalty payments or cash payments over time.
Nature of Business. Make any substantial change in the nature of its
business from that engaged in on the date of this Agreement or engage in any
other businesses other than those in which it is engaged on the date of this
Agreement, other than businesses reasonably related thereto.
Restricted Payments. Make, pay, declare or authorize any Restricted
Payment, provided, however, that (i) the Company may make Restricted Payments
with respect to any taxable year of the Company in the total amount not
exceeding the federal, state and local income taxes incurred by attribution to
the Company's shareholders of the S corporation taxable income of the Company
for such taxable year; so long as there shall not then exist a Default or Event
of Default, and so long as prior to such distribution the chief financial
officer of the Company shall deliver to the Agent a certificate in form
acceptable to the Agent stating that such distribution is in compliance with
this Section 5.2(h), and (ii) the Company and the Restricted Subsidiaries may
make additional Restricted Payments, provided that the aggregate of such
additional Restricted Payments made after the Effective Date shall be less than
the sum of (A) 50% of Consolidated Net Income for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the Effective Date to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (B) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the Effective Date
of Capital Stock of the Company (other than Capital Stock sold to a Subsidiary
of the Company) and 100% of the capital contributions received by the Company
after the Effective Date in cash, plus (C) one year and one day after the date
of such receipt, 100% of the cash payments received by the Company after the
Effective Date on a Company Shareholder Note Receivable, plus (D) to the extent
that any Investment permitted under Section 5.2(k) hereof that was made after
the Effective Date is sold for cash or otherwise liquidated or repaid for cash,
the lesser of (x) the cash return of capital with respect to such Investment
(less the cost of disposition, if any) and (y) the initial amount of such
Investment, plus (E) 50% of any dividends received by the Company or a
Restricted Subsidiary after the Effective Date from an Unrestricted Subsidiary,
to the extent that such dividends were not otherwise included in Consolidated
Net Income for such period, plus (F) provided that no Default or Event of
Default has occurred and is continuing, $2,500,000.
Capital Expenditures. Acquire or contract to acquire any fixed asset or
make any other capital expenditure if the aggregate purchase price and other
acquisition costs of all such fixed assets acquired and contracted to be
acquired and other capital expenditures made by the Company or any of its
Restricted Subsidiaries during any fiscal year of the Company would exceed, on a
Consolidated basis, an amount equal to $10,000,000 in any fiscal year, plus with
respect to any fiscal year after fiscal year 1999 the amount, if any, by which
such costs and other capital expenditures in the preceding fiscal year were less
than $10,000,000.
Capital Leases. Permit or suffer the aggregate outstanding capitalized
amount of all obligations under Capital Leases of the Company and its Restricted
Subsidiaries at any time to exceed $5,000,000, excluding from this amount
obligations on Capital Leases existing on the Effective Date and described on
Schedule 5.2(j).
Investments. Make any Investments other than (i) Investments by the Company
in any Restricted Subsidiary; (ii) extensions of trade credit made in the
ordinary course of business on customary credit terms and commission, travel and
similar advances made to officers and employees in the ordinary course of
business; (iii) Investments in commercial paper of any United States issuer
having the highest rating then given by Moody's Investors Service, Inc., or
Standard & Poor's Corporation, direct obligations of and obligations fully
guaranteed by the United States of America or any agency or instrumentality
thereof, or certificates of deposit of any commercial bank which is a member of
the Federal Reserve System and which has capital, surplus and undivided profit
(as shown on its most recently published statement of condition) aggregating not
less than $100,000,000, provided, however, that each of the foregoing
Investments has a maturity date not later than one year after the acquisition
thereof by the Company or any of its Restricted Subsidiaries; (iv) Investments
in joint venture or similar arrangements, exclusive of Investments described in
subsection (iii) above, and (except for loans and advances of credit)
Unrestricted Subsidiaries in which the aggregate of all such Investments does
not exceed, at any one time outstanding, an amount equal to 10% of Consolidated
Tangible Assets; (v) those Investments described in Schedule 5.2(k) hereto,
having the same terms as existing on the date of this Agreement, but no
extension or renewal thereof shall be permitted; (vi) redemptions of the
minority interest owned on the Effective Date by Martin H. Bart in NWS Illinois,
LLC; and (vii) Investments permitted under Section 5.2(e).
Transactions with Affiliates. Enter into, become a party to, or become
liable in respect of, any contract or undertaking with any Affiliate except in
the ordinary course of business and on terms not less favorable to the Company
or such Restricted Subsidiary than those which could be obtained if such
contract or undertaking were an arm's length transaction with a Person other
than an Affiliate.
Sale and Leaseback Transactions. Become or remain liable in any way,
whether directly or by assignment or as a guarantor or other contingent obligor,
for the obligations of the lessee or user under any lease or contract for the
use of any real or personal property if such property is owned on the date of
this Agreement or thereafter acquired by the Company or any of its Restricted
Subsidiaries and has been or is to be sold or transferred to any other Person
and was, is or will be used by the Company or any such Restricted Subsidiary for
substantially the same purpose as such property was used by the Company or such
Restricted Subsidiary prior to such sale or transfer.
Payments and Modification of Subordinated Debt. Make any optional payment,
prepayment or redemption of any Subordinated Debt, nor amend or modify, or
consent or agree to any amendment or modification, which would shorten any
maturity or increase the amount of any payment of principal or increase the rate
(or require earlier payment) of interest on any such Subordinated Debt, nor
amend the subordination provisions of any agreement under which any Subordinated
Debt is issued or created or otherwise related thereto, nor enter into any
agreement or arrangement providing for the defeasance of any Subordinated
Indebtedness.
Payments and Modification of Senior Unsecured Debt. Make any optional
payment, prepayment or any optional or mandatory redemption of any Senior
Unsecured Debt, nor amend or modify, or consent or agree to any amendment or
modification, which would shorten any maturity or increase the amount of any
payment of principal or increase the rate (or require earlier payment) of
interest on any such Senior Unsecured Debt, nor enter into any agreement or
arrangement providing for the defeasance of any Senior Unsecured Debt; provided,
that the Company may make redemptions of Senior Unsecured Debt that are
permitted or required by the terms of the indenture governing the Senior
Unsecured Debt from the cash proceeds of a sale of common stock of the Company,
if (i) immediately before and after such redemption, no Default or Event of
Default shall exist or shall have occurred and be continuing (ii) the
representations and warranties contained in Article 4 shall be true and correct
on and as of the date thereof (both before and after such redemption is
consummated) as if made on the date such redemption is consummated, and (iii)
the Company shall have provided to the Agent before such redemption pro forma
financial statements reflecting the occurrence of such redemption demonstrating
compliance with the covenants contained in this Agreement, certified by a duly
authorized officer of the Company.
Negative Pledge Limitation. Enter into any agreement with any Person other
than the Banks pursuant hereto which prohibits or limits the ability of the
Company or any Subsidiary to create, incur, assume or suffer to exist any Lien
in favor of the Agent and the Banks upon any of its assets, rights, revenues or
property, real, personal or mixed, tangible or intangible, whether now owned or
hereafter acquired, except for any such prohibitions or limitations contained in
the indenture governing the Senior Unsecured Debt as in effect on the Effective
Date.
Inconsistent Agreements. Enter into any agreement containing any provision
which would be violated or breached by this Agreement or any of the transactions
contemplated hereby or by performance by the Company or any of its Restricted
Subsidiaries of its obligations in connection therewith.
Accounting Changes. The Company shall not change its fiscal year or make
any significant changes (i) in accounting treatment and reporting practices
except as permitted by generally accepted accounting principles and disclosed to
the Banks, or (ii) in tax reporting treatment except as permitted by law and
disclosed to the Banks.
ARTICLE 6.
DEFAULT
Events of Default. The occurrence of any one of the following events or
conditions shall be deemed an "Event of Default" hereunder unless waived
pursuant to Section 9.1:
Nonpayment. The Company shall fail to pay when due any principal of the
Notes, or any reimbursement obligation under Section 3.3 (whether by deemed
disbursement of a Loan or otherwise), or failure to pay any interest on the
Notes or any fees or any other amount payable hereunder, which failure continues
for a period of five days; or
Misrepresentation. Any representation or warranty made by the Company in
Article 4 hereof or by the Company or any Guarantor in any Security Document or
any other certificate, report, financial statement or other document furnished
by or on behalf of the Company or any Guarantor in connection with this
Agreement, shall prove to have been incorrect in any material respect when made
or deemed made; or
Certain Covenants. The Company or any Guarantor shall fail to perform or
observe any term, covenant or agreement contained in Article 5 hereof, and any
such failure shall remain unremedied for 30 calendar days after notice thereof
shall have been given to the Company or such Guarantor, as the case may be, by
the Agent; or
Other Defaults. The Company or any Guarantor shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement or in
any Security Document, and any such failure shall remain unremedied for 30
calendar days after notice thereof shall have been given to the Company or such
Guarantor, as the case may be, by the Agent (or such longer or shorter period of
time as may be specified in such Security Document); or
Cross Default. The Company or any Restricted Subsidiary shall fail to pay
any part of the principal of, the premium, if any, or the interest on, or any
other payment of money due under any of its Indebtedness (other than
Indebtedness hereunder), beyond any period of grace provided with respect
thereto, which individually or together with other such Indebtedness as to which
any such failure exists has an aggregate outstanding principal amount in excess
of $1,000,000; or if the Company or any Restricted Subsidiary fails to perform
or observe any other term, covenant or agreement contained in, or if any other
event or condition occurs or exists under, any agreement, document or instrument
evidencing or securing any such Indebtedness having such aggregate outstanding
principal amount, or under which any such Indebtedness was incurred, issued or
created, beyond any period of grace, if any, provided with respect thereto if
the effect of such failure is either (i) to cause, or permit the holders of such
Indebtedness (or a trustee on behalf of such holders) to cause, any payment in
respect of such Indebtedness to become due prior to its due date or (ii) to
permit the holders of such Indebtedness (or a trustee on behalf of such holders)
to elect a majority of the board of directors of the Company; or
Judgments. One or more judgments or orders for the payment of money in an
aggregate amount of $1,000,000 shall be rendered against the Company or any
Restricted Subsidiary, or any other judgment or order (whether or not for the
payment of money) shall be rendered against or shall affect the Company or any
Restricted Subsidiary which causes or could cause a material adverse change in
the business, properties, operations or condition, financial or otherwise, of
the Company or any Restricted Subsidiary or which does or could have a material
adverse effect on the legality, validity or enforceability of this Agreement,
the Notes or any Security Document, and either (i) such judgment or order shall
have remained unsatisfied and the Company or such Restricted Subsidiary shall
not have taken action necessary to stay enforcement thereof by reason of pending
appeal or otherwise, prior to the expiration of the applicable period of
limitations for taking such action or, if such action shall have been taken, a
final order denying such stay shall have been rendered, or (ii) enforcement
proceedings shall have been commenced by any creditor upon any such judgment or
order; or
ERISA. The occurrence of a Reportable Event that results in or could result
in liability of the Company, any Restricted Subsidiary or their ERISA Affiliates
to the PBGC or to any Plan and such Reportable Event is not corrected within
thirty (30) days after the occurrence thereof; or the occurrence of any
Reportable Event which could constitute grounds for termination of any Plan of
the Company, any Restricted Subsidiary or their ERISA Affiliates by the PBGC or
for the appointment by the appropriate United States District Court of a trustee
to administer any such Plan and such Reportable Event is not corrected within
thirty (30) days after the occurrence thereof; or the filing by the Company, any
Restricted Subsidiary or any of their ERISA Affiliates of a notice of intent to
terminate a Plan or the institution of other proceedings to terminate a Plan; or
the Company, any Restricted Subsidiary or any of their ERISA Affiliates shall
fail to pay when due any liability to the PBGC or to a Plan; or the PBGC shall
have instituted proceedings to terminate, or to cause a trustee to be appointed
to administer, any Plan of the Company, any Guarantor, Restricted Subsidiary or
any of their ERISA Affiliates; or any Person engages in a Prohibited Transaction
with respect to any Plan which results in or could result in liability of the
Company, Restricted Subsidiary, any of their ERISA Affiliates, any Plan of the
Company, any Restricted Subsidiary or their ERISA Affiliates or fiduciary of any
such Plan; or failure by the Company, any Restricted Subsidiary or any of their
ERISA Affiliates to make a required installment or other payment to any Plan
within the meaning of Section 302(f) of ERISA or Section 412(n) of the Code that
results in or could result in liability of the Company, any Restricted
Subsidiary or any of their ERISA Affiliates to the PBGC or any Plan; or the
withdrawal of the Company, any Restricted Subsidiary or any of their ERISA
Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(9a)(2) of ERISA; or the Company, any
Restricted Subsidiary or any of their ERISA Affiliates becomes an employer with
respect to any Multiemployer Plan without the prior written consent of the
Required Banks; or
Insolvency, Etc. The Company or any Restricted Subsidiary shall be
dissolved or liquidated (or any judgment, order or decree therefor shall be
entered), or shall generally not pay its debts as they become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or shall institute, or there
shall be instituted against the Company or any Restricted Subsidiary, any
proceeding or case seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors or seeking the
entry of an order for relief, or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
assets, rights, revenues or property, and, if such proceeding is instituted
against the Company or such Restricted Subsidiary and is being contested by the
Company or such Restricted Subsidiary, as the case may be, in good faith by
appropriate proceedings, such proceeding shall remain undismissed or unstayed
for a period of 60 days; or the Company or such Restricted Subsidiary shall take
any action (corporate or other) to authorize or further any of the actions
described above in this subsection; or
Loan Documents. Any event of default described in any Loan Document shall
have occurred and be continuing, or any material provision of Article 8 hereof
or of any Loan Document shall at any time for any reason cease to be valid and
binding and enforceable against any obligor thereunder, or the validity, binding
effect or enforceability thereof shall be contested by any Person, or any
obligor shall deny that it has any or further liability or obligation
thereunder, or any Loan Document shall be terminated, invalidated or set aside,
or be declared ineffective or inoperative or in any way cease to give or provide
to the Banks and the Agent the benefits purported to be created thereby.
Control. James LaCrosse, and trusts established by him for the benefit of
his spouse and issue, shall cease to own directly or indirectly free and clear
of all Liens at least 65% of the securities of the Company of each class having
ordinary voting power for the election of directors (other than securities which
have such power only by reason of the happening of a contingency); or any Person
other than James LaCrosse and Norma Johnston shall possess, directly or
indirectly, the power to direct or cause the direction of the management and
policies of the Company, whether through the ownership of voting securities or
by contract or otherwise.
Remedies.
Upon the occurrence and during the continuance of any Event of Default, the
Agent may and, upon being directed to do so by the Required Banks, shall by
notice to the Company (i) terminate the Commitments or (ii) declare the
outstanding principal of, and accrued interest on, the Notes, all unpaid
reimbursement obligations in respect of drawings under Letters of Credit and all
other amounts owing under this Agreement to be immediately due and payable, or
(iii) demand immediate delivery of cash collateral, and the Company agrees to
deliver such cash collateral upon demand, in an amount equal to the maximum
amount that may be available to be drawn at any time prior to the stated expiry
of all outstanding Letters of Credit, or any one or more of the foregoing,
whereupon the Commitments shall terminate forthwith and all such amounts,
including such cash collateral, shall become immediately due and payable,
provided that in the case of any event or condition described in Section 6.1(h)
with respect to the Company or any Restricted Subsidiary, the Commitments shall
automatically terminate forthwith and all such amounts, including such cash
collateral, shall automatically become immediately due and payable without
notice; in all cases without demand, presentment, protest, diligence, notice of
dishonor or other formality, all of which are hereby expressly waived. Such cash
collateral delivered in respect of outstanding Letters of Credit shall be
deposited in a special cash collateral account to be held by the Agent as
collateral security for the payment and performance of the Company's obligations
under this Agreement to the Banks and the Agent.
The Agent may and, upon being directed to do so by the Required Banks,
shall, in addition to the remedies provided in Section 6.2(a), exercise and
enforce any and all other rights and remedies available to it, whether arising
under this Agreement, the Notes or any Security Document or under applicable
law, in any manner deemed appropriate by the Agent, including suit in equity,
action at law, or other appropriate proceedings, whether for the specific
performance (to the extent permitted by law) of any covenant or agreement
contained in this Agreement or in the Notes or any Security Document or in aid
of the exercise of any power granted in this Agreement, the Notes or any
Security Document.
Upon the occurrence and during the continuance of any Event of Default,
each Bank may at any time and from time to time, without notice to the Company
or any Guarantor (any requirement for such notice being expressly waived by the
Company and each Guarantor) set off and apply against any and all of the
obligations of the Company and each Guarantor now or hereafter existing under
this Agreement, whether owing to such Bank or any other Bank or the Agent, any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Bank to or for
the credit or the account of the Company or any Guarantor and any property of
the Company or any Guarantor from time to time in possession of such Bank,
irrespective of whether or not such Bank shall have made any demand hereunder
and although such obligations may be contingent and unmatured. Each of the
Company and the Guarantors hereby grants to the Banks and the Agent a lien on
and security interest in all such deposits, indebtedness and property as
collateral security for the payment and performance of the obligations of the
Company and each Guarantor under this Agreement. The rights of such Bank under
this Section 6.2(c) are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which such Bank may have.
ARTICLE 7.
THE AGENT AND THE BANKS
Appointment and Authorization. Each Bank hereby irrevocably appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement, the Notes and the Security Documents as are
delegated to the Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto. The provisions of this Article 7
are solely for the benefit of the Agent and the Banks, and neither the Company
nor any Guarantor shall have any rights as a third party beneficiary of any of
the provisions hereof. In performing its functions and duties under this
Agreement, the Agent shall act solely as agent of the Banks and does not assume
and shall not be deemed to have assumed any obligation towards or relationship
of agency or trust with or for the Company.
Agent and Affiliates. NBD Bank in its capacity as a Bank hereunder shall
have the same rights and powers hereunder as any other Bank and may exercise or
refrain from exercising the same as though it were not the Agent. NBD Bank and
its affiliates may (without having to account therefor to any Bank) accept
deposits from, lend money to, and generally engage in any kind of banking,
trust, financial advisory or other business with the Company, any Guarantor or
any of their respective Restricted Subsidiaries as if it were not acting as
Agent hereunder, and may accept fees and other consideration therefor without
having to account for the same to the Banks.
Scope of Agent's Duties. The Agent shall have no duties or responsibilities
except those expressly set forth herein, and shall not, by reason of this
Agreement, have a fiduciary relationship with any Bank, and no implied
covenants, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or shall otherwise exist against the Agent. As to any
matters not expressly provided for by this Agreement (including, without
limitation, collection and enforcement actioned under the Notes and the Security
Documents), the Agent shall not be required to exercise any discretion or take
any action, but the Agent shall take such action or omit to take any action
pursuant to the reasonable written instructions of the Required Banks and may
request instructions from the Required Banks. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, pursuant to the written
instructions of the Required Banks (or all of the Banks, as the case may be, in
accordance with the requirements of this Agreement), which instructions and any
action or omission pursuant thereto shall be binding upon all of the Banks;
provided, however, that the Agent shall not be required to act or omit to act
if, in the judgment of the Agent, such action or omission may expose the Agent
to personal liability or is contrary to this Agreement, the Notes or the
Security Documents or applicable law.
Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice, document or other communication (including any cable,
telegram, telex, facsimile transmission or oral communication) believed by it to
be genuine and correct and to have been sent or given by or on behalf of a
proper Person. The Agent may treat the payee of any Note as the holder thereof
unless and until the Agent receives written notice of the assignment thereof
pursuant to the terms of this Agreement signed by such payee and the Agent
receives the written agreement of the assignee that such assignee is bound
hereby to the same extent as if it had been an original party hereto. The Agent
may employ agents (including without limitation collateral agents) and may
consult with legal counsel (who may be counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable to
the Banks, except as to money or property received by it or its authorized
agents, for the negligence or misconduct of any such agent selected by it with
reasonable care or for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
Default. The Agent shall not be deemed to have knowledge of the occurrence
of any Default or Event of Default, unless the Agent has received written notice
from a Bank or the Company or any Guarantor specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice, the Agent shall give written notice thereto to
the Banks.
Liability of Agent. Neither the Agent nor any of its directors, officers,
agents, or employees shall be liable to the Banks for any action taken or not
taken by it or them in connection herewith with the consent or at the request of
the Required Banks or in the absence of its or their own gross negligence or
willful misconduct. Neither the Agent nor any of its directors, officers, agents
or employees shall be responsible for or have any duty to ascertain, inquire
into or verify (i) any recital, statement, warranty or representation contained
in this Agreement, any Note or any Security Document, or in any certificate,
report, financial statement or other document furnished in connection with this
Agreement, (ii) the performance or observance of any of the covenants or
agreements of the Company or any Guarantor, (iii) the satisfaction of any
condition specified in Article II hereof, or (iv) the validity, effectiveness,
legal enforceability, value or genuineness of this Agreement, Notes or the
Security Documents or any collateral subject thereto or any other instrument or
document furnished in connection herewith.
Nonreliance on Agent and Other Banks. Each Bank acknowledges and agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Company and the Guarantors and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decision in taking or not taking action under this Agreement. The Agent shall
not be required to keep itself informed as to the performance or observance by
the Company or any Guarantor of this Agreement, the Notes or the Security
Documents or any other documents referred to or provided for herein or to
inspect the properties or books of the Company or any Guarantor and, except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder, the Agent shall not have any duty
or responsibility to provide any Bank with any information concerning the
affairs, financial condition or business of the Company, any Guarantor or any of
their respective Restricted Subsidiaries which may come into the possession of
the Agent or any of its affiliates.
Indemnification. The Banks agree to indemnify the Agent (to the extent not
reimbursed by the Company or any Guarantor, but without limiting any obligation
of the Company or any Guarantor to make such reimbursement), ratably according
to the respective principal amounts of the Advances then outstanding made by
each of them (or if no Advances are at the time outstanding, ratably according
to the respective amounts of their Commitments), from and against any and all
claims, damages, losses, liabilities, costs or expenses of any kind or nature
whatsoever (including, without limitation, fees and disbursements of counsel)
which may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or the transactions contemplated
hereby or any action taken or omitted by the Agent under this Agreement,
provided, however, that no Bank shall be liable for any portion of such claims,
damages, losses, liabilities, costs or expenses resulting from the Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
agrees to reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including without limitation fees and expenses of
counsel) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, to the extent that
the Agent is not reimbursed for such expenses by the Company or any Guarantor,
but without limiting the obligation of the Company or any Guarantor to make such
reimbursement. Each Bank agrees to reimburse the Agent promptly upon demand for
its ratable share of any amounts owing to the Agent by the Banks pursuant to
this Section. If the indemnity furnished to the Agent under this Section shall,
in the judgment of the Agent, be insufficient or become impaired, the Agent may
call for additional indemnity from the Banks and cease, or not commence, to take
any action until such additional indemnity is furnished.
Successor Agent. The Agent may resign as such at any time upon ten days'
prior written notice to the Company and the Banks. In the event of any such
resignation, the Required Banks shall, by an instrument in writing delivered to
the Company and the Agent, appoint a successor, which shall be a commercial bank
organized under the laws of the United States or any State thereof and having a
combined capital and surplus of at least $500,000,000. If a successor is not so
appointed or does not accept such appointment before the Agent's resignation
becomes effective, the retiring Agent may appoint a temporary successor to act
until such appointment by the Required Banks is made and accepted or if no such
temporary successor is appointed as provided above by the retiring Agent, the
Required Banks shall thereafter perform all the duties of the Agent hereunder
until such appointment by the Required Banks is made and accepted. Any successor
to the Agent shall execute and deliver to the Company and the Banks an
instrument accepting such appointment and thereupon such successor Agent,
without further act, deed, conveyance or transfer shall become vested with all
of the properties, rights, interests, powers, authorities and obligations of its
predecessor hereunder with like effect as if originally named as Agent
hereunder. Upon request of such successor Agent, the Company and the retiring
Agent shall execute and deliver such instruments of conveyance, assignment and
further assurance and do such other things as may reasonably be required for
more fully and certainly vesting and confirming in such successor Agent all such
properties, rights, interests, powers, authorities and obligations. The
provisions of this Article VII shall thereafter remain effective for such
retiring Agent with respect to any actions taken or omitted to be taken by such
Agent while acting as the Agent hereunder.
Sharing of Payments. The Banks agree among themselves that, in the event
that any Bank shall obtain payment in respect of any Advance or any other
obligation owing to the Banks under this Agreement through the exercise of a
right of set-off, banker's lien, counterclaim or otherwise in excess of its
ratable share of payments received by all of the Banks on account of the
Advances and other obligations (or if no Advances are outstanding, ratably
according to the respective amounts of the Commitments), such Bank shall
promptly purchase from the other Banks participations in such Advances and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all of the Banks share such payment in
accordance with such ratable shares. The Banks further agree among themselves
that if payment to a Bank obtained by such Bank through the exercise of a right
of set-off, banker's lien, counterclaim or otherwise as aforesaid shall be
rescinded or must otherwise be restored, each Bank which shall have shared the
benefit of such payment shall, by repurchase of participations theretofore sold,
return its share of that benefit to each Bank whose payment shall have been
rescinded or otherwise restored. Each of the Company and the Guarantors agrees
that any Bank so purchasing such a participation may, to the fullest extent
permitted by law, exercise all rights of payment, including set-off, banker's
lien or counterclaim, with respect to such participation as fully as if such
Bank were a holder of such Advance or other obligation in the amount of such
participation. The Banks further agree among themselves that, in the event that
amounts received by the Banks and the Agent hereunder are insufficient to pay
all such obligations or insufficient to pay all such obligations when due, the
fees and other amounts owing to the Agent in such capacity shall be paid
therefrom before payment of obligations owing to the Banks under this Agreement.
Except as otherwise expressly provided in this Agreement, if any Bank or the
Agent shall fail to remit to the Agent or any other Bank an amount payable by
such Bank or the Agent to the Agent or such other Bank pursuant to this
Agreement on the date when such amount is due, such payments shall be made
together with interest thereon for each date from the date such amount is due
until the date such amount is paid to the Agent or such other Bank at a rate per
annum equal to the rate at which borrowings are available to the payee in its
overnight federal funds market. It is further understood and agreed among the
Banks and the Agent that if the Agent shall engage in any other transactions
with the Company and shall have the benefit of any collateral or security
therefor which does not expressly secure the obligations arising under this
Agreement except by virtue of a so-called dragnet clause or comparable
provision, the Agent shall be entitled to apply any proceeds of such collateral
or security first in respect of the obligations arising in connection with such
other transaction before application to the obligations arising under this
Agreement.
ARTICLE 8.
GUARANTY
As an inducement to the Banks and the Agent to enter into the transactions
contemplated by this Agreement, each Guarantor agrees with the Banks and the
Agent as follows:
Guaranty of Obligations.
Each Guarantor hereby (i) guarantees, as principal obligor and not as
surety only, to the Banks the prompt payment of the principal of and any and all
accrued and unpaid interest (including interest which otherwise may cease to
accrue by operation of any insolvency law, rule, regulation or interpretation
thereof) on the Advances and all other obligations of the Company to the Banks
and the Agent under this Agreement when due, whether by scheduled maturity,
acceleration or otherwise, all in accordance with the terms of this Agreement
and the Notes, including, without limitation, default interest, indemnification
payments and all reasonable costs and expenses incurred by the Banks and the
Agent in connection with enforcing any obligations of the Company hereunder,
including without limitation the reasonable fees and disbursements of counsel,
(ii) guarantees to the Agent and the Banks the prompt and punctual performance
and observance of each and every term, covenant or agreement contained in this
Agreement and the Notes to be performed or observed on the part of the Company
and (iii) agrees to make prompt payment, on demand, of any and all reasonable
costs and expenses incurred by the Banks or the Agent in connection with
enforcing the obligations of the Guarantors hereunder, including, without
limitation, the reasonable fees and disbursements of counsel (all of the
foregoing being collectively referred to as the "Guaranteed Obligations").
If for any reason any duty, agreement or obligation of the Company
contained in this Agreement shall not be performed or observed by the Company as
provided therein, or if any amount payable under or in connection with this
Agreement shall not be paid in full when the same becomes due and payable, each
Guarantor undertakes to perform or cause to be performed promptly each of such
duties, agreements and obligations and to pay forthwith each such amount to the
Agent for the account of the Banks regardless of any defense or setoff or
counterclaim which the Company may have or assert, and regardless of any other
condition or contingency.
Nature of Guaranty. The obligations of the Guarantors hereunder constitute
an absolute and unconditional and irrevocable guaranty of payment and not a
guaranty of collection and are wholly independent of and in addition to other
rights and remedies of the Banks and the Agent and are not contingent upon the
pursuit by the Banks and the Agent of any such rights and remedies, such pursuit
being hereby waived by the Guarantors.
Waivers and Other Agreements. Each Guarantor hereby unconditionally (a)
waives any requirement that the Banks or the Agent, upon the occurrence of an
Event of Default first make demand upon, or seek to enforce remedies against the
Company before demanding payment under or seeking to enforce the obligations of
the Guarantors hereunder, (b) covenants that the obligations of the Guarantors
hereunder will not be discharged except by complete performance of all
obligations of the Company contained in this Agreement and the Notes, (c) agrees
that the obligations of the Guarantors hereunder shall remain in full force and
effect without regard to, and shall not be affected or impaired, without
limitation, by any invalidity, irregularity or unenforceability in whole or in
part of this Agreement or the Notes, or any limitation on the liability of the
Company thereunder, or any limitation on the method or terms of payment
thereunder which may or hereafter be caused or imposed in any manner whatsoever
(including, without limitation, usury laws), (d) waives diligence, presentment
and protest with respect to, and any notice of default or dishonor in the
payment of any amount at any time payable by the Company under or in connection
with this Agreement or the Notes, and further waives any requirement of notice
of acceptance of, or other formality relating to, the obligations of the
Guarantors hereunder and (e) agrees that the Guaranteed Obligations shall
include any amounts paid by the Company to the Banks or the Agent which may be
required to be returned to the Company or to its representative or to a trustee,
custodian or receiver for the Company.
Obligations Absolute. The obligations, covenants, agreements and duties of
the Guarantors under this Agreement shall not be released, affected or impaired
by any of the following whether or not undertaken with notice to or consent of
the Guarantors: (a) an assignment or transfer, in whole or in part, of the
Advances made to the Company or of this Agreement or any Note although made
without notice to or consent of the Guarantors, or (b) any waiver by any Bank or
the Agent or by any other Person, of the performance or observance by the
Company of any of the agreements, covenants, terms or conditions contained in
this Agreement or in the other Loan Documents, or (c) any indulgence in or the
extension of the time for payment by the Company of any amounts payable under or
in connection with this Agreement or any other Loan Document, or of the time for
performance by the Company of any other obligations under or arising out of this
Agreement or any other Loan Document, or the extension or renewal thereof, or
(d) the modification, amendment or waiver (whether material or otherwise) of any
duty, agreement or obligation of the Company set forth in this Agreement or any
other Loan Document (the modification, amendment or waiver from time to time of
this Agreement and the other Loan Documents being expressly authorized without
further notice to or consent of the Guarantors), or (e) the voluntary or
involuntary liquidation, sale or other disposition of all or substantially all
of the assets of the Company or any receivership, insolvency, bankruptcy,
reorganization, or other similar proceedings, affecting the Company or any of
its assets, or (f) the merger or consolidation of the Company or the Guarantors
with any other Person, or (g) the release of discharge of the Company or the
Guarantors from the performance or observance of any agreement, covenant, term
or condition contained in this Agreement or any other Loan Document, by
operation of law, or (h) any other cause whether similar or dissimilar to the
foregoing which would release, affect or impair the obligations, covenants,
agreements or duties of the Guarantors hereunder.
No Investigation by Banks or Agent. Each Guarantor hereby waives
unconditionally any obligation which, in the absence of such provision, the
Banks or the Agent might otherwise have to investigate or to assure that there
has been compliance with the law of any jurisdiction with respect to the
Guaranteed Obligations recognizing that, to save both time and expense, each
Guarantor has requested that the Banks and the Agent not undertake such
investigation. Each Guarantor hereby expressly confirms that the obligations of
such Guarantor hereunder shall remain in full force and effect without regard to
compliance or noncompliance with any such law and irrespective of any
investigation or knowledge of any Bank or the Agent of any such law.
Indemnity. As a separate, additional and continuing obligation, each
Guarantor unconditionally and irrevocably undertakes and agrees with the Banks
and the Agent that, should the Guaranteed Obligations not be recoverable from
the Guarantors under Section 8.1 for any reason whatsoever (including, without
limitation, by reason of any provision of this Agreement or the Notes or any
other agreement or instrument executed in connection herewith being or becoming
void, unenforceable, or otherwise invalid under any applicable law) then,
notwithstanding any knowledge thereof by any Bank or the Agent at any time, each
Guarantor as sole, original and independent obligor, upon demand by the Agent,
will make payment to the Agent for the account of the Banks and the Agent of the
Guaranteed Obligations by way of a full indemnity in such currency and otherwise
in such manner as is provided in this Agreement and the Notes.
Subordination, Subrogation, Etc. Each Guarantor agrees that any present or
future indebtedness, obligations or liabilities of the Company to any Guarantor
shall be fully subordinate and junior in right and priority of payment to any
present or future indebtedness, obligations or liabilities of the Company to the
Banks and the Agent. Each Guarantor waives any right of subrogation to the
rights of any Bank or the Agent against the Company or any other Person
obligated for payment of the Guaranteed Obligations and any right of
reimbursement or indemnity whatsoever arising or accruing out of any payment
which any Guarantor may make pursuant to this Agreement and the Notes, and any
right of recourse to security for the debts and obligations of the Company,
unless and until the entire principal balance of and interest on the Guaranteed
Obligations shall have been paid in full.
Waiver. To the extent that it lawfully may, each Guarantor agrees that it
will not at any time insist upon or plead, or in any manner whatsoever claim or
take any benefit or advantage of any applicable present or future stay,
extension or moratorium law, which may affect observance or performance of the
provisions of this Agreement or the Notes; nor will it claim, take or insist
upon any benefit or advantage of any present or future law providing for the
evaluation or appraisal of any security for its obligations hereunder or the
Company under this Agreement and under the Notes prior to any sale or sales
thereof which may be made under or by virtue of any instrument governing the
same; nor will it, after any such sale or sales claim or exercise any right,
under any applicable law, to redeem any portion of such security so sold.
8.9 Limitation of Guaranteed Amount. (a) As used hereinbelow, the following
terms shall have the following respective meanings:
"Adjusted Net Worth" of any Guarantor shall mean, as of any date of
determination thereof, the excess of (i) the aggregate value of all assets of
such Guarantor, contingent or otherwise, at a fair valuation, as of the date of
such determination, over (ii) the sum of all liabilities of such Guarantor,
contingent or otherwise, as of the date of such determination (excluding,
however, all liabilities of such Guarantor in respect of this Guaranty).
"Maximum Guaranteed Amount" of any Guarantor shall mean, as of any date of
determination thereof, the greatest of (i) the aggregate amount of all Advances
to or for the benefit of the Company to the extent that the proceeds thereof are
extended directly to such Guarantor or are used to make a Valuable Transfer to
such Guarantor, and (ii) ninety-five percent (95%) of the Adjusted Net Worth of
such Guarantor at the date it incurred its obligation under this Guaranty, and
(iii) the maximum amount for which this Guaranty then may be enforced against
such Guarantor.
"Valuable Transfer" shall mean, in respect of any Guarantor, (i) all loans
or advances made to such Guarantor with proceeds of the Advances which have not
been repaid by such Guarantor, (ii) all capital contributions made to such
Guarantor with proceeds of the Advances, (iii) all debt securities or other
obligations of such Guarantor acquired from such Guarantor or retired by such
Guarantor with proceeds of the Advances, (iv) the fair market value of all
property acquired with proceeds of the Advances and transferred, absolutely and
not as collateral, to such Guarantor, (v) all equity securities of such
Guarantor acquired from such Guarantor with proceeds of the Advances, and (vi)
the value of any quantifiable economic benefits not otherwise included in
clauses (i) through (v) above, but includable in accordance with applicable
federal and state laws governing determinations of fraudulent conveyances or the
insolvency of debtors, accruing to such Guarantor as a result of the Advances.
(b) Notwithstanding any other provision in this Guaranty to the contrary,
the maximum liability of each Guarantor hereunder shall in no event exceed such
Guarantor's Maximum Guaranteed Amount. Each Guarantor agrees, however, that the
obligations guaranteed hereunder may at any time and from time to time exceed
the Maximum Guaranteed Amount of such Guarantor or the aggregate Maximum
Guaranteed Amounts of all of the Guarantors without impairing this Guaranty or
affecting the rights and remedies of the Agent and the Banks. No payment or
payments made by the Company or any receipt or collection by the Agent or any
Bank or any setoff or appropriation or application at any time or from time to
time in reduction or in payment of the obligations guaranteed hereunder shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Guarantor hereunder, and each Guarantor shall remain liable for the Guaranteed
Obligations up to its Maximum Guaranteed Amount until the first to occur of the
full and final payment to the Agent and the Banks by such Guarantor of its
Maximum Guaranteed Amount and the full and final payment of the obligations
guaranteed hereunder.
(c) In addition to the above limitation there is a further limitation as
follows: in the event of a bankruptcy, insolvency or other similar proceeding
involving a Guarantor, the claims made by the Banks with respect to the Guaranty
of such Guarantor and allowed in such proceeding shall be reduced by the claims
made by the Banks with respect to the Intercompany Notes of such Guarantor and
allowed in such proceeding (after reducing the claims with respect to the
Intercompany Notes by (i) the amount of any offset against such claims relating
to Indebtedness or other obligations owed by the Company to such Guarantor, and
(ii) the amount, if any, of the claims with respect to such Intercompany Notes
that is determined to be equitably subordinated to any other claim against such
Guarantor), to the end that there shall be no duplication of such claims.
ARTICLE 9.
MISCELLANEOUS
Amendments, Etc.
No amendment, modification, termination or waiver of any provision of this
Agreement nor any consent to any departure therefrom shall be effective unless
the same shall be in writing and signed by the Company and Required Banks and,
to the extent any rights or duties of the Agent may be affected thereby, the
Agent, provided, however, that no such amendment, modification, termination,
waiver or consent shall, without the consent of the Agent and all of the Banks,
(i) authorize or permit the extension of time for, or any reduction of the
amount of, any payment of the principal of, or interest on, the Notes or any
Letter of Credit reimbursement obligation, or any fees or other amount payable
hereunder, (ii) amend, extend or terminate the respective Commitments of any
Bank set forth on the signature pages hereof or modify the provisions of this
Section regarding the taking of any action under this Section or the definition
of Required Banks or any provision of this Agreement requiring the consent of
all of the Banks, (iii) provide for the discharge of any Guarantor or the
release of any collateral subject to any Security Document, or (iv) modify any
other provision of this Agreement which by its terms requires the consent of all
of the Banks.
Any such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Notwithstanding anything herein to the contrary, no Bank that is in default
of any of its obligations, covenants or agreements under this Agreement shall be
entitled to vote (whether to consent or to withhold its consent) with respect to
any amendment, modification, termination or waiver of any provision of this
Agreement or any departure therefrom or any direction from the Banks to the
Agent, and, for purposes of determining the Required Banks at any time when any
Bank is in default under this Agreement, the Commitments and Advances of such
defaulting Banks shall be disregarded.
Notices.
Except as otherwise provided in Sections 2.4(a), 2.7 and 9.2(c) hereof, all
notices and other communications hereunder shall be in writing and shall be sent
to the Company, and the Guarantors c/o the Company, at P.O. Box 1602,
Indianapolis, IN 46206-1602, or by facsimile to facsimile No. 317/685-8810, or
delivered to the Company, and the Guarantors c/o the Company, at 700 West Morris
Street, Indianapolis, IN 46225, in all the above cases to the attention of James
LaCrosse, President; and to the Agent and the Banks at the respective addresses
for notices set forth on the signatures pages hereof, or to such other address
as may be designated by the Company, any Guarantor, the Agent or any Bank by
notice to the other parties hereto. All notices and other communications shall
be deemed to have been given at the time of actual delivery thereof to such
address, or, unless sooner delivered, (i) if sent by certified or registered
mail, postage prepaid, to such address, on the third day after the date of
mailing, (ii) if sent by telex, upon receipt of the appropriate answerback, or
(iii) if sent by facsimile transmission, upon confirmation of receipt by
telephone at the number specified for confirmation, provided, however, that
notices to the Agent shall not be effective until received.
Notices by the Company to the Agent with respect to terminations or
reductions of the Commitments pursuant to Section 2.2, requests for Advances
pursuant to Section 2.4, requests for continuations or conversions of Loans
pursuant to Section 2.7 and notices of prepayment pursuant to Section 3.1 shall
be irrevocable and binding on the Company.
Any notice to be given by the Company to the Agent pursuant to Sections
2.4, 2.7 or 3.1 and any notice to be given by the Agent or any Bank hereunder,
may be given by telephone, and all such notices given by the Company must be
immediately confirmed in writing in the manner provided in Section 9.2(a). Any
such notice given by telephone shall be deemed effective upon receipt thereof by
the party to whom such notice is to be given. The Company and the Guarantors
shall indemnify and hold harmless the Banks and the Agent from any and all
losses, damages, liabilities and claims arising from their good faith reliance
on any such telephone notice.
No Waiver By Conduct; Remedies Cumulative. No course of dealing on the part
of the Agent or any Bank, nor any delay or failure on the part of the Agent or
any Bank in exercising any right, power or privilege hereunder shall operate as
a waiver of such right, power or privilege or otherwise prejudice the Agent's or
such Bank's rights and remedies hereunder; nor shall any single or partial
exercise thereof preclude any further exercise thereof or the exercise of any
other right, power or privilege. No right or remedy conferred upon or reserved
to the Agent or any Bank under this Agreement, the Notes or any Security
Document is intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and in addition to every other right or
remedy granted thereunder or now or hereafter existing under any applicable law.
Every right and remedy granted by this Agreement, the Notes or any Security
Document or by applicable law to the Agent or any Bank may be exercised from
time to time and as often as may be deemed expedient by the Agent or any Bank
and, unless contrary to the express provisions of this Agreement, the Notes or
any Security Document, irrespective of the occurrence or continuance of any
Default or Event of Default.
Reliance on and Survival of Various Provisions. All terms, covenants,
agreements, representations and warranties of the Company or any Guarantor made
herein or in any Security Document or in any certificate, report, financial
statement or other document furnished by or on behalf of the Company or any
Guarantor in connection with this Agreement shall be deemed to be material and
to have been relied upon by the Banks, notwithstanding any investigation
heretofore or hereafter made by any Bank or on such Bank's behalf, and those
covenants and agreements of the Company set forth in Section 3.7, 3.9 and 9.5
hereof shall survive the repayment in full of the Advances and the termination
of the Commitments.
Expenses; Indemnification.
Company agrees to pay, or reimburse the Agent for the payment of, on
demand, (i) the reasonable fees and expenses of counsel to the Agent, including
without limitation the fees and expenses of Dickinson Wright PLLC, in connection
with the preparation, execution, delivery and administration of this Agreement,
the Notes, the Security Documents and in connection with advising the Agent as
to its rights and responsibilities with respect thereto, and in connection with
any amendments, waivers or consents in connection therewith, and (ii) all stamp
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing or recording of this Agreement, Notes, the
Security Documents (or the verification of filing, recording, perfection or
priority thereof) or the consummation of the transactions contemplated hereby,
and any and all liabilities with respect to or resulting from any delay in
paying or omitting to pay such taxes or fees, and (iii) all reasonable costs and
expenses of the Agent and the Banks (including reasonable fees and expenses of
counsel and whether incurred through negotiations, legal proceedings or
otherwise)) in connection with any Default or Event of Default or the
enforcement of, or the exercise or preservation of any rights under, this
Agreement or the Notes or any Security Document or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement and (iv) all reasonable costs and expenses of the Agent and the Banks
(including reasonable fees and expenses of counsel) in connection with any
action or proceeding relating to a court order, injunction or other process or
decree restraining or seeking to restrain the Agent from paying any amount
under, or otherwise relating in any way to, any Letter of Credit and any and all
costs and expenses which any of them may incur relative to any payment under any
Letter of Credit.
The Company hereby indemnifies and agrees to hold harmless the Banks and
the Agent, and their respective officers, directors, employees and agents,
harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses of any kind or nature whatsoever which the Banks or the Agent
or any such Person may incur or which may be claimed against any of them by
reason of or in connection with any Letter of Credit, and neither any Bank nor
the Agent or any of their respective officers, directors, employees or agents
shall be liable or responsible for: (i) the use which may be made of any Letter
of Credit or for any acts or omissions of any beneficiary in connection
therewith; (ii) the validity, sufficiency or genuineness of documents or of any
endorsement thereon, even if such documents should in fact prove to be in any or
all respects invalid, insufficient, fraudulent or forged; (iii) payment by the
Agent to the beneficiary under any Letter of Credit against presentation of
documents which do not comply with the terms of any Letter of Credit, including
failure of any documents to bear any reference or adequate reference to such
Letter of Credit; (iv) any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit; or (v) any other event or
circumstance whatsoever arising in connection with any Letter of Credit;
provided, however, that the Company shall not be required to indemnify the Banks
and the Agent and such other Persons, and the Banks shall be liable to the
Company to the extent, but only to the extent, of any direct, as opposed to
consequential or incidental, damages suffered by the Company which were caused
by (A) the Agent's wrongful dishonor of any Letter of Credit after the
presentation to it by the beneficiary thereunder of a draft or other demand for
payment and other documentation strictly complying with the terms and conditions
of such Letter of Credit, or (B) the Agent's payment to the beneficiary under
any Letter of Credit against presentation of documents which do not comply with
the terms of the Letter of Credit to the extent, but only to the extent, that
such payment constitutes gross negligence of willful misconduct of the Agent. It
is understood that in making any payment under a Letter of Credit the Agent will
rely on documents presented to it under such Letter of Credit as to any and all
matters set forth therein without further investigation and regardless of any
notice or information to the contrary, and such reliance and payment against
documents presented under a Letter of Credit substantially complying with the
terms thereof shall not be deemed gross negligence or willful misconduct of the
Agent in connection with such payment. It is further acknowledged and agreed
that the Company may have rights against the beneficiary or others in connection
with any Letter of Credit with respect to which the Banks are alleged to be
liable and it shall be a precondition of the assertion of any liability of the
Banks under this Section that the Company shall first have exhausted all
reasonable remedies in respect of the alleged loss against such beneficiary and
any other parties obligated or liable in connection with such Letter of Credit
and any related transactions.
The Company hereby indemnifies and agrees to hold harmless the Banks and
the Agent, and their respective officers, directors, employees and agents, from
and against any and all claims, damages, losses, liabilities, costs or expenses
of any kind or nature whatsoever (including reasonable attorneys fees and
disbursements incurred in connection with any investigative, administrative or
judicial proceeding whether or not such Person shall be designated as a party
thereto) which the Banks or the Agent or any such Person may incur or which may
be claimed against any of them by reason of or in connection with entering into
this Agreement or the transactions contemplated hereby, including without
limitation those arising under Environmental Laws; provided, however, that the
Company shall not be required to indemnify any such Bank and the Agent or such
other Person, to the extent, but only to the extent, that such claim, damage,
loss, liability, cost or expense is attributable to the gross negligence or
willful misconduct of such Bank or the Agent, as the case may be.
Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided that the
Company may not, without the prior consent of the Banks, assign its rights or
obligations hereunder or under the Notes or any Security Document and the Banks
shall not be obligated to make any Advance hereunder to any entity other than
the Company.
Each Bank may, with the prior consent of the Company (which shall not be
unreasonably withheld and which is not required if there should then exist a
Default or Event of Default or if the sale is to an Affiliate of such Bank) may
sell to any financial institution or institutions, and such financial
institution or institutions may further sell, a participation interest
(undivided or divided) in, the Advances and such Bank's rights and benefits
under this Agreement, the Notes and the Security Documents, and to the extent of
that participation interest such participant or participants shall have the same
rights and benefits against the Company under Section 3.7, 3.9 and 6.2(c) as it
or they would have had if such participant or participants were the Bank making
the Advances to the Company hereunder, provided, however, that (i) such Bank's
obligations under this Agreement shall remain unmodified and fully effective and
enforceable against such Bank, (ii) such Bank shall remain solely responsible to
the other parties hereto for the performance of such obligations, (iii) such
Bank shall remain the holder of its Notes for all purposes of this Agreement,
(iv) the Company, the Agent and the other Banks shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement, and (v) such Bank shall not grant to its
participant any rights to consent or withhold consent to any action taken by
such Bank or the Agent under this Agreement other than action requiring the
consent of all of the Banks hereunder.
The Agent from time to time in its sole discretion may appoint agents for
the purpose of servicing and administering this Agreement and the transactions
contemplated hereby and enforcing or exercising any rights or remedies of the
Agent provided under this Agreement, the Notes, any Security Documents or
otherwise. In furtherance of such agency, the Agent may from time to time direct
that the Company and the Guarantors provide notices, reports and other documents
contemplated by this Agreement (or duplicates thereof) to such agent. The
Company and each Guarantor hereby consents to the appointment of such agent and
agrees to provide all such notices, reports and other documents and to otherwise
deal with such agent acting on behalf of the Agent in the same manner as would
be required if dealing with the Agent itself.
Each Bank may, with the prior consent of the Company (which shall not be
unreasonably withheld and which is not required if there should then exist a
Default or Event of Default) and the Agent, assign to one or more banks or other
entities all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the Advances
owing to it and the Note held by it); provided, however, that (i) each such
assignment shall be of a uniform, and not a varying, percentage of all rights
and obligations, (ii) except in the case of an assignment of all of a Bank's
rights and obligations under this Agreement, (A) the amount of the Commitment of
the assigning Bank being assigned pursuant to each such assignment (determined
as of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $10,000,000, and in integral multiples of
$5,000,000 thereafter, or such lesser amount as the Company and the Agent may
consent to and (B) after giving effect to each such assignment, the amount of
the Commitment of the assigning Bank shall in no event be less than $5,000,000,
(iii) the parties to each such assignment shall execute and deliver to the
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance in the form of Exhibit G hereto (an "Assignment and Acceptance"),
together with the Note subject to such assignment and a processing and
recordation fee of $3,000, and (iv) any Bank may without the consent of the
Company or the Agent, and without paying any fee, assign to any Affiliate of
such Bank that is a bank or financial institution or to any other Bank all or
any portion of its rights and obligations under this Agreement. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in such Assignment and Acceptance, (x) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Bank hereunder and (y) the Bank assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the remaining portion of an assigning
Bank's rights and obligations under this Agreement, such Bank shall cease to be
a party hereto).
By executing and delivering an Assignment and Acceptance, the Bank assignor
thereunder and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Company or the
performance or observance by the Company of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.6 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
assigning Bank or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement; (v) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of this Agreement are required to be performed by it as a Bank.
The Agent shall maintain at its address designated on the signature pages
hereof a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Banks and
the Commitment of, and principal amount of the Advances owing to, each Bank from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Company, the Agent
and the Banks may treat each Person whose name is recorded in the Register as a
Bank hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Company or any Bank at any reasonable time and
from time to time upon reasonable prior notice.
Upon its receipt of an Assignment and Acceptance executed by an assigning
Bank and an assignee, together with the Note subject to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the Company. Within five
Business Days after its receipt of such notice, the Company, at its own expense,
shall execute and deliver to the Agent in exchange for the surrendered Note a
new Note to the order of such assignee in an amount equal to the Commitment
assumed by it pursuant to such Assignment and Acceptance and, if the assigning
Bank has retained a Commitment hereunder, a new Note to the order of the
assigning Bank in an amount equal to the Commitment retained by it hereunder.
Such new Note shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit C hereto.
The Company shall not be liable for any costs or expenses of any Bank in
effectuating any participation or assignment under this Section 9.6.
The Banks may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 9.6, disclose to
the assignee or participant or proposed assignee or participant any information
relating to the Company, provided, that disclosures to proposed assignees or
participants the assignments or sales of participations to which are subject to
the consent of the Company may only be made with the consent of the Company,
which consent shall not be unreasonably withheld.
Notwithstanding any other provision set forth in this Agreement, any Bank
may at any time create a security interest in, or assign, all or any portion of
its rights under this Agreement (including, without limitation, the Loans owing
to it and the Note held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System; provided, that such creation of a security interest or assignment shall
not release such Bank from its obligations under this Agreement.
Counterparts and Telefacsimile Signatures. This Agreement may be executed
in any number of counterparts, and by telefacsimile signature, all of which
taken together shall constitute one and the same instrument, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
Governing Law. This Agreement is a contract made under, and shall be
governed by and construed in accordance with, the law of the State of Michigan
applicable to contracts made and to be performed entirely within such State and
without giving effect to choice of law principles of such State. Each of the
Company and the Guarantors and the Banks further agrees that any legal or
equitable action or proceeding with respect to this Agreement, the Notes or any
Security Document or the transactions contemplated hereby shall be brought in
any court of the State of Michigan, or in any court of the United States of
America sitting in Michigan, and the Company and each Guarantor and the Banks
hereby submits to and accepts generally and unconditionally the jurisdiction of
those courts with respect to its person and property, and, in the case of the
Company and each Guarantor irrevocably appoints NWS Michigan, Inc., whose
address in Michigan is 17550 Allen Road, Brownstown, MI 48192, as its agent for
service of process and irrevocably consents to the service of process in
connection with any such action or proceeding by personal delivery to such agent
or to the Company or such Guarantor, as the case may be, or by the mailing
thereof by registered or certified mail, postage prepaid to the Company or such
Guarantor at its address for notices pursuant to Section 9.2. The Company shall
at all times maintain such an agent in Michigan for such purpose and shall
notify the Banks and the Agent of such agent's address in Michigan within ten
days of any change of address. Nothing in this paragraph shall affect the right
of the Banks and the Agent to serve process in any other manner permitted by law
or limit the right of the Banks or the Agent to bring any such action or
proceeding against the Company or any Guarantor or property in the courts of any
other jurisdiction. The Company and each Guarantor and the Banks hereby
irrevocably waives any objection to the laying of venue of any such action or
proceeding in the above described courts.
Table of Contents and Headings. The table of contents and the headings of
the various subdivisions hereof are for the convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
Construction of Certain Provisions. If any provision of this Agreement
refers to any action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person, whether or not expressly
specified in such provision.
Integration and Severability. This Agreement, the Notes, and the Security
Documents embody the entire agreement and understanding between the Company, the
Guarantors and the Agent and the Banks, and supersede all prior agreements and
understandings, relating to the subject matter hereof. In case any one or more
of the obligations of the Company or any Guarantor under this Agreement, the
Notes or any Security Document shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
obligations of the Company and the Guarantors shall not in any way be affected
or impaired thereby, and such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of the
obligations of the Company or any Guarantor under this Agreement, the Notes or
any Security Document in any other jurisdiction.
Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenant, the fact that it would be permitted by an exception to, or
would be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
such condition exists.
Interest Rate Limitation. Notwithstanding any provisions of this Agreement,
the Notes or any Security Document, in no event shall the amount of interest
paid or agreed to be paid by the Company exceed an amount computed at the
highest rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Agreement, the
Notes or any Security Document at the time performance of such provision shall
be due, shall involve exceeding the interest rate limitation validly prescribed
by law which a court of competent jurisdiction may deem applicable hereto, then,
ipso facto, the obligations to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under applicable law, and
if for any reason whatsoever any Bank shall ever receive as interest an amount
which would be deemed unlawful under such applicable law such interest shall be
automatically applied to the payment of principal of the Advances outstanding
hereunder (whether or not then due and payable) and not to the payment of
interest, or shall be refunded to the Company if such principal and all other
obligations of the Company to the Banks have been paid in full.
Waiver of Jury Trial. The Banks, the Agent, the Company and the Guarantors,
after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waive any right any of them may have to
a trial by jury in any litigation based upon or arising out of this Agreement or
any related instrument or agreement or any of the transactions contemplated by
this Agreement or any course of conduct, dealing, statements (whether oral or
written) or actions of any of them. Neither any Bank, the Agent, any Guarantor
nor the Company shall seek to consolidate, by counterclaim or otherwise, any
such action in which a jury trial has been waived with any other action in which
a jury trial cannot be or has not been waived. These provisions shall not be
deemed to have been modified in any respect or relinquished by any party hereto
except by a written instrument executed by such party.
[THE REST OF THE PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on the 25th day of January, 1999, which shall be the
Effective Date of this Agreement, notwithstanding the day and year first above
written.
Address for Notices: NATIONAL WINE & SPIRITS, INC.
700 West Morris Street By:
Indianapolis, Indiana 46225
Its:
Attention: J. Smoke Wallin
Facsimile No.: (317) 685-8810
NWS, INC.
By:
Its:
NWS-ILLINOIS, LLC
By:
Its:
<PAGE>
<PAGE>
NATIONAL WINE & SPIRITS CORPORATION
By:
Its:
NWS MICHIGAN, INC.
By:
Its:
Address for Notices: NBD BANK, Individually as a Bank
and as Agent
701 First National Building By:
Detroit, Michigan 48226
Its:
Attention: Michael K. Kelly
Facsimile No.: (313) 962-2326
Commitment Amount: $25,000,000
Percentage of
Total Commitments: 41.667%
Total Commitment Amount of
all Banks: $60,000,000
BNY FINANCIAL CORPORATION
1290 Sixth Avenue, Third Floor By:
New York, NY 10104
Its:
Attention: Robert Nuytkens
Facsimile No.: (212) 408-4313
Commitment Amount: $12,500,000
Percentage of
Total Commitments: 20.833%
Total Commitment Amount of
all Banks: $60,000,000
LASALLE NATIONAL BANK
135 South LaSalle Street By:
Chicago, IL 60603
Its:
Attention: Michael S. Barnett
Facsimile No.: (312) 904-4364
Commitment Amount: $12,500,000
Percentage of
Total Commitments: 20.833%
Total Commitment Amount of
all Banks: $60,000,000
NATIONAL CITY BANK OF INDIANA
One National City Center By:
Indianapolis, IN 46225
Its:
Attention: Randy J. Collier
Facsimile No.: (317) 267-8899
Commitment Amount: $10,000,000
Percentage of
Total Commitments: 16.667%
Total Commitment Amount of
all Banks: $60,000,000
DETROIT 6-10 358986-18
IMDR 449182
Exhibit 12
<TABLE>
<CAPTION>
Statement Regarding Computation of Ratios
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Twelve Months Twelve Months
Ended December Ended
Nine Months Ended 31, December 31,
Years Ended March 31, December 31,
1994 1995 1996 1997 1998 1997 1998 1998 1998
(in (Pro Forma)
thousands)
Consolidated
pretax income (loss) $(1,281) $2,179 $3,024 $1,603 $7,111 $8,276 $5,586 $4,421 $4,421
Interest........... 4,907 7,341 7,935 8,486 9,672 7,325 8,018 10,365 11,299
Net amortization
of debt discount
and premium and
issuance expenses.. 368 405 244 261 325 281 346 390 390
Interest portion
of rental expense.. 407 331 365 634 1,120 857 815 1,078 1,078
-------- ------- ------- ------- ------- ------- ------- ------- --------
Earnings........... $ 4,401 $10,256 $11,568 $10,984 $18,228 $16,739 $14,765 $16,254 $17,188
======== ======= ======= ======= ======= ======= ======= ======= ========
Interest........... $ 4,907 $ 7,341 $ 7,935 $ 8,486 $ 9,672 $ 7,325 $ 8,018 $10,365 $11,299
Net amortization
of debt discount
and premium and
issuance expense... 368 405 244 261 325 281 346 390 390
Interest portion
of rental expense.. 407 331 365 634 1,120 857 815 1,078 1,078
-------- ------- ------- ------- ------- ------- ------- ------- --------
Fixed Charges...... $5,682 $8,077 $8,544 $9,381 $11,117 $8,463 $9,179 $11,833 $12,767
======== ======= ======= ======= ======= ======= ======= ======= ========
Ratio of earnings
to fixed charges... N/A* 1.3 1.4 1.2 1.6 2.0 1.6 1.4 1.3
--- --- --- --- --- --- --- --- ---
<FN>
*For 1994, earnings were inadequate to cover fixed charges by $1,281,000.
Note: Pro Forma information is presented assuming the proceeds from the sale of the outstanding notes and new credit
facility were received as of December 31, 1998.
</TABLE>
Exhibit 16
March 15, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read and agree with the comments in the "Change in Independent Auditors"
section of Form S-4 of National Wine & Spirits, Inc. dated March 17, 1999.
Very truly yours,
Katz, Sapper & Miller, LLP
Exhibit 21
List of Subsidiaries
National Wine & Spirits Corporation
NWS, Inc.
NWS-Illinois, LLC
NWS-Michigan, Inc.
Exhibit 23(a)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 17, 1998, in the Registration Statement (Form S-4)
and related Prospectus of National Wine & Spirits, Inc. dated March 17, 1999.
Our audit also included the financial statement schedule of National Wine &
Spirits, Inc. listed in the accompanying index to exhibits and financial
statement schedules (Item 21), as it relates to the year ended March 31, 1998.
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic combined financial statements taken as a whole, presents fairly
in all material respects the information set forth therein for the year ended
March 31, 1998.
Ernst & Young LLP
Indianapolis, Indiana
March 11, 1999
Exhibit 23(b)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 17, 1998, in the Registration Statement (Form S-4)
and related Prospectus of National Wine & Spirits, Inc. dated March 17, 1999.
Our audit also included the financial statement schedule of National Wine &
Spirits, Inc. listed in the accompanying index to exhibits and financial
statement schedules (Item 21), as it relates to the years ended March 31, 1997
and 1996. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic combined financial statements taken as a whole, presents fairly
in all material respects the information set for the therein for the years ended
March 31, 1997 and 1996.
Katz, Sapper & Miller, LLP
Indianapolis, Indiana
March 12, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- -----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
- -----------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. National Banking Association
(Jurisdiction of incorporation or
organization if not a U.S. national
bank)
41-1592157
(I.R.S. Employer
Identification No.)
Sixth Street and Marquette Avenue
Minneapolis, Minnesota
(Address of principal executive offices)
55479
(Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
- -----------------------------
NATIONAL WINE & SPIRITS, INC.
(Exact name of obligor as specified in its charter)
Indiana
(State or other jurisdiction of
incorporation or organization)
No.)
35-2064429
(I.R.S. Employer
Identification
700 West Morris
PO Box 1602
Indianapolis, Indiana
(Address of principal executive offices)
46206
(Zip code)
- -----------------------------
10 1/8% Senior Notes due 2009
(Title of the indenture securities)
============================================================================
<PAGE>
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Item 16. List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility.
Norwest Bank incorporates by reference into this Form T-1 the exhibits
attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the trustee to commence
business issued June 28, 1872, by the Comptroller of the Currency to
The Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust
powers issued January 2, 1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the trustee published pursuant to
law or the requirements of its supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with registration statement
number 33-66026.
** Incorporated by reference to exhibit number 25 filed with registration statement
number 333-25233.
</TABLE>
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 9th day of March 1999.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ CURTIS D. SCHWEGMAN
Curtis D. Schwegman
Assistant Vice President
<PAGE>
<PAGE>
EXHIBIT 6
March 9, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ CURTIS D. SCHWEGMAN
Curtis D. Schwegman
Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1999
<PERIOD-END> MAR-31-1998 DEC-31-1998
<CASH> 1,370 3,217
<SECURITIES> 0 0
<RECEIVABLES> 32,213 57,731
<ALLOWANCES> 900 1,370
<INVENTORY> 76,734 74,563
<CURRENT-ASSETS> 114,350 137,900
<PP&E> 74,610 77,756
<DEPRECIATION> 26,045 27,808
<TOTAL-ASSETS> 169,102 202,136
<CURRENT-LIABILITIES> 64,059 155,817
<BONDS> 0 0
0 0
0 0
<COMMON> 103 103
<OTHER-SE> 14,479 25,016
<TOTAL-LIABILITY-AND-EQUITY> 169,102 202,136
<SALES> 505,141 423,367
<TOTAL-REVENUES> 521,411 437,377
<CGS> 411,734 346,516
<TOTAL-COSTS> 510,852 425,206
<OTHER-EXPENSES> (6,224) (1,433)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,672 8,018
<INCOME-PRETAX> 7,111 5,586
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,111 5,586
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
Exhibit 99-1
LETTER OF TRANSMITTAL
NATIONAL WINE & SPIRITS, INC.
Offer to Exchange its
Series B 10 1/8% Senior Notes due 2009
for any and all of its outstanding
Series A 10 1/8% Senior Notes due 2009
Pursuant to the Prospectus dated ___________________, 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 RM., NEW YORK CITY
TIME, ON__________________,1999, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent for The Exchange Offer Is:
Norwest Bank Minnesota, N.A.
<TABLE>
<CAPTION>
<S> <C>
Facsimile Transmissions
By Registered or Certified Mail: (Eligible Institutions Only)
Norwest Bank Minnesota, N.A. (612) 667-9825
Corporate Trust
Northwest Center
6th & Marquette
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services
To Confirm by Telephone
By Hand or Overnight Delivery or for Information Call:
Norwest Bank Minnesota, N.A. Curtis D. Schwegman
Corporate Trust (612) 667-9764
Northwest Center
6th & Marquette
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed either if (a) certificates
are to be forwarded herewith or (b) tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth under "The Exchange
Offer-Procedures for Tendering Outstanding Notes" in the Prospectus and an
Agent's Message (as defined below) is not delivered. Certificates, or book-entry
confirmation of a book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at The Depository Trust Company ("DTC"), as well as
this Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth herein on or prior to the Expiration Date. Tenders by
book-entry transfer may also be made by delivering an Agent's Message in lieu of
this Letter of Transmittal. The term "book-entry confirmation" means a
confirmation of a book-entry transfer of Outstanding Notes into the Exchange
Agent's account at DTC. The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by this Letter of Transmittal and that National
Wine & Spirits, Inc., an Indiana corporation (the "Company"), may enforce this
Letter of Transmittal against such participant.
Holders (as defined below) of Outstanding Notes whose certificates (the
"Certificates") for such Outstanding Notes are not immediately
available or who cannot deliver their Certificates and all other
required documents to the Exchange Agent on or prior to the Expiration
Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their
Outstanding Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offer-Procedures for Tendering Outstanding
Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
<PAGE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
<TABLE>
<CAPTION>
DESCRIPTION OF OUTSTANDING NOTES
<S> <C> <C> <C>
If blank, please print name and
address of registered Holder(s) OUTSTANDING NOTES
(Attach additional list if necessary)
----------------- ---------------------- -------------------
CERTIFICATE AGGREGATE PRINCIPAL AMOUNT OF
NUMBER(S)* PRINCIPAL AMOUNT OF OUTSTANDING NOTES
OUTSTANDING NOTES TENDERED (IF LESS THAN
ALL)**
TOTAL:
<FN>
* Need not be completed by book-entry Holders.
** Outstanding Notes may be tendered in whole or in part in multiples of $1,000. All Outstanding Notes held
shall be deemed tendered unless a lesser number is specified in this column. See Instructions 4.
</TABLE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ___________________________________________
DTC Account Number _______________ Transaction Code Number ______________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED
DELIVERY IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING (SEE INSTRUCTION 1):
Name(s) of Registered Holder(s)___________________________________________
Window Ticket Number (if any) ___________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution which Guaranteed Delivery ___________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution ___________________________________________
DTC Account Number _____________ Transaction Code Number ______________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED
OUTSTANDING NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER
SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OUTSTANDING NOTES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: _________________________________________________________________________
Address: ______________________________________________________________________
<PAGE>
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to National Wine & Spirits, Inc., an Indiana
corporation (the "Company"), the above described principal amount of the
Company's Series A 10 1/8% Senior Notes due 2009 (the "Outstanding Notes") in
exchange for equivalent amount of the Company's Series B 10 1/8% Senior Notes
due 2009 (the "Exchange Notes") which have been registered under the Securities
Act of 1933 (the "Securities Act"), upon the terms and subject to the conditions
set forth in the Prospectus dated _______________, 1999 (as the same may be
amended or supplemented from time to time, the "Prospectus"), receipt of which
is hereby acknowledged, and in this Letter of Transmittal (which, together with
the Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Outstanding Notes tendered herewith in accordance with the terms
and conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to such Outstanding
Notes as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company in connection with the Exchange Offer) with respect to the tendered
Outstanding Notes, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest) subject only to the
right of withdrawal described in the Prospectus, to (i) deliver Certificates for
Outstanding Notes to the Company together with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company, upon receipt by
the Exchange Agent, as the undersigned's agent, of the Series B Notes to be
issued in exchange for such Outstanding Notes, (ii) present Certificates for
such Outstanding Notes for transfer, and to transfer the Outstanding Notes on
the books of the Company, and (iii) receive for the account of the Company all
benefits and otherwise exercise all rights of beneficial ownership of such
Outstanding Notes, all in accordance with the terms and conditions of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Outstanding Notes tendered hereby and that, when the same are accepted for
exchange, the Company will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances,
and that the Outstanding Notes tendered hereby are not subject to any adverse
claims or proxies. The undersigned will, upon request, execute and deliver any
additional documents deemed by the company or the Exchange Agent to be necessary
or desirable to complete the exchange, assignment and transfer of the
Outstanding Notes tendered hereby, and the undersigned will comply with its
obligations under the Registration Rights Agreement. The undersigned has read
and agrees to all of the terms of the Exchange Offer.
The name(s) and address(es) of the registered Holder(s) of the Outstanding
Notes tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Outstanding Notes.
The Certificate number(s) and the Outstanding Notes that the undersigned wishes
to tender should be indicated in the appropriate boxes above.
If any tendered Outstanding Notes are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more
Outstanding Notes than are tendered or accepted for exchange, Certificates for
such nonexchanged or nontendered Outstanding Notes will be returned (or, in the
case of Outstanding Notes tendered by book-entry transfer, such Outstanding
Notes will be credited to an account maintained at DTC), without expense to the
tendering Holder, promptly following the expiration or termination of the
Exchange Offer.
The undersigned understands that tenders of Outstanding Notes pursuant to
any one of the procedures described in "The Exchange Offer-Procedures for
Tendering Outstanding Notes" in the Prospectus and in the instructions attached
hereto will, upon the Company's acceptance for exchange of such tendered
Outstanding Notes, constitute a binding agreement between the undersigned and
the Company upon the terms and subject to the conditions of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth in the
Prospectus, the Company may not be required to accept for exchange any of the
Outstanding Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Outstanding Notes, that such Exchange Notes be credited to the
account indicated above maintained at DTC. If applicable, substitute
Certificates representing Outstanding Notes not exchanged or not accepted for
exchange will be issued to the undersigned or, in the case of a book-entry
transfer of Outstanding Notes, will be credited to the account indicated above
maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please deliver Exchange Notes to the undersigned at the address
shown below the undersigned's signature.
By tendering Notes and executing this Letter of Transmittal or effecting
delivery of an Agent's Message in lieu thereof, the undersigned hereby
represents and agrees that (i) the undersigned is not an "affiliate" of the
Company, (ii) any Exchange Notes to be received by the undersigned are being
acquired in the ordinary course of its business, (iii) the undersigned has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of Exchange Notes to be received in
the Exchange Offer, and (iv) if the undersigned is not a broker-dealer, the
undersigned is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such Exchange Notes. The Company
may require the undersigned, as a condition to the undersigned's eligibility to
participate in the Exchange Offer, to furnish to the Company (or an agent
thereof) in writing information as to the number of "beneficial owners" within
the meaning of Rule 13d-3 under the Exchange Act on behalf of whom the
undersigned holds the Outstanding Notes to be exchanged in the Exchange Offer.
By tendering Outstanding Notes pursuant to the Exchange Offer and executing this
Letter of Transmittal or effecting delivery of an Agent's Message in lieu
thereof, a Holder of Outstanding Notes which is a broker-dealer represents and
agrees, consistent with certain interpretive letters issued by the staff of the
division of corporation finance of the Securities and Exchange Commission to
third parties, that such Outstanding Notes were acquired by such broker-dealer
for its own account as a result of market-making activities or other trading
activities, and it will deliver a Prospectus (as amended or supplemented from
time to time) meeting the requirements of the Securities Act in connection with
any resale of such Exchange Notes (provided that, by so acknowledging and by
delivering a Prospectus, such broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act).
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a participating broker-dealer (as defined below) in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes, where such Outstanding Notes were acquired by such participating
broker-dealer for its own account as a result of market-making activities or
other trading activities, for a period ending one year after the Expiration Date
(subject to extension under certain limited circumstances described in the
Prospectus) or, if earlier, when all such Exchange Notes have been disposed of
by such participating broker-dealer. In that regard, each broker-dealer who
acquired Outstanding Notes for its own account as a result of market-making or
other trading activities (a "participating broker-dealer"), by tendering such
Outstanding Notes and executing this Letter of Transmittal or effecting delivery
of an Agent's Message in lieu thereof, agrees that, upon receipt of notice from
the Company of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in the Prospectus
untrue in any material respect or which causes the Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference therein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such participating broker-dealer
will suspend the sale of Exchange Notes pursuant to the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented Prospectus
to the participating broker-dealer or the Company has given notice that the sale
of the Exchange Notes may be resumed, as the case may be. If the Company gives
such notice to suspend the sale of the Exchange Notes, it shall extend the one
year period referred to above during which participating broker-dealers are
entitled to use the Prospectus in connection with the resale of Exchange Notes
by the number of days during the period from and including the date of the
giving of such notice to and including the date when participating
broker-dealers shall have received copies of the supplemented or amended
Prospectus necessary to permit resales of the Exchange Notes or to and including
the date on which the Company has given notice that the sale of Exchange Notes
may be resumed, as the case may be.
As a result, a participating broker-dealer who intends to use the
Prospectus in connection with resales of Exchange Notes received in exchange for
Outstanding Notes pursuant to the Exchange Offer must notify the Company, or
cause the Company to be notified, on or prior to the Expiration Date, that it is
a participating broker-dealer. Such notice may be given in the space provided
above or may be delivered to the Exchange Agent at the address set forth in the
Prospectus under "The Exchange Offer-Exchange Agent."
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Outstanding Notes tendered hereby. All
authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
The undersigned, by completing the box entitled "Description of Outstanding
Notes" above and signing this letter, will be deemed to have tendered the
Outstanding Notes as set forth in such box.
<PAGE>
<PAGE>
IMPORTANT
HOLDERS: SIGN HERE
(Please Complete Substitute Form W-9 herein)
Signature(s) of Holder(s)
Date:
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Outstanding Notes hereby tendered or on a security
position listing or by person(s) authorized to become the registered holder(s)
by certificates and documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please provide the following information and see Instruc tion 2 below.)
Name(s):
(Please Print)
Capacity (full title):
Address:
(Include Zip Code)
Area Code and Telephone No.:
Taxpayer Identification or Social Security No.:
(See Substitute Form W-9 herein)
GUARANTEE OF SIGNATURE(S)
(See Instruction 2 below)
Authorized Signature:
Name:
(Please type or Print)
Title:
Name of Firm:
Address:
(Include Zip Code)
Area Code and Telephone No.:
Date:
<TABLE>
<CAPTION>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(Signature Guarantee Required -- See Instruction 2) (Signature Guarantee Required -- See Instruction 2)
TO BE COMPLETED ONLY if Exchange Notes or Outstanding Notes TO BE COMPLETED ONLY if Exchange Notes or Outstanding
not tendered are to be issued in the name of someone other Notes not tendered are to be sent to someone
than the registered Holder of the Outstanding Notes whose other than the registered Holder of the Outstanding Notes whose
name(s) appear(s) above. name(s) appear(s) above, or such registered Holder at an address
other than shown above.
[ ] Outstanding Notes not tendered to: [ ] Outstanding Notes not tendered to:
[ ] Exchange Notes to: [ ] Exchange Notes to:
Name Name
(Please Print) (Please Print)
Address Address
(Include Zip Code)
(Include Zip Code)
Tax Identification or Social Security Number
</TABLE>
<PAGE>
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer-Procedures for Tendering Outstanding Notes" in the Prospectus and an
Agent's Message is not delivered. Certificates, or timely confirmation of a
book-entry transfer of such Outstanding Notes into the Exchange Agent's account
at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date. Tenders by book-entry transfer may also be made by delivering an Agent's
Message in lieu thereof. Outstanding Notes may be tendered in whole or in part
in integral multiples of $1,000.
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available or (ii) who cannot deliver their
Outstanding Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot
complete the procedures for delivery by book-entry transfer on a timely basis,
may tender their Outstanding Notes by properly completing and duly executing a
Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer-Procedures for Tendering Outstanding Notes" in the
Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution (as defined below); (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by the Company, must be received by the Exchange Agent on or prior to
the Expiration Date; and (iii) the Certificates (or a book-entry confirmation)
representing all tendered Outstanding Notes, in proper form for transfer,
together with a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in "The
Exchange Offer-Procedures for Tendering Outstanding Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery. For Outstanding Notes to be properly tendered pursuant to the
guaranteed delivery procedure, the Exchange Agent must receive a Notice of
Guaranteed Delivery on or prior to the Expiration Date. As used herein and in
the Prospectus, "Eligible Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer.
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
The method of delivery of Certificates, this Letter of Transmittal and all
other required documents is at the option and sole risk of the tendering Holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, or overnight delivery service is recommended. In all cases,
sufficient time should be allowed to ensure timely delivery.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering Holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required if:
i. this Letter of Transmittal is signed by the registered Holder
(which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as
the owner of the Outstanding Notes (the "Holder")) of Outstanding Notes
tendered herewith, unless such Holder(s) has completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" above, or
ii. such Outstanding Notes are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. Inadequate Space. If the space provided in the box captioned
"Description of Outstanding Notes" is inadequate, the Certificate number(s)
and/or the principal amount of Outstanding Notes and any other required
information should be listed on a separate signed schedule which is attached to
this Letter of Transmittal.
4. Partial Tenders and Withdrawal Rights. Tenders of Outstanding Notes will
be accepted only in integral multiples of $1,000. If less than all the
Outstanding Notes evidenced by any Certificate submitted are to be tendered,
fill in the principal amount of Outstanding Notes which are to be tendered in
the box entitled "Principal Amount of Outstanding Notes Tendered." In such case,
new Certificate(s) for the remainder of the Outstanding Notes that were
evidenced by your old Certificate(s) will only be sent to the Holder of the
Outstanding Note, promptly after the Expiration Date. All Outstanding Notes
represented by Certificates delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above or in the
Prospectus on or prior to the Expiration Date. Any such notice of withdrawal
must specify the name of the person who tendered the Outstanding Notes to be
withdrawn, the aggregate principal amount of Outstanding Notes to be withdrawn,
and (if Certificates for Outstanding Notes have been tendered) the name of the
registered Holder of the Outstanding Notes as set forth on the Certificate for
the Outstanding Notes, if different from that of the person who tendered such
Outstanding Notes. If Certificates for the Outstanding Notes have been delivered
or otherwise identified to the Exchange Agent, then prior to the physical
release of such Certificates for the Outstanding Notes, the tendering Holder
must submit the serial numbers shown on the particular Certificates for the
Outstanding Notes to be withdrawn and the signature on the notice of withdrawal
must be guaranteed by an Eligible Institution, except in the case of Outstanding
Notes tendered for the account of an Eligible Institution. If Outstanding Notes
have been tendered pursuant to the procedures for book-entry transfer set forth
in the Prospectus under "The Exchange Offer-Procedures for Tendering Outstanding
Notes," the notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawal of Outstanding Notes, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of
Outstanding Notes may not be rescinded. Outstanding Notes properly withdrawn
will not be deemed validly tendered for purposes of the Exchange Offer, but may
be retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described in the Prospectus under "The Exchange
Offer-Procedures for Tendering Outstanding Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
The Company, any affiliates or assigns of the Company, the Exchange Agent or any
other person shall not be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. Any Outstanding Notes which have been tendered but
which are withdrawn will be returned to the Holder thereof without cost to such
Holder promptly after withdrawal.
5. Signatures on Letter of Transmittal, Assignments and Endorsements. If
this Letter of Transmittal is signed by the registered Holder(s) of the
Outstanding Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written an the face of the Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of Outstanding Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Outstanding Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company, must
submit proper evidence satisfactory to the Company, in its sole discretion, of
each such person's authority so to act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Original Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless Exchange Notes are
to be issued in the name of a person other than the registered Holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Outstanding Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
or names of the registered owner(s) appear(s) on the Certificates, and also must
be accompanied by such opinions of counsel, certifications and other information
as the Company or the Trustee for the Outstanding Notes may require in
accordance with the restrictions on transfer applicable to the Outstanding
Notes. Signatures on such Certificates or bond powers must be guaranteed by an
Eligible Institution.
6. Special Issuance and Delivery Instructions. If Exchange Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Outstanding Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. Irregularities. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Outstanding Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for which, may, in the view
of counsel to the Company be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer--Conditions to
the Exchange Offer" or any conditions or irregularity in any tender of
Outstanding Notes of any particular Holder whether or not similar conditions or
irregularities are waived in the case of other Holders. The Company's
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) will be final and binding. No
tender of Outstanding Notes will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. The
Company, any affiliates or assigns of the Company, the Exchange Agent, or any
other person shall not be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. Questions, Requests for the Assistance and Additional Copies. Questions
and requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% Backup Withholding; Substitute Form W-9. Under the U.S. Federal
income tax law, a Holder whose tendered Outstanding Notes are accepted for
exchange is required to provide the Exchange Agent with such Holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 below. If the
Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the Holder or other payee to a $50 penalty. In
addition, payments to such Holders or other payees with respect to Outstanding
Notes exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering Holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
Holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the Holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60-day period
will be remitted to the Holder and no further amounts shall be retained or
withheld from payments made to the Holder thereafter. If, however, the Holder
has not provided the Exchange Agent with its TIN within such 60-day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Outstanding Notes or of the last transferee appearing on the transfers
attached to, or endorsed on, the Outstanding Notes. If the Outstanding Notes are
registered in more than one name or are not in the name of the actual owner.
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on which number to
report.
Certain Holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to the backup
withholding and reporting requirements. Such Holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
Holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to
backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be
obtained.
10. Waiver of Conditions. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
11. No Conditional Tenders. No alternative, conditional or contingent
tenders will be accepted. All tendering Holders of Outstanding Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of Outstanding Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Outstanding Notes nor shall any of them incur any liability for failure to give
any such notice.
<PAGE>
<PAGE>
12. Lost, Destroyed or Stolen Certificates. If any Certificate(s)
representing Outstanding Notes have been lost, destroyed or stolen, the Holder
should promptly notify the Exchange Agent. The Holder will then be instructed as
to the steps that must be taken in order to replace the Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen Certificate(s) have been
followed.
13. Security Transfer Taxes. Holders who tender their Outstanding Notes
for exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered Holder of the
Outstanding Notes tendered, or if a transfer tax is imposed for any reason other
than the exchange of Outstanding Notes in connection with the Exchange Offer,
then the amount of any such transfer tax (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PAYER'S NAME: NORWEST BANK MINNESOTA, N.A.
SUBSTITUTE Part I-Taxpayer Identification Number-For all
FORM W-9 accounts, enter taxpayer identification number in
Department of the Treasury the box at right. (For most individuals, this is
Internal Revenue Service your social security number. If you do not have a Social Security Number
number, see Obtaining a Number in the enclosed
Guidelines.) Certify by signing and dating below. OR
Note: If the account is in more than one name, see
chart in the enclosed Guidelines to determine which Employer Identification Number
number to give the payer.
(If awaiting TIN, write "Applied
For")
Payer's Request for Taxpayer Part II: [ ] For Payees exempt from backup
Identification Number (TIN) withholding, see the enclosed Guidelines and complete
as instructed therein.
</TABLE>
Certification-Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); and
(2) 1 am not subject to backup withholding either because (a) I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends,
or (b) the IRS has notified me that I am no longer subject to backup
withholding.
Certification Instructions-You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if, after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU IN CONNECTION WITH THE EXCHANGE OFFER. PLEASE
REVIEWTHE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON
APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER.
Exhibit 99-2
NOTICE OF GUARANTEED DELIVERY
NATIONAL WINE & SPIRITS, INC.
Offer to Exchange its
Series B 10 1/8% Senior Notes due 2009
for any and all of its outstanding
Series A 10 1/8% Senior Notes due 2009
Pursuant to the Prospectus dated ____________, 1999
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below)
if (a) certificates for the Company's Series A 10 1/8% Senior Notes due
2009 (the "Outstanding Notes") are not immediately available, (ii)
Outstanding Notes, the Letter of Transmittal and all other required
documents cannot be delivered to Norwest Bank Minnesota, N.A. (the
"Exchange Agent") on or prior to the Expiration Date or (iii) the
procedures for delivery by book-entry transfer cannot be completed on a
timely basis. This Notice of Guaranteed Delivery may be delivered by
hand, overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See "The Exchange Offer-Procedures
for Tendering Outstanding Notes" in the Prospectus. In addition, in
order to utilize the guaranteed delivery procedure to tender
Outstanding Notes pursuant to the Exchange Offer, a completed, signed
and dated Letter of Transmittal relating to the Outstanding Notes (or
facsimile thereof) must also be received by the Exchange Agent on or
prior to the Expiration Date. Capitalized terms not defined herein have
the meanings assigned to them in the Prospectus.
The Exchange Agent For The Exchange Offer Is:
Norwest Bank Minnesota, N.A.
<TABLE>
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By Registered or Certified Mail: Facsimile Transmissions
(Eligible Institutions Only)
Norwest Bank Minnesota, N.A.
Corporate Trust (612) 667-9825
Northwest Center
6th & Marquette
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services
To Confirm by Telephone
By Hand or Overnight Delivery: or for Information Call:
Norwest Bank Minnesota, N.A.
Corporate Trust Curtis D. Schwegman
Northwest Center (612) 667-9764
6th & Marquette
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF
A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER
OF TRANSMITTAL.
<PAGE>
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to National Wine & Spirits, Inc., an Indiana
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated ____________, 1999 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Outstanding Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer-Procedures for Tendering
Outstanding Notes."
Aggregate Principal Amount Name(s) of Registered Holder(s): _____________
Amount Tendered: $ ______________________* ____________________________________
Certificate No(s) (if available): ______________________________________________
$
(Total Principal Amount Represented by Outstanding Notes Certificate(s))
If Outstanding Notes will be tendered by book-entry transfer, provide the
following information:
DTC Account Number: __________________________________________________________
Date:
* Must be in integral multiples of $1,000.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X
X
Signature(s) of Owner(s) or Authorized Signatory Date
Area Code and Telephone Number:
Must be signed by the holder(s) of the Outstanding Notes as their name(s)
appear(s) on certificates for Outstanding Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below
and, unless waived by the Company, provide proper evidence satisfactory to the
Company of such person's authority to so act.
<PAGE>
<PAGE>
Please print name(s) and address(es)
Name(s):
Capacity:
Address(es):
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
instruction," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, government securities broker or
government securities dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (each of
the foregoing being referred to as an "Eligible Institution"), hereby guarantees
to deliver to the Exchange Agent, at one of its addresses set forth above,
either the Outstanding Notes tendered hereby in proper form for transfer, or
confirmation of the book-entry transfer of such Outstanding Notes to the
Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to
the procedures for book-entry transfer set forth in the Prospectus, in either
case together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof) and any other required documents within three
New York Stock Exchange trading days after the date of execution of this Notice
of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal (or facsimile thereof) and the Outstanding Notes tendered hereby to
the Exchange Agent within the time period set forth above and that failure to do
so could result in a financial loss to the undersigned.
<TABLE>
<CAPTION>
<S> <C>
Name of Firm Authorized Signature
Address Title
Zip Code (Please Type or Print)
Area Code and Telephone Number: Date:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR ORIGINAL NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<TABLE>
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<S> <C> <C> <C> <C> <C>
(b) Financial Statement
Schedules
II. Valuation and
Qualifying Additions
Accounts ----------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
- ----------------------------------------- ----------------- -------------- -------------- ------------- ---------------
Year ended March 31, 1998
Deducted from assets account:
Allowance for doubtful accounts $ 926,000 $ 601,000 $ - $ 627,000(1) $ 900,000
LIFO reserve 6,430,000 570,000 - - 7,000,000
----------------- -------------- -------------- ---------------- ---------------
Total $ 7,356,000 $ 1,171,000 $ - $ 627,000 $ 7,900,000
================= ============== ============== ================ ===============
Year ended March 31, 1997
Deducted from assets account:
Allowance for doubtful accounts $ 800,000 $ 571,000 $ - $ 445,000(1) $ 926,000
LIFO reserve 4,975,000 1,455,000 - - 6,430,000
----------------- -------------- -------------- ---------------- ---------------
Total $ 5,775,000 $ 2,026,000 $ - $ 445,000 $ 7,356,000
================= ============== ============== ================ ===============
Year ended March 31, 1996
Deducted from assets account:
Allowance for doubtful accounts $ 750,000 $ 507,000 $ - $ 457,000(1) $ 800,000
LIFO reserve 4,430,000 545,000 - - 4,975,000
----------------- -------------- -------------- ---------------- ---------------
Total $ 5,180,000 $ 1,052,000 $ - $ 457,000 $ 5,775,000
================= ============== ============== ================ ===============
<FN>
(1) Uncollectible accounts written off, net of recoveries.
</FN>
</TABLE>
